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Turbulent Skies: Surf Air sued for $3.1 million by operator

BEAM Staff
June 30, 2018

Surf Air, the California-based private jet operator, is now being sued for $3.1 million by Encompass Aviation, the operator it used until last week for its shuttle flights. According to Encompass, Surf Air allegedly owes them this amount in flights already flown on the startup's behalf.

Encompass had taken over the operation of Surf Air's California-based flights in May 2017, shortly after receiving its FAA Part 135 clearance, allowing it to perform intra-state charter flights. The move came as Surf Air switched to using third-party operators on all of its flights nationwide and surrendered its own Part 135 certification.

By November of that year, Encompass was flying all of Surf Air's 70 daily flights in California, with plans to expand their model to operating fleets for other business jet startups. Earlier this month, Surf Air terminated the agreement with Encompass, with Sudhin Shahani, issuing the following statement to Bloomberg.

"Surf Air terminated its agreement with Encompass on Friday for breach, citing various reasons including performance issues. We believe their suit has no merit and intend to defend ourselves vigorously, while seeking any and all remedies available to us.”

The suit against the company comes months after it was reported that the startup allegedly owed $2.5 million in unpaid taxes tot the IRS.  According to a statement issued by Encompass, the operator acquired Surf Air's airline assets back in May 2017, when it started operating the company's flights. However, 4 months into the contract, Surf Air was allegedly in payment deficit of near $3.7 million according to Steve Harfst, CEO of Encompass.

"Since the early stages [...], Surf Air’s business was faced with, among other things, Encompass’ unreliable and substandard service quality and overall poor management of the flight operations." commented Sudhin Sahani, Surf Air's CEO. 

"There’s never a good time, but it had become untenable." he added speaking of the termination of the agreement.

Founded in 2011, Surf Air raised a total of $83.8 million in venture and debt funding from a group of investors that included Base Ventures, FF VC and Anthem VC. In 2017, the company said it had over 5,000 paying customers.