Special Bulletin: Avantair Lays off Employees, Halts Operations, Faces Lawsuits—Updated July 26, 2013
An Involuntary Petition was filed today with the Bankruptcy Court–view PDF file for further information.
Fractional aircraft provider Avantair’s troubles continue to mount. The company, whose fleet of Piaggio Avanti P-180 aircraft was grounded for the second time earlier this month, announced in a filing with the United States Securities and Exchange Commission on Wednesday that it has begun laying off employees just two days after a class action was initiated against the company in Oklahoma. Avantair also revealed that two of the lessors of aircraft in its fleet have notified the company that it is in breach of a forbearance agreement entered into earlier this month and those lessors intend to begin repossessing six aircraft from the company.
Avantair grounded its entire fleet of 56 aircraft for inspections last October after one of the company’s Avanti P-180 aircraft lost a tail elevator during a flight from Camarillo to San Diego, California last July. Avantair began restoring limited flight service in November, but the fleet was grounded a second time on June 7 because of an issue involving the inspection of time-sensitive parts. It does not appear that Avantair has conducted any flight operations since then.
News report out of Tampa Wednesday indicated that as many as 500 Avantair employees were being laid off. Employees reportedly received a letter stating that the Clearwater, Florida-based company would not be able to make its payroll Friday for the hours employees have worked since June 8.
The lawsuit filed in Oklahoma County District Court on Monday was brought by a company named Heisman Square, L.L.C. and seeks court approval to represent all Avantair owners as a class. The action comes on the heels of another lawsuit filed just last week by well-known Florida businessman and Republican Party leader C.C. “Doc” Dockery, who is seeking damages for the company’s repeated failures to provide him with aircraft flight services when requested and other alleged breaches of contract.
For hundreds of Avantair customers who have struggled to utilize the services of Avantair since the initial grounding in October 2012, this latest announcement comes as another dose of unwelcome reality. The majority of the Avantair owners who have consulted with Aerlex attorneys over the past nine months reported that they enjoyed the service prior to the grounding in October of 2012 and were especially fond of the Avanti P-180 aircraft. Today’s SEC filing indicates that Avantair hopes to seek alternative financing and resume operations as quickly and efficiently as possible. But for now, Avantair customers will be seeking alternative private aviation solutions. This group of owners has been sought after by charter companies and fractional providers for months and now will likely be inundated with solicitations.
When comparing fractional programs and charter programs, it is imperative to understand the differences and make sure that specific service obligations are incorporated into the agreements. Furthermore, prospective buyers should investigate their prospective provider and attempt to determine whether the selected company is financially stable.
In its Form 8-K filing with the SEC, Avantair stated:
On June 26, 2013, Avantair, Inc. (the “Company”) commenced employee furloughs as the Company addresses liquidity issues and seeks alternative financing arrangements that it hopes will enable it to resume operations as quickly and efficiently as possible. In addition, on June 24, 2013 the Company received notice of service of a class action lawsuit filed by Heisman Square, L.L.C. in Oklahoma County District Court, Oklahoma.
On June 13, 2013, the Company also entered into a Forbearance Agreement with Midsouth Services, Inc. and Clear Aircraft, Inc. (“Lessor”) related to past due lease payments for certain core fleet aircraft leased to the Company by the Lessor. On June 18, 2013 and June 25, 2013, the Company was notified by the Lessor that it was in breach of the terms of the Forbearance Agreement and the Lessor has been exercising and will continue to exercise all rights and remedies available under the Forbearance Agreement and applicable law, including taking possession of its leased aircraft and aircraft engines.