Surf Air flights down by 85 percent, but noisy legal fight continues

Commuter airline responds to suit claiming it owes former operator millions

July 10, 2018

Author: Barbara Wood/ Almanac

The skies over the Midpeninsula may have become quieter in the weeks since Surf Air, a commuter airline that uses the county-owned San Carlos Airport, announced it had changed the company operating its planes. But there’s a noisy fight going on behind the scenes.

County officials say the number of Surf Air flights going in or out of the San Carlos Airport fell by 85 percent after Surf Air replaced Encompass Aviation LLC with Advanced Aviation LLC as its flight operator in mid-June.

County spokeswoman Michelle Durand said that between June 17, when Advanced took over the flights, and July 5, Surf Air had only 51 arrivals or departures. In comparison, between May 17 and June 5, Surf Air had 338 arrivals and departures, Durand said.

An attorney representing the airline, Louis R. “Skip” Miller of the Los Angeles firm Miller Barondess LLP, said the airline will be back to its full schedule at San Carlos as soon as it gets its PC-12 turboprop planes back from Encompass, which has sued Surf Air claiming $3.1 million in unpaid bills. In the meantime, Miller said, Surf Air used the Moffett Federal Airfield for a short time but is now using the San Jose and Oakland airports for Bay Area flights that can’t land at San Carlos. The San Carlos runway is too short for most of the planes Advanced uses.

On July 5, Surf Air filed a response to the Encompass lawsuit, claiming Encompass has not returned its planes and owes Surf Air over $10 million.

Encompass isn’t the only one dunning Surf Air over allegedly unpaid bills. The federal government says Surf Air owes $2.33 million in taxes, and San Mateo County says Surf Air owes it $131,371 for 2017 taxes and may owe more for 2015 and 2016.

Miller said that “the taxes are being paid.”

The Encompass lawsuit, filed on June 19 in the United States District Court for the Southern District of New York, says in the last six months of 2017 Surf “continued to demand full performance from Encompass in exchange for little to no payments.” The lawsuit says, “Surf made and broke promises over and over again, and imposed on Encompass to be patient and allow, among other things, Surf to grow its cash balances to make its business seem more profitable.”

The July 5 Surf Air response to the lawsuit states that Surf Air ended the agreement with Encompass because it “proved to be a subpar operator. Encompass demanded payments far in excess of the proposed contract rates, failed to provide full transparency for financial and operating data, and demonstrated an inability to handle managerial aspects of the business.”

“In June 2018, Surf Air discovered that Encompass had conjured a plan to oust management and take over Surf Air for itself,” Surf Air’s legal filing says.

The document states that Encompass tried to get two of Surf Air’s partners, key financial backer Partners for Growth and Stonebriar Commercial Finance, which leases Surf Air its planes, to replace Surf Air’s management with Encompass. “Out of concern for the business, (Partners For Growth) reached out to Surf Air and told management what Encompass was scheming. In the process, PFG reiterated its commitment to Surf Air,” the legal filing says.

“Given this treachery and intentional interference by Encompass with two of Surf Air’s key financial partners, and because of ongoing poor management of services and lack of financial transparency, Surf Air decided to, and did, terminate Encompass,” the filing says.

Soon after Surf Air began using San Carlos for scheduled flights in June 2013, complaints about the noise from its turboprop planes began to flood in. The airline offers unlimited flights for a monthly fee and has had as many as 45 scheduled flights a day using the airport.

Because Surf Air’s planes carry fewer than nine passengers, under FAA regulations the company may operate out of the San Carlos Airport even though it is a general aviation — not a commercial — airport. The airport is considered a “reliever airport,” keeping small planes out of busy regional airports such as San Jose, San Francisco International and Oakland.

Read the full article in the Almanac >>

What’s happening at Surf Air? A press release after midnight, June 19, 2018 raises more questions than it answers (Updated)

Who is Surf Air in 2018 and what are they doing?

