Largest DOT fine so far handed down in Direct Air demise

dbryant@thesunnews.comFebruary 7, 2013 

Federal regulators have handed down the largest penalty yet in the abrupt shut down of Direct Air flights last year.

Sky King, which was a carrier for Direct Air and has since filed for bankruptcy, was fined $500,000 by the U.S. Department of Transportation for its role in the sudden cancellation of Direct Air flights, which left thousands of passengers -- many of them vacationers along the Grand Strand -- stranded and others with tickets in hand scrambling to make other arrangements.

Sky King is the fourth carrier for Direct Air to be fined. Direct Air, which operated under the DOT’s charter rules, used eight carriers for its routes. Direct Air filed for bankruptcy in mid-March, just days after all its flights were abruptly cancelled. The case was converted to Chapter 7 bankruptcy liquidation. Officials are sorting through what led to the demise of the Myrtle Beach-based carrier, including what happened to $30 million that should have been in escrow accounts the carrier was required to keep.

Starting in January 2012, Direct Air failed to transfer sufficient funds from its escrow account to Sky King before the flights, according to the DOT. Sky King continued to operate the flights without requiring full payment of the total charter price from Direct Air, which is a violation of DOT rules.

Sky King stopped flying Direct Air flights March 13 because it was owed money for Direct Air flights it had already completed, according to the DOT. Carriers can’t cancel public charter flights less than 10 days before their scheduled departure, except for weather. Sky King also failed to ensure return flights for round-trip passengers who had traveled the first parts of their trips.

“Airline passengers should be able to book charter flights with the confidence that they will be returned home on time,” U.S. Transportation Secretary Ray LaHood said in a news release.

The lack of payments from Direct Air led to Sky King’s Chapter 11 bankruptcy, its president told a Florida newspaper last year. The Lakeland, Fla.-based company, which provided planes, pilots and crews to Direct Air, was owed $1 million by Direct Air, its president, Frank Visconti told the Lakeland Ledger.

The DOT has fined three other carriers for their roles in the abrupt shutdown of Direct Air flights: Vision Airlines was fined $50,000, Xtra Airways was fined $300,000 and World Atlantic Airlines was fined $180,000. DOT estimated Direct Air’s fines would have been $9.6 million as of last summer, according to bankruptcy court filings.

DOT and bankruptcy court officials continue to investigate the Direct Air case.

DOT also has tweaked its rules for charter operators because of Direct Air. Several practices by Direct Air likely exacerbated the frustration experienced by thousands of passengers when the carrier suddenly stopped flying, the DOT has said.

Among the new conditions: charter operators must retain control over passenger reservations to make it easier to contact passengers about cancellations and only accept payments by debit cards if they provide the same protections for passengers as those paying by credit card.

It also prohibits charter operators from selling vouchers for future travel not tied to specific flights because they are not protected under charter escrow requirements. Direct Air regularly sold vouchers through its “Friends and Family” promotion.

Contact DAWN BRYANT at 626-0296 or at dbryant@thesunnews.com or follow her at Twitter.com/TSN_dawnbryant.

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