Western Global Airlines’ Ratings Withdrawn amid Bankruptcy Consideration

Freighter operator Western Global Airlines has had its credit rating withdrawn by financial services firm Moody’s while reports suggest the company is considering bankruptcy.

Newswire Bloomberg yesterday reported that the Florida-based airline was weighing up whether to declare bankruptcy due to liquidity issues.

Citing people with knowledge of the matter, Bloomberg said that talks with creditors were underway but that a final decision has yet to be made.

Air Cargo News has contacted the airline for comment.

Meanwhile, financial firm Moody’s last week withdrew the airline’s Caa1 corporate family rating (CFR) and Caa2 senior unsecured rating.

“The ratings are no longer on review for downgrade and the outlook of ratings under review has been withdrawn,” Moody’s said.

“Moody’s has decided to withdraw the ratings because it believes it has insufficient or otherwise inadequate information to support the maintenance of the ratings.”

Earlier this year, Moody’s downgraded the carrier’s ratings from B2 and B3 citing a liquidity shortage even though it had cancelled an order of two Boeing 777 freighters.

“The company’s $47.5m revolving credit facility, expiring February 15 2025, will likely remain fully utilised even after the company receives a return of certain deposits associated with its now aborted agreement to purchase two 777F aircraft from The Boeing Company,” Moodys’ said in its March ratings review.

“Furthermore, all of Western Global’s assets are encumbered, limiting its ability to raise new funding on favorable terms. Additionally, declining operating block hours in recent quarters have contributed to weakness in Western Global’s revenues and cash flow.”

Moody’s said that the company faced elevated fuel prices and declining aircraft utilisation and a negative free-cash flow as of September last year.

“In the second quarter, fuel expenses increased because the company was unable to transport cargo on its westbound routes to Asia due to it not meeting minimum requirements for the number of pilots operating the aircraft,” Moody’s said.

It added that the ratings downgrade reflected the “modest scale, aged fleet composition, high customer concentration – top three customers were 64% of total revenue as of 30 September 2022 – and negative tangible equity”.

The situation the airline reportedly finds itself in is in contrast to its expansion plans of the last couple of years as freighters were in high demand as a result of the Covid crisis.

In late 2021, Western Global had plans to expand its freighter fleet approved by the US Department of Transportation.

Two months later the carrier confirmed its now cancelled order for two 777 freighters from Boeing.

According to its website, Western Global currently operates a fleet of 19 MD-11 and 747-400 freighters.

Since then the air cargo market has cooled, with demand declining, belly capacity returning and fuel prices increasing.