Global Aviation Holdings, the largest commercial provider of charter lift to the U.S. military, filed for Chapter 11 bankruptcy reorganization February 5 in New York. The company cited reduced rates paid by the military, the end of the war in Iraq, the drawdown of troops in Afghanistan and decreased demand for commercial cargo services as driving its decision to seek relief from creditors.

Global Aviation is owned by private equity firm Matlin Patterson. It operates through two subsidiary airlines: World Airways, based in Peachtree City, and North American Airlines, based at New York JFK Airport. World Airways operates four 747-400 and nine MD-11 freighters and seven MD-11 passenger aircraft. North American is a passenger carrier with five Boeing 757-200s and five 767-300ERs. Global Aviation employs 1,782 people and has had annual revenues of more than $1 billion. Its contract with the U.S. Air Force Air Mobility Command represents the largest portion of that revenue.

The company has outstanding debt of $244 million, according to documents filed at the U.S. Bankruptcy Court. Earnings before interest, taxes, depreciation and amortization declined from $115 million in 2010 to $35.7 million last year, the company reported, leaving it without the capacity to service its debt. “The company needs to complete its comprehensive restructuring due to having too large a fleet, labor costs that exceed industry standards given the current global economic environment and the necessity to align the capital structure with the size of the company,” Robert Binns, Global Aviation chairman and CEO, said in a press release.

As part of its reorganization strategy, Global Aviation said it will relocate North American Airlines headquarters to Peachtree City. It is also seeking the bankruptcy court’s approval to secure aircraft lease modifications and reject certain unnecessary leases. Some 140 employees will be laid off by April, and salary reductions will be instituted at the manager level and above.

According to the bankruptcy filing, military passenger revenue for 2011 decreased by $80.2 million, or 11 percent compared to 2010. Military cargo revenue decreased by $41 million, or 29 percent. Hourly rates paid per mile under the 2011 Air Mobility Command contract were down 5.2 percent for widebody passenger aircraft, 5.5 percent for narrowbodies and 2 percent for large freighter aircraft compared to the 2010 contract. The decline in rates was due mainly to a combination of lower costs from other airlines and changes in the mobility command’s allowable costs, Global Aviation said.