The time to talk to your broker, operator or jet card provider about COVID-19 related cancellations is before you sign the contract
One problem in life is most consumers don’t read the fine print in contracts they sign until there’s a problem. That was a key point from panelists, including a private jet charter operator, a major charter broker, and executives of the National Air Transportation Association (NATA), during a webinar yesterday.
The COVID-19 pandemic is now throwing new wrinkles into what happens if you need to cancel your flight after you book it. Or, if your provider cancels.
It’s not a one-size-fits-all answer, either. While the yachting industry has industry-standardized charter contracts, there is no such thing for private jet charters, said the panelists. Operators and brokers each have their own and differing contracts. Agreements can range from a couple of pages to more than a dozen.
Private Jet Charters vs. Buying An Airline Ticket
When you buy an airline ticket, you are joining a flight that is leaving and departing at specific times somebody else schedules. It’s leaving whether or not you are on it. When you sign that contract to charter a private jet, you are in essence becoming an airline scheduler.
Yes, offering private jets for charter is not the same as selling seats on a scheduled airline.
With the latter, airline computers and analysts plot out where their fleet is going to fly and when as far as a year in advance. That includes the time the aircraft will spend on the ground between flights down to the last minute. They can view historical data to know on a day-by-day, hour-by-hour basis how much time they have to add for delays on the ground or in the air. Even with all this, around 25% of airline flights arrive at their destinations delayed more than 15 minutes late.
Private jet charter operators allow you to rent an airplane on a flight-by-flight basis. In other cases, they offer jet cards or fulfill flights for brokers, a combination of one-off customers and jet cards sold by the broker. The operators are, in fact, running unscheduled airlines. Where they go and when they go is based on your needs. Your signature on a charter contract is putting into motion the deployment of a multitude of people to move an asset worth millions of dollars.
Suran Wijayawardana, a panelist and the COO of charter operator Alerion Aviation, said these days most flights are booked a mere four to 10 days prior to departure.
Single bookings easily range from $10,000 to well over $100,000. Customers, particularly novices, have high expectations, including to be accommodated when their plans change. For the reasons noted above, that’s not always easy or possible.
Elleana Spanos, senior legal counsel for Air Charter Service, one of the largest brokers of on-demand charters and jet cards, said due to COVID-19 she is seeing more operators add force majeure clauses specific to pandemics to their contracts. Not unexpectedly, they are worded to protect the operator.
How Private Jet Charter Cancellations Work
When you book your flights on a one-by-one basis – on-demand charter – generally speaking, you pay upon signing the contract. Contracts for one-way flights in many instances have a 100% cancellation charge after booking, particularly if you are traveling during peak periods.
Some may have deadlines requiring shorter notice periods to cancel, however, the point is they vary significantly. After all, once you book, it means the operator can’t offer that aircraft to other customers. It also now means they are now building that aircraft’s schedule around your flight and others who had booked.
The operator has to schedule pilots based on Part 135 regulations dictating daily and monthly duty limits. Much of the charter fleet in the U.S. is managed. That means the operator is flying the aircraft on behalf of its owner, usually UHNWs and companies that don’t want to have their own flight department.
The operator is filling in charters around the owner’s needs. Some management contracts require the operator to deliver specific amounts of charter revenue, so there is pressure there. Plus, there is regular maintenance that has to be planned for as well. COVID-19 has made finding available slots for that harder to schedule.
By the way, a one-way booking doesn’t mean you aren’t returning to the same airport you are leaving from. It just means the operator can’t fulfill your trip with the same aircraft and flight crew. In other words, after they drop you off, the plane is returning to base, picking up new customers, or jetting somewhere else to pick up new passengers.
Unless you are returning the same day, next day, or for places like Hawaii and Europe, within a week, you are usually buying one-way pricing.
So Sad, Too Bad
Operators, as you may know, if you regularly read this site, can cancel for a host of reasons. A mechanical or sick pilot is typical as day-of-flight reasons. However, the owner might decide to pull his or her aircraft because they need their plane those days. It could even be the operator got a more lucrative trip. All they have to do is refund your money.
If after the operator pulls your aircraft and the new charter costs more, you have to pay the new, higher price if you want to fly.
How often does that happen? It’s hard to put a finger on it. Broadly speaking, one answer would be not often. However, in talking with three brokers, the answers I got were last week, this week, and this morning.
If the operator cancellation happens a week or more in advance of your flight, brokers say they can typically get a replacement jet at a similar price. If you are a big customer or regular customer, they may eat the difference to keep you in the fold. However, that’s a customer service decision.
Once the first operator cancels, the next contract is likely with a new operator. Even if it’s the original operator, the aircraft is probably owned by somebody else, so the terms might be different. A same-day requote if your flight is canceled by the operator can mean a price bump anywhere from 10% to 100%.
One broker compares it to buying a house and your first deal falls through. The owner of the next house isn’t going to change their price because the previous deal didn’t work out. If you are flying out of a smaller airport, chances are the replacement aircraft has to be repositioned in. Your requote is in part paying for that empty leg flight.
