Employees Sue Volato and its Superyacht Shopping Season

Jessie Naor (00:00)

Good morning and welcome to the VIP seat. Today is September 19th and these are your top stories in private aviation including how China may be winning the AAM market and how many employers are under fire right now from their employees. Your hosts today include yours truly, Jesse Neuer and no one else because we had a last minute cancellation. So sit back, buckle up and let's take off.

So in our first story today, Volato, the fractional operator who we covered a couple of weeks ago, recently transferred its aircraft management system to Fly Exclusive, another publicly traded firm. Now that management clause gave Fly Exclusive the right to merge with Volato, but it explicitly stated it will not take any responsibility for the payment of wages or back pay for Volato's employees. The 8-K doesn't show any payment exchange that's happening between the two firms, but that Volato will continue to briot -fied consulting services

use of their proprietary software and continue to operate the Vaughn program. So, Volado doesn't seem to be interested in filing a bankruptcy filing, which would sometimes allow a firm to be excluded from a Warrant Act requirement. The Warrant Act is essentially a law that was enacted in 1988. It requires firms that are laying off or terminating more than 100 employees to give at least 60 days notice to those employees.

That allows people to have more time to train, retrain, get a new job, what have you, knowing that those math layoffs are coming. In this case, that did not happen. So the employees are suing Velado for this issue. According to Jones Day, when an employer ceases operations due to not reasonably foreseeable business circumstances, or if it was a faltering company, the employer can give less than 60 days more notice.

provided the notice contains certain basic information and reasons why the employers could not provide 60 days notice. We don't know if that happened in this case or not. The regulations state that closings and layoffs are not foreseeable when caused by some sudden, dramatic and unexpected action or condition outside of the employer's control. Now, given that Volado has been announcing terminations, aircraft leases, and that their share price has been below a dollar, which is outside of the requirements of a New York Stock Exchange since June,

We'll have to see what happens in this court case, whether or not they find them. If they are viable, Velado would be found for up to 60 days of back pay for those employees that were terminated. Now, with only $5 million in cash at the end of June, per the last reports filed by Velado, there may not be much cash left to pay for these damages. However, there have been multiple attempts to hold owners and directors personally liable for these violations when there has been a breach of fiduciary duty. None of those cases have been won yet.

but it's certainly something that's probably on the table and then the thoughts of the firm that's representing the employees. We'll have to see how this all pans out from an outside view. It doesn't look like Volado intends on closing shop given the way that they've handled this, not filing for bankruptcy and transitioning this aircraft services agreement over yet still maintaining some operations at the business. So we're going to have to see how they end up reorganizing the firm and two, if this Warnack violation does get enabled, how that's going to affect the firm.

ongoing basis. Now this comes on the heels of this news just today. In addition to Volados case, ATP Fight School is also being subjected to a lawsuit from former flight instructors. In this case, there are claims that the employees were misclassified as independent contractors and not full -time employees, which resulted in a failure to pay overtime wages and not paying them for ground training time. This story was dropped by Era News Network yesterday, which claimed that the school had allegedly the

gall to fire those instructors who opted to join a lawsuit against it and explicitly stated the only way to get hired was to withdraw from this case. Now, outside looking in, you know, who knows the details of all these things and where these will pan out, but it does seem to me like we need to get some HR professionals involved in some of these cases at the beginning. Obviously, I'm sure people have their reasons for doing things, but some of these are pretty basic missteps from a human resources perspective that kind of should have been.

definitely should have been thought about in advance. Now, in a case of someone really caring about their employees and going above and beyond, the National Basketball Association is building up their own fleet of VIP private jets for their players and staff. corporatejetinvestor got the exclusive on this last week. They've made the decision to build 13 Airbus 321 Neos. The deal was leased by SMBC Capital.

They're one of the largest lessors in the world with over 500 aircraft in their portfolio of least aircraft. Pomlex is going to be doing the completion of the very highly customized interior of these Airbus corporate jets. And Delta, due to a longstanding agreement with the NBA, is expected to be operating these flights in the future. This is all about player and staff welfare.

as NBA players travel way more than any other sports teams. It's also been shown that teams flying west lose more games than teams flying east. And I can imagine being a very tall, large NBA star, how this could really enhance your experience as a player. And certainly from a security and safety standpoint, obviously much more secure. I'm not going to have fans coming up to them in the airport. They're going to be able to get some rest, extra time to talk with coaches and what have you. Boeing is undoubtedly frustrated to hear this news. Considering that America's top athletes will be flying

on European metal and not American metal, much to our chagrin. With an estimated price of $110 million dollars before the VIP interior is added, this deal is an eye -watering $1 .5 billion dollar range or something in that area. And aircraft leases are generally speaking somewhere from 1 to 1 .5 percent per month of the value of the aircraft.

