Gemini seeks protection from creditors
Gemini Air Cargo filed for bankruptcy protection Wednesday for the second time in two years but will continue to operate, according to a message from management to employees.
The Dulles, Va.-based carrier is the latest airline to be victimized by the deadly combination of sharply rising fuel prices and slow demand in a weak economy. Nine airlines this year have ceased operations, including passenger-based ATA Airlines, Aloha Airlines and Skybus. Last October, Kitty Hawk Aircargo went out of business after being whipsawed by high fuel prices, a downturn in business and stiff competition from other cargo carriers.
Privately held Gemini has secured an additional $14 million in debtor-in-possession financing from its existing senior lender and is seeking additional investors this summer to support operations, the message, obtained by American Shipper, said.
The correspondence referred to “disappointing activity” this year flying cargo for the U.S. military as well as a decline in full-service leased equipment orders from airlines.
Gemini has seven old DC-10-30s and operates four MD-11 aircraft. Its plan earlier this year was to ground its DC10s by the end of 2009 and replace them with more fuel-efficient, leased MD-11s.
Airlines who hire Gemini to haul cargo on their behalf have shied away from the fuel-guzzling DC10s. In response, the cargo carrier said it has idled four of the aircraft, and furloughed crews and marketing staff accordingly.
The fuel situation is hitting wholesalers such as Gemini especially hard because it's difficult to fly dedicated transport for airlines and maintain their low-cost model when they can't control their market by assessing fuel surcharges or changing routes as can a scheduled airline.
“Gemini continues to have strengths, and in important ways we are stronger than a year ago. The MD-11 operation has stabilized, with reliability and other performance measures at record levels. Demand for MD-11s has increased as it is a highly fuel-efficient freighter, increasing its cost advantages over the B747-200 classics, DC10s, and other competitors,” Acting Chief Executive Officer George Gonzalez said in the correspondence.
Gemini intends to sell the business or the assets at auction on Aug. 11, according to documents filed with the U.S. Bankruptcy Court in Miami, Bloomberg News said.
Affiliates Gemini Cargo Logistics, Gemini Leasing and Gemini Leasing Holdings also sought protection.
Gemini narrowly avoided bankruptcy in 2003 when it was able to recapitalize with the help of then-majority owner, buyout specialist The Carlyle Group. Following its emergence from bankruptcy in 2006, Bayside Air Cargo Acquisition LLC became Gemini’s primary owner.
The bankruptcy court is scheduled Friday to rule on Gemini’s plan. ' Eric Kulisch