Avantair Shuts Down, Seeks ‘Alternative Financing’

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Avantair
Clearwater, Fla.-based Piaggio Avanti fractional provider Avantair shut down today and furloughed employees as it “seeks alternative financing arrangements that it hopes will enable it to resume operations as quickly and efficiently as possible."
June 26, 2013, 7:00 PM

Clearwater, Fla.-based Piaggio Avanti fractional provider Avantair shut down today and furloughed employees as it “seeks alternative financing arrangements that it hopes will enable it to resume operations as quickly and efficiently as possible,” according to a June 26 8-K SEC filing. The company also received notice on Monday of a customer class-action lawsuit and is in breach of a lease agreement for its six core airplanes, with their repossession by lessors a possibility.

“Today, Avantair conducted a furlough of its employees as it addresses liquidity issues. It has requested that several specialized employees remain with the company voluntarily as it pursues alternative financing arrangements,” it said in a statement provided to AIN. “The company regrets having to enter into this process and for the inconvenience this brings to Avantair’s owners and card holders but believes it to be the most prudent action at this time.  It is hopeful that it will soon be in a position to resume operations.”

Avantair’s fleet of 56 Avanti twin turboprops has been grounded since June 6 following allegations that the company was not properly tracking time-controlled parts on its aircraft, requiring detailed inspections to ensure compliance with FAA regulations. This is the second extended “voluntary” grounding of the Avantair fleet in recent months–the operator suffered a nearly three-week grounding in late October prompted by maintenance issues surrounding an incident last July in which an Avantair Avanti shed an elevator during a flight.

The customer lawsuit was filed by Heisman Square, an Avantair fractional shareowner, in Oklahoma County District Court in March, saying the incident that led to the first grounding should have been disclosed when it was buying a share in the program in August. On June 24, Avantair “received notice of service of [this] class-action lawsuit.”

Meanwhile, the company is apparently now involved in a fight to prevent its six core airplanes from being repossessed. On June 13, Avantair reached a forbearance agreement with Midsouth Services and Clear Aircraft related to past-due lease payments for these core airplanes, the 8-K filing says. But on June 18 and 25, the company was notified that it was in breach of this forbearance agreement, “and the lessor has been exercising…all rights and remedies available under the [agreement] and applicable law, including taking possession of its leased aircraft and aircraft engines.”

Avantair also operates 43 fractionally owned aircraft and seven “leased and company-managed” Avantis, according to a June 13 SEC 10-Q filing that discloses the company’s financial situation at the end of its fiscal third quarter, ending March 31. In the quarter, Avantair posted an $8.33 million dollar loss, compared with a nearly $1.6 million loss during the same period last year. Its total accumulated deficit is $122.75 million, the filing says.

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Avantipilot
on June 26, 2013 - 7:26pm

Forgot to mention that the pilots were also told that they wouldn't be getting their paycheck tomorrow either.

Horrible!

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Chad Trautvetter
on June 26, 2013 - 7:32pm

I heard this, but wasn’t able to confirm this information. We can publish only what can be verified. If any Avantair employees want to go on record to confirm this, please send me an email (ctrautvetter [at] ainonline.com) with your name and contact info where I can reach you.

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Avantair employee
on June 26, 2013 - 8:00pm

It is true. We are not getting paid.

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Douglas E Carper
on June 26, 2013 - 7:39pm

It is with great sadness that it has come to this. I have been a fractional owner for over 8 years and for most of that period, a very satisfied one. Somewhere along the way, the management of Avantair started to lose focus on quality and the maintaining our aircraft and that was the death spiral that now seems all but done. It also underscores the flaw in the fractional model...placing the owners of the airplanes and the operator on two opposite sides of the table. Selling "hours"and then hoping the owners don't fly them in total. They also sold cards like crazy and took on the liability of then providing those hours....the fleet (owners aircraft) was flown wildly above expectations, averaging near a 1000 hours a year!!! The fleet is now aged and the market for 50 plus worn out Piaggos is next to nothing. Good luck to any fractional owners and too bad for the card owners...who have absolutely nothing to show for their money paid in.

I hope that the lawyers don't end up with the owners remaining asset values...

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Former Employee
on June 26, 2013 - 8:51pm

Last summer when I was still employed by Avantair, I checked the usage for every tail in the fleet. More than a few were over 1400 hours in the previous 12 months. EVERY plane that wasn't down for an extended period of time was over 1000 hours in the year. Since the the first stand down, they have only been averaging 8-15 airplanes in service and I can only imagine how many hours they've been logging trying to cover the workload.

