A contractual dispute between startup airline GLO and the company that provides pilots and other services has prompted the regional carrier that has service from Arkansas' largest airport to New Orleans and Destin, Fla., to file for bankruptcy protection.
An emergency hearing scheduled for 2 p.m. today in U.S. Bankruptcy Court in New Orleans likely will determine whether the carrier continues flying beyond Thursday.
The bankruptcy was triggered by a contractual dispute between GLO and Corporate Flight Management of Smyrna, Tenn., which operates the flights on behalf of GLO, according to the filing.
Corporate Flight Management has claimed that GLO defaulted under the terms of the contracts it has with the company and an affiliate, Air Carrier Management Company, and terminated the contracts with notice.
The two entities, in a default notice emailed on April 15, cited GLO's failure to pay invoices dated after March 23. Two days later, Corporate Flight Management notified GLO and the U.S. Department of Transportation that it intended to terminate its contract with the airline.
The company said it would follow through with its termination unless GLO paid $276,694.04 to Corporate Flight Management, $80,000 to Air Carrier Management Company and post a $500,000 security deposit.
GLO, for its part, said Corporate Flight Management and its affiliate has erroneously overbilled GLO for unauthorized charges, prematurely demanded payment for some expenses, submitted incorrect invoices, hired unqualified employees and negligently managed the airline's maintenance department.
In addition, a pilot Corporate Flight Management hired severely damaged a GLO-leased aircraft in March 2016 and tried to "hot start" the plane, resulting in its grounding and the cancellation of several flights.
The termination is set to happen Thursday unless the bankruptcy court intervenes. The New Orleans Jazz Festival begins on Friday, and GLO said in court pleadings that many of its passengers on flights scheduled beyond Thursday were traveling to and from New Orleans for the festival.
"The suspension of flying will cause irreparable harm to the Debtor and cause countless customers to be stranded or be unable to attend and return from the New Orleans Festival and the Debtor needs the use of its debtor in possession financing to continue its business operations," attorneys for GLO said in the pleadings.
In another pleading, GLO said if Corporate Flight Management carries out its threat to cease providing services on Thursday, GLO "will be grounded and necessarily required to cease all active operations."
The bankruptcy filing comes as GLO has enjoyed a surge in passenger traffic at Bill and Hillary Clinton National Airport/Adams Field, according to the most recent data.
It has carried 4,243 passengers through the first three months of 2017, a 62 percent increase over the same period a year ago when it carried 2,614 passengers.
"We're pleased with the level of service GLO has provided passengers," said Shane Carter, the spokesman for Clinton National. "The New Orleans and Destin routes are popular. We hope the issues are resolved as soon as possible to minimize passenger inconvenience."
The airline, which began operations in 2015, also serves Shreveport; Huntsville, Ala; and Memphis.
GLO said it had no choice but to "seek bankruptcy protection as a means to reorganize the business, protect jobs and continue the fly," the airline said in a statement.
GLO, which leases three 30-passenger SAAB 340B turbo-prop aircraft, said it carried more than 32,000 passengers last year and is on pace to carry 40,000 in 2017. The company said its direct and indirect support of 79 jobs with a annual payroll exceeding $2.8 million has a "significant economic impact in the markets it services" and its shutdown would be "detrimental to the growth of the economy of the Greater New Orleans Region.
Corporate Flight Management "has failed on its contractual obligations to deliver quality performance and solid management of GLO's program to provide air service to chosen markets," the statement continued. "After raising serious concerns over its performance and business practices, rather than find solutions, the air carrier unilaterally terminated its contract to operate GLO's programs and fly passengers.
"This entirely unjustified action has put GLO's operations and the financial health of many of GLO's partners at risk," the company said.
The bankruptcy pleadings asked the court to declare GLO wasn't in default under the contracts and to award damages "resulting from CFM's wrongful notice of its intent to terminate performance of its contractual obligations."
Trey Fayard, GLO's founder and chief operating officer, said in a statement that the decision to file for bankruptcy was a "difficult decision, but a necessary one to protect everyone involved.
"We look forward to promptly and successfully emerging from reorganization in the near future."
Business on 04/25/2017