May 11, 2020 – The Debtor filed a motion to convert its Chapter 11 case to a case under Chapter 7 arguing that its hopes to reorganize in Chapter 11 had been dashed by the extended nature of the COVID-19 pandemic which "was continuing with no end in sight in respect of the resumption of normal flight operations." [Docket No. 183].
The motion states, “The Debtor filed the within Chapter 11 case as a direct result of the recent worldwide pandemic resulting from the spread of the Coronavirus (COVID-19), which substantially and adversely affected Miami Air and its operations along with the rest of the commercial airline industry.
The Debtor sought to use the protections of the Bankruptcy Code to weather the economic storm caused by the Coronavirus pandemic, right size its business to adjust to the current situation and restructure its obligations so as to be positioned to emerge from this Chapter 11 case as and when the Coronavirus subsides and the global economy begins to recover.
Specifically, immediately on the filing of this Chapter 11 case, the Debtor took action to drastically reduce its operating expenses, including laying off approximately 173 of its employees, rejecting the leases for three of its aircraft and rejecting the leases for two aircraft engines. The Debtor also obtained the financial assistance from its sole shareholder, TSI Holding Co., in the form of a debtor-in-possession loan. The Debtor also engaged an investment banker, Cassel Salpeter & Co., LLC, in order to market and attempt to generate a transaction for the Debtor, whether through a sale of assets under Section 363 of the Bankruptcy Code or through a plan sponsor. Finally, the Debtor applied for payroll support payments from the United States Government as part of the airline stimulus program passed by Congress in connection with the CARES Act.
Despite all of the above efforts, which were substantial by all parties involved, the Debtor was unable to obtain and advance a viable transaction that would allow the airline to continue its operations in the face of the Coronavirus pandemic that was continuing with no end in sight in respect of the resumption of normal flight operations across the entire airline industry. As a result, the Debtor was left with no choice but to make the difficult and disheartening decision to cease operations on Friday, May 8, 2020, to proceed with an orderly wind-down of such operations and to take action to preserve its assets and its books and records.
As part of the Debtor’s decision to wind-down its, the Debtor evaluated the most effective and efficient way to proceed and, after consultation with the Official Committee of Unsecured Creditors and the Office of the United States Trustee, decided to proceed with this Motion seeking an order converting the Debtor’s Chapter 11 case to a case under Chapter 7 of the Bankruptcy Code.”
The Court scheduled a hearing to consider the motion for May 13, 2020.
Background
Objectives of the Chapter 11 Filing (at filing)
The Debtor's Declaration in support of first day motions (the "Declaration") [Docket No. 29] states: "Miami Air seeks to use the protections of the Bankruptcy Code to weather the economic storm caused by the Coronavirus pandemic, right size its business to adjust to the current situation and restructure its obligations so as to be positioned to emerge from this Chapter 11 Case as and when the Coronavirus subsides and the global economy begins to recover. Importantly, Miami Air has the support of its parent, TSIHC in the form of emergency debtor-in-possession financing discussed below to enable it to meet its obligations during this Chapter 11 Case."
Events Leading to the Chapter 11 Filing
The Declaration states: "[T]he recent worldwide pandemic resulting from the spread of the Coronavirus (COVID-19) has substantially and adversely affected Miami Air and its operations along with the rest of the commercial airline industry. As a result of the declaration of national emergencies in several countries, along with ever-tightening travel restrictions that have been imposed to and from the United States and other countries, Miami Air has experienced a rapid plunge in bookings and an increase in cancellations. In fact, Miami Air’s entire retail flight operation has ground to a halt. At present and for the foreseeable future, Miami Air is only scheduled to fly certain flights for the United States military under the Civil Reserve Air Fleet (CRAF) program, pursuant to which Miami Air provides flight services to the United States Air Force Air Mobility Command (USAF AMC) in connection with transporting troops and cargo."
About the Debtor
The Debtor operates one of the world’s premier charter airlines through its state-of-the-art fleet of six (6) Boeing 737-800 aircraft out of its principal place of business located at Miami International Airport. Miami Air is wholly owned by TSIHC, a family-owned and operatedinvestment company located in St. Louis, Missouri. Miami Air provides private charter services to a wide customer base all over the world, including, among others, professional and college sports teams, corporate and incentive groups, tour operators, cruise lines, student travel groups, entertainment groups, global government agencies, dignitaries, political groups and the United States government, military and first responders. Miami Air’s operations are worldwide and include every continent except Antarctica.
About TSI
According to TSI: "Founded in 1953 by John M. (Jack) Hauck. TSI Holding is a St. Louis-based family-owned and operated investment company established by John C. Hauck and affiliated investors. Our core belief is to invest in private middle market companies that look to diversify into new product lines and geographies.
We have over 65 years of experience as equity partners, owners and operators of businesses in distribution, aviation, consumer products and light manufacturing."
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