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JSW
on June 27, 2013 - 2:12pm

It seems that many fractional owners don't think about the "conflict of interest" that exists within companies that provide both Fractional and JetCard options. Owners assume residual value on their aircraft (never knowing their true cost/hr), and JetCards buyers invest into assets that are, by contract, limited in how often they can fly. The final nail in the coffin is "Guaranteed Availability", which in Avantair's case only solidified their demise (and was probably one of many contract breaches). You can have one or the other, but not both. Find an operator that owns all their aircraft, or purchase your own and have it managed. Seems to be the best ways to approach bizav moving forward.

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jetguy
on June 27, 2013 - 7:51pm

If I'm not mistaken there is nothing in their contract that limits flight hours. But you're spot-on regarding the share owners-vs-cardholders conflict. The share owners assume all of the capital risk; unfortunately there was also nothing in their contract (at least not 3 years ago) preventing them from offering a card program.

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JSW
on June 27, 2013 - 8:46pm

Interesting jetguy, I had just assumed fractional contracts would have some type of built in protection for the ones taking on risk. How else could they project their expected residual value?

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Samantha
on June 26, 2013 - 7:44pm

None of the employees will be receiving their paycheck tomorrow. Really shady Avantair........really shady

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Avantipilot
on June 26, 2013 - 8:06pm

"The company regrets having to enter into this process and for the inconvenience this brings to Avantair’s owners and card holders."

Yes its inconvenient for the owners, but I can guarantee you that the guys who got told that they no longer have a job are a little more inconvenienced right now. Especially as they won't even be getting the pay they are owed to keep them going until they find another job.

The pinnacle of despicable, sleazy tactics. Way to go management!

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No longer employed
on June 26, 2013 - 9:54pm

All employees will not be getting paid..not just the pilots. There is a whole operation behind the scenes and those people work hard! Communication has been poor and then stopped completely.

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The employees
on June 26, 2013 - 10:04pm

I've Got Rent To Pay In 5 Days. I'm Tired Of Hearing From Owners About Their "Investment." I've Got Bills To Pay, And No Way To Pay Them. Stop The Whining About Rich Peoples Problems. Come Down To Our Level.

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Former Employee
on June 26, 2013 - 10:25pm

But the company is graciously extending health insurance until the end of the month, so that's 2 business days to make all of your health care dreams come true.

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Former Employee
on June 27, 2013 - 11:17am

Oh so sorry that you've been living month to month and its finally caught up to you. Why don't you just recognize that this company screwed everyone across all tax brackets.

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Chad Trautvetter
on June 27, 2013 - 11:32am

Personal attacks aren’t going to change the situation here. While it’s true that Avantair’s actions have hurt people across the tax brackets, it’s the Avantair employees who are going to be pained the most in the near term since they will not be receiving any paychecks tomorrow. Depending on what happens, shareowners and card customers might or might not lose much or all of their investment – but this is up in the air at the moment. Until we find out whether the company gets new funding, files for bankruptcy or goes with another option, we don’t yet know what will happen to the owners’ money. Shareowners are a little more insulated than cardholders, though, since they’re listed as owners on the aircraft registration, so they still own the airplane asset. And managed aircraft clients can just take their airplane back and have it managed by another Part 135 operator, so they’re the most insulated of all here.

In any case, there is no need for personal attacks. Please keep the comments civil.

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The employees
on June 27, 2013 - 6:46pm

thanks for the Solidarity, I really appreciate it.

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Fractional Owner Admin
on June 27, 2013 - 1:16pm

I understand your frustration in losing your job and having bills to pay. I know I would be in big trouble as well since I work for "rich people". We had many hours that were due to roll over into the next lease period which are now most likely lost. Thousands and thousands of dollars. Sure, rich people's problems are different than ours. They paid for a service and expected a service. Who wouldn't? When my elderly boss and his wife have to wait around for 4 hours or more for their plane, its not good. These "rich people" have commitments, people who depend upon them to run a business - like their employees - like myself. If their flights are consistently late or unavailable it makes them look bad. Confidence levels are compromised, stress levels rise, and people get angry all the way down the line. Don't knock the rich people for being frustrated. Sure their loss isn't the same as yours, but when you have your employees and other's people lives depending on you to make sure you are where you need to be and when you need to be there, it doesn't make for a good situation.

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The employees
on June 27, 2013 - 6:51pm

I apologize about my comments of rich people, I was drunk at the time. it was a really rough day yesterday.

