Bankruptcy court approves JetSuite's reorganization plan

The approval of JetSuite’s Chapter 11 reorganization comes after opposition from the Trustee overseeing the case and charges the private jet operator had become a Ponzi scheme

(Updated Sept. 8, 2020) JetSuite may fly again. At least that’s the possible outcome now. The judge overseeing the Chapter 11 confirmed the company’s reorganization plan, according to Ted Gavin, managing director of Gavin Solmonese. Gavin serves as the private jet charter operator’s chief restructuring officer. The hearing took place this morning in Delaware.

“I’m pleased and proud that the Bankruptcy Court confirmed JetSuite’s plan of reorganization. The plan received overwhelming support from creditors, SuiteKey customers, aircraft lessors, and trade creditors alike,” Gavin tells Private Jet Card Comparisons.

He added, “The Court’s order means that the company can look forward to its next chapter of providing exceptional service to customers, and the post-confirmation trust established under the plan will shortly get to the business of returning value to unsecured creditors. Most cases are liquidations. I’ve been privileged to be a part of a case where everyone worked together to find a way to reorganize this company and return the best possible value to its stakeholders.”

Last-minute roadblocks

The approval came after potentially being derailed at the last minute. Last week, on the final day to file comments, both the trustee and two SuiteKey customers filed objections.

The trustee questioned the need for non-consensual third-party waivers as well as the company’s intent to restart operations.

The two former customers accused JetSuite of becoming a Ponzi scheme.

JetSuite dismissed the objections and charges of impropriety. The company, officially known as Superior Air Charter, LLC, pointed a surplus of over $50 million in transfers it received from related companies. It also pointed to an industry that operates on thin margins. There was also expensive litigation over a fleet of Citation CJ3s it planned to use for east coast expansion. It said the “defective” aircraft cost it “upwards of $24 million,” not including litigation costs.

Alex Wilcox, the group’s founder and CEO, called the claims of “wrongful conduct and breach of fiduciary duties” false. He said, “All funds received by the Debtor, including from SuiteKey members, were used solely to fund the Debtor’s operating expense.” In an interview, Gavin said, “Nobody was getting any money out (of JetSuite).”

The judge noted, “[W]hile the plan includes an injunction barring suits against released parties, arguments to allow individual suits can still be considered by the court after confirmation.”

Adding the over $50 million is jet card deposits lost and the inbound funds, JetSuite apparently burned through over $100 million since 2016. JetBlue and Qatar Airways both had made high-profile investments in JetSuite and JSX, although amounts were never disclosed.

JSX continues to offer scheduled flights in the Western U.S. It uses reconfigured regional jets operating from private jet terminals on short-hop flights. It was not part of JetSuite’s bankruptcy.

JetSuite 2.0

JetSuite moves forward with three Phenom 100 ver light jets. In its filings, it says it has maintained a Gold rating from Argus, a third-party safety ratings agency.

Wilcox noted, after the initial downturn in travel, including private aviation, the market now holds opportunities for the restructured company. Part 135 flights dropped 67% in April when JetSuite grounded its fleet. The current volume is off by slightly less than 20%.

“[A]s the country has begun to reopen, a new segment of travelers have turned to chartered and other private alternatives to the traditional commercial airlines,” Wilcox said.

He predicts, “[A] surge in bookings” with “the majority…made by new leisure travel customers,” something he said JetSuite’s “aircraft and operations are well suited.”

So far, the company hasn’t revealed specifics about its planned restart.

(Sept. 8, 2020 updated) – A report by Law360 reports the new JetSuite will offer charter flights via “a brokerage model” as opposed to “direct consumer interactions.”

Nearly 1,000 SuiteKey customers had over $50 million in unused deposits when JetSuite grounds its fleet in mid-April. They will now be eligible to receive credits on JSX or payouts between 3 and 15 cents on the dollar.