2024-08-15 19:38:37
Jet Airways Canada has suspended all flights and temporarily ceased operations due to a financial crisis within the company.
The airline said Thursday it could not find the money needed to keep flying and planned to seek shelter from creditors.
“company […] “We have investigated all available financing alternatives, including strategic transactions and equity and debt financing. Unfortunately, despite these efforts, the company is currently unable to obtain the financing it needs to continue operations,” spokeswoman Erica Dymond said in a statement.
The company said passengers who had booked flights should contact their credit card companies to seek refunds. “Every effort is being made to assist customers.”
In a sign of the worst, Jet Airways President and CEO Brigitte Goersch and executives Ryan Goepel, Beth Horowitz and Shawn Klere resigned on Monday.
Market difficulties
This is another airline failure following the closure of Lynx Air and low-cost airline Swoop last year.
“Every time you lose a little competition in the Canadian market, travelers feel a little sad because it puts less pressure on prices,” said Jacques Roy, a professor of transportation management at HEC Montreal’s business school.
He said Jet Air Canada accounts for only a small portion of flights to sun destinations. As of Thursday, the airline had dozens of flights a month from Toronto to Miami, Orlando, Florida, and Cancun, Mexico, according to aviation tracking firm Cirium.
The closure highlights the challenges of operating an airline in a vast country with a sparse population and only a few air travel hubs.
“Every time a new player wants to enter the market, there is only one certainty: they will lose money for at least the first eight, nine, 10 months or even longer. So you need a good bank account,” Mr Roy explained, stressing that leisure travelers are particularly price-sensitive.
“The major players will come out to compete. If you cut rates below cost, you’ll lose in the short term. It’s a tough market,” he continued.
The company’s shares were suspended on the Chicago Board Options Exchange in Canada on Wednesday afternoon.
A tough start
Jet Air Canada, which has been struggling to get several planes off the ground since the first flight in September 2022, faced a series of problems before this week’s turmoil.
In October 2019, the Mississauga, Ontario-based company announced it was delaying its product launch, originally scheduled for December of that year, and laid off most of its employees after failing to obtain necessary financing and losing its investment partners.
In January 2023, Jet Air Canada suspended domestic routes to refocus on sun destinations and leased aircraft, but said at the time it intended to resume domestic flights in the fall of the same year.
On June 30, 2024, Eddy Doyle resigned from the position of President and CEO, which he had held since 2021.
The latest setback comes after seven years of fundraising, even though Ottawa in 2018 raised the international ownership cap on Air Canada from 25% to 49%, allowing a wider range of investors to participate.
Financial documents show that Jet Airways lost C$14.2 million between March 2023 and March 2024, despite having a profitable quarter. Its quarterly revenue was between C$8 million and C$12 million.
In May, the company received a $2 million loan from Square Financial Investment, a Mississauga-based company owned by Jet Canada board member Reg Christian, who was named executive vice president following the decision. The loan is one of several Jet Canada has extended over the past two years.
Just on May 10, the company said in its financial statements that it plans to increase the number of aircraft to seven by the end of the year and to 15 by 2026.
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