03/12/2024

Flair Airlines CEO Pursues Expansion Opportunity Amid Industry Turbulence

Flair Airlines CEO Stephen Jones is eyeing an opportunity to expand the airline's fleet by adding Boeing 737 Max 8 planes from Lynx Air's inventory, as part of the company's ambitious growth strategy. The move comes as Flair has expressed interest in participating in the bidding process for Lynx Air's assets, which are currently being handled in a court-supervised sale in Edmonton. With Lynx Air's assets valued at $345 million in property and equipment, coupled with $355 million in long-term lease liabilities, the competition to acquire these assets is escalating. However, concerns have been raised about the potential for an "anti-competitive result" if larger airlines are allowed to bid while Flair is excluded from the process. Flair's financial stability is also under scrutiny, particularly in light of the $67.2 million in unpaid taxes owed to the federal government for import duties on their existing fleet of 20 Boeing jets. Last year, Flair faced the repossession of four planes by an aircraft leasing manager due to missed rent payments, prompting the airline to launch a $50 million court action against leasing firms over what they deemed as "baseless" demands for payment. The escalating costs in the airline industry are further evident with the market lease rate for a new 737 Max 8 soaring to over $540,000 per month, up from approximately $350,000 per month four years ago. Additionally, the recent shutdown of Lynx Air on February 26 has led to a reduction in competition within the low-cost airline sector, potentially limiting choices for travelers in certain markets. Air Canada and WestJet have responded to the changing landscape by increasing their first checked-bag fees by $5 for economy-type fares in a bid to remain competitive. This move may prompt passengers to opt for carrying on luggage instead of checking bags to avoid the added fees, which now range between $35 and $42 for the first checked bag on basic and standard economy fares for travel booked after specific dates in February. The increment in checked-bag fees reflects a broader trend in the industry, with fees escalating by at least 40% over the past decade. Some airlines have even begun to charge for cabin baggage, further complicating the cost structure for travelers. Flair Airlines has also adjusted its fee structure, with changes and cancellation charges experiencing significant hikes, a move defended by the airline as an effort to provide customers with more flexibility to pay for the services they require. Despite the mounting concerns over rising fees and the competitive landscape in the airline industry, Transport Canada has indicated that it has no immediate reservations about the proliferation of additional charges, leaving passengers to navigate the complex web of fees and costs associated with air travel on their own. As the bidding process for Lynx Air's assets unfolds and the industry faces ongoing shifts in cost structures and competition, the future of the Canadian airline sector remains uncertain. However, stakeholders continue to monitor developments closely as the industry undergoes significant transformations in response to market dynamics and evolving consumer preferences.