An airliner cuts through the skies over Montreal, Wednesday, Dec. 23, 2020. An aviation expert says the seizure of four Flair Airlines planes over the weekend points to the fierce competition and high demand playing out in the Canadian air travel industry. THE CANADIAN PRESS/Paul Chiasson
MONTREAL – The head of Flair Airlines is accusing one of Canada’s two major airlines of attempting to kneecap the discount carrier’s operations by trying to lease four planes that were recently seized from it due to overdue payments.
“We’ve come in and upset the cozy duopoly, and as a consequence people want us out of business. And we do believe that there were negotiations going on behind the scenes between one of the majors and the lessor to hurt Flair by them offering probably above-market rates for the aircraft we’ve been leasing,” said CEO Stephen Jones at a news conference Monday.
“While I’m not going to name names or cite evidence, I believe that there is much more to this picture than the surface that you see.”
The Boeing 737 Maxes were grounded Saturday after a “commercial dispute” with New York-based Airborne Capital Inc., Flair said.
The four planes were “only a few days in arrears” with about $1 million owing, “which is about half of one day’s sales for us,” Jones told reporters.
“We’re 100 per cent caught up,” he added, referring to payments on leases across its 19-plane operating fleet. The tally does not include the four seized planes.
“The behaviours to date would say that it would be a tough road to see them back down. This sort of precipitous hedge-fund behaviour makes negotiations tough,” he said, expressing doubt about retrieving the locked-up jetliners from Airborne Capital.
Jones did not answer directly whether other payments have been overdue in the past six months: “There’s no business, really, that doesn’t have some delays.”
Airborne Capital has not responded to requests for comment over the past few days.
WestJet and Air Canada did not immediately reply to questions Monday.
The abrupt seizures and subsequent accusations hint at the fierce competition and high demand playing out across the Canadian air travel industry.
Leasing prices have skyrocketed since the COVID-19 pandemic due to surging travel demand, even as domestic airfares have dropped amid a crop of new carriers and expansions at others, said John Gradek, head of McGill University’s aviation management program.
As a result, the “slightest sneeze” in a payment plan could trigger termination of an older lower-price lease, allowing the lessor to find a new client willing to pay more per month for the pricey planes, he said.
“If you screw up your payment with the lessor, they will take the first opportunity to seize the airplane, bring it back and then remarket it at a much higher level of revenue than you would normally get with Flair.”
Gradek said 737 Max 8s can now cost lessees up to $450,000 per month versus about $150,000 in 2021. A delayed payment may also tarnish Flair’s credit and reputation, making future leases even costlier, he added.
The sudden seizure of more than one-fifth of its operating fleet saw Flair scramble to roll out other planes over the weekend, as passengers in Toronto, Edmonton and Waterloo, Ont., dealt with last-minute flight cancellations.
About 1,900 passengers saw their flights cancelled Saturday, with some 420 of them rebooked within three days, Jones said.
Canadians still reeling from memories of pandemic confinement have been eager to board flights this year – putting planes in even higher demand from airlines and leasing companies.
The number of scheduled flights by Air Canada and WestJet jumped 31 per cent to 47,362 this month from 36,062 in the same period a year earlier, according to flight data firm Cirium.
Domestic ticket prices have dropped 15 per cent from 2019 amid heightened airline competition – six carriers now ply the Toronto-Vancouver route versus two a few years ago – leaving carriers with thinner profit margins as they battle for control of the skies, according to Montreal-based travel data firm Hopper Inc.
Flair spokesman Mike Arnot said the company had three spare aircraft to backfill the flights cancelled Saturday.
Passengers travelling in the subsequent 72 hours will either be accommodated on Flair flights or on another airline at the company’s expense if a Flair flight isn’t available, he added.
An update from the company later on Saturday added that customers can also rebook their own travel and receive a reimbursement within seven days.
This report by The Canadian Press was first published March 13, 2023.
