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. https://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:

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 >>