Canada Jetlines edging closer to a complete failure to launch with latest delay

Canada Jetlines edging closer to a complete failure to launch with latest delay

TORONTO — While Air Canada and WestJet soar on the strength of third quarter results, would-be ultra low-cost carrier Canada Jetlines has announced yet another delay plus the resignation of its CEO, effective immediately, along with layoffs for most of Jetlines’ staff.

According to a new statement from the company, Jetlines’ CEO, Javier Suarez, has tendered his resignation. Jetlines says it will lay off most of its employees except for a core team lead by the Executive Chairman who the company says will continue meeting with investors trying to secure financing.

Jetlines says it intends to re-hire employees once proper funding has been secured.

Canada’s airline industry is littered with low-cost carriers that ultimately failed, from Jetsgo to the short-lived Roots Air. Most LCCs and ULCCs focus on B2C strategies and don’t work effectively with the trade. Some of the more notorious, like Greyhound Air, made a point of encouraging passengers to bypass travel agents. Now Canada Jetlines is faltering before it even gets off the ground.

Back in April 2019 Canada Jetlines said its launch date for commercial service would be Dec. 17, 2019.

“It is very unfortunate that we have to postpone our launch date,” said Jetlines Executive Chairman, Mark Morabito. “We have built as much as anybody can without access to more capital. We have invested in bringing the most talented people who have done an incredible job putting together our operations manuals and systems, our brand, website and all other commercial components needed for launch.”

Last month the ULCC announced that in order to get its winter sun flights in the air on Dec. 17, it would need more money. “The completion of the financing required to launch airline operations remains critical to Jetlines continued advancement and launch,” said the company, adding that “Jetlines’ intent is to convert investor interest into financing commitments, but it cannot provide any assurances that this will occur.”

Now, says Jetlines, “The Company advises that given that it has not satisfied the financing condition to secure $40 million in financing in addition to the funds committed by SmartLynx […] SmartLynx and InHarv ULCC Growth Fund have exercised their rights to terminate their investment commitments.”

The statement continues: “The Dec. 17, 2019 launch date will need to be postponed and the company will not pay additional deposits and will therefore not receive their first two Airbus 320 it has planned to receive in November this year.

“No further date will be announced until funding is secured.”

In its statement Jetlines lashed out at its competitors. “One of the principal concerns encountered by Jetlines team while engaging with investors is that they believe the existing dominant members of Canada’s aviation duopoly will react very aggressively once the company starts operations, and in fact have already done so in anticipation of Jetlines entry into the market,” said Jetlines.

One of its six points of concern is that “Swoop is pricing lower than other airlines, and significantly lower than the other ULCC entrant serving Canadian and transborder passengers.”

This past summer Jetlines debuted its “playfully provocative” marketing strategy, and said that all the consolidation in the Canadian airline industry – including Onex’s acquisition of WestJet, and Air Canada’s proposed acquisition of Transat – was beneficial to Canada’s low-cost and ultra low-cost airline industry.

It even staged an in-air protest against what it says is decreased airline competition, despite what is already a crowded field, including Air Canada Rouge, Swoop and Flair.

Both Air Canada and WestJet have posted strong third quarter results.

Air Canada’s third quarter 2019 EBITDA (earnings before interest, taxes, depreciation, amortization and impairment) were $1.472 billion, compared to third quarter 2018 EBITDA of $1.351 billion, an increase of $121 million or 9%.

Air Canada’s third quarter 2019 operating income was $956 million, compared to third quarter 2018 operating income of $923 million.

WestJet’s Q3 2019 results included with net earnings of $119.4 million, compared with net earnings of $70.1 million, in Q3 2018. The results mark WestJet’s highest ever third quarter load factor, second-highest ever third quarter net earnings and the third-highest quarterly net earnings in the airline’s history.

Jetlines’ setback is the latest of many. Talk of a launch has gone on for several years. In 2017 Jetlines was touting June 2018 as the launch date. Those plans folded with a March 2018 announcement. There was also talk of a summer 2019 launch.

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