Wheels Up has filed suit against FlyExclusive alleging that the charter company wrongfully terminated its agreement to fly Wheels Up members on flights booked for the July 4th holiday weekend, one of the busiest weekends of the year.
Wheels Up is seeking damages for breach of contract and the return of millions of dollars in deposits, the lawsuit says.
New York-based Wheels Up has chartered flights from FlyExclusive to help fly its members since November 2021 under a Fleet Guaranteed Revenue Program.
FlyExclusive CEO Jim Segrave told The Weekly of Business Aviation that the company terminated its agreement with Wheels Up because the company is in default.
“This litigation is simply a result of our termination,” Segrave said, adding that he did not wish to comment further.
According to the lawsuit filed July 5 in the U.S. District Court Southern District of New York, “Without any prior notice, on the eve of the Fourth of July holiday weekend, one of the busiest private flying weekends of the year, FlyExclusive wrongfully terminated the agreement and baselessly demanded hundreds of thousands of dollars to charter flights it was already contractually obligated to complete—despite the fact that FlyExclusive retained millions of dollars in deposits provided by Wheels Up under the agreement.”
The deposits held by FlyExclusive allegedly were sufficient to cover at least six months of flying activity and were to be returned minus any amounts owed at the end of the contract, Wheels Up says in the lawsuit. The agreement was to have lasted at least through March 1, 2024.
According to court documents, at 8:41 p.m. on Friday, June 30 before the busy weekend, Segrave emailed Wheels Up a Notice of Termination to end the agreement.
“Stuck between a rock and a hard place and determined not to let FlyExclusive’s surprise wrongful termination ruin the holiday weekend of more than 75 Wheels Up passengers, Wheels Up agreed to pay FlyExclusive the $300,000 ‘prepayment’ it demanded in exchange for providing the already-chartered flights through the weekend,” the lawsuit alleges. “Although the agreement does not entitle FlyExclusive to prepayment—it instead contemplates payment by Wheels Up within ten days of invoice—Wheels Up had no choice but to pay in order to avoid significant service disruptions.”
Less than 24 hours later, however, FlyExclusive allegedly asked for an additional $300,000 as a prepayment for two Sunday flights, even though the cost of the previous day’s flights had used less than 65% of the prepayment already paid and leaving ample funds to cover the flights, court documents allege.
“In light of Segrave’s bad faith repudiation of FlyExclusive’s obligations under the Agreement and coercive demands, Wheels Up instead rebooked its customers’ flights with other operators for the remainder of the holiday weekend,” the documents say.
While there was no “factual basis” for the termination, it also was “timed in a way that would cause maximum disruption and damage to Wheels Up” and without regard for customers. The company also was forced to pay $300,000 it did not owe and was forced to scramble to rebook customer flights with other operators at the last minute, the lawsuit alleges.
Under the agreement, Wheels Up guaranteed FlyExclusive a certain amount of flight hours per month for each aircraft assigned to the company for charter. It gave both parties the right to terminate the agreement under certain circumstances, they say.
The termination notice from FlyExclusive claimed that Wheels Up had failed to pay amounts owed in a timely manner and that Wheels Up was in a “current state of insolvency.” Wheels Up denies both allegations, saying it has “consistently and promptly paid its weekly bills.” It also alleges that the company was not “the subject of bankruptcy or receivership proceedings” or had committed “an act of insolvency,” according to the court filing.
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