Surf Air buys online private aviation marketplace BlackBird Air; Creates Surf Air Mobility Corporation

By Doug Gollan, February 13, 2020

The new entity wants to ‘transform’ the 50-to-400-mile mobility market

50% of all flights are under 500 miles, it says

BlackBird was recently under FAA scrutiny

Surf Air has been trying to fly past liquidation of its European arm, a lawsuit with a former operator and IRS tax lien

Plans call for phasing out the BlackBird Air name

Los Angeles-based Surf Air said it has acquired BlackBird Air, an online aviation marketplace that has been under scrutiny from the Federal Aviation Authority.

At the same time, Surf Air is renaming itself as Surf Air Mobility Corporation.

Competing against eVTOLs

The mission is to transform the 50-to-400-mile mobility market. However, unlike Electronic Vertical Takeoff and Landing aircraft, the new entity is taking a different approach.

“Unlike eVTOL that requires building new infrastructure and new aircraft, Surf Air Mobility Corp. is able to capitalize on existing and under-used airports and airplanes today, scaling the business in advance of electrification,” the company said in announcing the deal.

Surf Air buys private aviation booking platform BlackBird Air
BlackBird Air has discontinued Part 91 dry leases after FAA scrutiny. While continuing to focus on turboprops and piston aircraft, it now only allows members to fly under stricter Part 135 rules.

“We’re in the first phase of a massive industry shift where more flyers are choosing to access the time-savings and optimal experience that only general aviation can provide,” said Surf Air CEO Sudhin Shahani.

Last March, BlackBird said it had raised $10 million in funding, powering it to 500% year-over-year growth in 2019, according to Shahani. He said the BlackBird name will eventually disappear.

Shahani said, “Similar to the way that three-sided marketplaces have transformed the home and ride-sharing economies, Blackbird has unlocked the potential of general aviation with a simple consumer experience and by tapping into an existing underutilized asset base to create affordable on-demand flying.”

He claimed, “Combining this with our scheduled membership platform will bring increased value and options to both of our customer bases and current and future operating partners.”

Shahani said some Surf Air flights will be added to the BlackBird app.

BlackBird Air founder and CEO Rudd Davis becomes COO at the new entity.

BlackBird Air’s Controversy

BlackBird’s fast growth has come with considerable controversy.

An exclusive report last March by Private Jet Card Comparisons uncovered BlackBird’s complex and legally binding contracts. Customers agree to terms when they click the buy button.

While flights on private aircraft, typically single-engine piston and turboprop airplanes, could be had for as little as $100, users were actually entering a Part 91 dry lease for the aircraft instead of typical Part 135 charter. As such, they were agreeing to operational control and the same responsibilities of an owner.

At the same time, the contracts exempted BlackBird Air from any liability. In other words, if there was a problem, don’t call us.

https://privatejetcardcomparisons.com/2019/03/27/blackbird-just-raised-10-million-to-be-the-uber-of-private-flying-heres-what-i-learned-from-reading-the-fine-print-with-an-aviation-attorney/

In selling to Surf Air, Davis said, “There is a staggering amount of excess capacity in general aviation because historically the space has been fractured and inaccessible.”

He added, “We founded BlackBird to change that, using technology to bring transparency and simplicity to customers while bringing more demand and utilization to operators.”

FAA Investigates BlackBird Air

However, in December, the FAA released a letter it had sent to BlackBird accusing it of circumventing Part 135 regulations that govern private aviation charters.

By flying under Part 91, the rules that govern an airplane owner flying for their own purposes, airplanes, operators, and pilots received less safety scrutiny. That includes duty time for pilots. However, pilots, owners and operators of these flights are only allowed to accept compensation under a series of very narrow exemptions.

After receiving the letter from the government, Davis told us, “We disagree with the FAA’s interpretation and look forward to our continued discussions with them.”

He added, “Part 91 operations (short-term leases to users) are the minority of our business and for the moment we will pause that aspect of the business and continue to provide charter and individual seats from our part 135 partners.”

Shahani confirmed that BlackBird ended offering the Part 91 flights in December.

https://privatejetcardcomparisons.com/2019/12/19/faa-investigation-of-uber-for-private-flights-blackbird-highlights-serious-problems/

At the same time, Surf Air Mobility Corp said it has added Peter Evans, former head of operations for Virgin Atlantic Airways, as head of operations.

