Canada’s Flair Airlines discusses balance sheet restructure

Canada’s Flair Airlines Ltd. is in talks to raise funds that would help ease the debt burden at the budget carrier beset by aircraft repossessions, back taxes and a financial backer accused of fraud. 

Interim Chief Executive Officer Maciej Wilk is in discussions with “financial institutions that are not shy of taking a slightly higher-risk investment” to participate in an ongoing recapitalization of the low-cost carrier, he said in a phone interview. New lenders or equity funding would help the airline address its significant debt load, which he wouldn’t quantify. 

“In order really to give us breathing space and comfort to continue a restructuring of the company, I think we would be very happy if we received like a hundred million” Canadian dollars, Wilk said by phone. “Just to be clear, it’s not like this is something that we desperately need right now.”

Flair ran into financial trouble after higher costs upset its efforts to rapidly scale up as the pandemic eased. Lessors repossessed four Boeing Co. 737 aircraft in March 2023 — stranding passengers headed for spring break — and its former lead investor, 777 Partners LLC, has faced accusations of fraud in court. Another 777-backed carrier, Australia’s Bonza, entered liquidation last month.

Flair still owes the Canadian government tens of millions in back taxes, the Canadian Press reported in January, prompting them to arrange a payment plan with the Canada Revenue Agency. A court dispute over the planes, which Flair alleges were “unlawfully” seized by Airborne Capital Ltd., is ongoing.

777 is still a lender to Flair, Wilk said, but its stake has fallen to less than 10% from about 25%, and it no longer has board seats. Advantage Capital Holdings LLC, a New York-based insurance company which held senior rights to collateral associated with 777, has provided support, Wilk said, declining to provide details.

Representatives for 777 and Advantage Capital, known as A-Cap, didn’t respond to requests for comment.

If it can secure its finances, there’s an opportunity for Flair to take advantage of its position as “last man standing” in Canada, since competition has eased, Wilk said. In recent months Lynx Air and Canada Jetlines Operations Ltd. filed for creditor protection, while the country’s second-biggest carrier, WestJet Airlines Ltd., axed low-fare brand Swoop last year.

Wilk, a veteran of LOT Polish Airlines, joined Flair last year as chief operating officer and became interim CEO in June. He said the Edmonton-based carrier’s fleet ownership has been restructured, and the company has new lessors including SMBC Aviation Capital Ltd., BOC Aviation Ltd. and Jackson Square Aviation LLC.

Wilk said Flair was profitable during July, will be again during August, and he plans to lower its unit costs via efficient expansion. He wants to grow its fleet to at least 24 jets after next summer, up from 20 today, he said. He added that the existing structure could handle as many as 35 planes, including older Boeing 737-800s.

“The competitive environment has changed dramatically for Flair,” he said. “Now the business case for any investor to consider Flair as an investment target is much more compelling.”