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Bankruptcy court allows CHC to ‘reject’ 90 aircraft leases

By Vertical Mag | May 12, 2016

Estimated reading time 3 minutes, 56 seconds.

When CHC filed the motion requesting authorization to restructure its fleet, it had 230 medium and heavy helicopters in its fleet. CHC Photo
When CHC filed the motion requesting authorization to restructure its fleet, it had 230 medium and heavy helicopters in its fleet. CHC Photo
CHC Group has received permission from a U.S. bankruptcy court to immediately return 44 aircraft it had on lease, and return a total of up to 90 by early July.The company filed for Chapter 11 bankruptcy protection on May 5, pointing to the decline in oil prices and “general uncertainty” in the energy market, which has led to decreased customer demand and an increase in idle aircraft.

When CHC filed the motion requesting authorization to restructure its fleet, it had 230 medium and heavy helicopters in its fleet. Of those, it only owned 67 — the remainder were leased from various lessors.

The 90 aircraft to be returned include 16 Sikorsky S-76s, 16 Sikorsky, S-92s, 18 Airbus AS332s, 20 Airbus H225s, one Airbus H155, and 19 AW139s. The projected cuts don’t end there, though — CHC expects to reduce its fleet to about 75 aircraft by 2017, eliminating five older types from its operations entirely.

“The Court’s approval of our first day motions is another positive step forward in our efforts to restructure our balance sheet and fleet, and should provide our customers, suppliers, and employees with confidence in CHC’s ability to continue normal business operations worldwide throughout this court-supervised reorganization process,” said Karl Fessenden, CHC’s president and chief executive officer, in a company statement.

The leasing companies affected by the first wave of 44 returned aircraft include Lombard, Milestone, Element Capital, GE Capital, Leonardo Helicopter, Lobo Leasing, Macquarie, Parilease S.A.S., and Waypoint.

“[CHC] entered into the leases and related agreements in a different economic climate than the one facing the [helicopter] industry today,” CHC’s court filing states. “Today, with the ongoing downturn in [CHC’s] industry, these same helicopters are no longer necessary to [CHC’s] operations. As of [May 5], [CHC has] taken or will take all of the excess equipment out of service. Consequently, the unused equipment is, or will be, languishing in expensive storage space without generating any value for [CHC’s] estates and the excess equipment is nothing more than a cash drain on [CHC’s] businesses.”

In a letter to CHC employees following the Chapter 11 filing, Fessenden warned that “we must also address our operating costs – including our direct labor costs” in the coming weeks, but said the company would continue to provide employee salaries, healthcare coverage, and other benefits without interruption.

“You should see little effect on your day-to-day job responsibilities,” the letter states.” We ask that you remain as focused as ever and not let this process distract you from maintaining our record of safety, compliance, customer service and operational excellence.”

As part of CHC’s restructuring process, it has appointed Bill Transier — a specialist in corporate reorganizations — to its board of directors.

“We are pleased to add a director of Bill’s caliber to our board,” said John Krenicki Jr., CHC’s chairman of the board. “In addition to a wealth of experience in the oil and gas industry and firsthand experience in corporate reorganizations, Bill’s knowledge of our industry will help us to continue to focus on serving our customers for the long term.”

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