They are not in very good shape right now, you should think twice before going there. They do not own any of the 737's and and are very heavy in debt. They have expressed an interest to be sold off, but unless someone wanted a sort center there is nothing to buy but debt. I also just read they are going to lose their stock listing and be traded OTC. I wish the guys at KH the best of luck, but I don't see who would touch KH for purchase. They only own 5 in service 727's, the rest are parked and all 737's are leased.
Boeing 737-300SF Cargo Aircraft Leases. At March 9, 2006, we had seven Boeing 737-300SF cargo aircraft under operating leases with aÇliates of GE Capital Aviation Services. The obligations of Kitty Hawk Aircargo under the operating leases are guaranteed by Kitty Hawk, Inc. and Kitty Hawk Cargo. The leases generally are not terminable prior to the expiration of the initial ten year term and impose limits on our ability to sublease the aircraft, but generally do not limit our ability to operate them on behalf of third parties in ACMI service. Each of the leases contains two 30-month extension options exercisable at our discretion. The leases allow us to substitute these aircraft for larger Boeing 737-400 cargo aircraft during the sixth year of the lease if they are available for lease by the lessor and we can agree on terms. In addition, we have a power-by-the hour maintenance agreement with Aviation Services International, LLC which covers normal maintenance for these aircraft.
During 2004 and 2005, we incurred signifcant one-time costs to integrate these Boeing 737-300SF cargo aircraft into our current feet and operations, including, but not limited to, costs relating to pilot training, maintenance training, purchases of additional tooling and spare parts and costs to modify our operational manuals and maintenance program. In 2004 and 2005, we incurred costs of approximately $1.9 million and $3.7 million, respectively, related to the induction of the Boeing 737-300SF cargo aircraft. We do not anticipate incurring additional Boeing 737-300SF cargo aircraft induction costs during 2006.
The Boeing 737-300SF cargo aircraft has higher lease and insurance costs than our Boeing 727-200 cargo aircraft. In addition, the Boeing 737-300SF cargo aircraft has approximately 30% less cargo capacity than our Boeing 727-200 cargo aircraft. The Boeing 737-300SF cargo aircraft generally has lower operating costs than our Boeing 727-200 cargo aircraft as a result of signiÑcantly lower aircraft fuel consumption rates, lower crew costs from operating with a two person crew instead of three, as well as lower landing fees and reduced maintenance costs over the long-term. In addition, the Boeing 737-300SF cargo aircraft has improved performance capabilities and range over the Boeing 727-200 cargo aircraft. We have
deployed the Boeing 737-300SF cargo aircraft in our operations in situations in which we can take advantage of its lower operating cost and improved performance characteristics and for which its capacity
is better suited.
Owned Aircraft. At March 9, 2006, we owned 12 Boeing 727-200 cargo aircraft of which five were operating in revenue service and one is temporarily parked and will be available for revenue service during
2006. Based on our current feet composition plan, we have determined it is uneconomical to perform the heavy maintenance required on the remaining six aircraft to return them to revenue service.