Your Jet Card Deposit Could Be a Broker’s Working Capital

The recent news surrounding ONEflight International raises a bigger question for private aviation: who is protecting the customer when hundreds of thousands of dollars are prepaid for flights that haven't happened yet?

I have spent my entire professional career in aviation, but one of the lessons that has stayed with me the longest came from my early years managing a flight school in California.

At the time, our industry was dealing with the aftermath of several high-profile flight school failures, most notably Silver State Helicopters.

Silver State operated flight schools across the country and, according to California legislative records, students in many cases paid upwards of $70,000 in advance for their training. In February 2008, the company abruptly closed. More than 2,500 flight students were left with millions of dollars in debt.

California lawmakers took notice.

The resulting regulatory changes ultimately led to SB 619 in 2011. Under that legislation, FAA-compliant flight training providers could remain exempt from California's broader private postsecondary education regulations only if they did not require students to take on indebtedness and did not accept more than $2,500 in prepaid instruction-related costs.

The reasoning was fairly straightforward: a customer's money should not be put unnecessarily at risk simply because a company promises to provide a service in the future.

More than 15 years later, I find myself asking why we haven't had the same conversation about private jet charter.

The ONEflight News Should Get Our Industry's Attention

On September 15, Private Jet Card Comparisons reported that Denver-based charter broker ONEflight International was pausing flights for 30 days. The report also stated that ONEflight customers commonly prepay for future travel, with minimum deposits beginning at $100,000, and estimated that more than $150 million in prepaid flights could potentially be at stake.

To be very clear: ONEflight has not filed for bankruptcy, and there is no basis at this point to say that customers have lost their money. The company has said it is addressing financial and operational issues.

But the situation should concern every charter customer — not just ONEflight customers — because it highlights a much larger issue with the way portions of our industry operate.

Why should a charter broker need to hold $100,000, $250,000, $500,000 or more of a customer's money before that customer actually flies?

And perhaps more importantly:

What happens to that money after the customer wires it?

Is Your Money Still Your Money?

This is where I believe private aviation needs greater transparency.

When a customer places money “on account” with a charter broker or prepays for a jet card, it is easy to assume that money is sitting somewhere waiting to pay for that customer's future flights.

That isn't necessarily the case.

Unless the agreement provides specific protections, customers need to understand whether their prepaid funds are segregated, escrowed or simply become part of the company's general operating funds.

Those are very different things.

If prepaid customer funds become general working capital, they can potentially be used for payroll, marketing, sponsorships, overhead and other expenses long before the customer ever steps onto an airplane.

That creates a fundamental question:

Should a company be permitted to finance today's operations with money customers deposited for tomorrow's flights without clearly explaining that risk?

This question extends far beyond ONEflight.

Private aviation has seen customers lose substantial prepaid balances when providers have failed. Private Jet Card Comparisons points to JetSuite's 2020 bankruptcy, in which jet card customers reportedly lost more than $50 million, and Verijet's bankruptcy, which reportedly resulted in approximately $10.5 million in jet card losses.

Yet customers continue to be encouraged throughout our industry to deposit significant sums of money in exchange for preferred rates, guaranteed availability, memberships or future flight hours.

We Already Decided This Was a Problem in Flight Training

That is what makes the comparison to my flight school days so striking.

California lawmakers looked at students losing tens of thousands of dollars after flight schools closed and essentially asked: how much customer money should a business be able to collect before providing the service?

For qualifying flight schools seeking exemption from the broader regulatory structure, California settled on $2,500.

Today, a private jet customer can potentially wire a charter provider hundreds of thousands of dollars toward future travel.

The numbers are dramatically different, but the underlying consumer-protection question is remarkably similar.

The irony isn't lost on me.

A student pilot paying for flight lessons was afforded protections intended to limit the amount of money exposed if the flight school failed.

Meanwhile, a private jet customer may voluntarily put six or even seven figures on account with a company for transportation that could take months or years to use.

