Landmark and Signature Prepare for NetJets Dispute
A legal battle is under way between the nation’s largest private aviation provider and two of the major FBO chains over whether NetJets’ aircraft charter and management arm, Executive Jet Management, can require the chains to provide fuel discounts to aircraft owners and operators whose aircraft are not part of the company’s fully managed fleet. In April, NetJets filed lawsuits against Landmark Aviation and Signature Flight Support in an attempt to force the two service providers to continue to offer contracted high-volume fuel discounts to corporate flight departments and other clients enrolled only in EJM’s Support Services program. The service providers say that because members of that program are not part of NetJets’ fully managed fleet, they are not eligible for such preferred pricing.
When NetJets launched Support Services at the NBAA Convention last October, it described the program as providing flight departments and aircraft owners with a suite of services that offer cost savings via discounts leveraged by the buying power of NetJets and its subsidiaries.
In the Landmark case filed in the Franklin County Court in Columbus, Ohio, NetJets said that in March the FBO chain’s San Diego facility refused to provide fuel to a Support Services client at NetJets’ discounted rate. An exchange of emails filed with the court outlines the disagreement. In an email dated March 19, NetJets warned Landmark that failure to serve such clients with discounted pricing could be considered a breach of contract and requested written assurance from Landmark that the incident would not be repeated with any aircraft covered under EJM’s latest management agreement.
On March 22 the FBO chain replied, informing NetJets that it would not provide the contract fuel discount to NetJets’ corporate flight department clientele at any Landmark location, claiming that “the EJM ‘Support Services’ program appears to be nothing more than an effort by EJM to sell Landmark’s discount pricing to aircraft owners and operators for whom EJM does little else.”
In an early-April letter to EJM clients, Landmark outlined its position, explaining that through its Support Services program, EJM is attempting to offer participants, for a “relatively nominal annual fee,” the same discounted services extended to EJM fully managed aircraft.
“The benefits afforded EJM-managed aircraft take into consideration the overall volume of fuel purchased throughout the Landmark Aviation network, and are available solely to aircraft that are part of the NetJets EJM fully managed fleet,” wrote Ted Hamilton, Landmark’s executive vice president of operations. Landmark’s objection is that EJM allegedly refused to differentiate between aircraft added to its managed fleet since early this year and those Support Services clients, leading to confusion about which was which. “If you are part of the EJM fully managed fleet, we will gladly afford you the discounts once EJM has provided the previously requested documentation,” the letter stated.
In its complaint against Landmark and subsequent request for a temporary restraining order against the Houston-based company, NetJets stated that its agreement with Landmark expressly states that Landmark shall provide its fuel and FBO services to “NetJets’ entire fleet” and all of NetJets’ “clientele”–regardless of the scope of management services NetJets provides to the client.
Though the initial filing against Signature and parent BBA Aviation in the New York State court is sealed to prevent disclosure of proprietary information, follow-on court documents suggest a similar complaint against this FBO chain. In both cases, until hearings start, it appears the FBOs are operating under court orders requiring them to provide fuel to the NetJets fleet, including Support Services clients. The Landmark Aviation case is scheduled for trial beginning July 15.
When asked for comment on the situation, NetJets replied that it “is continuing to operate normally in and out of Signature Flight Support and Landmark Aviation.” Landmark declined to comment on the pending litigation, but the court ruled on April 5, 2013, that the FBO chain is “restrained from denying fuel and other FBO services to plaintiffs’ existing clientele, including plaintiff’s existing Support Services clientele, pursuant to the Fuel and FBO Services Agreement between plaintiffs and defendant dated as of July 1, 2010.” That order was later dissolved and replaced by a “consent order,” to which the parties agreed, that is not part of the public court file.
In the case of Signature, per a court order of April 22, the company must provide available contract fuel rates to the Support Services customers–not necessarily the rate that was previously negotiated for the NetJets fleet. Depending on the outcome of court proceedings, NetJets may later be entitled to recover the difference between the price paid and the price in the agreement plus interest, according to the court’s order. “NetJets is a highly valued customer and otherwise it’s business as usual” between the two companies, a Signature spokesman told AIN. “Signature is abiding by the court order until the case is resolved.” On May 15, the BBA Aviation subsidiary filed a motion requesting that the court dismiss the entire case. As of press date that motion was still pending.