U.S. Airline Faces $50MN Lawsuit by Chinese Tourists

A group of Chinese tourists as well as five businesses located in a remote U.S. territory are suing Florida-based XTRA Airways for racketeering. The claim: the airline took money for charter operations with no intention of actually starting service.

XTRA Airways is a charter airline based in Coral Gables, Florida. It provides charter services around the world and is the central defendant here, though a handful of other travel agencies have also been joined to the same lawsuit. Racketeering is dishonest and fraudulent business dealings.

XTRA and its co-defendants are also being sued for breach of contract, tortious interference with a contract, unjust enrichment, and conversion.

The Saipan Tribune lays out every grizzly detail, but here’s a summary:

XTRA Airways entered into a contract with Dream Pacific, a Hong Kong-based travel company, to offer charter services between three cities in China and Saipan, the largest of the Northern Mariana Islands (a U.S. commonwealth in the Pacific Ocean south of Japan and east of the Philippines).
Routes would include:
- Nanjing ⇄ Saipan – three weekly flights
- Tianjin ⇄ Saipan – three weekly flights
- Changsha ⇄ Saipan – one weekly flight
1 Boeing 737-800 would be utilized
XTRA was paid a $1MN as a deposit for this new service
Before service commenced, XTRA determined that the financial arrangement would not work and entered into new negotiations with Dream Pacific
The new deal involved two aircrafts instead of one and service to Nanjing, Tianjin, Wuhan, and Shenzhen, all three times weekly
Charter flights began in the September 2017, but XTRA only provided one aircraft
Aircraft was not ETOPS certified (allowing it to fly safely for a long distance with only one engine)
XTRA said ETOPS not necessary because the routes overflew Iwo Jima, which offered an emergency landing airport in case of engine failure
XTRA never obtained permission from the Civil Aviation Administration of China (CAAC) and U.S. Federal Aviation Administration (FAA) to fly to Wuhan and Shenzhen
Last November, the Boeing 737-800 suffered a mechanical failure in Saipan
XTRA claimed the airplane could only be fixed in the Continental USA and flew it back
Thereafter, XTRA informed Dream Pacific it would not provide a replacement aircraft and would not bring the 737-800 back, once repaired
Customers were stranded without food, water, lodging or alternate forms of transportation back to China
XTRA also stiffed Nanjing of ground handling fees and never paid LSG Sky Chefs for catering in Saipan, as the contract specified

This is one side of the story: pulled from the lawsuit filed by the Chinese tourists and businesses from the Northern Mariana islands. Now XTRA Airways will be forced to respond and I’ll be interested to see how they do.

It’s my hunch they assured Dream Pacific one thing, but had contractual protection hidden in boilerplate language to weasel out of any deal. They’ll probably rely on that in their building their defense case.

This story is interesting to me because it represents the perils of dealing with charter airlines, a less-regulated industry than commercial air service. While the $50MN lawsuit, mostly punitive damages, is perhaps high, stranding passengers with no intent or effort to help them does not strike me as a legitimate business practice for any operators of charter air service.