On May 19, 2023, fractional operator, JetIt, grounded its HondaJet fleet, citing safety concerns. Within a week, JetIt announced that it had ceased operations. Private Jet Card Comparisons turned to Shaircraft CEO, James Butler, for his thoughts on what’s next for JetIt and strategies available to JetIt owners.
PJCC: “What are the potential options for JetIt? Is it bankruptcy, or do they have other options?”
Butler: “The JetIt matter is rather complex for the owners. That’s exacerbated by the fact that at least some fractional shares in some aircraft may be owned by JetIt, and so, at a minimum, JetIt may be precluded from acting in support of their owners.”
PJCC: “If the owners are able to sell their jets, is it possible the Trustee could unwind the transaction?”
Butler: “[A] ny bankruptcy filing by JetIt will look back and unwind actions by creditors, including owners, and also put in place a stay of future actions. That said, individual owners can provide notice of default under their contract documents. Also, owners should think carefully about paying their bills to JetIt, in particular, whether they may have an offset against any amounts owed them by JetIt.”
PJCC: “Is there any other advice you would give to JetIt fractional owners?”
Butler: “If individual owners of aircraft can band together to take possession of their aircraft, that’d be better than not. To do so, they may have to pay off unpaid debts for maintenance, hangaring, etc., which may now be liens against the aircraft. Of course, getting possession of the aircraft may involve flying them, for which, obviously, you need pilots who likely have been laid off by JetIt. It’s likely that unrelated third-party brokers will attempt to swoop in to manage the situation for owners and help sell their aircraft.”
The bottom line? As you’d expect, fractional companies draft their contracts in a way that shifts more and more risk to owners. When you are putting thousands, or millions, on the line, you want to make sure that you have real and workable recourse should the provider fail. JetIt isn’t the first fractional company to go belly up, and it won’t be the last. Stories like this underscore the importance of having an experienced private aviation attorney on your side when navigating fractional contracts.
