Lynx Air to ground operations on Monday; passengers told to seek refunds from credit-card companies

‘This was not how our story was intended to play out,’ executive Jim Sullivan wrote in a memo to staff

Citing financial pressures and “significant headwinds,” Calgary-based low-cost airline Lynx Air announced it will cease operations on Monday.

In a memo to staff, COO Jim Sullivan revealed the airline has successfully filed for creditor protection from the Court of King’s Bench of Alberta under the Companies’ Creditors Arrangement Act. The company’s fleet will take to the skies for the final time Sunday.

In the memo, Sullivan said compounding financial difficulties brought on by high inflation, fuel, capital and regulatory costs, coupled with adverse exchange rates and “competitive tension in the Canadian market” ultimately proved too steep of a mountain for the Calgary company to overcome.

“I know this is a terrible shock for many of you and this was not how our story was intended to play out,” Sullivan wrote in the memo that was circulating online Thursday night.

“While we did our best, the pressures mounted and the risks increased, which has led to today’s announcement.”

Taking its first flight in April 2022, the low-cost carrier grew quickly, building up its network to service destinations across Canada, the U.S. and Mexico.

Sullivan’s memo claimed the airline boasted nearly two million passengers, with the year-over-year number increasing by 187 per cent in 2023.

However, despite the airline’s substantial growth, ongoing operational improvements, cost reductions and efforts to explore a sale or merger, “the challenges facing the company’s business have become too significant to overcome,” a press release stated.

Lynx Air flights will continue to operate as per usual until Sunday night, according to the release. Operations will cease as of 12:01 a.m. on Monday.

Passengers pass the Lynx Air check-in desk at the Calgary International Airport on Friday.
Passengers pass the Lynx Air check-in desk at the Calgary International Airport on Friday.Jim Wells/Postmedia

“Consumers are going to be laughing all the way to the bank,” John Gradek, an aviation expert and lecturer at McGill University in Montreal, told Postmedia in January.

“The problem is the fares will be so low that it won’t be compensatory to the carriers that are flying those fares.”

Unique challenges for Canadian ULCCs

Robert Kokonis, president of AirTrav Inc. — a Toronto-based aviation advisory firm — said Lynx’s demise is indicative of the difficulties of operating an ultra-low-cost carrier in Canada.

He said there are five factors that make it difficult for discount carriers to compete with the larger airlines in Canada, including the small number of large population centres across the country and the distance between those urban centres.

There are also high “structural costs,” such as taxes, airport charges and regulatory fees that make it challenging for ULCCs to “stimulate” the market, Kokonis added.

“Canada is one of the highest-cost aviation jurisdictions in the world,” he said. “The challenge for these discount carriers is that for a lot of their traffic, they do rely upon, not ‘stealing’ their share from WestJet or Air Canada, but stimulating the marketplace to make the whole pie get bigger.

“But if your starting point for that stimulation — the starting point for those fees, taxes and charges — is so high already, it makes that stimulation effort really difficult.”

Lynx plane at YYC
A Lynx Air Boeing 737 on the tarmac at the Calgary International Airport on April 7, 2022.Jim Wells/Postmedia

Other challenges for ULCCs, according to Kokonis, are the imposition of airline passenger protection regulations (APPRs) and the high degree of “seasonality” within Canada’s travel industry.

“We have a very brief, busy summer season, a sharp sun destination season in March, but the shoulder seasons are very tough to make money,” he said. “Everyone is still flying, but you can burn through a lot of cash quickly.”

Lynx’s CEO announced her departure last June, with no successor named since.

The airline’s fleet consists of nine Boeing 737 Max 8s. Lynx’s website lists 23 destinations, including most major Canadian cities and U.S. locations such as Phoenix, San Francisco and Tampa Bay.

Its investors include Stephen Bronfman’s Claridge Inc. and Bill Franke’s Indigo Partners, a U.S. private equity firm that invests in no-frills airlines such as Wizz Air and Frontier Airlines.

— With files from Matt Scace and The Canadian Press

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