So we're talking about a monthly lease payment of probably around $15 million for this change. But considering the NBA generated over $10 billion in 2023, I think it's a drop in the bucket. Now there are a couple of teams that already have their own aircraft. It will be interesting to see because it's only 13 jets, obviously there's times where there's gonna be overlap in need. So I wonder how they're gonna prioritize who gets the airplane to what event.

probably still going to be some supplementary charter in there happening if I had to guess. And maybe even some commercial, especially maybe for lower level staffers that don't get the chance to get on the private jet. certainly something very cool. Obviously, I think it'll have huge improvements in performance. It'll be interesting to see how statistically this changes the outcome of games. Will there still continue to be a difference between the West Coast and East Coast teams?

their performance and what other impacts it could potentially have on the system. So pretty cool news and congratulations to those involved with the deal. I'm sure that's very exciting deal to go through and get done.

Unlike some people who support private jets and see the value of that in terms of safety and security, Europe continues to lead the world in accusations that the wealthy are more responsible for destroying the climate than anybody else. Oxfam, who is a UK charity focused on issues like climate change, has recently proposed a new wealth tax, which it claims would raise over £2 billion for the country's treasury. The UK has over 450 super yachts and it's the leader in private jet activity in Europe.

Oxfam figures show that up to 830 million pounds could have been raised in the last year by introducing a higher air passenger duty tax for private jets and introducing a super yacht ownership tax. The research also highlighted that another $1 .2 billion of revenue could have been raised by taxing private jet fuel, charging a value added tax on private aviation, as well as private jet landing and departure fees. They claim that private jets pay no tax at all on their fuel while motors do. Now,

The difficulty of this is that stems from IKO agreements, international trade agreements between European countries, actually countries all over the world on who is allowed to levy aviation fuel taxes. Because the UK is a smaller country inside of Europe, obviously most of the flights that are occurring are international, thus not subject to taxes. In contrast, here in the US, where we mostly have domestic operations, we pay around 22 cents per gallon for jet fuel today, and some states tax even higher than that, depending on where you are.

But most of our flights happen within our borders. However, there are air passenger duties that are also levied on flight operations in the UK. So it's not like these planes are departing, taking off, not paying any taxes whatsoever. And my biggest problem with this issue is that it's also the use of tax revenues. If the goal is ultimately to reduce emissions, I don't think levying heavy taxes is going to solve the issue.

Unless those funds are specifically and irrevocably put aside for green initiatives or greenhouse gas emission reduction programs. This kind of sounds to me like just another one of these, let's attack the wealthy. They're the classic scapegoat of these issues just to grab headlines and get political issues moving forward. It doesn't really sound like this is.

meant to enact some real change. Now as for the super yacht tax, I would imagine if I was a super yacht owner in the UK and this new tax was levied upon me, I would just simply move my boat to the Mediterranean and enjoy a little more time in Greece or Capri. And this could also do some real damage to the super yacht production facilities in the UK. I don't know if lot of people know this, but some of the largest and most respected brands in yacht building

are in the UK. They're English brand Princess and Sunseeker. They're really known around the world for their level of quality, but it's also a really strong source of domestic production in the UK. These shipbuilders employ over 30 ,000 people and they produce $3 billion in economic output. So you start letting taxes on an industry like this and specifically kind of targeting the super yacht brands, you're starting to do a lot of damage.

to what is a really high quality of manufacturing business and something that's a positive contributor to GDP. But anyway, it's another day, another attack on luxury industries that's the tale as old as time. With the end of summer comes the beginning of super yacht shopping season. The Newport Boat Show ended last week and the Monaco Yacht Show is going to begin next week. The most anticipated boat on display at Monaco this year is a 400 foot Lurssen named Kismet. It's available for charter at a cool $3 .25 million a week.

which gives you and your closest friends the chance to enjoy the Nemo Lounge, an onboard marine viewing area, a Balinese -inspired spa, and an 80s -inspired Matrix dance floor. Boat builders have also begun experimenting with alternative fuel sources. San Lorenzo will be showing off its first fuel cell -powered superyacht, the 50 Steel. This 50 -meter, 164 -foot yacht

is named Allmox, which will convert biomethanol into electricity of up to 100 kilowatts. This will allow the vessel to be at anchor with no emissions. While the price hasn't been disclosed, it's expected it's going to run north of $40 million.

