Limited resources halt investigation into NetJetsEurope  

 - July 28, 2011, 8:30 AM

Britain’s Office of Fair Trading (OFT) has said that it will not continue to investigate a complaint made against NetJets Europe because it has insufficient resources to do so. “This is an administrative priority decision and does not reflect a substantive view on the merits of the case,” the OFT told Fractional Jet Europe, the UK company that filed a complaint in May alleging that NetJets had changed its contractual terms to prevent fractional owners from reassigning unused flight hours to people buying their aircraft shares. “Our intention, at this time, not to make further enquiries into this complaint does not preclude the OFT from revisiting the matter,” the agency concluded.

Fractional Jet Europe remarkets existing shares in NetJets aircraft, facilitating the process by which they can be transferred to new owners. The company’s chief executive, Chris Moody, told AIN that NetJets contracts permit owners to transfer unused flight hours to be passed on to share buyers and that this was common practice until late in 2010 when the fractional ownership provider started blocking this move.

NetJets has insisted that there has been no change to the contract and that this has never in theory allowed unused hours to be passed on. However, on May 31 sales director Emily Williams indicated that in practice NetJets has in the past allowed some flexibility on this point. “We sometimes used to assign hours,” she told The Financial Times. “Now we stick to the contract, which has not changed in eight years.”

Fractional Jet Europe indicated that it will continue its campaign to force NetJets to accept the reassignment of unused flight hours, complaining that its refusal to allow this has undermined the value of aircraft shares. “The OFT has made no ruling and so, on behalf of our customers, we will continue to fight against the new practices NetJets has introduced,” said Moody, who formerly worked as part of the NetJets Europe sales team. “We still believe that NetJets is acting in both an anti-competitive way and against the interests of its clients. While we are disappointed that the OFT doesn’t have the resources for this matter, we will continue to highlight the behavior of NetJets to ensure that customers and potential customers are aware of the implications. There are many existing owners who are still angry with NetJets as well as being substantially out of pocket.”

NetJets has declined to discuss individual client cases and it does not publish its contracts. According to Fractional Jet Europe, which released extracts from the contracts to the media, the contracts do entitle owners to assign unused hours. “NetJets is continuing to assign shares without unused hours, yet they are not honoring hours for which they have already received the fixed costs,” a Fractional Jet Europe statement claimed. “The loser is the owner who has paid those costs.”

Extracts from the NetJets contract (as supplied by Fractional Jet Europe):

16. Available Hours: Owner and Manager agree that Owner shall be entitled to the use of the Aircraft, and Manager agrees to make the Aircraft available, for the Allotted Hours (or the pro rata amount if the Flight Services Management Agreement terminates or expires prior to the end of a year) plus all unused Allotted Hours carried over from previous years of the Flight Services Management Agreement (the “Carry Over Hours”)

41. Assignment and Transfer: The Flight Services Management Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their representatives, successors and permitted assigns and transferees. The Flight Services Management Agreement shall not be assignable by Owner except to a Bank as security or otherwise on sale or transfer by Owner of title to the Interest as permitted under the Purchase Agreement subject in each case to the express written consent of Manager, which consent shall not be unreasonably withheld

44. Entire Agreement: The Flight Services Management Agreement and these General Conditions constitute the entire understanding among the parties with respect to its subject matter, and there are no representations, warranties, conditions, covenants or agreements other than as set forth expressly herein, and any changes or modifications hereof must be in writing and signed by authorized representatives of all parties.