GRAHAM WARWICK / WASHINGTON DC
Carrier accuses manufacturer of reneging on deal to refund advance payments after demise of fractional arm Avolar
United Airlines is suing Gulfstream Aerospace for more than $50 million in deposits paid for business jets. The orders were placed by its now defunct Avolar fractional ownership subsidiary, which shut down in March before taking delivery of any of the aircraft on firm order.
United confirms it has filed a suit against Gulfstream in Chicago's Cook County Circuit Court. Local reports say parent company UAL is seeking the return of $39.5 million in advance payments on 36 firm orders and $11.4 million in deposits on 63 options. Avolar had also placed orders and options with Dassault Aviation, but United says no other litigation is planned.
Gulfstream parent General Dynamics refuses to comment on pending litigation, but chairman Nick Chabraja told analysts earlier this year that the company intended to hold on to $51 million in advance payments from Avolar - at least until it had successfully remarketed the aircraft (Flight International, 30 April - 6 May). Gulfstream president Bill Boisture has since confirmed the company has no plans to return the money.
United shut Avolar down in March, just three months after it began operations, blaming market conditions and its failure to secure outside investment. The company took a $52 million after-tax charge in the first quarter to cover the expected costs of shutting down the operation and including an "estimate of forfeitable advance payments" on aircraft purchases.
According to local reports, UAL's lawsuit charges that Gulfstream, rather than assist with an orderly shutdown of Avolar, tried to cancel agreements requiring the manufacturer to return advances on orders and options. Gulfstream expects to sell the six aircraft it planned to deliver to Avolar this year.
Source: Flight International