Short answer:
(1) They are late in tax payments to the County.  We hear that Surf owes $131,000.   Poor form by the County of San Mateo to let Surf pay late with no penalties.  We will try to find the agreement with Surf and see if there are remedies that the County is not pursuing.   It is unclear what taxes are owed.
(2) The IRS has a lien against Surf for $2,330,000.
(3) Former Surf business partner Encompass is suing Surf for $3,100,000.
Greater detail and links to articles follow:

Surf had a relationship with Encompass and it is now over. The County of San Mateo took the opportunity of the merger with Encompass to file a legal challenge to Surf’s business model. That legal challenge was previously on our home page and is now filed in the website. As we know, Surf’s entire business model and existence is predicated on a misapplication of the FAA’s Part 150 designation.

For those of you following this saga, the founder of Surf Air was eventually forced out and filed a lawsuit against Surf in 2015. From that lawsuit:
“One of the most significant hurdles to starting Surf Air was to obtain FAA approval to operate a passenger airline with regularly-scheduled flights under a part 135 certificate.” The Part 121 certificate is the appropriate one for this service. More detail is found in the FAQs 8 and 9. http://calmtheskies.org/faqs/

Also from the lawsuit and FAQ 9:
“At first the FAA expressed skepticism to Dave that his plan of operating such an airline was legal. The FAA told Dave it had never seen this regulation used in the way he was proposing. Dave had to walk the FAA through arcane FAA regulations to demonstrate the legality of his idea. Dave worked tirelessly with the FAA for two years to obtain FAA approval. Without approval from the FAA, Surf Air could not operate. After two years, in June 2013, Surf Air received FAA approval and had its inaugural flight.” Pg 8 – 9

This Part 135 certificate has allowed Surf to bring the volume of passenger service along with the problems. It is what differentiates Surf from the other businesses at KSQL. It is why complaints against Surf are not complaints against the airport and against other businesses at the airport.

Around June 2017 Surf Air became owned by Encompass Aviation. Encompass was the operator of Surf. They hired and trained the pilots. Surf does its own scheduling and marketing. On Flightaware.com the flights were listed under the Ident column as ROM—. If you clicked on the flight for additional information, you would see Empresa Aeromar as the airline. FAQ 26.

This Encompass acquisition provided an opportunity for the County of San Mateo to challenge the bogus business model of Surf – the use of Part 135 to engage in scheduled passenger service.

In 2017 Encompass filed an Application for authority to operate as a commuter air carrier. The County filed an Answer objecting to the Encompass Application. FAQ 27. The page reference below is from the County’s challenge to the Encompass Application. “Surf air separately contracts with operators – Encompass and Advanced- and dictates virtually all of the service – schedule, aircraft type, airport, and livery-other than the actual operation of the flight.” Pg 12

The gyrations of Surf get a bit complicated but are explained in the FAQs and the pdfs attached in the FAQs. A few excerpts:

“Thus Surf Air’s entire legal structure seems designed to circumvent direct regulation by DOT.” Pg 19

“If Encompass Application is granted, Encompass would facilitate the unauthorized operations of Surf Air.” Pg 18

“Surf Air’s operation is a classic indirect carrier operation and its “innovative” business model is simply a distraction.” Pg 12

…the arrangement between Encompass and Surf Air seems carefully designed to avoid DOT regulation of Surf Air.” Pg 18

Now, June 2018, Surf is on the move again. Encompass is out. They don’t like it.

Aviation Air is the new partner with Surf. If you look for the flights on Flightaware, the designation is WSN20. Further discussion can be found in this article:
https://privatejetcardcomparisons.com/2018/06/16/whats-happening-at-surf-air-a-press-release-after-midnight-raises-more-questions-than-it-answers/

Nice to know that we are not the only ones blindsided and confused by Surf behavior.

