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Thursday,  February 29, 2024 10:39 AM 

A “muted” year: Flair pauses expansion plans amid debt, delivery delays

A “muted” year: Flair pauses expansion plans amid debt, delivery delays
Stephen Jones, CEO of Flair Airlines. (File photos)
Michael Pihach

Michael Pihach is an award-winning journalist with a keen interest in digital storytelling. In addition to PAX, Michael has also written for CBC Life, Ryerson University Magazine, IN Magazine, and Michael joins PAX after years of working at popular Canadian television shows, such as Steven and Chris, The Goods and The Marilyn Denis Show.

The head of Flair Airlines says he’s suspending the low-cost-carrier’s expansion plans for at least a year as the company grapples with mounting debt and aircraft delivery delays.

In an interview with the Canadian Press on Monday (Jan. 29), Flair CEO Stephen Jones said 2024 “will be a more muted year,” saying that the airline will return to “growth mode” in 2025.

The comments came after a Globe and Mail report revealed that Flair owes more than $67 million dollars in unpaid taxes, prompting the Canada Revenue Agency (CRA) to obtain an order for the seizure and sale of the airline’s property.

The taxes were incurred after Flair imported 18 Boeing 737 Max aircraft, beginning in 2021, reports say.

READ MORE: Flair Airlines owes more than $67M in unpaid taxes

The airline says it imported the planes to meet the "post-COVID travel demand." 

Edmonton-based Flair now owes the CRA $67,174,123.37 (plus penalties, interest and other fees), according to court documents obtained by The Globe.

Arrangements to pay the amount have been made, with Jones saying the situation has no impact on Flair’s operations.

The terms of the payment deal are confidential. However, Jones, characterizing the CRA as "understanding,” said it involves making monthly payments.

"We have a plan in place with them for repayment of the outstanding amount," Jones told CP. “The court-issued writ of seizure and sale was a belt-and-braces arrangement that they put in place if we were to fail on that plan — which we don't plan on doing.”

The CRA told CBC News that it will typically come to an arrangement with companies "based on their ability to pay" before it seizes property to recover money.

"As a last resort, we may take additional legal collection actions such as seizing property or assets to protect the interests of the Crown," spokesperson Nina Ioussoupova told the outlet.

On top of this, Flair is still on the hook for making payments of more than USD $7 million per month on its Boeing 737 leases and manage loans amounting to between US$200 million and USD $300 million. 

Flair took to social media platform X on Monday to address the situation, assuring customers that there are no "flair-ups" at the airline. 

"We want to address today's media coverage and be clear that the Government is NOT seizing flair property & this situation does not impact our daily flight operations. We will continue to fly and look forward to serving you now and in the future," the airline wrote. 


Hold-ups at Boeing

Flair’s growth will also slow this year due to delays at Boeing, which is answering to U.S. regulators after a mid-flight blowout of a side panel on board an Alaska Airlines flight earlier this month that grounded 737 MAX 9 planes for weeks.

As of last fall, Flair’s plan was to boost its fleet to 26 Boeing 737 MAX jetliners in 2024, up from 20.

READ MORE: Flair investor sued by aircraft lessors over missed payments

Jones said Boeing’s MAX program has faced a number of delays, telling CP that planes that were supposed to arrive in spring won’t land at Flair until late fall.

“This is a tough industry," he told the outlet. "The development of the financial performance will take some time."

Growing pains 

Flair’s tax troubles are the latest in a string of legal, financial and publicity problems the carrier has faced in recent years.

In 2022, the Canadian Transportation Agency (CTA) launched an investigation into Flair to see if the airline was truly Canadian.

The probe was conducted to see if Miami-based 777 Partners was controlling the airline, in violation of federal laws (foreign investment in a Canadian airline is limited to 49 per cent, or 25 per cent by one person).

(Pax Global Media/file photo)

The CTA eventually ruled that Flair was, in fact, Canadian, but only after the airline agreed to reduce its reliance on 777 Partners for financing and leases, and to add more Canadian members to its board.

Flair’s lease agreements have been another pain point.

Earlier this month, a U.S.-based minority investor with Flair was sued by three aircraft lessors for US$30 million after the carrier allegedly missed lease payments on four jets.

"Despite being repeatedly notified of their financial obligations, 777 Partners have continued to ignore calls to settle outstanding payments of almost $30 million. 777 Partners cannot just ignore its financial and contractual obligations. This legal action is a last resort," reads a statement on behalf of the lessors, sent to PAX on Monday (Jan. 29).

It's the latest in a dispute over aircraft that were leased to Flair, but were repossessed in March last year by Airborne Capital, which managed the planes on behalf of three lessors.

Last year’s repossession led to four grounded airplanes, cancelling several Flair flights, while impacting some 1,900 customers, just as the busy March Break travel period was ramping up.

Jones, at the time, admitted the carrier had fallen behind on lease payments after a “tough” winter on some routes

The CEO said Flair paid Airborne $4.2 million shortly before the seizures took place, assuring another $1 million was coming before the planes were repossessed.

READ MORE: Flair CEO says "growing pains" haven't gotten in the way of airline improvements

Airborne disputed this account, however, saying that missed payments were common.

Jones later accused two major Canadian airlines (which he did not name) of attempting to poach his company’s aircraft, stating that rivals “want us out.”

According to data analytics company Cirium, Flair has about 10 per cent of the domestic market in Canada.

Meanwhile, Flair has been on an ongoing journey to improve its customer service.  

Last year, the airline began releasing monthly operational metrics through its channels to show how its flight completion times were improving.

Jones, last summer, vowed to improve Flair’s customer service by establishing a specialist team in Montreal.

His remarks came one week after Flair made headlines for generating the most complaints from customers, according to federal data released that same month.

Near the end of last year, however, the airline said it flew more than 1,000 scheduled flights in November “with no cancellations.”

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