Passengers still owed money by Direct Air could get partial refunds by year’s end

dbryant@thesunnews.comSeptember 19, 2013 

Passengers still owed money by bankrupt Direct Air could see at least some money refunded by the end of the year, according to the trustee handling the bankruptcy case.

Joseph Baldiga, the trustee in the Chapter 7 case, has about $250,000 that he aims to distribute by the end of the year to passengers who file a claim form with his office by Wednesday. The money is from a surety bond and another account for Direct Air.

Baldiga estimates that thousands of passengers could still be owed money, but the exact number won’t be known until next week’s deadline. But the $250,000 won’t be enough to give every passenger a full refund; he anticipates each passenger will get about 30 percent of what he or she is owed.

“We are trying to get some money out to folks right away,” Baldiga said.

About 6,000 claims from passengers for reimbursement were filed shortly after the Myrtle Beach-based carrier abruptly stopped flying and filed for Chapter 11 bankruptcy in March 2012. The case was quickly converted to Chapter 7 liquidation, and officials determined that between $25 million and $30 million was missing from an escrow account Direct Air was required to keep to protect passenger payments in case a refund is needed.

The investigation into what happened to that money continues and could take a year or two to complete, Baldiga said.

“The money went somewhere,” he said.

Passengers who were left stranded or had bought future tickets, fuel companies and others that did business with Direct Air quickly lined up aiming to get reimbursed shortly after the carrier abruptly stopped flying and filed for bankruptcy. Passengers filed roughly 6,000 claims through three avenues, though some of those are likely duplicates, according to court filings.

Since the initial flurry of filings of claims, many of the passengers have been reimbursed through chargebacks by their credit or debit card company, according to court filings. Trying to determine how many passengers were still owed money, Baldiga sent new claim forms to passengers this summer to submit if they are still owed money. Passengers still seeking reimbursement must fill out the claim form and return it by Wednesday to Mirick, O’Connell, DeMallie & Lougee, attn: Kimberly M. DelleChiaie, 100 Front St., Worcester, MA, 01608.

“It will be thousands,” he said of the expected number of claims.

The carrier’s failure had huge fallout, not only for the stranded passengers and the businesses owed money.

The loss of Direct Air contributed to a 16 percent decline in passenger numbers at Myrtle Beach International Airport in 2012 and prompted the U.S. Department of Transportation, which oversees carriers such as Direct Air, to tweak its rules for such charter operators, including not allowing the sale of 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.

DOT also fined several of the carriers for Direct Air flights for their roles in the abrupt shutdown of flights in March 2012 that left thousands of travelers stranded or scrambling to line up alternate means of travel.

DOT also recently fined Valley National Bank of Wayne, N.J., $125,000 for violating rules over the escrow accounts it held for Direct Air and another public charter, EZjet Air Services, that also has shut down.

In the Direct Air case, DOT says Valley National Bank violated DOT rules by transferring money from Direct Air’s escrow account to a fuel supplier before paying the airlines operating the flights. The payments were made without invoices from the fuel company or documentation of the fuel costs for specific flights, which DOT regulations require, DOT said.

DOT also continues to investigate where the millions of dollars went that were supposed to be in Direct Air’s escrow account.

“We are still looking into it,” DOT spokesman Bill Mosley said.

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

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