Encompass filed a Complaint 6/19/18 against Surf Air:
Encompass v. Surf Complaint

The Complaint alleges that Surf owes Encompass “more than $3.1 million for services already rendered.”
The Complaint in Section 4 references the County and DOT (Department of Transportation) Legal Challenge when in Section 4 “…Surf, facing uncertain future prospects and a federal agency investigation…”

Note the following Sections:

#14. Encompass seeks damages…including the more than $3.1 million that Surf owes in overdue payments for services rendered.

#23: “Surf was facing uncertain financial prospects and pending federal government investigations concerning its possible illegal activities.”

#24: “Upon information and belief, Surf determined that it could no longer provide air transportation services to its members.”

31: “….Encompass continued repeatedly to chase Mr. Shahani (Surf’s Executive Chairman) for Surf’s contractually owed payments”

#36: “Mr. Shahani sought to use Encompass’ cash to create a fiction for another creditor seeking overdue payments from Surf.”

#44: “Advance Air spent the weekend days of June 16 and June 17, 2018 soliciting Encompass pilots to fly for them.”

Read The Almanac’s news story dated June 22, 2018 >>

County Challenge to Surf Air (Encompass) Explained

On June 15, 2017 Encompass filed an Application with the Department of Transportation (DOT) “for authority to conduct scheduled passenger operations as a commuter air carrier.” The San Mateo County filed an Answer in Opposition to this Application on July 6, 2017.
This Answer is attached as a pdf. The material gets complicated.Summarizing Surf Air’s business plan, we quote Mr. Allen, “It’s a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham.”

Some of the statements from the County Answer:

“Thus Surf Air’s entire legal structure seems designed to circumvent direct regulation by DOT.” Pg 19

“If Encompass Application is granted, Encompass would facilitate the unauthorized operations of Surf Air.” Pg 18

“Surf Air’s operation is a classic indirect carrier operation and its “innovative” business model is simply a distraction.” Pg 12

…the arrangement between Encompass and Surf Air seems carefully designed to avoid DOT regulation of Surf Air.” Pg 18

“County also requests the DOT to investigate (1) Surf Air for operating as a direct or indirect air carrier without the appropriate economic authority from DOT..” pg 19

There is a more detailed discussion of Surf’s operation in the County Answer. Here are some of the points with their page location if you want to follow the subterfuge as Surf tries to game the system so they can fly what we consider an “airline” (Part 121, flying scheduled passenger service, TSA) under rules (Part 135) applicable to a charter or commuter service.

In the beginning, and “as of late 2016, Surf owned and operated its own aircraft in intrastate travel, and therefore did not require economic authority from the DOT. When Surf decided to add interstate service, which would have made it a direct carrier, it changed its model, as described above, to cease direct operations itself and to use the services of other direct carriers to provide its service.” Pg 18 – 19

The County Answer claims Surf Air knew it would need permission from the federal government for interstate flights and that Encompass has applied for the federal approval “only to facilitate Surf Air’s plans.”

“Surf leased all its aircraft to Encompass and then contracted with Encompass to provide full use of those aircraft for Surf Air’s customers. Surf contracted with Advanced Air to provide its Las Vegas flights, and Advanced Air then sought economic authority to provide interstate service. Now Encompass also seeks economic authority to provide Surf Air’s interstate service.” Pg 19

Encompass, which in mid-May took over Surf Air’s flight operations, currently can only fly within California. “Surf air separately contracts with operators – Encompass and Advanced- and dictates virtually all of the service – schedule, aircraft type, airport, and livery-other than the actual operation of the flight.” Pg 12

Surf Air is a Direct Carrier. See page 12 – 17 for a good explanation of the why Surf would be considered a direct air carrier in spite of their claims otherwise.

Surf Air is a common carrier pg 17 and an air carrier engaged in interstate air transportation pg 18

“If Encompass Application is granted, Encompass would facilitate the unauthorized operations of Surf Air.” Pg 18

“…the arrangement between Encompass and Surf Air seems carefully designed to avoid DOT regulation of Surf Air.” Pg 18

“Thus Surf Air’s entire legal structure seems designed to circumvent direct regulation by DOT.” Pg 19

“County also requests the DOT to investigate (1) Surf Air for operating as a direct or indirect air carrier without the appropriate economic authority from DOT…” pg 19

This situation is discussed further in the website FAQ (26) Who Owns Surf Air Now?

