Global Eagle has warned that there is the “the substantial risk that it may be necessary for us to seek protection under Chapter 11 of the United States Bankruptcy Code,” amidst concerns surrounding liquidity and ability to access new funding.
One major concern is its cash reserves. According to its latest quarterly results, as of 31 March, the company had US$54.2 million in cash and cash equivalents. As of 30 June, this had been depleted to $30.7 million.
Coupled with rising debts, Global Eagle has applied for a US Treasury Loan under the CARES Act and has announced additional job losses and further consolidation of offices.
According to a statement, “The COVID-19 pandemic is having, and will likely continue to have, a significant negative impact on several important aspects of our business.”
The company commented that: “The pandemic is ongoing and dynamic in nature and, to date, our customers have experienced temporary closures in key regions globally. Growth in our overall business is principally dependent upon the number of customers that purchase our services, our ability to negotiate favourable economic terms with our customers and partners and the number of travellers who use our services. In addition, certain of our customers have ceased or delayed payment or filed for insolvency protection, and we are unable to predict the speed of recovery of the travel sector necessary to mitigate these ongoing risks.
“To date, customer purchasing activity has been significantly impacted and we expect this to continue to negatively affect us. We have a large concentration of customers that operate in the Asian, European, Pacific, and Middle Eastern market regions which experienced shutdowns from the COVID-19 pandemic well before domestic airline customers. As such we saw a decline by percentage in the number of contracts with our customers in the first quarter of 2020 which was greater than that seen by the general airline industry in the US. The extent and duration of the pandemic remains uncertain and is expected to continue to impact consumer purchasing activity if disruptions continue throughout the year, which could continue to negatively impact us. Additionally, payments to certain vendors have not been made in accordance with payment terms.”