The fierce competition and high demand playing out across the Canadian air travel industry bubbled to the surface over the weekend when four Flair Airlines planes were abruptly seized over lease payments.
The Boeing 737 Maxes were grounded Saturday after a “commercial dispute” with New York-based Airborne Capital Inc., Flair said.
A person familiar with the matter but who was not authorized to speak publicly about it said the payments for the affected planes were a few days behind and the amount owed was small relative to Flair’s overall revenue.
Flair has since “initiated” lease payments, the airline said, calling the seizures “unprecedented … extreme and unusual.”
Leasing prices have skyrocketed since the COVID-19 pandemic due to surging travel demand, even as domestic airfares have dropped amid a crop of new carriers and expansions at others, said John Gradek, head of McGill University’s aviation management program.
As a result, the “slightest sneeze” in a payment plan could trigger termination of an older lower-price lease, allowing the lessor to find a new client willing to pay more per month for the pricey planes, he said.
“If you screw up your payment with the lessor, they will take the first opportunity to seize the airplane, bring it back and then remarket it at a much higher level of revenue than you would normally get with Flair.”
Gradek said 737 Max 8s can now cost lessees up to $450,000 per month versus about $150,000 in 2021. A delayed payment may also tarnish Flair’s credit and reputation, making future leases even costlier, he added.
The sudden seizure of more than one-fifth of its fleet saw Flair scramble to roll out other planes over the weekend, as passengers in Toronto, Edmonton and Waterloo, Ont., dealt with last-minute flight cancellations.
Canadians still reeling from memories of pandemic confinement have been eager to board flights this year — putting planes in even higher demand from airlines and leasing companies.
The number of scheduled flights by Air Canada and WestJet jumped 31 per cent to 47,362 this month from 36,062 in the same period a year earlier, according to flight data firm Cirium.
Domestic ticket prices have dropped 15 per cent from 2019 amid heightened airline competition — six carriers now ply the Toronto-Vancouver route versus two a few years ago — leaving carriers with thinner profit margins as they battle for control of the skies, according to Montreal-based travel data firm Hopper Inc.
Flair spokesman Mike Arnot said a number of Flair flights were cancelled Saturday morning, but the company had three spare aircraft to backfill those flights.
Passengers travelling in the subsequent 72 hours will either be accommodated on Flair flights or on another airline at the company’s expense if a Flair flight isn’t available, he said.
An update from the company later on Saturday added that customers can also rebook their own travel and receive a reimbursement within seven days.
—Christopher Reynolds, The Canadian Press