The final call for Aviator UK

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The article was originally published in RECOVERY Magazine, Autumn 2017 and is reproduced with permission from the publisher.

"FTI Consulting and DLA Piper worked closely together over a 12-week period to deliver an exceptional result in challenging circumstances. The commercial and technical acumen of the DLA Piper team led by Neil Riley was very impressive and their client delivery was exemplary."

Simon Kirkhope
Senior Managing Director,
FTI Consulting

The aviation industry is a network business, relying upon strict regulation, rigorous safety standards and operations planned to minute detail. Unexpected financial or operating changes, particularly to ‘ground handling’ services (the aggregation of services that manage customer check-in through to loading and unloading the aircraft) can have an impact on the lives of thousands of employees and hundreds of thousands of air travellers. When Aviator UK, the company that supplied ground handling services to four major UK airports, ran into immediate financial trouble it was clear that action would be needed – and fast.

The Aviator Group is a large European ground handling operator, headquartered in Sweden. The Group operates in Europe with a focus on the Nordic region and, until recently, included UK operations (acquired from Servisair in 2015). The UK business provided ground handling services to most major airlines at Gatwick, Birmingham, Newcastle and Manchester airports, and employed approximately 1,700 people in the UK. In mid-2016, while the group was in the process of negotiating refinancing of its debt facilities, its lender group advised that it was no longer supportive of the Group’s UK operations.

Following the unexpected (and immediate) loss of financial support for UK operations, and incurring a £3 million+ wage bill, the directors of Aviator UK faced the risk that the business was cash-flow insolvent, with potentially no other option but to cease operations immediately.

The directors were cognisant that the potential disruption resulting from ceasing UK operations would have been reminiscent of other major aviation incidents, such as the Icelandic ash cloud in 2010, which cost the economy over €1 billion. As a result, FTI Consulting and DLA Piper were engaged to advise the board and management of Aviator UK on alternative options to avoid the need to immediately cease operations.

Over the 48 hours following the insolvency, a plan was developed to avoid the need for an immediate shutdown of operations. The plan involved securing sufficient cash-flow support from key stakeholders (primarily airports and airline customers) to manage the transition of customer contracts and employees to alternative ground handling suppliers in a controlled manner over a 12-week period.

This article focuses on the specific legal and operational issues involved in managing this situation.