$30 million in legal fees, years of litigation, and a billion-dollar settlement, Flexjet’s Ricci says, customers must now come before profits.
Hours after banking a settlement of $470 million in cash and logging $575 million in maintenance credits from Honeywell, Corporate Jet Investor described Flexjet Chairman Kenn Ricci’s mood during an interview as “not particularly happy.”
If that seems crazy, it may make a lot of sense.
For Ricci, the settlement doesn’t solve the problem.
And the problem, per Ricci, is that the ecosystem of companies like Honeywell, which support companies like Flexjet, is failing their customers.
Ricci’s business, of course, is operating what is essentially an on-demand airline.
Flexjet operates around 300 private jets that customers can use to fly globally or locally.
It simultaneously juggles customers flying from Dresden to Detroit and from Shreveport to San Antonio.
Unlike regular airlines, which set schedules months in advance and tell customers what they can eat – if anything at all – Flexjet customers, like those of NetJets, VistaJet, and others, draw up the routes and order the catering hours before departure.
Whereas planners at scheduled airlines like American, United, and Delta know how many room nights they need for crews at the Kansas City Doubletree every night, night by night, for the next year, flight crews at Flexjet often end up in a different city than the one planned when they woke up.
Customers – who own fractional shares of a jet in its fleet and then get access to an entire fleet type – pay millions of dollars for the privilege, including monthly management fees, in addition to getting charged when they are flying.
Daily, flight planners and operations professionals at Flexjet and other private jet operators that offer guaranteed programs are trying to complete a puzzle whose pieces change dynamically.
It’s a game that never ends.
Weather, congestion, and closures can mean searching for alternative airports while in flight.
That includes helping customers rearrange ground transportation, all in the goal of getting them to their destination safely and on time.
And then there is maintenance.
Mechanical issues pop up during the day.
Schedulers have to juggle aircraft to cover those that go out of service.
Replacement aircraft of the same type or better at no extra cost to the customer are contractually guaranteed by programs like Flexjet.
Then there is scheduled maintenance.
Scheduled maintenance should be scheduled, right?
There is a schedule. The airplane goes in on a certain date. The maintenance is done. It’s ready to go on a schedule.
If it actually worked like that, there wouldn’t have been a lawsuit.
READ: Flexjet could pocket $1.1 billion in lawsuit against Honeywell
Flexjet’s lawsuit came after Honeywell failed under its contract to service the engines it made that power a large part of Flexjet’s bread and butter: its Embraer and Bombardier midsize and super-midsize cabin fleet.
Depositions and documents found that Honeywell didn’t have enough loaner engines.
It also stopped contractual liquidated damages payments that helped offset the cost of Flexjet chartering replacement aircraft from other operators to fulfill its flight obligations to customers.
Honeywell claimed force majeure, citing the Covid pandemic.
However, Flexjet lawyers argued that while Honeywell failed to repair or replace engines on Flexjet airplanes, it was providing OEMs with those same engines.
That way, they could deliver new jets and earn income by selling jets to new customers.
Flexjet and other existing customers were made to wait.
The lawsuit lasted three years, and Ricci says legal bills were in the $30 million range.
Speaking to Private Jet Card Comparisons, Ricci said, “They were brazen about it. And that’s ultimately what I think is sad. They entered into an agreement. They should have honored it.”
Ricci says the settlement is in the books; his mission now is to convince Honeywell and others that they are taking advantage of their market positions and that they understand they are killing the golden goose, so to speak.
“I want to encourage them to do that. We’re not going to have Honeywell disappear. They need to be a positive in our industry, not a negative, because they can help design engines for new airplanes. They can move us forward,” Ricci says.
Ricci says it is not just Honeywell that needs to recalibrate its business relationships with operators.
“According to the FAA regulations, repair and overhaul manuals have to be given to the airplane operators, but the reality is manufacturers refuse to do it, and the FAA doesn’t enforce it, and so they essentially get a monopoly on repair and overhaul items, okay, and, you know, this permeates our industry,” Ricci says.
Beyond engine and airplane makers, Ricci says FBOs, the private terminal operators use for passenger lounges, fueling, and to park their airplanes, are guilty of gouging.
“Look what FBOs have been able to get away with, event fees, everything’s an event. Oh, the sun’s up, a sun event,” he says.
Surcharges for big jets at big events routinely run over $20,000.
Holiday weekends and regular-season football games now draw extra fees, too.
Ricci, a Notre Dame alum, says fees for Irish games at South Bend Airport are sending more flyers to Elkhart Municipal Airport, slightly further away, but also undermining the convenience factor that drives private aviation usage.
Caterers, too, gouge operators, and you, the flyer, Ricci has said in the past.
Of its battle with Honeywell, Ricci says, “We as a company couldn’t execute our plan. We couldn’t move forward because we were handcuffed.”
Big airline CEOs regularly speak out to put airport authorities and OEMs on blast.
However, sharp criticism by top brass of private jet operators has typically been muted.
That may be changing.
During the Corporate Jet Investor in Miami, Nicholas Air CEO Nicholas Correnti said, “I don’t think there’s a supply chain issue…We’re producing airplanes at a staggering rate, and the backlogs are 18 months, two years, depending on the OEM,” Correnti noted, before adding, “All those airplanes being produced and sold off the assembly lines have to have the parts that the current aircraft that are in circulation need.”
Correnti told the audience that the revenue loss of having airplanes grounded for months at a time will be too much for smaller operators.
He continued, “Who I feel sorry for is the one, two, three airplane operations, or the young entrepreneur… They’re not going to make it. They are going to fail.”
Correnti compared it to buying a new luxury car.
After driving it off the lot, your new car breaks down and is towed back to the dealership.
The dealership service center tells the customer they know the problem, but there is an eight-month wait for the component.
Also, no loaners are available.
At the same time, you see more of the car types you just bought being offloaded onto the lot.
When you ask why they can’t take the part from one of those cars or loan you one, you are told they are committed to new customers.
Yet the car owner still must make their payments on the car they can’t drive.
Ricci says it was a literal high-wire act for Flexjet to maintain the level of service its clients expect while being hamstrung by a large portion of its fleet being unavailable.
Speaking of Honeywell, he says, “The company’s bravado, the monopolistic bravado came through many, many people that executed this, that dealt with us over a six-year period. So, it wasn’t any one person. It was a company culture.”
Ricci believes the new leadership at Honeywell presents an opportunity.
Ricci says the current state of the market doesn’t just impact fleet operators – it also impacts corporate flight departments and single-jet owners, who find their airplanes out of service more often and face more nuisance fees.
He says, “Somewhere during the (lawsuit), I started to realize that this was elsewhere in the industry and that I could be a lightning rod for this issue. And so I took a more proactive approach, not in the interest of Flexjet, but in the interest of the – well, maybe it’s in our interest too, but in the interest of the industry.”
Back in 2022, one CEO did speak up.
Jet It CEO Glenn Gonzales wrote to customers about the OEM of its largest fleet type.
He told them, “We have done our best to shield you from Honda’s ineptitude, but our shield has worn through.”
He said excessive downtime of its HondaJet fleet had cost the company.
It spent $20 million securing off-fleet flights for its fractional owners.
Back then, there was no support or encouragement from other operators for Gonzales.
After grounding its fleet in 2023, Jet It filed for Chapter 7 bankruptcy in December.
Flexjet, the number two player behind NetJets, was big enough to have fought the long and expensive battle.
Ricci says he is now hoping more CEOs and other private jet operators speak up.
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