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Western Global Airlines sued for nonpayment of logistics services
Founder Jim Neff tries to fend off legal claims, bankruptcy as revenue base shrivels
Thursday, July 06, 2023
Western Global Airlines sued for nonpayment of logistics services
Founder Jim Neff tries to fend off legal claims, bankruptcy as revenue base shrivels
Eric Kulisch
·
Thursday, July 06, 2023
Western Global Airlines is under a financial cloud.
The company's fleet includes MD-11 jets, including this one parked at Southwest Florida International Airport in Fort Myers
Troubled Western Global Airlines is defending against a $750,000 legal claim by Radiant Global Logistics
for allegedly reneging on contracts to transport aircraft components needed for fleet maintenance
as founder Jim Neff maneuvers to keep the carrier out of bankruptcy.
Radiant Logistics says Western Global Airlines didn’t pay 41 invoices for delivery of aircraft parts
between September and November last year
and that it owes more than $556,000, plus nearly $210,000 in interest,
according to a suit filed in March 2023
in the U.S. District Court for the Western District of Washington.
Radiant Logistics (NYSEAmerican: RLGT) is a $1.2 billion, publicly traded multimodal logistics company based in Renton, Washington.
Western Global Airlines hired Distribution by Air,
a Radiant freight forwarding subsidiary, to manage transportation of its shipments.
In its complaint, Radiant Logistics said it still possesses some aircraft parts
and has the right to sell them through an auction
to recover some of the money owed by Western Global
and asked the judge to place a lien on the property.
The parties informed the court that they opt to pursue mediation,
but if there is no resolution a trial date will be set for early 2024,
court records show.
The lawsuit adds to the turmoil surrounding Estero, Florida-based Western Global Airlines
and questions about its ability to survive.
A severe downturn in air cargo business has hit WGA harder than most competitors,
with the loss of its contract with Amazon being the biggest blow.
An Amazon spokesman said Amazon has not used WGA since January 2023.
Sharply lower revenues combined with high maintenance costs
for its aging fleet of 21 Boeing 747-400 and McDonnell Douglas MD-11 freighters,
as well as a shortage of pilots
and an employee lawsuit have made it difficult to pay off a heavy debt load.
Credit ratings agencies Fitch and Moody’s this year downgraded Western Global’s debt to junk status and recently withdrew their ratings, citing a lack of financial transparency at the company.
Bloomberg recently reported that the freighter operator is considering several restructuring options, including filing for bankruptcy.
In an online message board for pilots,
one person in March 2023
said some WGA pilots have had small company credit card charges denied.
A check of FlightAware and other aviation databases shows that only six aircraft in Western Global’s fleet have been active in the past week.
Many are parked at Southwest Florida International Airport in Fort Myers
or the company’s maintenance center in Shreveport, Louisiana.
Two aircraft have been sent to desert storage.
And Western Global earlier this year
canceled an order with Boeing for two factory-built 777 cargo jets, according to Fitch and Moody’s.
Angry stakeholders
WGA faces several legal threats besides the one from Radiant Logistics.
A group of Western Global employees recently sued
Western Global and Jim Neff, the company’s principle owner and CEO,
for sticking them with devalued shares
after arranging debt financing at exorbitant interest rates for a 37.5% stake in the company.
On Thursday,
Bloomberg separately reported that Neff recently bought the cargo airline’s highly distressed debt.
The move, designed to stave off liquidation,
has upset some investors who now are second in line for any claim on WGA assets.
Loan holders get priority in bankruptcy proceedings over unsecured bondholders.
Those investors could potentially file suit seeking restitution for alleged fraud
if Western Global files for bankruptcy,
according to Bloomberg.
In 2019, logistics provider Flexport sued Western Global
for substituting MD-11 aircraft for 747s called for in the charter contract
because of maintenance delays.
18.07.2023 - 14:22 UTC
Western Global Airlines failed to pay invoices totalling USD556,000 over three months in 2022, according to a lawsuit filed by multimodal logistics company Radiant Logistics.
https://www.freightwaves.com/news/cargo ... protectionWestern Global Airlines Has Filed From Protection Against Bankruptcy
BY
PUBLISHED 13 HOURS AGO
The airline’s CEO said the main priority is to preserve the value of the carrier and protect its employees.
SUMMARY
American cargo carrier Western Global Airlines has filed for Chapter 11 bankruptcy protection
to restructure and reduce its debt by over $450 million.
Creditors, including bondholders, will provide $77 million in assistance to Western Global Airlines during its reorganization.
The restructuring was prompted by collapsing revenues,
a heavy debt load,
and the removal of financial protection by credit rating agencies
due to a lack of transparency.
Despite financial challenges and an aging fleet,
the airline plans to continue its operations and pay its employees and vendors.
American cargo carrier Western Global Airlines filed for Chapter 11 bankruptcy protection
and announced it will restructure on Monday.
The measures are expected to help the airline reduce its debt by more than $450 million.
Cargo operator Western Global Airlines files for bankruptcy protection
Restructuring plan designed to reduce debt load by $450M
Monday, August 07, 2023
Unsecured debtors include
U.S. Bank ($419.1 million in outstanding loans);
aircraft maintenance company Lufthansa Technik (owed $10.4 million);
GE Engine Services (owed $7.4 million);
Delta TechOps ($4.9 million for maintenance);
Eurocontrol ($388,000 for navigation fees);
the Shreveport Airport Authority ($292,573 for facility rentals and other fees);
and the city of Chicago ($191,000 for landing and other fees at O’Hare), according to court documents.
Radiant Global Logistics in March sued Western Global for nonpayment of $556,000 in freight transportation services.
The bankruptcy filing shows Trans-Caribbean Cargo with a $6.7 million claim against Western Global.
Trans-Caribbean Cargo is a Miami-based freight forwarder
that “suffered substantial monetary and reputational damage when WGA breached its contract to fly cargo”
Trans-Caribbean sued and won an arbitration judgment in May,
but Western Global has not paid any portion of the damages.
A former Western Global employee,
who spoke on condition of anonymity because of the ongoing legal issues facing the company,
said Western Global abandoned several long-term customers
to grab larger, more lucrative business from Amazon
at the height of supply chain disruptions caused by the pandemic.
Western Global’s business has significantly declined in the past year
from the peak shipping demand triggered by the coronavirus pandemic,
making it more difficult to make debt payments and leading to a liquidity crunch.
The overall market is down 7% to 10% over the past 16 months
and airlines are reporting sharply lower revenues for cargo.
Amazon, Western Global’s largest customer, ended its contract in January.
The company, which began operating in 2014,
has a fleet of aging MD-11 and Boeing 747-400 freighters that are expensive to operate and maintain.
Fifteen of its 20 aircraft are older than 25 years and the average fleet age is 28.4 years.
WGA owns all of the aircraft, except for one 747 that is leased from a company controlled by Neff, plus two spare airframes.
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