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jetguy
on June 27, 2013 - 7:52pm

...your sentiments but keep in mind it was those "rich people" that kept the doors open for as long as they were. Don't be so quick to slam your customers.

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Employee of Another Fractional Program
on June 26, 2013 - 11:16pm

In response to the comment by Mr. Carper, I submit that you are in error in assuming the the Avantair business model can be referred to as "the fractional model." Avantair gave too many allotted hours to the fractional owners for too low a price in an attempt to capture market share. It then overloaded the system with card program (a/k/a block charter) to increase further the need for flight capacity. Of course Avantair hoped that owners would underfly their hours, but that is not the business model or the hope of the successful fractional programs. The program I work for is designed to hope that owners DO use all their hours. That makes happy owners, and it is why we have some owners since day one, seventeen years ago. I am purposely not naming this program so as not to market here, but I urge you to explore the other, realistic fractional models used by other programs that have proved themselves over time.

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Employee of Another Fractional Program
on June 26, 2013 - 11:16pm

In response to the comment by Mr. Carper, I submit that you are in error in assuming the the Avantair business model can be referred to as "the fractional model." Avantair gave too many allotted hours to the fractional owners for too low a price in an attempt to capture market share. It then overloaded the system with card program (a/k/a block charter) to increase further the need for flight capacity. Of course Avantair hoped that owners would underfly their hours, but that is not the business model or the hope of the successful fractional programs. The program I work for is designed to hope that owners DO use all their hours. That makes happy owners, and it is why we have some owners since day one, seventeen years ago. I am purposely not naming this program so as not to market here, but I urge you to explore the other, realistic fractional models used by other programs that have proved themselves over time.

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Glad I Moved On
on June 27, 2013 - 7:01am

Employees cannot claim this was a surprise. Anyone who ever worked there knows there were shady things happening all the time, even in the supposed "good" times. The first shut down and furlough, then the departures of the president, CFO, and the highly touted FAA Safety guy (whose sudden departure was kept quiet), then the missing payroll several weeks ago. How many red flags do you need?

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Fractional Owner Admin
on June 27, 2013 - 10:29am

I always felt like they were lying to us. Always late by 3 hours, overbooking flights. I dreaded those 8pm the night before phone calls saying they were going to be 3 hours late.

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Fractional Owner
on June 27, 2013 - 11:56am

Sorry that you are having problem to pay your rent. But your attitude about rich people is uncalled for....Who do you think provided you with the job in the first place...We the owners did with our investment in the aircraft. I have been an owners for 10 years and I have warned employees that the end was near after events of the last nine months. Maybe it is the attitude that you have against those that supported you with their dollars that has caused the demise of the Company. Avantair expected us and we did continue to pay for services that were not rendered. I don't care what your economic status....fair is fair. Maybe you should blame Steve Sanyo for putting your income and ability to pay your bills at risk. He is the decision maker.

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Avantipilot
on June 27, 2013 - 12:28pm

Someone who just lost their job and isn't even going to be paid for time owed has a right to be angry and vent.
I don't think anyone resents wealthy people or their private jet lifestyle, but they don't have to worry about how they are going to pay for the roof over their heads, or feed their kids do they?
The comment about living month to month, well health insurance at Avantair was over $5,000 a year, they cut pay, vacation, and per diem went down to just $1 an hour. Once the IRS and state take their tax's, you fill up your gas tank, buy groceries and pay the rent, their isn't much left over to put away for a rainy day.

At the end of the day, everyone gets a bite of the turd sandwich. For some the ripple effects are no ore than a major inconvenience, for others they are devastating.

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Zachary DeBoer
on July 2, 2013 - 5:46pm

Everyone, at all income levels, is effected by these types of situations. I think the person who attacked "rich people" has apologized and retracted their statement. They were angry and lashed out and that is understandable. It is difficult to apologize, but they did it anyways, so I think we should accept their apology and move onto the real issues that effect our industry.

To me, this is a clear issue with the current structure of private air charter coupled with an over-burdensome Government. Competition is fierce in the industry and that just means the strongest and most efficient companies will survive and the weakest will collapse if they do not evolve. The industry will be better for it when companies that are not ran properly actually fail. The unfortunate thing is the lives it effects in the meantime.

The good news is that the demand is still there for private aviation, that isn't going away yet. The biggest threat to our industry comes from the Government. Over-burdensome taxes and regulations are driving up costs. When the costs go up, the demand goes down. When the demand goes down, employees are effected the most because their jobs disappear completely. It isn't the owners, it isn't the operators, it is the Government who poses the biggest threat to every one of our hard earned livelihoods.

