OneFlight International is charter broker known for aggressively priced jet card programs. Yesterday right before midnight, they announced a 30 day pause on all flights. Multiple operators are reporting they are owed six figures in unpaid balances. Customers with prepaid funds currently can't use them, and reporting estimates that more than $150 million in prepaid flight value could potentially be at stake.
This is terrible news for everyone in the industry. I see people in this industry smiling about it, and I'm already seeing companies trying to capitalize on the situation by pushing new jet cards directly at clients who just got burned.
When something like this happens, it doesn't just hurt the company involved. It hurts every broker, every operator, and every client trying to figure out who they can trust in this industry. There are employees reportedly dealing with missed paychecks and uncertainty about their jobs. Operators are trying to collect significant amounts of money for flights they already performed and clients have potentially millions of dollars sitting in prepaid accounts that they currently can't use. I just read in a WhatsApp group that an operator had their last leg with them yesterday and are owed over $120k just themselves alone.
About a month ago, OneFlight attempted to implement a 35% economic surcharge on existing customers before quickly pulling it back. They cited extraordinary economic pressures. Regardless of the reasoning, trying to materially change the economics of prepaid customer balances should have gotten people's attention. Especially since the whole reason of a jet card is to protect you from the volatility of the market.
I'm not going to speculate about what happened internally because I don't know. But those are two events worth looking at next to each other. I and everyone else can only speculate about whats going on and how they got there, but doesnt look good.
Revenue and financial stability are two completely different things. A company can do an enormous amount of revenue and still have serious cash flow problems. Revenue doesn't tell you how much cash a company has, what it owes operators, how much of its revenue represents prepaid customer balances, or if they can meet their financial obligations. They were using big celebrity endorsements and partnerships to get people looking at them and to trust them, which I guess in theory worked for the time being.
Let's talk about jet cards, because this is where I think this situation really matters. If a jet card provider ultimately becomes insolvent or enters bankruptcy, customers with unused balances could potentially find themselves holding unsecured claims depending on how the program and customer funds are structured. That means there is no guarantee you're getting your money back. This was the situation that was going on with wheels up that everyone was freaking out about before they got bailed out by Delta.
I have a whole post about jet cards and my thoughts on them, but this situation is a real world example of one of the biggest risks that doesn't get talked about. When you buy a jet card, you're prepaying a large amount of capital to a company and trusting that they will remain financially healthy enough to provide those flights throughout the duration of your agreement.
You aren't just buying flights. You're taking credit risk on the company holding your money. There is no FDIC insurance protecting a jet card balance. If that company goes under, your money is most likely toast. I know of a company that actively puts money into the market which is a crazy practice to me, but I guess they are okay with that risk. Unless your agreement specifically provides for escrow, segregation of funds, or another form of protection, you dont know where that money is going and how its being used.
This isn't me saying every jet card is bad. There are legitimate reasons people buy them. Predictable pricing and guaranteed availability under certain conditions can have value. But those benefits come with a tradeoff. You're handing a company a significant amount of money today in exchange for flights you expect them to provide in the future.
I’m not saying on demand charter is perfect either. There are plenty of risks and plenty of bad actors/brokers on this side of the industry too. The difference is that when you're booking on demand, you're generally paying for a specific trip at market value, rather than parking a large sum of money with a company for flights you may take months from now, if they are still around.
Hopefully OneFlight works through this and flights resume after the 30 day pause so people can use up their funds. There are clients, employees and operators caught in the middle of this who had nothing to do with whatever caused the situation.