Voice your opinion to the FAA by Oct 27, 2017

On Sept. 27, the FAA held what it called an informational meeting in San Jose as part of its consideration of whether to make what it calls the Bayside Visual Approach an official charted flight path.

The FAA says comments will be taken on the Bayside approach until Oct. 27, 2017 at 11:59pm. Comments can be emailed to: 9-awp-sql-cvfp@faa.gov or mailed to: Noise Concerns, AJV-W25, FAA, 1601 Lind Ave. SW, Renton, WA 98057. Comments may also be made on the FAA website, which also includes a number of presentations from the meeting.

It’s important to ensure that your voice is heard to counter opponents of the BVA or supporters of Surf Air. Please write to the FAA to ensure they understand you support the BVA.

Residents of Sunnyvale are in the Surf Air GPS flight path. They are justifiably upset with the Surf noise as we are. They feel that the approval of the BVA will be the end of Surf’s efforts to appease residents. We need to continue efforts to get Surf out of San Carlos airport.

According to the FAA, the Sunnyvale GPS slight path is 15 miles. Surf planes have flown 13 of those miles (86%) before the decision is made to continue over some of Sunnyvale and over Mountain View, Palo Alto, Menlo Park, Redwood City, and San Carlos with the GPS path or to fly east over some of Sunnyvale to Moffett Field and over the bay. Use of the BVA will still have significant flight time and noise over Sunnyvale. The effort to reduce Surf noise does not end with the BVA.

(FAA) To Host Meeting for KSQL Bayside Visual Approach

There will be a meeting on Sept 27, 2017 in San Jose to hear from the FAA regarding the Bayside Visual Approach. If you can’t make it to the meeting, please write to the FAA at the email address at the end of this announcement.

The Federal Aviation Administration (FAA) is planning to hold an informational meeting regarding the six-month operational test of the Bayside Visual Approach (BVA) that was conducted July 2016 through January 2017. The BVA informational meeting will include presentations by the FAA, County of San Mateo, and Surf Air/Encompass. The FAA’s meeting will be held on Wednesday, September 27, 2017 from 6pm until 9pm at the following location:

Santa Clara County Government Center
Isaac Newton Senter Auditorium
70 West Hedding Street, San Jose, CA 95110

To submit a comment on the Bayside Visual Approach please email
9-awp-sql-cvfp@faa.gov
or write to:
Noise Concerns
AJV-W25
FAA
1601 Lind Ave SW, Renton WA 98057.

For additional information regarding the FAA’s meeting please contact Mindy Wright, Manager, NAS Analytics & Environmental Team, Operations Support Group at mindy.wright@faa.gov.

New fees imposed at two San Mateo County airports

County board adopts $75 landing fee for charter flights at San Carlos, Half Moon Bay airports

The Mercury News
August 8, 2017

San Mateo County is introducing two new fees at two airports to address impacts from an increase in charter flights.

The county’s Board of Supervisors on Tuesday adopted new fees for charter flights into San Carlos Airport and Half Moon Bay Airport that will be paid by charter operators and passengers. Beginning immediately, all charter flights will be charged a $75 landing fee at both airports.

In addition, for a six-month trial period, passengers at San Carlos Airport will be charged $10 a day for vehicle parking. At the end of the period, the board will review the parking fee and consider whether to continue imposing it. The parking fee was rejected for Half Moon Bay Airport because it has sufficient parking. The board also adopted a new policy that will allow airport cameras to be used to verify incoming charter flights and then bill the operators.

The landing and parking fees together are expected to generate roughly $150,000 in net revenue annually, according to a news release. The landing fee will go toward offsetting increasing costs needed to maintain runways, taxiways and aircraft parking areas, as well as additional staffing and expanded hours of operations to deal with the increase in charter landings.

