(Montreal) Fierce competition and high demand in Canada’s airline industry came to a head over the weekend when four Flair Airlines planes were abruptly seized over a lease payment issue.
The Boeing 737 Max planes were grounded on Saturday due to a “trade dispute” with New York-based Airborne Capital, Flair said.
A person familiar with the matter, but who was not authorized to speak about it publicly, said payments for the affected planes were a few days behind schedule and the amount owed was small compared to Flair’s overall revenue.
Flair has since “initiated” rental payments, the airline said, calling the foreclosures “unprecedented, […] extreme and unusual”.
Rental prices have soared since the pandemic due to strong demand for travel, even as domestic airfares have fallen with the arrival of new carriers and expansions at other competitors, observed John Gradek, head of the aviation management program at McGill University.
As a result, the “tiniest sneeze” in a payment plan could trigger the termination of the lease, allowing the lessor to find a new customer willing to pay more each month to use the planes.
“If you miss your payment with the lessor, they will seize the plane at the first opportunity, bring it back, and then remarket it at a much higher level of revenue than you would normally get with Flair. »
According to Gradek, 737 Max 8s can now cost renters up to $450,000 a month, up from about $150,000 in 2021. Late payment can further tarnish Flair’s credit and reputation, making its even more expensive future leases, he added.
The sudden seizure of more than a fifth of its fleet saw Flair rush to deploy more planes over the weekend as its passengers in Toronto, Edmonton and Waterloo, Ont. faced last minute flight cancellations.
Canadians, still scarred by memories of the pandemic lockdown, are keen on air travel this year, making the devices even more in demand by airlines and rental companies.
The number of scheduled Air Canada and WestJet flights jumped 31% to 47,362 this month from 36,062 in the same period last year, according to flight data firm Cirium.
Domestic ticket prices have fallen 15% from 2019, amid increased competition between airlines – six carriers now operate the Toronto-Vancouver route compared to two a few years ago – which leaves carriers with margins slimmer recipients, according to Montreal-based travel data company Hopper.
Flair spokesman Mike Arnot said a number of Flair flights were canceled on Saturday morning, but the company had three spare aircraft to fill those flights.
Passengers traveling within the next 72 hours will either be accommodated on Flair flights or on another airline at the company’s expense if a Flair flight is not available, he continued.
In a company update released later Saturday, Flair said customers can also book their own flight and receive a refund within seven days.