Jetlines postpones launch amid financing woes

Canada Jetlines, the ultra-low-cost carrier which planned to operate from Vancouver International Airport, has postponed its planned entry into the market and is laying off most of its employees.

Start-up Canada Jetlines is postponing its planned launch and laying off most employees after failing to secure C$40m in financing and losing its existing investment partners.  

The ultra-low-cost carrier (ULCC), which planned to operate Airbus A320s on routes from its home base at Vancouver International Airport, was scheduled to launch on 17 December 2019.

However, in a statement the company said it has “not satisfied the financing condition” to secure an additional C$40m and, as a result, its backers SmartLynx and InHarv ULCC Growth Fund have exercised their rights to terminate their investment commitments.

It will therefore not receive their first two Airbus 320s planned for delivery in November.

Jetlines said that one of the main concerns encountered while engaging with investors was that they believe Canada’s dominant airlines “will react very aggressively once the company starts operations, and in fact have already done so in anticipation of Jetlines entry into the market”.

The carrier alleged that Swoop, WestJet’s ULCC subsidiary, is “pricing lower than other airlines, and significantly lower than the other ULCC entrant serving Canadian and transborder passengers”.

It also claimed that Swoop is “pricing below Jetlines’ avoidable costs as well – and is attempting to deter entry by Jetlines on its proposed routes”, which Jetlines’ management said was an “abuse of dominance”.

Canada’s Competition Bureau is investigating the claims. WestJet told Routesonline that it refutes the allegations made by Jetlines.

In order to conserve cash, Jetlines will lay off most employees except for a core team who will continue trying to secure finance. The airline said it intends to rehire employees again “once proper funding has been secured”.

However, chief executive Javier Suarez has tendered his resignation, effective immediately.

Mark Morabito, Jetlines’ executive chairman, said: “It is very unfortunate that we have to postpone our launch date. We have built as much as anybody can without access to more capital.

“We have invested in bringing on board 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.”

Meanwhile, WestJet has released its third quarter results for 2019, with net earnings of C$119.4m, a rise of 70.4 percent year-on-year. Its load factor was 86.8 percent, up from 84.6 percent during the third quarter of 2018.

"We are very pleased with these remarkable results, achieving our highest ever third quarter load factor, second-highest ever third quarter net earnings and the third-highest quarterly net earnings in WestJet's history," said Ed Sims, WestJet president and chief executive.

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