Canada Jetlines on 15AUG stated it is temporarily ceasing airline operations and seeking creditor protection.
The decision, reported early on 14AUG by Open Jaw, raises more questions about an industry that has seen a seemingly endless string of airlines give up and call it quits. Back in February of this year, Lynx Airlines gave up its quest to be a low-cost Canadian airline.
WestJet folded its low-cost airline, Swoop, in June of 2023.
Losing Canada Jetlines will no doubt spark many questions from federal politicians, who recently began a market study of the Canadian aviation industry. It’s also sparking debate in Canadian airline circles, with plenty of speculation about what went wrong with Jetlines.
"For any discount carrier, our massive pile of fees and taxes is a challenge. This is writ large in the demise of Lynx," Robert Kokonis, president of AirTrav, told Open Jaw.
"Clearly, they weren't driving enough revenues, and there were also some complaints that the Board or management were not making the right strategic decisions for the carrier.”
He added, "Carriers fail for one of three reasons: one is they are undercapitalized. Number two, they expand too quickly, and number three, they deviate from that core initial business plan."
That said, Kokonis shared he doesn't see any additional failures on the horizon. "Notwithstanding Jetlines, I'm feeling relatively bullish about prospects in Canada's aviation sector. We have strong players in the market and Flair is looking very stable at the moment."
One industry insider told Open Jaw there were strong indications that management had different views on how the airline should be run.
“Poor choices were made by parts of the team who weren’t commercially savvy.”
Some observers said it was clear the company was in trouble this week when four executives, including Jetlines CEO Brigitte Goersch, suddenly announced they were quitting.
“The continuing operations of the Company have been dependent upon the Company's ability to raise adequate financing and to grow the airline to the point where it can commence profitable operations,” Jetlines spokeswoman Erica Dymond said in a statement. “The Company has historically financed its future requirements through a combination of debt, equity or other facilities.
“The Company, overseen by an independent Board committee and advised by external advisors, pursued all available financing alternatives including strategic transactions, and equity and debt financings. Unfortunately despite these efforts, the Company has been unable to obtain the financing required to continue operations at this time.”
Dymond said Jetlines intends to file for creditor protection and that additional details will follow.
It wasn’t clear how many pax and crew may have been stranded by the sudden closure. But with six jets in its fleet, an average of 165 passengers per flight could mean more than a 1,000 people were left in the lurch.
Dymond said every effort is being made to assist passengers and repatriate crew at this time. Passengers with existing bookings are advised to contact their credit card company to secure refunds for pre-booked travel.
Aviation expert John Gradek told CBC News that the airline had "been on the edge for months."
"When you look at their pattern of operations and their pattern of funding ... to me it was a surprise that they didn't get their licence pulled by Transport Canada earlier," said Gradek, who’s based at McGill University.
"These guys had six airplanes and a couple hundred people, and they were just going month-to-month, trying to scramble and get as much cash as they possibly could to meet the payroll and the lease cost on the airplanes.
“We have a problem in terms of commercial aviation in Canada," Gradek added. "People were spending five, six, $700 to buy a ticket on an airline that, in my opinion, was on pretty shaky ground. That, to me, is a failing of our transportation policy [and] practices."
“Any time you lose some competition in the Canadian market it’s kind of sad for the travellers, because it puts less pressure on prices,” Jacques Roy, a professor of transport management at HEC Montreal business school, told Global News.
“Every time a new player wants to enter the market, there’s only one certainty: they’re going to be losing money for the first eight, nine, 10 months at least, and perhaps even more. So you need a good bank account,” said Roy, who noted that leisure travelers in Canada are quite sensitive to price.
“The major players will play the game of meeting your fares. And if you reduce your fares below your cost, then that’s a recipe for failure in the short term,” he said.
Jetlines launched its first flight in September 2022 and until Thursday, was flying a few dozen flights per month from Toronto to Miami and Orlando, Fla., as well as Cancun, Mexico.
The CBC said Jetlines lost $14.2 million over the 12 months between March 2023 and last March, despite eking out a profit in one of the quarters, according to financial filings.
Jetlines earlier this year announced that then-CEO Eddy Doyle his retirement after serving in the role since 2021.
Sanjay Kopalkar, director of Sales and Business Development at Canada Jetlines, announced his departure in June of this year.
