Low-cost air carriers | Flair Airlines and Lynx Air consider marriage

Flair Airlines and Lynx Air, two Canadian low-cost carriers that have landed in Montreal and Quebec in recent years, are considering a marriage, have confirmed The Press. If it materializes, this grouping will change the face of a segment of the industry that is struggling to take off in the country.

According to our information, obtained from sources familiar with the matter, but who are not authorized to speak publicly, a transaction could be announced soon, or even as early as this Thursday. In a statement, Flair, who is based in Edmonton, responded Wednesday that he does not comment on “rumors” or “speculation.” Lynx, headquartered in Calgary, did not respond to questions from The Press sent by email. Citing confidential sources, the specialized American publication The Airline Observer had mentioned the rumors of a merger between the two companies on February 8.

By establishing themselves at the Montreal-Trudeau and Jean-Lesage airports (Quebec), these two airlines allowed the Quebec market to stop being ignored by low-cost carriers. With the exception of the route between Montreal and Calgary, there is no overlap between the Flair and Lynx networks in Quebec.

“There wouldn’t really be any negative repercussions here,” says aviation expert and lecturer at McGill University John Gradek. The two companies planned to continue establishing themselves in the Quebec market. »

Quebec had been ignored by the local low-cost carriers that had appeared in Canadian skies. This changed in July 2021 with the arrival of Flair.

Currently, the company operates 18 Boeing 737 Max 8 aircraft as well as 2 737-800 aircraft, while Lynx’s fleet consists of 9 737 Max 8 aircraft. At the time of writing, it had not been possible to obtain all the details of the planned merger. We didn’t know, for example, if it was Flair who would absorb Lynx or the other way around. The first company is partly owned by the Florida firm 777 Partners, while the other has Indigo Partners LLC – the firm of businessman Bill Franke – among its investors.

Turbulence

The last few months have not been easy for both companies.

After the departure of its president and CEO Merren McArthur last September, Lynx has still not found a successor. The surprise resignation of M^me McArthur was announced in June 2023, two years after her arrival. The manager had agreed to stay on for a few additional months to “select and appoint a new CEO,” Lynx explained at the time.

The turbulence was greater at Flair. According to court documents, the company owes $67.2 million in unpaid taxes to Ottawa, which prompted the Canada Revenue Agency (CRA) to obtain an order for the seizure and sale of the airline’s assets. Flair’s daily operations were not disrupted, however, as the carrier said it was able to come to an agreement with the tax authorities.

“When they write the book on Flair’s trajectory to success, this will be just a footnote,” wrote Flair CEO Stephen Jones in an internal memo to employees sent to the end of January, that The Press consulted, in order to calm things down regarding the dispute with the CRA.

In an interview with The Canadian Press on January 29, Mr. Jones indicated, however, that the company’s growth plan would be on hold this year due to its heavy debt and delivery delays at Boeing.

Mr Jones did not respond to a message sent to him by The Press.

Viable ?

A merger between Flair and Lynx would certainly attract the attention of Canadian regulatory authorities, who would have to look into the proposed transaction. If it goes ahead, it would be another shift in the low-cost carrier segment.

Last fall, WestJet integrated the activities of its subsidiary Swoop as competition intensified in Western Canada with the emergence of Lynx and Flair.

“Carriers like Flair and Lynx make money from mid-April to mid-September,” says Gradek. The question, if these companies come together, will be whether they will be able to improve their profitability. Both carriers are losing money. »

The business model of these companies, known in English asultra-low cost carriers, generally relies on the use of secondary airports, because their costs are lower and their lower traffic reduces the risk of delays. In Quebec, however, Flair and Lynx cannot use this strategy, due to a lack of secondary airports equipped with infrastructure capable of accommodating them.

Depending on the time of year, these carriers offer attractive prices to travelers. For example, on the Flair site, a one-way ticket to Fort Lauderdale is offered for $118 next month. Mr. Gradek wonders how much longer this can last.

“The prices are attractive for consumers, but it is not [soutenable] for carriers, says the expert. This is illogical and irresponsible. A form of happy medium would allow the model [de ces compagnies] to function longer. »