Inflight connectivity and entertainment specialist Global Eagle is reported to be in financial difficulty as a result of the worldwide coronavirus crisis. In a bid to get control of its costs, the firm has hired in professional support to assist it in debt restructuring. With the company already suffering from the grounding of the 737 MAX, its viability as a business is looking to be on shaky ground, although bankruptcy is not thought to be an imminent danger.
Global Eagle reworking balance sheet
In a Reuters exclusive, it was revealed that Global Eagle, a leading provider of IFEC for airlines, is seeking support to restructure its debt. The move comes as the world’s aviation industry experiences a major downturn amid the global COVID-19 pandemic.
According to the Reuters report, Global Eagle is carrying a liability burden of around $1bn. As such, it has hired a team of investment bankers and lawyers who have specialist experience in renegotiation debt obligations to assist it in weathering the crisis.
Sources close to the LA-based company were quick to assure reporters that no bankruptcy filing was imminent. However, it is noted that Global Eagle’s creditors are also in discussions with restructuring advisors in anticipation of a reworking of the company’s balance sheet.
It’s an illustration of just how far the repercussions of the current situation spread. While airlines around the world have been in the spotlight as being negatively affected by coronavirus, the implications for all parts of the supply chain are beginning to come to light.
Just this week, UK satellite operator OneWeb filed for bankruptcy protection in the US. It’s likely there will be a few more casualties too before this situation is over.
Another headwind for the company
Global Eagle was already suffering even before the current pandemic. As a major supplier of IFEC for narrowbody aircraft, the company was hard hit by the worldwide grounding of the Boeing 737 MAX. As a consequence of this and of Boeing’s production shut down of the type, Global Eagle anticipated somewhere between 10 and 15 fewer installations of its system each quarter.
As a result, the company reported a loss of $153.4m last year, and had already embarked on an efficiency drive prior to the coronavirus outbreak.
Now, with airlines around the world grounding planes and cutting routes, the company is seeking to minimize its losses to keep its head above water until things settle down. Global Eagle is suffering a double hit, as a significant portion of its business is involved in cruise ships; an industry that has been equally hard hit by the current pandemic.
CEO Josh Marks is reported to have taken a 33% cut on his basic pay for around three months. He is reported to earn around $4.6m per year all in. Other executives at the company have also taken pay cuts, as have a number of airline CEOs.
Global Eagle’s airline customers include Turkish Airlines, ANA, Southwest Airlines and Garuda Indonesia. With few aircraft left flying, Global Eagle is not only robbed of its chance to sell new systems, but is also unable to collect licensing fees for its inflight WiFi and entertainment solutions.
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