As Flair Airlines accused one of Canada’s top two airlines of trying to “kneecap” its operations, 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 whereby the “slightest sneeze” in a payment plan could trigger lease termination.
“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 Flair CEO Stephen Jones on Monday.
He added, “We’ve come in and upset the cozy duopoly, and as a consequence people want us out of business… 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.”
Flair says the Boeing 737 Maxes were grounded Saturday after a “commercial dispute” with New York-based Airborne Capital Inc., and that the airline has since begun lease payments that were several days overdue.
John Gradek, head of McGill University’s aviation management program, says leasing prices have skyrocketed since the pandemic due to surging travel demand, even as domestic airfares have dropped amid a crop of new carriers.
As a result, he says, the “slightest sneeze” in a payment plan could trigger lease termination, allowing the lessor to find a new client willing to pay more per month for the pricey planes.
Gradek says 737 Max 8s can now cost lessees up to $450,000 per month, and a delayed payment may tarnish Flair’s credit and reputation, making future leases even costlier.
The sudden seizure of more than one-fifth of its 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.
Jones 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.”
He added, “We’re 100% caught up,” referring to payments on leases across Flair’s 19-plane operating fleet. The tally does not include the four seized planes.
As for getting the four planes back from Airborne Capital, Jones admitted, “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.”
Jones did not answer directly whether other payments have been overdue in the past six months, stating, “There’s no business, really, that doesn’t have some delays.”
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 percent 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 percent 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.
Airborne Capital has not responded to requests for comment over the past few days and WestJet and Air Canada did not immediately reply to questions Monday.