Bad breakup: GlobalX Airlines revokes lawsuit vs. Ascent Global Logistics

Most of GlobalX’s business comes from contract flying for professional and college sports teams, the Department of Homeland Security, and other groups. But the startup company also controls four Airbus A321 narrowbody converted freighters that have never been able to deliver consistent cargo business, partly due to Ascent’s efforts to stymie GlobalX in the North American regional market.

In March, GlobalX parked two of the A321 freighters because slow business made them unprofitable to operate. 

During the second quarter ended June 30, cargo revenue dropped $2.9 million, or about 50%, year over year, according to earnings released Wednesday.

“For cargo operations, freight market conditions have not materially improved relative to passenger flying as excess capacity and lower market rates continue to pressure utilization and earnings. Cargo remains a drag on near-term results, and we continue to prioritize passenger flying as the primary economic engine of the business,” said President and Chief Financial Officer Ryan Goepel during a conference call to discuss the results. The cargo business is taking about $1 million per month from the bottom line, he explained.

GlobalX is now operating three of the A321 cargo jets after Miami competitor 7Air outsourced some of its business, Goepel told FreightWaves in a subsequent email.

But the new transport services agreement doesn’t alter the ongoing pressure on GlobalX’s cargo business. On the earnings call, Goepel said the company continues to review a range of options for the freighter fleet, including parking aircraft, returning them to lessors, subleasing, selling, using engines for its passenger fleet or leasing the engines to passenger airlines.

The choices aren’t ideal. Lessors don’t want to take back planes and GlobalX would likely be on the hook to pay a penalty for breaking the lease. And airlines experienced in managing subleases to other carriers, especially since they still retain the ultimate risk on the assets.

GlobalX has learned the hard way that breaking into a regional freight market with a glut of narrowbody aircraft — Boeing 737-800 converted freighters, older 737 variants, McDonnell Douglas MD-88s and other aircraft exceeding 30 years in age — and incumbent carriers operating fully depreciated assets. 

Lufthansa Airlines is at a similar crossroads with its fleet of four A321 converted freighters. FreightWaves recently reported that Lufthansa Cargo has removed the brand logo from the planes and is trying to return them to the lessor, or sublease them, despite assertions of a planned return to service. 

Goepel said there is hope that cargo airlines will need more capacity than they can handle with their existing fleets if the peak shipping season is strong, which could result in calls to GlobalX to provide extra lift. 

Overall, GlobalX lost $1.3 million during the quarter. Revenue was $62 million, up 1% year over year thanks to passenger operations. Earnings before interest, taxes, depreciation, amortization and rent dipped 3% to $19.3 million. EBITDAR is a common metric for measuring financial health in the airline industry because of the heavy rent costs for aircraft. Management attributed the weaker results to a high concentration of scheduled maintenance work that kept several aircraft out of service during the quarter. 

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

Write to Eric Kulisch at ekulisch@freightwaves.com.

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