“While the total number of operations has remained steady over the last five years, commuter and charter operations have increased significantly in that same period,” the release states.

Surf Air is one of five charter operations that fly out of San Carlos, according to the airport. Of the charters, Surf Air runs the most flights by far and is the only one that has scheduled departures.

The board argued that the $75 landing fee is consistent with landing fees charged at several nearby airports. The fee is supported by the San Carlos Airport Association, the California Pilot Association and the San Carlos Airport’s aviation consultants.

Read the Article >>

No More Surf Air Protest June 17, 2017

News coverage by San Jose Mercury News. Calm the Skies mounts protest against Surf Air at San Carlos Airport.
County board of supervisors expected to address noise issue sometime in July
Calm the Skies, a group formed of residents of Atherton, North Fair Oaks and other cities that are under the flight path of Surf Air Pilatus PC-12 turboprop airplanes, held a protest at San Carlos Airport on Sunday calling for Surf Air to leave the area.

Some 80 people, residents of cities as far away as Sunnyvale, showed up with signs and bullhorns to chant “Go away, Surf Air” and other slogans. They also chanted at some Surf Air passengers — on the other side of a fence from the tarmac — who reacted by making photos of the protesters, according to Jennifer Tasseff, who was there.

Sunnyvale residents have joined the protest because when the Surf Air airplanes are on one of two approaches to land at San Carlos Airport, they go over a portion of that city. It is indicative of the noise created by the turboprops that even at that higher altitude, they still significantly disrupt the quiet.

On the other approach, which passes right over Atherton’s Holbrook-Palmer Park, at a much lower altitude, the planes make so much noise that people standing next to each other can’t hear each other in conversation. Windows rattle, dishes fall, babies wake.

The airport has received many thousands of complaints about the noisy airplanes since Surf Air began operations there in 2013, and, as Atherton City Council member Elizabeth Lewis remarked on Wednesday, “It hasn’t gotten better, it’s gotten worse. I am very, very frustrated.”

Lewis has long been a part of a working group trying to find a solution to the noise created by the planes, and has attended countless meetings with Surf Air and airport authorities and San Mateo County officials, but said the airline has “continued to expand and disrupt the quiet.”

“My personal feeling is that the county supervisors should be doing a lot more than what they are doing,” said Lewis. “They have some legal standing to manage the airport for the community at large.”

A phone call to Supervisor Lee Horsley, who attended a meeting on the issue in the Pavilion Building at Atherton’s Holbrook-Palmer Park in August 2016, was not returned before deadline.

Adam Ullman of North Fair Oaks, who has long worked to combat the noise created by the Surf Air planes, also thinks the county should take action, and has his “fingers crossed that the county will put something forth.”

Ullman, who has filed suit against Surf Air in the past in Small Claims Court, in an action that lost on appeal because the judge thought it should go to Superior Court, said Ullman, appreciated the protest on Sunday.
“Absolutely. It’s a good new approach. …

“These planes are loud. This particular plane (the Pilatus PC-12) is louder than a 737 or a 757.”

Ullman agrees that the county “has to put something together,” and notes that the recent management change at Surf Air — CEO Jeff Potter and senior vice president of operations Jim Sullivan are out, and a management company, Encompass Aviation, has taken over — has put efforts to regain some quiet behind.

“We’ve been working with Surf Air for years,” Ullman said. “Now we’re back at ground zero, starting with a new management team. The county needs to put something in place.”

The county board of supervisors is expected to take up the issue again in July, and several options have been floated, from establishing some kind of curfew limiting flights to raising airport fees enough to make it a problem for Surf Air to operate.

Read the full story >>

Surf Air Protest

On Saturday, June 17, 2017 a protest was held specifically targeting Surf Air. Residents from Bay Area cities attended the protest at San Carlos Airport (KSQL).

Customers of Surf Air arriving or departing from the San Carlos Airport Saturday morning, June 17, were greeted by a crowd of protesters waving picket signs and passionately shouting, “No more Surf Air,” and other slogans.