COVID-19 and Private Jet Charters
So that’s without a global pandemic. Now, what about adding COVID-19 into the mix?
For example, you book a trip to a destination months in advance. A few days before you are ready to go, that destination implements a 14-day stay-at-home quarantine edict for people arriving from where you live.
Even if the borders are now closed to American citizens, if the operator and its pilots are legally able to fly the flight, you could be out of luck and money.
The operator lost the opportunity to sell that aircraft to another charter customer. Over 80% of Part 135 operators have fewer than 10 jets in their fleets.
Or let’s suppose you were to fly you from New York to Turks & Caicos. That jet may have been headed to San Juan to pick up another customer two days later and fly their group to Philadelphia. The operator still needs to get the plane from New York to Puerto Rico regardless if you are going or not.
Now let’s say the new restrictions mean they can’t operate your flight due to government restrictions. It would depend on the operator’s contract. A force majeure clause might apply.
Whether or not the operator can keep all your money is unclear. They certainly could cite expenses incurred, and deduct those. That might include the cost of getting the airplane where it needs to be for the flight after yours. That could be a big chunk of your money.
Now let’s look at another complicated example.
One of your family members tests positive for COVID-19 a day or two before your trip. You notify your broker or the operator as such and want to cancel the trip.
The answer to you is the trip can be cancelled, but no refund.
You then decide the rest of the party will travel. You have the villa rented, right?
The operator declines to fly your group worried others in your party could pose a risk to their flight crew. There is also potential liability flying a COVID-19 positive passenger into an area with restrictions.
At that point, the operator has spent hours planning your flight and even thousands of dollars organizing permits, and so forth. They also had to turn down other flights since the aircraft you booked. The answer is still, no refund.
Would that hold up in court if you sued to get your money back? It hasn’t happened yet, so panelists were unsure.
After a representative from a large operator asked, Spanos, said, “There’s no question the operator (has) a right to refuse (to fly you). The question is what is anybody entitled to charge – or do you have to refund?”
She adds a different example of where an operator would likely be able to keep your funds.
With the current fires in California, you can’t get to the airport because of road closures. However, the operator had the aircraft positioned, with the crew ready to go.
Panelists on the NATA seminar said many of the current challenges aren’t specifically addressed in contracts.
What can you do?
What are you options to reduce risk?
One answer is jet cards offering fixed one-way pricing and guaranteed availability. The non-peak cancellation window for jet cards ranges from under 10 hours to 96 hours. Peak cancellation deadlines generally span from 48 to 168 hours.
If you book your flights weeks or months in advance, these types of membership programs give you more flexibility to change your plans late in the game. If the operator cancels, most fixed-rate card programs include service recovery – getting you a replacement aircraft at their expense. Some will even offer you compensation for delays. Jet card memberships with dynamic pricing sometimes feature better cancellation terms that if you just call for a one-off booking.
Jet card providers also try to accommodate post-deadline changes as well. After all, they want you to renew. People who spend a quarter of a million dollars on private jet travel annually don’t grow on trees.
Michael Farley is CEO of Outlier Jets, which sells cards and single trip charters. He says, “The most undervalued aspect of a jet card is we assume a lot of risk for you, particularly if you are going to cancel. It only takes one cancellation to wipe out years of savings from on-demand charters.”
The Worth Of A Good Broker
The second recommendation is to work with a good broker. Brokers know which operators are more flexible both contractually and when something goes amiss. They also know the operators who are the most dependable. Like good travel agents, they are volume buyers, so they have more clout in getting a resolution that favors you.
“It’s better to be working with somebody who has the cellphone of the CEO instead of a 25-year-old kid who is just reading what’s written on a piece of paper,” says Kevin Diemar, CEO of Unity Jets.
Andrew Flaxman, a former private jet pilot and director at ExpertJet, said one of his customers was delayed returning to the U.S., meaning he was going to miss a domestic charter flight. The operator initially wouldn’t refund the $22,000 for the domestic flight that had been booked. After some back and forth, Flaxman was able to get the operator to fly his customer for the original price a day later.
Jonathan Epstein, an aviation attorney with Holland & Knight says even if the contract is seemingly against you, you can still argue to get a refund, particularly if the operator can’t make a case that they suffered a loss because you canceled. He said courts are typically wary of giving one party a windfall especially, particularly if you were simply accepting a boilerplate agreement.
So what’s the bottom line?
I want to emphasize the brokers I talked to, both the ones I quoted directly and others, say operators are not trying to cancel trips. Knowledgable brokers work with operators they know to be dependable. They also know and avoid specific tails with finicky owners. “It’s a small industry,” says Diemar.
Both he and Epstein say the first course is to see if there is common ground. Would you be willing to fly to another destination? Will you agree to delay your trip and rebook at a later date.
However, the fact that the various cancellation scenarios I’ve reviewed may not be widespread won’t mean much if you end up on the short end of a $50,000 charter that cancels.
Now, more than ever, discuss with your provider cancellation scenarios. Then read – and have your lawyer read the contract before signing.
If something goes wrong and you can’t get a refund, Kittle summed it up this way: “It’s probably going to be messy.”