Hopefully everyone here is a paying member of NBAA because they are on the front lines fighting for us. The general public do not understand our industry or how important it is. Politicians pander to the uninformed public and general aviation is an easy target because most people think it is "rich people" jetting all over the world for vacations. One of the only organizations fighting that image and resisting the politicians is NBAA. Please support them so they can support us.

My thoughts and prayers go out to everyone effected by this situation.

-- Zachary DeBoer

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Chad Trautvetter
on July 2, 2013 - 6:03pm

Zachary,

C’mon, an “over-burdensome government” isn’t the problem with Avantair or any other fractional. Yes, there are lots of regulations, most of which are needed and some that probably aren’t. But Avantair is on the same level playing field (from a regulation standpoint) as the other fractionals. If it were over-regulation, then NetJets certainly wouldn’t be able to post quarterly profits of $100 million, now would they?

The real difference between NetJets and Avantair is that NetJets has appropriately priced their fees to ensure a profit, while Avantair has drastically under-priced their services and has consistently lost money every quarter, with an accumulated deficit probably hovering around $135 million at the end of the second quarter.

NetJets employs the Apple model: top-notch products with a premium price; Avantair went with the Eclipse Aviation model: lose money on every sale, but hope that you can make it up in volume.

This is about simple economics – charge more for your product or services than it costs you to make or provide. It has nothing to do with government regulation.

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john doe
on June 27, 2013 - 5:32pm

Avantair has always had a "issue" with tracking time on parts from the very start. The real question is how many times has the FAA come in to slap Avantair on the hand and do a audit? Do that investigation and you might not be too surprised at what you find..

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Kevin Jordan
on June 27, 2013 - 6:08pm

Aviation is one of the toughest businesses in the world. Why do you think almost all of the major carriers are, or have been in bankruptcy? It is by far the most regulated, most scrutinized, most onerous of businesses with the greatest risks and liability, and lowest, if any profit margin. If Warren Buffet had not purchased Net Jets they would have under as well. For decades, people have been trying to invent better mousetraps with regards to private air travel. Here is the deal: if you are wealthy, buy an airplane you can afford, and hire a competent pilot or pilots to fly it. You own it, it's yours for better or worse. If there is an FAA issue, or IRS issue it is yours to manage just like any other business asset. If you can't afford it, fly the airlines. You don't fraction out your Mercedes or your house.

As far as furloughed pilots go, it is a perpetually recurring theme and always will be. The only "security" in aviation is a good reputation and a fresh résumé' . Sad but true.

Anytime you pass the buck or try to take shortcuts, there is no one to blame but you.

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Charles Van Horn
on June 27, 2013 - 6:23pm

I am surprised it took this long. I saw problems when I worked for the back in 2008 and when I spoke up I was let go. Best thing that could have happen. I feel bad for the good hard working people that were sucked into this company. Just dont trust that they will be anything different that what they have been. And for those who are staying on without pay you are wasting your time. Move on and run away from this company as fast as you can you will never see anything for what you do to try to get the company back on track.

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BenjyB
on June 27, 2013 - 6:30pm

Hey you fractional owners. You can buy a decent aircraft for the price of a quarter share (or less) and hire one of these freshly unemployed pilots with some common sense to fly and manage it for you under Part 91. Don't try to generate revenue with it, as it's a huge hassle and a proven money losing proposition. Plus it wears out the aircraft. You will have COMPLETE control of the aircraft and it will retain more of it's resale value. The right pilot, especially one who has some experience in maintenance can save you a lot of money. I have been doing this for the same individual for 19 years now, we are on our 4th aircraft, we have had it for 2 years, 200 hours per year, and it's worth more than we paid for it, and, yes, it came with a great maintenance history and 0 time engines, and was purchased for less than the price of a quarter share for a new one of the same type, with the other expenses coming in fairly close as well. You can do it.

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skeptic
on June 27, 2013 - 6:33pm

I have a question. How do you sell a 1/4 share or any share for that matter of a aeroplane?

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skeptic
on June 27, 2013 - 6:35pm

I mean as a owner.

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BOHICA
on June 27, 2013 - 6:56pm

Sounds like these guys are the same guys that ran TAG USA/Sentient/JetDirect into the ditch.

Better find out of they made the quarterly payments on all of your payroll withholding.....like taxes, insurance, 401K contributions, etc. (Note that they filed on the next to last business day of the quarter). I'm betting that you will find out that they didn't.