with deliveries expected in 2026 and four have already been sold. Now if you're stateside looking for your next major show, the next one will be coming up in Fort Lauderdale, my hometown, at the end of October. So many people familiar with the eVTOL industry know eHang. This is a Chinese eVTOL builder. They gained approval last week to do flight tests of their EH216, which is a pilotless electric aerial vehicle, or an EAV, in Brazil. The company was the first in the world to receive type certification from a civil aviation administration.

This happened last year. Now, analysts are saying that due to strong support, not only from the Chinese government, but also a much lower cost basis in China may allow these manufacturers to attain certification much faster than their global counterparts. For one, the estimated certification cost of an eVTOL in the US is expected to run around $2 billion, while the process in China is expected to cost anywhere from $141 to $705 million.

depending on the safety requirements. And according to an aviation international report, the Chinese AAM sector as a whole was boosted by a statement on July 21st by the Central Committee of the Communist Party of China that emphasized the importance of developing both general aviation and the low altitude economy. That being said, we know that China doesn't have the most robust private jet industry in the first place. So it'd be interesting to see how this starts to develop. Ehang also delivered

10 of its $410 ,000 EH216S's to a local group in China for low altitude tourism in August. And we just haven't seen that kind of progress in the US yet. However, if you've ever been at one of these shows and actually seen the Ehang, it's quite small. US manufacturers like Joby, Archer, and others seem to be pursuing a much larger

platform that I would liken more to a helicopter platform. That being said, you start to see the progress of Ehang versus our domestic competition and you're starting to see a pretty big gap into you. Whether that's just from aircraft type or the Chinese being more willing to certify something before the FAA does, who knows. But there is a point to this with battery technology being where it is and with the limitations that we know already are there for eVTOLs.

Maybe someone should be pursuing a much smaller platform before going into these larger, really heavy passenger carer operations. The Ehang can only carry two people. It's a pile of aircraft versus some of these others that are supposed to have at least one in the cockpit carrying up to four passengers. So not quite an apples to apples comparison, but it is interesting to see them progressive quickly. And the facts and cost differences just that's.

pretty significant, especially when you're talking about a startup being cash strapped, being able to get to certification that much faster with cheaper costs of labor, materials, batteries, everything. There could be something to it. I for one am kind of okay with China beating us to the EV toll market. New technologies, particularly those carrying passengers inevitably have high risks and a lot of lessons are gonna be learned in the process. And being first isn't always the best, but I'm sure anyone that's passionate in the space of the industry,

is probably getting pretty frustrated to be seeing the Chinese advance so much more in the AABs than they are. Now, back in 2018, Boeing had announced its intention to acquire Embraer. In October of 2019, the European Commission launched an antitrust investigation. And ultimately in 2020, Boeing decided that it no longer wanted to purchase Embraer. Boeing claimed that Embraer hadn't lived up to the terms of an agreement. Embraer countered, accusing the US company of engaging in a systematic pattern and repeated violations of the agreement.

No matter what, it's been an ongoing dispute between the two companies and they finally have come up with a resolution this week. Boeing has agreed to pay Embraer $150 million for backing out the deal. Embraer has become a real leader in the business aviation space, but it also continues to have a really robust airline and defense operations strategy. And it's also been developing new aircraft in the Evita space, Evair Mobility. But it just goes to show you how long and arduous these tasks can be. Five years ago announcement a deal was happening and

finally coming to a resolution at this point, but I wouldn't expect the two to be talking any merger acquisition deals in the future at this point. Now we should note too that some of this occurred during COVID -19. Obviously a very tumultuous time. Lots of companies were in disputes at that time, but you know, you have to wonder would that have been a great combination of companies or not? I guess we'll never know. Embraer still seems to keep trucking and doing its thing and producing amazing business aircraft. So.

Continue to do that please for our industry. And with that, we will wrap up this pod today. We like to keep everything short and sweet on your morning commute so you can get all the news that you need quickly for this week. Don't forget to subscribe to our weekly email digest in the show notes and make sure you click subscribe everywhere you get your podcasts. Comments and suggestions on what we should cover next are always welcome. So stay tuned and we'll see you next time on the VIP seat.