Flexjet could pocket $1.1 billion in lawsuit against Honeywell

A 2023 lawsuit filed by Flexjet, LLC., against Honeywell International, Inc., related to a 2019 agreement, could see the fractional provider pocket $1.1 billion, including liquidated damages, if it prevails.

It may also provide the untold story of an industry that, even before the Covid demand surge, was ill-prepared to handle any additional stress.

With minimal recovery and stagnation following the Great Recession of 2008, the OEMs and MROs in business aviation had been in a holding pattern for a decade when Flexjet and Honeywell signed their pact.

At the same time, fractional and large charter fleet operators, who fly airplanes more than double or triple the average individual owner in a typical year, were becoming a more critical part of the market.

The percentage of total flight hours clocked by charter and fractional operators increased from 43.5% in 2009 to 48.5% in 2019.

That five percentage-point increase represented an additional 648,472 flight hours flown by fractional and charter private jets in 2019 compared to a decade earlier.

Last year, fractional and charter operators accounted for 54.2% of all flying, according to ARGUS data.

Landings, takeoffs, and flight hours calibrate much of the maintenance needs for private jets.

The wear and tear of high-volume charter and fractional flights make it more likely that an airplane needs repairs.

Think about the house you live in and treasure versus an Airbnb at the beach.

Even pre-COVID, the Flexjet-Honeywell litigation shows intermittent parts shortages that delayed repairs.

For example, a September 2018 Honeywell service bulletin on defective #4 bearings created component shortages through 2019, delaying engine rebuilds for the aircraft types at issue in the litigation.

Then there were challenges of recruiting for next-generation skilled workers amid a constant stream of media vilification of private aviation.

The Mechanical Services Agreement, or MSA, at issue in the litigation called for Honeywell to service and maintain the engines it had supplied for several key Flexjet aircraft types.

As of early 2023, around 60 percent of the 271 aircraft in Flexjet’s fleet used Honeywell-manufactured HTF engines, according to court documents.

What’s more, if the engines weren’t returned within a specified time – between four and 30 days, Honeywell would be on the hook for $30,000 per day in liquidated damages for each delayed power plant.

In the private jet space, where the expectations of folks riding in the passenger cabin are sky-high, the turnarounds and penalties left little room for error.

Falling Behind At The Start

Flexjet says that in the first three years of the deal, until late 2021, Honeywell, despite not meeting schedules, honored the terms of the agreement and paid the liquidated damages.

From there, Flexjet says the relationship deteriorated with Honeywell not responding and eventually asserting Force Majeure in November 2021, citing Covid-19-related issues.

However, Flexjet says discovery showed blaming the pandemic was merely a pretext, and Honeywell had problems keeping up from the outset.

Flexjet Chairman Kenn Ricci tells Private Jet Card Comparisons he believes, despite signing a 15-year agreement, Honeywell was “unprepared for the pace of repairs.”

The case is currently progressing through the Supreme Court of the State of New York in the County of New York.

So far, the Court has found via summary judgment in favor of Flexjet on several key issues.

Honeywell is appealing.

A Bigger Force

For consumers of private aviation, the dispute provides a unique window into how the second-largest private jet flight provider, the industry’s most significant player behind behemoth NetJets, found itself struggling against an even bigger and more powerful force, the company that made and was contracted to maintain the engines that power a large part of its fleet.

Ricci sees his battle with Honeywell as a symptom where private aviation is being dominated by what he calls monopolistic OEMs and service providers that can dictate terms to operators.

“These monopolists go to try to preserve their position,” Ricci says.

He adds that Honeywell has the power to “force people to do things their way.”

As a side agreement to the 2019 deal with Honeywell, a Flexjet joint venture operating as N1, which served an in-house engine overhaul shop, was required to cease operations.

Flexjet alleges that Honeywell offered to speed up repairs if Flexjet would waive its rights to liquidated damages.

Filings also show Honeywell prioritized parts for engines bound for new airplanes over after-market customers like Flexjet.

A bigger issue may be the companies that supply and support private jet operators like Flexjet and other high-volume outfits, which, after being caught moving too fast before the 2008 crash, were stuck in neutral even before the pandemic brought more havoc and record demand.

Airlines Where Customers Set Routes and Schedules

The over 1,000 filings and countless pages of motions and exhibits reveal the complexity of operating an airline in which customers set schedules and routes, and even order catering, with as little as 10 hours’ notice.

In this case, it highlights how expensive and frequent maintenance demands for big fleet operators that regularly fly aircraft more than 1,200 hours per year are, as different as chalk and cheese, from those of private owners, who often use the same airplane types less than 400 hours per annum.

With the fractional model, where Flexjet has around seven customers per aircraft on types powered by Honeywell engines, the pressure to keep the engines attached to the airplanes and the airplanes in the air is intense.

Customers shell out millions of dollars for a slice of an airplane that grants them access to that fleet type.

They also pay six figures a year in monthly management fees, plus hourly fees for the time they spend traveling in the jets.