Surf Air plane taking off from tarmac while protesters wave signs. June 17, 2017

Surf Air plane taking off from tarmac while protesters wave signs. June 17, 2017

When one of the blue-and-white turboprop PC-12s used by the subscription-based commuter airline arrived, the group of protesters – numbering more than 50 people at times – moved to a chain-link fence to confront the five passengers who disembarked.

 

“No more Surf Air,” the group chanted in unison. “You disturb our lives,” shouted one protestor. “We’ve had it,” yelled another.

Picket signs ranged from professionally printed signs that said “No Fair – No More Surf Air” to hand-drawn signs with slogans such as “Like a Bad Neighbor, Surf Air is There,” “Horsley – Say Neigh to Surf Air” (aimed at county Supervisor Don Horsley), and “Surf Less, Sleep More.” One said simply: “Surf Err.”

“There are humans underneath these airplanes who are suffering so a few people can have a convenient service,” said North Fair Oaks resident Heather Brinkerhoff, who was there with her 23-month-old son. The planes often wake up her son, she said, and make it unpleasant to be in their yard.

Protesters at the San Carlos Airport on Airport Way, in front of Surf Air office. June 17, 2017

Protesters at the San Carlos Airport on Airport Way, in front of Surf Air office. June 17, 2017

Ms. Brinkerhoff said her family previously lived near the train tracks in Menlo Park, so she’s had experience with noise. But unlike train noise, which she said her family got used to, the noise from Surf Air’s turboprop PC-12s is grating and impossible to ignore, she said.

One of Surf Air’s customers had a suggestion for the protestors. “You guys ought to move,” he said, as he exited the terminal and got into his car.

Winn Siegman, who has lived in North Fair Oaks for 29 years, said he’d never really even thought about the fact that there was an airport in San Carlos until Surf Air began using it.

Because Surf Air’s Pilatus PC-12s carry fewer than nine passengers, under FAA regulations they may operate out of the San Carlos Airport even though it is a general aviation, not a commercial, airport. The airport is considered a “reliever airport,” keeping small planes out of busy regional airports such as San Jose, San Francisco International and Oakland.

Protesters at the San Carlos Airport near the Surf Air tarmac. June 17, 2017

Protesters at the San Carlos Airport near the Surf Air tarmac. June 17, 2017

Mr. Siegman’s sign expressed support for the San Carlos Airport, as did many of the other protestors.

“The airport is not at all the issue. The pilots are not the issue,” said Tom Holt of Atherton, who lives under the flight path used most often by Surf Air. The issue is, he said, “just Surf Air and the noise they make.”

 

Anna Traver and her husband, Michael Pagano, and many of their neighbors came from North Fair Oaks, an unincorporated neighborhood between Atherton and Redwood City that is also under Surf Air’s flight path.

“The noise is getting increasingly incessant,” Ms. Traver said, with planes waking her up at 5:45 a.m. and again at 11:30 p.m. “They’re growing,” she said of Surf Air, which recently announced it would add 48 weekly flights at the San Carlos Airport this summer.

Other protesters came from Sunnyvale and Cupertino, where Tony Guan said he has 200 flights headed to different airports going over his house daily.

“We really cannot take more,” he said. Although the Surf Air flights are at a much higher altitude there than they are closer to the airport, the noise from the turboprop planes is impossible to ignore, he said.

The Sunnyvale and Cupertino residents said their main concern is that the attempts by San Mateo County and Surf Air to shift flights away from the communities close to the airport by sending planes over the Bay means more flights are going over their homes.

“It’s a shifting of airplane noise,” Mr. Guan said.

Organizers of the protest estimate that 120 people took part during the 9 a.m. to noon protest, with about 30 to 40 of them from Sunnyvale and Cupertino.

Participants said they plan more protests, and have begun organizing one for the San Mateo County Board of Supervisors’ offices in Redwood City.

Posted in The Almanac by Barbara Wood June 18 2017
Read the full article >>