News / Amerijet struggles may be 'a reason to think twice about PE ownership'

© Richair

Amerijet’s financial struggles, blamed in part on private equity (PE) “extraction”, have seen it taken over by a hedge fund, according to a source familiar with the matter. 

It was acquired in 2016 by ZS Fund and partners. But according to a well-placed source, Amerijet became saddled with some $200m of debt under PE ownership, which it was unable to service after the Covid-fuelled demand boom ended and the market softened, in tandem with the loss of some contracts. 

The new owner is thought to be Silver Point Capital. Amerijet declined to comment, while the PE companies involved did not respond to requests for information.

A source suggested Fortress has been involved in Amerijet financing, but the only public reference is an SEC filing from 2019, which showed Amerijet board members from ZS Fund and Fortress did issue $2.5m in debt securities for the carrier.  

Amerijet emphasised this week that it had undergone “consensual” restructuring, and taken a $55m capital infusion from “existing lenders”. However, one source said: “It does give one a reason to really think twice about private equity ownership. 

“This was definitely a case of extraction at Amerijet, leaving the company and, importantly, the employees in a terrible spot.” 

Bob Horne, ZS Fund’s Amerijet board member, claimed in an interview in 2020 that ZS was a “light touch”. 

“We are on the lighter touch side of the spectrum. We’re not really looking for a say in the day-to-day operations. We absolutely want a say in strategic decisions and acquisitions and capital-raising scenarios or liquidity events. So we want a seat at the table.” 

Joe Mozzali, Amerijet CEO, said: “We are pleased that we were able to complete this restructuring with the support of our investors and lessors. Our ability to execute this transaction consensually is a strong signal of the strength of our brand, the commitment of our employees and the significant opportunities ahead for Amerijet.

“These strategic actions have strengthened the company’s financial foundation, ensuring its scheduled service, and contract flights will continue to operate as usual.” 

Amerijet also confirmed this week it would return its 757 fleet to their lessors, make “non-pilot” redundancies, although it did not specify numbers, and operate with an all-767 fleet – although it added that it would modify its “go-forward obligations” on the 757s. 

Three of its 757Fs are leased from Titan Aviation Holdings, a subsidiary of Atlas Air, two are from Petrus Aviation and the sixth is leased from Nehalem Aviation Holdings. 

It operates 16 767Fs, of which 10 are leased from Cargo Aircraft Management, a subsidiary of ATSG, which has also faced struggles recently. Three are operated for DHL Express and three for Maersk Air Cargo, according to CH Aviation’s database. 

Amerijet, which offered its pilots a significant pay rise last year, has been seeing customers downsize operations, notably USPS, which has decided to move its domestic operations from air to ground. There is some good news, however. Business in Central and South America is picking up. 

One source said: “On the plus side of the ledger, the company has seen an upswing in demand on the core network in the Latin American region.” 

Another North American source added: “Everyone thought Amerijet would go bust, but it’s picked up in Central and South America, and is getting more business there – it will survive.” 

Amerijet said: “Despite a difficult demand environment, Amerijet’s December quarter 2023 airfreight volumes in its core scheduled service segment increased 8%, versus 2022, and 3% versus the December quarter end for the pandemic year of 2020. The 8% growth in scheduled service volumes was achieved with 10% fewer flown block hours as Amerijet continues to execute its network optimisation strategy.  

“These strong service levels have propelled recent customer wins, including a new contract operating four weekly frequencies between Bogotá and Miami, as well a new multi-year contract transporting a global integrator’s express and cargo volumes in Central America and the Caribbean.” 

In other US freighter news, Kalitta Air is returning, for reallocation, two of its three weekly frequencies for fifth freedom services between Hong Kong and Singapore, which were given to the carrier in December 2020. And Atlas Air yesterday received the fourth delivery of a 777F on behalf of MSC Air Cargo. Atlas said the aircraft would “complement the weekly service, including a route from Hong Kong to Dallas/Fort Worth”.