Adam Smith

While you're technically correct, Flair has not exactly helped itself. The very public repo of several of their aircraft last year indicated some serious financial difficulties. Consumers have clearly bought in to their BS explanations and continued to give them business, but Flair would hardly have the moral high ground if consumers ran away now.

abcx

So if I'm looking at a SFO-YVR flight in the fall on Flair, I should not book now? Much cheaper than UA or AC, which is the only reason I am considering it.

TravellingChris

It's not about the moral high ground. It's about self-interest. Canadians claim they want lower fares and want an alternative to the big two carriers--each of which is significantly larger than Flair is or Lynx was. The alternative is here, Canadians have the choice to support it or not. But my point was that if Flair disappears and we're left with just the big two and Porter (which isn't an LCC) Canadians will immediately resume complaining about market concentration and high fares.

If Canadians don't support alternatives like Flair, such businesses won't survive and consumer choice will be reduced. And the demise of such carriers makes it less likely that other investors will start similar ventures in the future--they will conclude that attempting to compete with Air Canada and WestJet is a fool's errand and that there are plenty of more lucrative ventures into which they can put their money.

tobiashenry

Very strange that I receive refund from Lynx at my RBC account lol

Adam Smith

Some takeaways from recent filings:

• Great illustration of the difficulties of winding down an airline: Lynx planned operate 115 flights between the announcement of the CCAA and the scheduled end of operations. They had to cancel 51 of those flights because service providers refused to provide services that were necessary to operate the flights
• Lynx planned to store the fleet at YYC. YYC claimed their existing agreement for parking (at $118 per day) was not applicable to Lynx's long-term storage plans and a new agreement at $2,000 per day would need to be signed. Lynx was not happy about this, and in consultation with its lessors (which paid the costs of the move), on Thursday the fleet was all flown to TUS for storage
• Under the Cape Town Convention, Lynx has until April 22 to either cure defaults under its leases or negotiate an agreement with the lessors, or risk the lessors taking the planes back (this could drag on much longer, as long as the lessors are happy, but it does look like they have the hammer as of April 22)
• Flair says it's still interested in doing a deal, but that it's not getting the responsiveness it would like from Lynx and the monitor - if there's a plan for a quick transaction here, it doesn't appear to be with Flair
• There's already a conflict brewing between DL (yes, Delta Air Lines) and the lessors over ranking of their charges (DL believes it has a right to priority repayment for certain maintenance work it did)

Should be some news early next week, I think, as there was a hearing yesterday about the process by which Lynx expects to sell assets or attract new investment to continue operating.

Your previous post implies that Canadians will somehow be to blame if Flair hits a vicious cycle because people are concerned about its solvency ("those same Canadians will go back to complaining that there isn't enough competition in the domestic airline industry and that fares are too high"). But if we're thinking of self-interest, Flair has already demonstrated, by getting several of its aircraft repossessed, that it's financially unstable - the story they put out about predatory lessors taking their planes back because they had new lessees lined up at higher rates was absolute garbage. If Canadians were to slow down or stop booking with Flair because they're worried about a collapse in the wake of Lynx going under, that would also be rational self-interest, not a lack of interest in lower-cost airfares.

Flair has been running at high load factors (86% in 2023), so it's not like Canadians are ignoring their offering in the market. But I would argue that both Flair and Lynx were under-capitalized from the beginning given the challenging market they were entering. As a corporate finance professional, from what I know of these situations, the challenge isn't a lack of demand from Canadians for ULCC services, it's that the effective duopoly of AC and WS will compete like hell to preserve their positions, and one needs to come armed with a substantial war chest. It also may be unwise for two entities to launch around the same time (while acknowledging Flair was around for many years in a smaller, more limited role, it kicked off its big expansion drive only over the last few years).

FlyerGoldII

I just read this article:

LILLEY: Flair Airlines' high-flying partners | Toronto Sun

Is it possible that Flair will less likely go bankrupt than Lynx or previous Canadian ultra low cost airlines - as is backer/25% owner: 777- has deep pockets, and the other ultra low cost discount airlines did not have such deep pockets.

m.y

Aviation related fees in Canada is too high such that we can't have ultra low fares that can stimulate additional demand, there is also very few Canadian markets that can support point to point services. The scale is just not there for ULCC to sustain itself.

TravellingChris

But the core issue hasn't changed. If consumers don't support an LCC alternative to WS and AC, and vote with their wallets, then there won't BE an LCC alternative. Yes, Flair may be on shaky financial ground at the moment--but Canadian travelers choosing en masse to stay away will almost certainly make a tenuous situation into a fatal one for the company. And then Canadians, as I said before, will go back to complaining about how sky-high airfares are in this country and why can't we have the equivalent of Ryanair or Southwest or EasyJet in Canada, etc. etc.

And my second point stands as well. Potential investors who might see opportunity in the Canadian aviation market will almost certainly be scared off by the almost unbroken rate of failures of LCC competitors to AC and WS--a dubious history that goes back to JetsGo, the original CanJet, Roots Air, Greyhound Air and more.

If you want a competitive alternative, you have to support it by giving it your business. If people don't support it, the company in question won't survive. Simple as that.