Avantair Owners Seek Possession of Piaggios from Bankruptcy Court
Owners of fractional shares in Piaggio Avanti twin turboprops operated by Avantair are trying to take possession of their aircraft in the wake of the August 16 court hearing that put the Clearwater, Fla.-based company into involuntary bankruptcy.
Owners have been seeking to locate and determine the condition of their aircraft and identify co-owners since Avantair announced cessation of operations on June 26 after a grounding of the fleet three weeks prior, and amidst reports that fleet aircraft had been “cannibalized” (FAA terminology) for parts. Avantair had provided no assistance in these efforts, owners have said, and at the hearing Judge Catherine McEwen of Florida Middle District U.S. Bankruptcy Court in Tampa ordered Avantair to facilitate contact among owners, according to an attorney at the hearing who requested anonymity.
The judge also granted owners limited relief from an injunction that quarantined the fleet, allowing access to aircraft for inspection, preservative work on engines, airframes and components, and relocation at their current airport (from outdoor parking to hangar, for example, or from one storage facility to another), according to the attorney. An expert will be appointed by the trustee and paid by the owners to assess the condition of the aircraft and conduct an inventory of the fleet.
Airworthiness Certificates Suspended
Joel Trammel, one of the four Texas-based Avantair owners who filed the Chapter 7 involuntary bankruptcy motion, told AIN he’s “hopeful this moves us forward” in gaining possession of aircraft, but considerable and costly hurdles remain. An FAA attorney attending the hearing by telephone told the court the agency was issuing emergency suspension of airworthiness certificates for some fleet aircraft and issuing non-emergency suspensions of the airworthiness certificates for all others. (An FAA spokesperson subsequently confirmed to AIN that emergency suspensions were issued on 38 aircraft and non-emergency suspensions are being issued for 18 more, representing all the Avantis in the Avantair fleet.)
In an emergency suspension letter sent to the owners of N132SL, the FAA Enforcement Division attributed the decision in part to “Avantair’s systemic failure to properly track maintenance and time-in-service of life-limited parts” and “problems in transferring accurate time-in-service records for parts ‘cannibalized’ from some [Avantis] to other [Avantis] in Avantair’s fleet.”
The letter stated that an agency re-inspection of four aircraft removed from Avantair’s operations specifications found “numerous discrepancies,” numbering between 18 and 83 per airplane, while inspections of nine Avantis on the company’s operations specifications revealed that all “lacked key components,” with only one having both engines, and most having neither engines nor propellers, among other critical missing parts.
“We’re trying to locate our other engine as we speak,” said Daniel Catalfumo, an owner from Palm Beach Gardens, Fla., whose airplane is in Houston. Catalfumo and his fellow owners plan to sell the aircraft “as is”–after they try recovering parts that have been put on other aircraft–calculating that in even the best case its value in the pre-owned market doesn’t justify the cost required to make it airworthy. Avantair’s maintenance lapses make them unwilling to keep the airplane for themselves because of uncertainties about hidden problems, Catalfumo said.
The case’s next hearings are scheduled for September 11 and 13, when the court will consider allowing owners to take possession of aircraft if they can demonstrate that Avantair (the estate) has no claim to them. However, the systemic and unrecorded swapping of parts could cause more legal wrangling, as owners seek return of parts taken from their aircraft.
Attorney Amanda Applegate of Los Angeles-based aviation law firm Aerlex, which represents some 120 owners with shares in approximately 20 former Avantair aircraft, told AIN she believes the bankruptcy court is unlikely to get involved in disputes about parts ownership. That could trigger further litigation among owners of various aircraft, even though the airplanes may have little value, given their condition and the number that could enter the used aircraft market at one time. (Judge McEwen also ruled that owners may designate their aircraft as Avantair’s property and auction them off in an estate sale.)
Any decisions regarding the disposition of an aircraft must be unanimous among all its owners, according to legal experts, complicating the resolution process. Not all owners have been identified, and some may have simply walked away from the debacle. Getting as many as 16 owners to agree on a single course of action could also be challenging; owners may buy out others’ shares to reach agreement in some such situations, Applegate said.
Nonetheless, with the company’s management removed as a result of the bankruptcy and all assets secured, one veteran observer hoped “everyone will calm down now and this won’t devolve into some free-for-all.”
Meanwhile, owners must also contend with mechanics’ liens for unpaid maintenance work filed in state courts on many aircraft in the fleet. These state actions are subject to a stay while the assets are under the bankruptcy court’s supervision. Teterboro Rams, which has liens on four Avantis in its possession and 37 others, filed a motion for relief from the automatic stay so it can proceed with an auction of the aircraft in its possession, an auction approved by New Jersey’s Bergen County Court. Rams claims Avantair owes it $454,303.60 for services, along with more than $21,000 in growing storage fees. Rams co-owner Dennis Espinosa told AIN he’d prefer to settle directly with owners, but that “some owners groups want to give us cents on the dollar. We’re not a big enough company that we can afford to write this off.”
But the liens themselves may not be unencumbered. Dallas Airmotive has filed a limited objection to pending motions for relief from the stay, such as Rams’. Dallas Airmotive claims it hasn’t been paid for maintenance work performed under contract for Avantair on Piaggio engines and accessories. The objection also contends that loaner engines Dallas Airmotive provided to Avantair are now on some of the aircraft that owners are seeking to take possession of. While Dallas Airmotive “does not know the location of all the DAI loaner engines,” two of the eight “are believed to be located at Teterboro Rams on an aircraft bearing FAA registration number N169SL.”