News / Rivals circle sanction-wounded Cargologicair, eyeing its aircraft spares

A “Dutch cargo airline company” is eyeing Cargologicair’s UK AOC, according to its administrators, as other companies circle, eyeing the carrier’s aircraft parts.

The latest progress report from CLA’s administrator, Buchler Phillips, shows that winding-up the sanctioned UK company has been difficult, with no access to its bank accounts.

The hope was that CLA would be able to continue to trade. The administrator wrote: “Steps were taken to immediately assess whether it would be feasible … to continue trading the business whilst a buyer for all or part of the company’s business was sought.

“However, this has proved impossible, due to the company not having access to its bank accounts as an effect of the sanctions regime.”

The administrator has noted interest from the Dutch company, reporting: “The AOC is not a saleable commodity, but if the company is sold as a going concern, it will remain in the company’s name and will continue to be in force.”

But it adds: “It is unlikely that the company will be sold as a going concern, but the interested party is keen on purchasing the company’s systems and documentation, which will assist in its own AOC application.”

There are also parties interested in buying CLA’s inventory: the administrators have calculated a stock figure of £2.1m ($2.65m) relating to 747 aircraft parts, although it was unable to properly assess the stock at Schiphol as it is stored on wrapped pallets.

“The majority of the stock is held at East Midlands Airport, Amsterdam Airport and Hahn Airport. There are also some high worth items of stock at various other locations.

“We have been in contact with several parties interested in acquiring the stock, but they require specialist documentation … before the stock can be sold.”

The administrators have been frustrated in their efforts to dissolve or sell CLA by the sanctions regime and banks’ fear of resultant risk. CLA’s electronic records have also been blocked by Microsoft since July 2022, because of sanctions, despite repeated requests.

Meanwhile CLA’s MRO Trax system, which details stock levels, locations and relevant documentation, has also been blocked because of outstanding invoices. Once Trax is paid and the system operational, CLA’s 747 parts stock can be sold.

But the bank accounts remain blocked. Citibank said it would transfer the funds to a designated new bank account – but despite an initial agreement with NatWest, it then “refused to deal with sanctioned funds”.

“The UK banks do not have the risk appetite to accept sanctioned funds, and the Office of Financial Sanctions Implementation would not grant authorisation for their transfer to a non-UK regulated bank.”

The company had cash of £10.5m on the date administration began. But the lack of access to electronic records and bank accounts have meant CLA staff have still not been fully paid, or received their P45s.

The administrators said they were dealing with employee queries “almost daily”. Without P45s, documents showing how much tax you’ve paid on your salary when you leave a company, the 100+ staff have had to use emergency tax codes.

“Once we have opened a bank account and are able to effect dividend distributions, we will issue all payments to employees and creditors,” noted the administrators, adding that there would be “sufficient funds available”.

Staff secured claims are estimated to be more than £262,000, with further staff unsecured creditor claims of £2.9m. Trade and intercompany creditors are said to be owed some £5.2m.

There is some litigation under way: the administrators are trying to recover a £1m deposit held by lessor Aircastle; and £2.2m given to WWTAI Airopco 1 Bermuda “in relation to two B747 aircraft, [which] may involve litigation”.

Additionally, before the administrators were appointed, France’s Strategic Airlift Support (SAS) claimed CLA and Volga-Dnepr UK had terminated a contract. While a French court has dismissed a €5m claim, SAS has appealed.