Former Lynx Air CEO Merren McArthur poses with one of the airlines Boeing 737 Max jets in Calgary in this 2023 file photo.Todd Korol/The Globe and Mail
Discount airline Lynx Air will cease operations on Sunday night after being granted creditor protection in an Alberta court.
The Calgary-based airline, which flies nine Boeing 737 Max aircraft and launched in April of 2022, told employees in a memo it was unable to secure enough financing to stay in business.
In a court filing, Lynx said it is unable to repay its loans, faces unspecified enforcement actions from suppliers and barely has enough cash to operate day-today.
Customers with flights booked should ask their credit card companies for refunds, Lynx said in a press release. Passengers scheduled to return home on Monday or later should try to rebook a return flight before the airline ceases operations on Feb. 26 at 12:01 a.m. MT, or seek a refund from their credit card provider.
“Over the past year, Lynx Air has faced a number of significant headwinds including rising operating costs, high fuel prices, exchange rates, increasing airport charges and a difficult economic and regulatory environment,” Lynx said on Thursday night. “Despite substantial growth in the business, ongoing operational improvements, cost reductions and efforts to explore a sale or merger, the challenges facing the company’s business have become too significant to overcome.”
Lynx’s investors include Stephen Bronfman’s Claridge Inc., Torquest Partners, and Indigo Partners LLC, the U.S. private equity company run by Bill Franke, whose stable of discount airlines includes Frontier Airlines and Wizz Air.
Lynx has been without a chief executive office since September, when founding CEO Merren McArthur departed for “personal” reasons.
Lynx said it obtained creditor protection in the Court of King’s Bench of Alberta under the Companies’ Creditors Arrangement Act.
According to documents filed in court as part of the creditor protection proceedings, Lynx described itself as “insolvent” with “insufficient cash” to continue. It intends to wind down the business.
“Certain critical service suppliers have recently elected to take enforcement actions, which, if pursued, would jeopardize the … ongoing operations, and would likely result in [Lynx’s] operations being shut down in a chaotic and haphazard manner,” the filing said.
The airline pointed to three factors that delayed the airline’s launch and contributed to its failure: the rise in jet fuel prices; COVID-19 travel restrictions and their lingering effects; and the 2019 grounding of the 737 Max jets after two fatal crashes.
“The financial strains placed on the … business as a result of the foregoing events has been disastrous to [Lynx’s] business,” the filing says.
A division of Indigo provided Lynx with $71-million in start-up financing, the court documents says, and another $22-million in debt financing last year. Indigo lent Lynx another $20-million in February and January of 2024.
“While the applicants have in the past received debt financing from Indigo to fund its operating costs, it has never been able to achieve profitability in order to become self-sustaining,” the filing says, adding Lynx has been unable to find new financing. “As a result, the applicants find themselves in a situation where not only can they not repay the Indigo [loans], but they are on the brink of not being able to fund day to day operations.”
Transport Minister Pablo Rodriguez said in a statement he expects Lynx to provide refunds to customers who cannot travel. “For any travellers that had a return flight booked with Lynx, I expect Lynx to help you get back home as soon as possible,” he said.
Lynx’s shutdown comes just ahead of the busy March break travel season, when thousands of Canadians fly south or visit families and friends.
WestJet Airlines said it would offer a 25-per-cent discount on routes previously flown by Lynx, for limited time, and sell “repatriation” tickets from sun destinations capped at $250 plus taxes and fees.
Lynx’s roots date to 2006, when it was founded by former WestJet executive Tim Morgan as Enerjet, and later, Jet Naked and FlyToo.
Lynx planned to fly 870 flights in March, to such destinations as Phoenix, Toronto and Orlando, according to aviation data company Cirium.
Duncan Dee, a former operating chief at Air Canada, said Lynx had an experienced management team but faced a tough business climate.
The Canadian capital markets pool is relatively small, and makes it difficult to raise enough money to operate in a capital-intensive business, Mr. Dee said. Foreigners cannot own more than 49 per cent of an airline, and one individual is restricted to 25 per cent.
“My understanding … is their investors basically said, ‘We’ve had enough and we’re not putting another nickel into this operation,’ " Mr. Dee said by phone. “So that gives you an idea of the pressures that an airline like Lynx, which is not a new player,” is up against.
Lynx bills itself as an ultra-low-cost airline, a model popular in Europe and elsewhere. It is a no-frills approach to travelling – customers pay for their seat and are charged extra for food and bags. The planes are flown more often, and usually have less legroom.
Their target customer is someone who would normally take a car or bus, or not fly at all.
But the high fees and taxes charged by Canadian airports, security agencies and air traffic services combine to drive up airfares. This means discount airlines cannot offer truly affordable tickets, Mr. Dee said.
“What ends up happening is Canadians … drive across the border,” Mr. Dee said. “They’ll go to Buffalo, they’ll go to Bellingham, Wash., Burlington, Vermont and to Bangor, Maine. All of these border airports thrive on Canadians being stimulated into travel.”
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2024-02-23 12:19:59Z
CBMiXGh0dHBzOi8vd3d3LnRoZWdsb2JlYW5kbWFpbC5jb20vYnVzaW5lc3MvYXJ0aWNsZS1seW54LWFpci1zaHV0dGluZy1kb3duLWNyZWRpdG9yLXByb3RlY3Rpb24v0gEA
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