Charter Brokers Are Not All the Same

I want to make another distinction because it matters.

There is nothing inherently wrong with using a charter broker. I am one.

A knowledgeable broker can provide tremendous value by sourcing aircraft across multiple operators, evaluating aircraft and operators, managing complex logistics and advocating for the client when things don't go according to plan.

The issue isn't broker versus operator.

The issue is what happens to the customer's money.

At TruNorth Jets, our business model is intentionally different. We don't sell jet cards, and we don't ask clients to maintain large prepaid balances with us simply for the privilege of flying in the future. We've written more about that distinction in why on-demand charter beats jet cards.

When a client has a trip, we source the appropriate aircraft from qualified Part 135 operators and arrange that specific flight. The client knows what they are purchasing and what their money is paying for.

I believe there is an important distinction between paying for a contracted flight and effectively lending a private aviation company hundreds of thousands of dollars against services that may not be consumed for months or years.

Federal Rules Already Recognize the Importance of Protecting Charter Funds

Aviation isn't unfamiliar with protecting customer money.

Federal regulations applicable to certain charter operations already contain escrow, bonding and other financial-protection requirements. Public charter regulations, for example, include specific protections designed to prevent passenger funds from simply disappearing if transportation isn't provided.

The question is why consumers purchasing other forms of private charter do not necessarily have comparable protections when depositing substantial sums with a broker for future flights.

The Department of Transportation regulates air charter brokers under 14 CFR Part 295, including disclosure requirements and protections against unfair or deceptive practices.

Perhaps the next discussion needs to go further.

Should substantial prepaid charter balances be segregated from operating funds?

Should there be mandatory disclosures telling customers exactly how their deposits can be used?

Should customers know whether their funds are held in escrow?

Should brokers maintaining large customer balances be required to demonstrate financial responsibility?

And should there be limits on how much money can be collected for transportation that has not yet been contracted or performed?

These are questions our industry should be willing to discuss.

Ask One Question Before Wiring the Money

If you are considering depositing a substantial amount of money into a jet card, membership program or charter account, ask a very simple question:

“Where does my money go after I wire it to you?”

Then keep asking.

Is it held in a segregated account? Is it held in escrow? Can the company use it for general operating expenses? What happens to your balance if the company becomes insolvent? Are you a secured creditor or an unsecured creditor? Can you withdraw the unused balance? What does your contract actually say?

A recognizable brand, celebrity spokesperson, impressive sponsorship or sophisticated app doesn't answer any of those questions.

The contract does.

If You Currently Hold a ONEflight Card

A few practical steps if you're a current ONEflight cardholder, or reconsidering a jet card commitment with any provider in light of this news:

• Contact the company directly for a status update on your specific balance and any planned flights.
• Ask the escrow and creditor-status questions above in writing, and keep the response on file.
• Get quotes for on-demand alternatives for near-term travel needs so a pause doesn't leave you without options for trips you've already planned.

Maybe It's Time for the Charter Industry to Have Its SB 619 Moment

I remember the discussions surrounding flight schools because I was running one when these regulations were changing. At the time, many legitimate flight schools understandably viewed the new regulatory environment as burdensome.

But the underlying concern was difficult to argue with.

Consumers had handed aviation businesses significant amounts of money for future services. Some of those businesses failed. The money was gone, and customers were left holding the loss.

Today, we should be asking whether private jet customers deserve stronger protections when they do essentially the same thing — only with substantially larger amounts of money.

What ultimately happens with ONEflight remains to be seen, and it would be premature to draw conclusions about the company's future or the status of its customers' funds.

But we don't need to wait for another private aviation company to fail before asking the larger question.

If a company hasn't yet provided the flight, how much of the customer's money should it be allowed to spend?

That is a conversation worth having.

Sarah Oberman is Founder & CEO of TruNorth Jets, a private jet charter brokerage providing clients with global aircraft access through qualified charter operators. She has worked in professional aviation for more than two decades, including managing an FAA Part 141 flight school before entering private jet charter.