Within what’s called a primary and extended service area, which for the airplanes affected spanned from Hawaii to Alaska across Canada and down to the northern reaches of South America, customers can literally create their own route maps and schedules with the only constraints being runways long enough to accommodate their jet type and the ability to secure international permits.

If you are not a member of a fractional or jet card program that guarantees both rates and availability, it would be like calling American Airlines and telling them you wanted to go nonstop from Boca Raton (yes, there’s an airport there) to Napa (and no, they don’t have nonstop flights) Saturday at 4 pm on an specific aircraft type, and by the way, here’s what I want to eat and the type of bottled water.

Oh, and once they figure out the airplane, crew, catering, flight planning, and so forth, you can cancel without penalty up until the night before.

It’s a business; even when everything is going right, it’s hard to comprehend that, in the vast majority of cases, more doesn’t go wrong.

“The fractional operating model has always been demanding,” says Craig Ross, CEO/Founder of Aviation Portfolio, a service provider that works with fractional and high-volume flyers to maximize their experience.

He continues, “The fact is, even before Covid, it was difficult, and I am not sure that flyers appreciate what it takes to run a dependable, safe operation. Every day is a challenge, and I think this is just another example of how difficult it is to run an airline where your customers set the routes and schedules.”

No Engines For You

Part of the agreement Flexjet negotiated with Honeywell meant it was on the hook to service and return the engines enrolled in the program—or, in some cases, provide a loaner—within just four days.

What’s more, during the discovery process, Flexjet learned that, as early as 2019, a NetJets retrofit campaign was straining Honeywell’s rental-engine capacity, something it alleges contributed to Flexjet’s service delays.

A 2024 filing states that in 2019, “John Head, then Honeywell’s Vice President of Demand Management and the Customer Business Team Leader for Bombardier (made aircraft), testified that this NetJets campaign was ‘putting strain’ on Honeywell’s pool of available rental engines.”

For Flexjet, those loaner engines were not readily available.

A Flexjet damages expert named Philip Green testified that, except for March 2020 through January 2021, when there were up to 19 rental engines available, Honeywell’s Engine Rental Bank has never had more than four rental engines available for rent at any one time between April 2019 and April 2023.

He also told the Court that, over at least 10 months between April 2019 and April 2023, Honeywell’s Engine Rental Bank had no rental engines available.

Filings revealed that in July 2018, Bombardier warned Honeywell that its “rental pool of seven HTF7350 engines was not sufficient to meet needs, considering the amount of upcoming inspections and high rate of failure.”

Grounded Fleet

Ricci says, “In a normal operating environment, we would expect dispatch availability on the overall fleet to run between 82% and 85% on a regular week, and it would increase to as high as 92% to 94% for our heaviest peak travel days.”

Dispatch availability is the percentage of the fleet that is ready to fly when needed.

He continues, “Due to the impact of the HTF engine issue with Honeywell, we were seeing 64% to 74% for a regular week and approximately 76% to 82% for our heaviest peak travel days.”

HTF refers to the HTF7000 series of engines that power its Embraer Praetor/Legacy and Bombardier Challenger fleets of midsize and super-midsize private jets.

In other words, on some days, more than a third of its fleet powered by Honeywell engines was not available.

If you owned your own jet, you would be grounded and need to find an alternative.

With an on-demand charter, your broker would call you and offer options that might cost 50% more than you had initially paid.

In the world of fractional ownership, that’s not your problem, and if there are significant delays, you likely will be compensated in some way.

Ricci says, “We worked incredibly hard to avoid disruptions to our owners despite facing extraordinary internal strain. That wasn’t by luck. It was the result of deliberate, expensive, and often invisible actions we took behind the scenes to uphold our service commitment.”

He adds, “At the peak – December of 2024 and January 2025 – there were 91 engines off-wing supported by a small percentage of rental engines for a net impact of nearly 40 aircraft parked. At that time, some engines had been out of service for nearly three years.”

READ: Comparing the five ways to fly privately

$1.1 Billion in Damages

Honeywell has already noted the potential liability in a filing with the SEC.

The potential payout comes as Honeywell is planning to split into three separate companies.

So far, the Court has ruled that a provision for liquidated damages is enforceable, and, despite the pandemic, Honeywell did not have a viable force majeure defense.

A Honeywell spokesperson did not respond to a request for comments.

Ricci says, “The ruling provides that liquidated damages are enforceable against Honeywell with regard to enrolled engines, as well as engines not yet accepted by Honeywell for enrollment that were shipped to Honeywell’s Phoenix R&O facility, which are in the accrued amount of over $600 million, and leaves open the possibility for a further $500 million, representing liquidated damages relating to engines that Honeywell has not accepted for enrollment.”

Honeywell is appealing those rulings, and if successful, the case will go to trial sometime next year.

At this point, Flexjet is still paying Honeywell around $3 million per month to honor the terms of the agreement, which does not allow it to offset that cost against the liquidated damages.

Last year, Honeywell had revenues of $38.5 billion and an operating income of $7.4 billion.

Last year, Flexjet, Inc., including its fractional arm, jet card seller Sentient Jet, on-demand broker FXAir, and other businesses, had total revenues of around $4 billion.

