Bankrupt Charter Airline iAero to Cease Operations

Headquartered in Greensboro, North Carolina, iAero operates several narrowbody cargo jets for DHL Express. Other customers include the National Hockey League and U.S. Immigration and Customs Enforcement. The airline's main flying base is at Miami International Airport. 

"It is with great regret that without continuing DIP financing from our lenders or an alternative lender, we have been directed to prepare to suspend all revenue operations of the airline at the end of the day on April 6" Rainey said Monday in a memo to staff members that that was obtained by FreightWaves.

The airline received $22.5 million in debtor-in-possession financing from Synovus Financial Corp. SNV when it filed for bankruptcy reorganization last September and an additional $5 million in March, which allowed it to keep operating.

Synovus, which has first priority over the company's assets, recently agreed to sell 28 Boeing 737 passenger aircraft to Eastern Airlines in exchange for assuming $71 million in first-lien debt, but iAero has been unable to find anyone interested in running the DHL cargo and NHL business, said Rainey.

iAero, founded in 1997 as Swift Air before its 2019 acquisition by iAero Group, is one of the few domestic passenger airlines to still operate older Boeing 737 Classics. It has about 30 active aircraft and a dozen more parked or in storage. The operating fleet includes about eight 737-300s and 11 737-400s, plus a dozen newer 737-800s, according to various fleet databases.

As of September, iAero Airways conducted about 100 flights per week for DHL, utilizing 12 dedicated freighters. Cargo revenue became a significant source of revenue during the COVID crisis and by 2022 represented 12% of total revenue, according to the bankruptcy filing. 

iAero provides its own aircraft for some of the routes it operates for DHL. Other aircraft it flies in the DHL network are owned by DHL, with iAero providing crews and maintenance. Some of the freighters wear the DHL livery, including at least one 737-800. The freighters operate in the United States and between Miami; Santo Domingo, Dominican Republic; and San Juan, Puerto Rico.

Other primary customers include professional and college sports teams, musical groups, and travel service companies in Cuba. The airline also handles deportation flights for the Department of Homeland Security, its largest customer. And Texas Gov. Greg Abbott, a Republican, chartered iAero to transport migrants to Chicago as part of his campaign to shift the burden of immigration to Democrat-controlled cities, according to the Chicago Tribune. 

iAero ran into financial difficulties when slower cash flow made it difficult to service an $860 million debt load, which in turn made it difficult to raise additional capital. According to court documents, business problems included mismanagement and alleged fraud by previous leadership, the downturn in leisure passenger flying during COVID, a temporary cessation of flight service for DHS and a $29 million adverse arbitration award as a result of a contract dispute with a sales agency.

iAero Airways generated $345 million in gross revenue during 2022, according to its bankruptcy filing. The holding company also owns a business that conducts light aircraft maintenance and airframe checks, and an engine maintenance, repair and overhaul business. As of last fall, the three sister companies employed 860 people. 

iAero's demise potentially removes a large chunk of capacity from the charter market, opening the door for rivals such as Global Crossing Airlines, also based in Miami, to pick up customers.

All iAero employees will be compensated for work conducted through April 6, the memo said.

Eastern is a small airline that currently operates four Boeing 767 widebody passenger jets and two Boeing 777s, mostly on a charter basis. It offered some scheduled service to South America from New York a couple years ago. The company has 14 planes on its books, but eight of the aircraft have not flown in months, according to aircraft tracking site FlightRadar24.

A judge for the U.S. Bankruptcy Court for the Southern District of Florida in Miami is scheduled on April 8 to make a decision on whether to approve the asset sale to Eastern Airlines. Under terms of its stalking horse bid, any party that makes a higher offer for iAero has to pay a $2 million breakup fee.

Multiple creditors oppose the sale of assets to Eastern Airlines, arguing that the sale process is designed to benefit Synovus at the expense of all other stakeholders. Private Jet Services Group, the general sales agency, alleges iAero and former president Jeffrey Conry, now an executive at Eastern, struck a non-cash sweetheart deal to help iAero's owners avoid paying $102 million for breach of contract that began when Conry was at iAero.

All-cargo operator Western Global Airlines, headquartered in Estero, Florida, exited bankruptcy protection earlier this year.

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