ROCKFORD -- Ryan International Airlines' descent into bankruptcy reorganization comes two years after the U.S. military began changing contracts for companies that fly troops around the globe, the company said in its filing Tuesday.
The unrest in Egypt, where in January 2011 the Rockford-based airline arranged to buy a Boeing 777 from Egypt Air, prevented Ryan from securing delivery of the plane that could have qualified it for military contracts favoring more efficient wide-body jets, according to the filing.
Ryan, which owes $7.5 million to 18 of its largest creditors, said in a Chapter 11 bankruptcy filing that less reimbursement to military air carriers and a move to wide-body aircraft for troop flights "led to a precarious cash flow crisis."
Ryan has $244 million in annual revenue, according to the filing. The airline has arranged with its primary lender, INTRUST Bank N.A., for $4.5 million to allow it to continue operating.
"We continue to fly," Mark Robinson, executive vice president and secretary of Ryan, said in an interview Wednesday. "We're flying today, we're flying tomorrow. It's not going to affect our day-to-day operations."
Robinson said business this spring looks solid. But the company needed to file for reorganization now to make it through the first quarter.
"We know that in April and May we have a large amount of contracted flying with our customers," he said. "We just needed to get to April and May."
The majority of Ryan's debt, $6.4 million, is for fuel it bought from the military. Other debts to creditors, which include Boeing Commercial Airplanes, Airbus Americas Customer Service, Lufthansa Technik-Aktiengese and Rolls-Royce LLC, are for parts or services needed to keep planes operating.
Egypt's government fell just weeks before Ryan signed a contract to buy the 777. Despite efforts to move the plane out of the country, Egypt Air still has it.
Last fall, the company leased an Airbus A330 from Virgin Atlantic and hoped to have it moving troops by December. But the plane was not approved for military use until Feb. 1, and Ryan won't be able to use it until April 1.
Together, Ryan spent $7 million in pre-operating costs, pursuing deals for both planes, according to the filing.
Ryan said it attempted to negotiate with lessors, vendors and employees but rent and payroll costs coupled with fewer military flights and less reimbursement from the government created financial hardship.
A month ago, Ryan announced temporary layoffs for nearly 200 pilots, flight attendants and support staff at four U.S. bases. It said it planned to add more commercial charter flights to its services during the first two quarters of 2012. Robinson said many of the pilots and flight attendants are back at work, but the furloughs were necessary to preserve cash. Ryan employs about 460.
The company believes it is in position to land more military business while diversifying its customer base to include nonmilitary agencies.
The first quarter is proving to be a tough financial one for the owners of Rubloff Ryan LLC, parent company of Ryan. Ronald E. Swenson and Gerald H. Weber Jr. each own 50 percent of Ryan Rubloff as well as Rubloff State & Lyford LLC, a real estate development company. Rubloff State & Lyford, Swenson and Weber were named in a Feb. 7 lawsuit, along with Robert S. Brownson and Florian Guski, in Winnebago County Circuit Court by Midwest BankCentre of St. Louis.
The bank is seeking $2.5 million from Rubloff State & Lyford LLC for defaulting on loan payments.
Reach staff writer Brian Leaf at [email protected] or 815-987-1343. Follow him on Twitter at twitter.com/B_Leaf.
Copyright 2012 GateHouse Media, Inc.All Rights Reserved
