The cost of labor, growing debt and the U.S. military pulling its troops out of Iraq are all factors for the recent bankruptcy filing by Global Aviation Holdings, Inc., as reported by Reuters and other news media sites.
Global Aviation Holdings Inc., the biggest commercial provider of charter flights for the U.S. military, has filed for
Chapter 11 bankruptcy protection.
Global Aviation is the parent company of North American Airlines Inc. and World Airways Inc.
The filing was made in Brooklyn, New York, Bankruptcy Court on the heels of the Pentagon’s announcement to reduce spending by $487 billion within the next ten years.
The Pentagon’s budget for 2013 was outlined less than two weeks ago.
Global Aviation counts up to three-fourths of its revenue from flying both soldiers and cargo. With the U.S. removing all troops from Iraq, and plans by the U.S. Defense Secretary Leon Panetta to end combat operations in Afghanistan – also within the next ten years – the bankruptcy was unavoidable.
Aerospace and defense industry analyst, Wayne Plucker, said, “Every individual major defense contractor that we work with has been downsizing. That has had an effect on smaller companies: If Boeing catches a cold, others get pneumonia. Services providers will be the hardest hit as larger companies and the Department of Defense itself do more of that work in-house.”
Global Aviation has seen a loss of $60.3 million on revenue of $775.1 million in the nine months that ended September 30. Losses a year earlier were $6.9 million on revenue of $877 million.
On December 27 Global Aviation was “derailed” by a federal appeals court that tossed out a $71.3 million award against FedEx Corp. That decision is currently being appealed.
The company has been struggling with the cost of “unsustainable” labor and a glut of debt.
Global Aviation’s Chief Financial Officer, William Garrett, said in a court hearing, “While Global Aviation has navigated fluctuations in demand in the past, the current decrease, coupled with high labor and fixed costs, excess aircraft and an overleveraged balance sheet, requires Global Aviation to restructure.”
The company employs 1,782 people in its base in Peachtree City, Georgia. Salaries for executives are due to be cut by 10 percent and 140 workers were told that they would not have a job after April 5.
North American Airlines, World Airways and eight other affiliates join Global Aviation in bankruptcy protection filings in the U.S Bankruptcy Court in the Eastern District of New York.
As of December 31, Global Aviation claimed to have assets of $589.8 million and debts of $493.2 million.
Operations are planned to continue at Global Aviation, as well as payments to both vendors and suppliers.
The company has provided charter services for several presidential campaigns and began operations in 1948.
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