But hey, no big deal........it's SOP for the way the suit trash does business anymore. All you gotta do is pull yourself up by the bootstraps......

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Anon
on June 28, 2013 - 3:28pm

TAG was a fantastic operation and was shut down by the FAA to make a point about foreign ownership. Their forced sale to Sentient was only a by-product of the revocation of their 135 certificate.

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Planetjem
on June 27, 2013 - 8:47pm

And this is exactly the reason I suggest individuals to stay away from the aviation industry (run like hell)!
Sure airplanes are COOL, but it comes down to the bottom of aviation operations (91) to the top (121) the employees always suffer first, the overpaid, incentive paid and bonus paid executives always get theirs.

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Michael Bohling
on June 28, 2013 - 8:06am

Better yet, find a good crew with both pilot and maintenance background with the ability and desire to offer excellent service. I don't think that ther is a safer, more efficient, cost effective way to operate this kind of equipment. The plus is the owners know and trust the folks they've hired.

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Geo
on June 28, 2013 - 8:38am

So they are keeping "some" people on the payroll but not paying the people they are laying off their past wages? Is Santos paying himself? Youbetcha! The money he is paying himself and the bankruptcy lawyers is YOUR money that you have EARNED. I would go to the head office and not leave until they had cut my check. Absent that get a lien against one of their company-owned aircraft and chain it to the ramp.

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john doe
on June 28, 2013 - 1:22pm

Also might find it interesting how Avantair had a couple accidents with its aircraft more severe than the elevator coming off. A aircraft came into HPN with no landing gear and skid across the runway on its belly. A aircraft had a engine strike where the prop hit the ground on landing when a landing gear retracted.. I believe that was Florida. And a aircraft flipped over on the runway when it landed in I believe Pontiac. You can find video of the HPN on youtube and the audio for Pontiac on the web as well.

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Chad Trautvetter
on June 28, 2013 - 1:52pm

While you’re throwing stones at Avantair here, let’s not lose sight of the fact that there have been pleny of accidents at other fractionals, too. In fact, a quick scan of the NTSB accident database shows 23 at NetJets, seven at Flexjet, three at CitationShares, seven at Flight Options and five at Avantair. Some of these were very minor and others resulted in the airplane being written off. Fortunately, none of these accidents resulted in fatalities.

Bottom line is that any operator, no matter how safe it tries to be, can still have accidents. As the old saying goes: those who live in glass houses shouldn’t throw stones…

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TexasFlyer
on July 1, 2013 - 8:56pm

Any displaced Avantair employees in Maintenance or Corporate (staff level through executive management) that may need a new job, please send resume to jalai@vip-staffing.com and feel free to call me directly at 210-867-0036. I am a Professional Aviation Recruiter (and Pilot) with connections from coast to coast. I been networking in the industry as a recruiter now for nearly 15 years! You may also link to me on Linked-In at www.linkedin.com/in/flyingrockstar to learn a bit more on how I can help you secure a possible new position. - Joseph Alai.

Oh. No pilots though. Sorry. I'm a pilot and I can't help myself land a good flying job. But I am an expert at helping aviation professionals that are not pilots that have expertise in Maintenance (A&P, DOMs, Avionics, etc.) and Corporate (warranty, tech reps, sales, procurement, HR, accounting, etc.). Hence why I rarely plug myself on here as we are mostly all pilots. But if you know anyone that may be looking to advance their aviation related career, forward this to them.

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randomlinetech
on July 6, 2013 - 3:52am

Yeah piaggios suck sorry for the people that fly them though

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EJ
on July 7, 2013 - 9:12am

I am hiring a private crew for my personal P180. Must have significant experience and time in this aircraft. Must be service oriented and comfortable managing all maintenance and travel requirements for my company and family travel. I am most interested in a Chief Pilot, who will manage the aircraft and copilot. Do not respond unless you consider yourself among the best in your ability, ambition, and quest of greatness in all that you do. You will be tested. In return, you will enjoy an absolute comfortable, and very long term engagement.

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EJ
on July 7, 2013 - 9:21am

Forgot contact info for position in above post:
p180crew@google.com

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RockyM
on July 13, 2013 - 1:10pm

Hi Guys,

Sky Limo at FXE is getting 7 P180 by these days (probably from Avantair) They are looking for experienced P180 pilots to start the operation as soon as the first 3 got in the certificate.
So get in touch with Greg, the Chief Pilot for more info. Hope it helps somebody.

Good Luck.

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