Overcoming Delays

Despite the challenges of having a large chunk of its midsize and super-midsize fleet grounded without engines, 97.3% of Flexjet customers who are subscribers to Private Jet Card Comparisons rated its service as Excellent or Very Good —the highest of any provider in this year’s survey.

NetJets clocked in within the margin of error, gaining 95.2% top ratings.

Still, 40.5% of Flexjet clients reported delays, cancellations, or other service issues over the past 12 months.

That was slightly better than the survey average of 41.8%.

However, it reflects the delta between the challenges of navigating weather, air traffic control overloads, mechanical issues, maintenance, and everything that impacts getting you where you want, when you want, and how subscribers rate the overall experience.

In an industry that sells its services and justifies the cost with glossy brochures showing dad arriving in time to catch his kids’ soccer game and public relations focused on slick cabin interiors and celebrity chef partnerships, the Honeywell litigation gives an insightful view of the challenges of running an airline where your customers make up the routes and schedules as they go.

Fractional executives don’t have the carte blanche to cancel flights and rebook passengers via Chicago instead of Dallas two days later.

In fact, the liquidated damage rates, according to filings, were based on the average daily cost of chartering a replacement aircraft on the third-party charter market to replace the jet whose engine is being repaired.

Executives of several private jet fleet operators, who asked not to give specifics, say even today, too many of their factory-new airplanes are grounded, awaiting everything from replacement windshields to engine blades.

They say defect rates are too high, meaning newly delivered airplanes are often quickly out of service.

Behind those aircraft are customers who were sold guaranteed programs.

Another Record

The problems come as 2025 is shaping up to be the industry’s best year ever for flight demand, beating the previous records set in 2021 and then broken in 2022.

According to the latest WingX data, worldwide business jet departures are year-to-date 2% above the 2022 all-time highs.

The Lost Decade

While flyers may not have noticed, the post-Great Recession recovery never reached the folks who make and make the parts for business jets.

During the decade leading up to Covid, deliveries of new private jets were more or less flat line.

In 2008, the OEMs delivered a record 1,317 new private jets.

In that number, 2009 fell to 874.

From there, it went 767, 696, 672, 678, 722, 718, 666, 677, 703, reaching 809 in 2019.

2020 saw deliveries fall to 644 before rebounding to 710, 712, and 730, and last year to 764, per the General Aviation Manufacturers Association.

Top executives from Embraer Executive Jets, Textron Aviation, and Bombardier, speaking at the National Business Aviation Association’s annual convention this week in Las Vegas, discussed that period.

Embraer Executive Jets President & CEO Michael Amalfitano told a panel moderated by CNBC’s Phil LeBeau, “I think the difference is, if you say for a decade ago, the industry was flat for a decade…so the supply chain didn’t believe any growth that was coming from the OEMs because the marketplace was flat — 715 (new) airplanes (delivered) for a 15-year period was the norm.”

Textron Aviation President & CEO Ron Draper continued, “Michael’s not wrong. (The manufacturing side of the industry) doesn’t have the capacity that it needs to support the growth, and there are choke points…Covid accelerated retirements of a lot of older workers, and now everybody’s struggled to replace them. Workforce becomes the major problem to solve for OEMs and for the supply base.”

Bombardier’s President & CEO, Eric Martel, didn’t offer many reasons for optimism that there won’t be more challenges ahead.

He said, “We’ve seen a lot of craftsmanship leaving — people retiring or leaving the industry after COVID. And clearly, there’s been some knowledge transfer that just did not happen. So, we see quality escapes at tier-five suppliers that then hit tier-two, tier-three, and of course, tier-one.”

Insulating Private Jet Flyers

For the most part, operators you sometimes curse when there are delays or cancellations have been insulating you from most of the challenges they face, keeping the airplanes ready to fly.

After the percentage of Private Jet Card Comparisons subscribers who rated their jet card or fractional programs as Excellent/Very Good fell from 77.5% in 2021 to 61.7% in 2022, it recovered to 73.3% in both 2023 and 2024.

In the most recent survey, which concluded last month, 82.4% of flyers gave their provider Excellent/Very Good marks, with an additional 11.6% rating it Average and 1.7% stating it was too soon to tell. Only 4.3% gave their programs Below Average or Poor ratings.

However, several senior flight provider executives seconded Ricci’s assessment that making the planes fly on time — so you aren’t exposed to the issues they face — has become more complex and more expensive.

The WingX data shows current demand is 33% higher than in 2019, when records from the Honeywell litigation show a system already under “strain.”

Respondents to the latest quarterly JetNetIQ survey of business jet owners and operators say the top industry challenges for the next five years are aerospace supply chain recovery, aircraft maintenance overhaul and repair capacity, and, in fourth place, attracting and retaining top talent to the industry, a slim half percentage point behind antiquated and overstretched air traffic control systems.

Environmental and sustainability issues ranked 10th.

Don’t expect any letup in demand.

Ninety-one percent (91%) of respondents agreed with the statement that “without business aviation, my/our company or organization would be less successful and less profitable.”

Moreover, 67.6% strongly agreed on the necessity of private aviation.