Surf Air's Troubles Raise The Question, Who's Flying Your Airplane?

Citing Failed Business Models, Poor Management, and Undercapitalization, James Butler Reinforces the Importance of Due Diligence

Bethesda, Maryland • July 2018

A week after celebrating its five year anniversary, membership-based jet provider, SurfAir, put out a late-night press release downplaying some very grave financial and operational problems.  In addition to being sued by aircraft operator Encompass Aviation for $3.1 million in overdue payments and unspecified damages for breach of contract, SurfAir also owes more than $2.3 million in federal taxes, according to tax lien notices filed with the IRS.  

James Butler, CEO of Shaircraft Solutions, tells Forbes, “In general, there are few barriers to entry into the private jet business and, over the past 20 plus years the landscape is littered with newcomers who failed because their business models didn’t make sense, they were poorly managed, they were undercapitalized, or all of the above. The lesson here for private jet customers is do your due diligence, just as you would with any substantial financial investment, and have a knowledgeable attorney or adviser on your side of the negotiating table.”

Butler, who has been independently advising private air travelers for more than 20 years, offers sage advice on how to mitigate the risks associated with jet investments.  “Review the operator’s financial statements and make sure they’re audited; Determine the operator’s pedigree. How long has it been in business? Ask what safety ratings it has, and speak directly with the CFO and demand information with regard to financial factors such as capitalization, debt, cash flow, revenue and historical results.”

Butler also suggests searching public records to make sure there are no existing liens against the operator’s assets. Then, to safeguard against future financial woes, he advises requiring that any funds paid on account be held in escrow.  This way, in the event the operator ever files for bankruptcy, those funds are not susceptible to creditors.

The bottom line? “If the operator is making promises to you that seem too good to be true, for example, free flight time, free upgrades, it’s probably making the same sorts of promises to other customers,” Butler says. “Consider whether it can it perform all these promises and still turn a profit.”

Whether you’re considering a new private jet investment, or have concerns about your current provider, contact Shaircraft to discuss how we can help!

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