“Keeping our travelers safe is the company’s number one priority,” said Evans. “Our operations will continue to exceed all safety requirements of the FAA and continue the strict vetting and safety policies of all Part 135 operators on the network.”

Surf Air Plots Turnaround

The accessible private aviation marketer sells programs that enable customers to book single seats on scheduled flights, mainly aboard a fleet of Pilatus PC-12s. It has offered a combination of pay-by-flight and memberships that enable customers to fly as much as they want for one monthly price.

Surf Air’s own challenges date from around the time veteran airline executive Jeff Potter exited as CEO in 2017.

The company had built a seemingly successful network in California linking mostly secondary airports and other airports that focused on general aviation.

However, its deal to acquire Texas-based RISE and expand the service across the western U.S. never yielded growth.

Surf Air also made an attempt to expand into Europe using a mix of Embraer Phenom 300s and PC-12s even recruiting former a top British Airways executive to lead the push.

In less than two years that operation was shuttered. Filings show it left around $272,000 due to former members for unused deposits and subscriptions. Sudhani told Forbes.com the company was working to reimburse those customers.

https://privatejetcardcomparisons.com/2018/11/27/surf-air-pulls-the-plug-on-europe-plans-to-focus-on-u-s-operation/

During the same period, Surf Air made the decision to outsource operations. That resulted in competing lawsuits with now-defunct Encompass Aviation, which included a fight over part of the PC-12 fleet.

Those problems were heightened when the IRS filed a lien against Surf Air alleging millions of dollars in unpaid bills.

Last March, Sudhani told me for an article on Forbes.com, “I think we are at the last page of a turnaround plan. We’re profitable on unit economics, and we’re working on getting the company profitable.” He also said it was paying off the back taxes via an agreement with the IRS.

BlackBird Air current pricing

Currently, the BlackBird Air app includes a myriad of single and twin-engine propeller aircraft. However, they now are offered under Part 135.

Perhaps, unsurprisingly, prices seem to be significantly higher than when I did my report nearly a year ago.

At that time, I was able to book a seat via a dry lease from Los Angeles to San Diego for $99.

This morning, the best rate was $905 for a single seat on 4-seat Cessna Centurion or $1,076 for all seats.

In addition to the Part 135 charter flights, the BlackBird website also lists flights operated by JSX.

JSX, is part of JetSuiteX, Inc., and instead of selling whole airplane charters, it offers seats. It is using refurbished regional jets offering scheduled flights in the Western U.S. However, by using private aviation facilities instead of commercial airport terminals, its “hop-on, hop-off” marketed flights can cut total travel time in half.

Sudhin said, “We have no plans to remove them for now.” He also said a desktop booking engine is in the pipeline.

However, it seems BlackBird didn’t have any deals with JSX to begin with. “JSX has no business or contractual relationship with either Blackbird or SurfAir,” JetSuiteX, Inc. CEO Alex Wilcox told Private Jet Card Comparsions.

He warned, “Members of the public should not be misled by either of them. Blackbird engages in screen scraping and (is an) unauthorized reseller of JSX services.”

Private Jets Go Digital

Surf Air isn’t alone in plucking up troubled companies to boost its digital profile.

Vista Global Holdings acquired JetSmarter for its technology despite more than a dozen lawsuits. It then promptly erased its name by merging it with XOJET and renaming the new entity XO.

Other major players have been working to expand their digital acumen preparing for a new world of private aviation consumers.

Directional Aviation, which owns Flexjet and Sentient Jet, acquired U.K.-based digitally forward charter broker PrivateFly. It has been expanding the broker’s presence in the U.S. It also launched a B2B platform Tuvoli.

Wheels Up, which recently acquired Delta Air Lines’ private jet division, also picked up Avianis, a B2B connector.

Wheels Up now counts Delta Air Lines as its largest shareholder. It is expected it will attempt to leverage the airline’s digital presence. That means accessing tens of millions of consumers who have its app already on their smartphones.

Separately, BlackBird sent an e-mail offering 20 flights on Surf Air for $7,900, not including the 7.5% Federal Excise Tax. It is also offering 25% off various Surf Air membership for up to one year.

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