Boutique Silicon Valley Air Service Sued For Dodging Bills

(Bloomberg) -- Surf Air Inc., which offers an “all-you-can-fly” monthly air travel membership service, owes $3.1 million for more than a year of unpaid flight services in California, according to a lawsuit by the company that operated the carrier’s flights.

Encompass Aviation LLC said it agreed in May 2017 to provide Surf Air’s California service, but hasn’t been paid in a timely fashion for its services since then. The complaint filed late Tuesday in Manhattan federal court comes four days after Surf Air switched to charter operator Advanced Air LLC, a move Encompass contends breached its agreement with Surf.

“Not a single month went by when Surf satisfied its financial obligations under the agreements on time and in full,” Encompass alleged in court papers, which accused Surf of trying to dodge its debt by moving flights to another operator.

“Surf pleaded with Encompass time and again beginning in mid-2017 to continue to provide flight operations and maintenance of the aircraft so that Surf’s business would not come to a screeching halt,” Encompass said in the complaint. “Surf made and broke promises over and over again, and imposed on Encompass to be patient and allow, among other things, Surf to grow its cash balances to make its business seem more profitable.”

Surf Air Chief Executive Officer Sudhin Shahani said in a statement that the company terminated its agreement with Encompass last week for “various reasons including performance issues.” He said the company would fight the lawsuit, which it said is “without merit.” In a June 16 statement, he said the transition from Encompass to Advanced Air was “a logical step to broaden the value proposition Surf Air can offer its clients.”

Based in Santa Monica, California, Surf Air was founded in 2011 as a novel way to travel in California, and in particular Silicon Valley: A flat monthly fee for unlimited flights between suburban Los Angeles and the Bay Area tech hub. Surf Air has also expanded its service to four Texas cities and in Europe.

The company charges $1,950 monthly for what it calls “core routes” in California and Texas, or $2,450 per month for flights on all routes in both states, along with other membership plans, including group rates. Surf Air’s flights are operated by other carriers because it doesn’t own or fly any aircraft. Previously, the company was led by Jeff Potter, the former chief executive of Frontier Airlines; he left the company last June, according to his LinkedIn profile.

Encompass sent Surf Air a “cease-and-desist” letter Monday seeking payment and the end of the flying arrangement with Advanced Air, according to the lawsuit. Encompass has a fleet of eight Pilatus PC-12 turboprop aircraft, which seat eight passengers. Encompass said it flew 662 flights for Surf Air in May, with 3,084 passengers, and 615 passengers the week ending June 14.

©2018 Bloomberg L.P.