Group A | 5
Proposal:
Blue Yonder Airline Bankruptcy Negotiations Proposal
Evangeline Crenshaw, Bankruptcy Trustee~ Viktoriya Kobzar, Pilot & Flight attendants ~ Lylla Harold, Long-term bond holder, and ~ Therese Dennis, Lease holder aircraft
Walden University
Professor: Nicole Martin-Martinez
Advanced Business Law
April 02, 2018
Bankruptcy do not have to be bad, or a means to an end, but should be clear and well understood!
~ By Evangeline
Bankruptcy Negotiations
Introduction
From a management’s perspective, I feel that Chapter 11 would be the best option at this time. A pay cut of 15% maybe good in the long run, however, I feel that our overhead is high and the industry is hurting. Due to struggling industry suffering from change, we have determined filing for bankruptcy under chapter 11 provides several benefits to Blue Yonder. This also gives us the option of being in charge of business operations. If the court agrees with this plan to repay the debts, being this is the most convenient option, the business would remain operational. A chapter 11 provides the opportunity for the company to be restructured more efficiently, hopefully resulting in the company returning back to profitability. On completion of the repayment plan the management of the company will be returned to the debtor. Additional information required could involve the number of assets that are under lien. Some airplanes maybe disposed to reduce the operational costs and also to assist in debt recovery. Also it is assumed that the average net earnings per year would average $260 million as reflected on the statement of financial position. The measures would be critical to avoid filing the bankruptcy under chapter 7, understanding this provisions provide for liquidation of assets to repay the creditors (US Courts.gov, nd).
Blue Yonder Airlines has proposed to file a Chapter 11 and following this plan to avoid the pitfall of a Chapter 7.
· The representatives of Pilots and Flight Attendants have proposed to review reduction in their salaries by 25% in order to recover about $57 million annually instead of retrenching some employees.
· Our group has also proposed the sale of about six planes to reduce the fuel and maintenance expenses. These amounts would also be used to reduce the payment of debts and consequently the reduction of interest payments.
· The overall repayment plan is to downsize the operations of the company and allow the company some time to recover from the lease contracts and the hard economic period. Regular employees are also willing to take a pay-cut, as well as, the executives.
· The sale of planes are targeted to raise about $300 million as the planes are well maintained and can still serve for another five to ten years. The planes would also save about 20% of total fuel expenses as well as the maintenance costs.
· Other amounts would be recovered from the company’s annual profits while no dividends would be paid for the next five yea ...
1. Group A | 5
Proposal:
Blue Yonder Airline Bankruptcy Negotiations Proposal
Evangeline Crenshaw, Bankruptcy Trustee~ Viktoriya Kobzar,
Pilot & Flight attendants ~ Lylla Harold, Long-term bond
holder, and ~ Therese Dennis, Lease holder aircraft
Walden University
Professor: Nicole Martin-Martinez
Advanced Business Law
April 02, 2018
Bankruptcy do not have to be bad, or a means to an end, but
should be clear and well understood!
~ By Evangeline
Bankruptcy Negotiations
Introduction
From a management’s perspective, I feel that Chapter 11 would
be the best option at this time. A pay cut of 15% maybe good in
the long run, however, I feel that our overhead is high and the
industry is hurting. Due to struggling industry suffering from
change, we have determined filing for bankruptcy under chapter
11 provides several benefits to Blue Yonder. This also gives us
2. the option of being in charge of business operations. If the court
agrees with this plan to repay the debts, being this is the most
convenient option, the business would remain operational. A
chapter 11 provides the opportunity for the company to be
restructured more efficiently, hopefully resulting in the
company returning back to profitability. On completion of the
repayment plan the management of the company will be
returned to the debtor. Additional information required could
involve the number of assets that are under lien. Some airplanes
maybe disposed to reduce the operational costs and also to
assist in debt recovery. Also it is assumed that the average net
earnings per year would average $260 million as reflected on
the statement of financial position. The measures would be
critical to avoid filing the bankruptcy under chapter 7,
understanding this provisions provide for liquidation of assets
to repay the creditors (US Courts.gov, nd).
Blue Yonder Airlines has proposed to file a Chapter 11 and
following this plan to avoid the pitfall of a Chapter 7.
· The representatives of Pilots and Flight Attendants have
proposed to review reduction in their salaries by 25% in order
to recover about $57 million annually instead of retrenching
some employees.
· Our group has also proposed the sale of about six planes to
reduce the fuel and maintenance expenses. These amounts
would also be used to reduce the payment of debts and
consequently the reduction of interest payments.
· The overall repayment plan is to downsize the operations of
the company and allow the company some time to recover from
the lease contracts and the hard economic period. Regular
employees are also willing to take a pay-cut, as well as, the
executives.
· The sale of planes are targeted to raise about $300 million as
the planes are well maintained and can still serve for another
five to ten years. The planes would also save about 20% of total
3. fuel expenses as well as the maintenance costs.
· Other amounts would be recovered from the company’s annual
profits while no dividends would be paid for the next five years.
· Fuel suppliers are willing to supply the fuel as long as they
are paid half the amount owed and the rest spread out through a
five year period. The same case applies to the long term bond
holder and the aircrafts lessor.
· Operating revenues have been calculated and add up to $927.
This has been taken as the turnover of the annual company sales
turnover.
· The lease holder of the planes will reduce the lease payout by
$100,000,000 which is a 20% reduction. Which will result in an
immediate debt reduction of $100,000,000. To reduce the
interest collected this year by 50% the lease holder can
eliminate 22.5 million in Operating cost.
In conclusion, expenditure on fuel would reduce by 20%
because of the sale of the six planes while the regular earnings
have been determined at 927, leaving out the savings of 260
million as a provision of reduction in earnings due to the sale of
the six planes. The payment plan is attached on the appendices.
Note: at the end of the five year period, Blue Yonder would
have an extra $8 million after paying off all its debts.
Appendices:
Blue Yonder 5 year Repayment Plan
Earnings & Operating Expenses ( Figures in $ millions)
YR 1
YR 2
YR 3
YR 4
YR 5
7. Unfunded Pension Obligation
80
80
80
80
80
Total Annual Expenses
1365
955.5
955.5
955.5
955.5
Income from the Sale of planes
300
0
0
0
0
Turnover
927
927
927
927
927
Total Earnings (Net + Bal b/fwd)
1487
1049
1020.5
992
963.5
Net Profit
122
93.5
65
36.5
8
8. References
Miller, R. (2014). Business law today. The essentials (10th ed).
Mason, OH: Cengage Learning.
US Courts.gov (n, d) Chapter 7 – Bankruptcy Basics retrieved
March 8, 2018 from http://www.uscourts.gov/services-
forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-
basics
