A Canadian aviation industry expert says purchasing Flair tickets could be a risky decision right now as the airline’s issues raise concerns about potential bankruptcy before the year’s end.
John Gradek, a supply networks lecturer at McGill University, told Daily Hive that Flair’s behaviour is concerning and reminds him of the weeks leading up to the closures of other low-cost carriers in Canada.
“I don’t think they’re gonna make it to Thanksgiving,” he said. “The financial crisis will catch up to Flair.”
The airline may get enough customers through the busy summer travel season to pay some bills, but Gradek thinks they’ll start running into trouble in mid-September when Canadian domestic travel slows down again.
How risky is it to buy a ticket through Flair?
“Oh, I think it’s risky,” he said. “It reminds me of a week or two before Lynx disappeared.”
Financial foreboding
Flair made headlines last month for abandoning passengers for days at a time in Cancun and for refuting reports that it slashed 600 flights as a cost-cutting measure.
“Where there’s smoke, there’s fire,” Gradek said, arguing that if you look at the recent flight cancellations, it shows something more problematic.
That’s not the only issue the company is facing. In January, it was revealed that Flair owed $67.2 million in unpaid taxes connected to import duties on 20 Boeing 737 planes that are part of its fleet. CEO Stephen Jones told Daily Hive that the airline has worked out a repayment plan with the CRA.
In addition, the company was fighting a financial services company for allegedly withholding $25 million, arguing it had no right to do so. It has since withdrawn its legal action.
“Steadfast in our confidence”
The CEO has stood firm in his message that the company is here to stay and will advocate for affordable travel.
“I acknowledge the skepticism surrounding Ultra-Low-Cost Carriers (ULCCs) in Canada, given the market dominance of large carriers and the challenges faced by newcomers. However, I firmly believe that it is misplaced, and I want to assure all Canadians that Flair Airlines is steadfast in our confidence that the ULCC model has potential to thrive in Canada,” Jones wrote in a March statement.
NAB_Photography/Shutterstock
However, Gradek says that there’s a lot at play here working against the company’s future, including the low-cost model having proven unsuccessful time and time again.
“[Flights] from Toronto to Calgary, or Toronto to Vancouver, [flights] were $99 and $129 one way, from Flair and Lynx. To the airline, they were netting somewhere between $20 and $40 net after you pay all the taxes and the fees and all that stuff, and that doesn’t even pay for the gas on the airplane,” he said.
“Forget the cost of the airplane, the cost of the people. They’re not making any money at that fare level. But that was the price as you were competing against each other, so you have no choice,” he said about the competitive cheap flights last summer.
How does a low-cost carrier make money?
He says, overall, the Canadian travel market sees highs and lows and is challenged trying to get Canadians off the couch during those slower months.
“On average, they were losing between $20 and $40 for every passenger they carried at this price level. So there was a need for them to increase the price level, but this would stymie Mr. Jones’ philosophy to get Canadians off the couch,” Gradek said of Flair’s CEO.
Last year was a record year for Canadian tourism, and Gradek says a big part of that was the cheap fares, but he questions if it can be stay cheap.
Flair President and CEO Stephen Jones at Edmonton International Airport in 2021. (Flair/Facebook)
Jones was unavailable for an interview Thursday, but Flair did provide a recent opinion piece on the CEO’s feelings on that topic.
“Disruptor airlines like ours dared to defy convention, to offer an option to those who had been priced out of the skies,” his op-ed reads in part. “Our presence in the market has saved Canadians over $700 million with our lower fares and commitment to affordability. This ‘Flair Effect’ has compelled the aviation duopoly to reevaluate their pricing strategies and put the needs of the people first.”
Gradek is critical of bare-bones pricing, suggesting it turns into bare-bones customer service.
“The duty of care component of Flair’s customer service is really missing,” he adds.
That issue was raised over spring break when a website problem kept many customers from booking Flair flights. Some complained that they saw the glitch for two whole days, and took to social media to complain about the lack of explanation. The company has since said it has fixed the issue and apologized.
Not all doom and gloom
Travel expert Claire Newell has seen the demise of more than a dozen low-cost aircraft carriers in her career and says it’s important for travellers to be prepared — and cautious.
“When I talk about Flair as an ultra-low-cost carrier in the Canadian airspace, I kind of need to talk about the other airlines that we have. First of all, the demise of Lynx Air, because that was hardly a shock to those familiar with the country’s aviation history. Sadly, it’s rich with low-cost airline failures. I could probably list 20 of them that have come and gone in my 30-plus years in the industry, but the demise of Lynx has left an opportunity for Flair Airlines because it is now the only ultra-low-cost carrier in the country,” she said.
Robin Guess/Shutterstock
The Travel Best Bets owner says Air Canada, WestJet, and Air Transat’s Porter Airlines all have strong business plans and know their brands. Flair has the potential to do the same, but it does have a barrier.
“They don’t have a big fleet, so if something goes sideways… they don’t have other aircraft that can swoop in and help with the domino effect that is created,” she says, referencing the recent situation over spring break where people were stranded in Mexico.
But in terms of whether the company could fold? Newell says that losing their main competitor can only help them. She says many in the industry are watching to see if Canada can sustain even a single ultra-low-cost carrier after decades of cost-related issues.
She says those $99 flights, for example, are something they should consider, echoing Gradeks’ statements.
“It isn’t sustainable. They are going to have to be very careful with how they price to be able to cover their cost of operation, expand the way that they want to, take on the new leases that they have coming for aircraft. I’m hoping with fingers and toes crossed that they are doing everything in their power to ensure they have the funds that are needed moving forward with their operation,” she said. “There is opportunity.”
So would Newell tell her customers to avoid Flair? Not necessarily.
“Flair doesn’t deal with anyone in the [travel] industry. It’s an airline that you work with directly, you take the chance.”
She recommends getting travel insurance first and foremost and considering your own circumstances. If you are travelling for a concert, for example, you might run into trouble if there’s a mechanical problem or if, worst case scenario, the company files for bankruptcy, and you miss that event.
However, travel insurance can add up.
“What I encourage people to do when they’re looking at an ultra-low-cost carrier is to look at everything that they’re going to need because, in some cases, when you add in the baggage or a seat assignment, you’ll realize it may not be that much different.”
While many assume that the airlines have certain responsibilities to passengers, there are a lot of misconceptions.
Newell says a new tool from BCAA, the Air Passenger Help Guide, is great for helping people navigate the complicated world of passenger rights.
airpassengerhelpguide.ca
Plus, remember to use a credit card to book.
“Just protect yourself.”
With files from Irish Mae Silvestre and Simran Singh