The future of emerging airlines looks bleak after the closure of Canada Jetlines

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Canada Jetlines Ltd. temporarily suspended operations on Thursday after four of its executives resigned on Monday, including CEO Brigitte Goersch.

The leisure airline joins the ranks of smaller Canadian carriers that have run into financial difficulties. It said it was unable to raise the funds needed to continue flying and plans to seek creditor protection. It also said passengers with existing bookings should contact their credit card company for a refund.

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Trading in the company’s shares, which are traded on the NEO exchange, was suspended on Wednesday afternoon.

Headquartered in Mississauga, Ontario, Jetlines was founded in September 2022 and offers charter and scheduled flights from Toronto to destinations across North America and the Caribbean.

However, one expert said the airline has been struggling to get planes in the air for some time, citing repeated requests for short-term financing to keep operations going.

John Gradek, a lecturer in McGill University’s Aviation Management Program, said Jetlines has been on the “brink of bankruptcy” for nearly a year.

In June, the company closed a $2 million loan and announced it would use the proceeds to repay the remaining principal balance at Square Financial Investment Corp. after obtaining a separate $2 million loan in May.

In its latest quarterly report, Jetlines reported a net loss of $6.4 million, up $2.7 million from the same period in 2023.

“You need cash to survive in Canada,” Gradek said, noting that Jetlines has targeted high-volume, highly competitive markets by positioning itself as an upscale airline rather than focusing on generating steady revenue and profits.

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He said the airline, with only six aircraft in service, has a lower chance of survival than midsize competitors such as Porter Airlines Inc., which bills itself as an upscale economy-class airline and recently announced a fleet expansion last year.

The more worrying issue, Gradek said, is whether Canada’s commercial aviation market is broken. If Jetlines shuts down for good, it would be the third Canadian airline to cease operations this year, following the closure of low-cost carrier Lynx Air and the integration of Swoop into WestJet Airlines Ltd.

Flair Airlines Ltd. has also faced challenges: The CEO resigned this summer and the company must implement a payment plan to settle $67 million in unpaid federal taxes.

Gradek said Jetlines’ financial problems were just “another nail in the coffin” for newer, smaller airlines.

At the beginning of the year, the Competition Office announced that it would launch a market study to examine what changes could be made to improve competition in the aviation industry.

“Despite promising market entry and expansion by some airlines, the Canadian market appears to be challenging for many airlines,” spokesman John Power said in an email. “This includes low-cost and ultra-low-cost carriers, which appear to have greater difficulty in Canada compared to other countries.”

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Jacques Roy, professor of transportation management at HEC Montreal business school, said Canada has always been a “two-airline market,” with major players Air Canada and WestJet and a few niche players.

“There wasn’t much room for new competitors,” he said, adding that even airlines trying to become low-cost carriers would struggle in the long run. “The existing airlines won’t let you gain market share without resistance.”

Roy said Canada is a larger country with a smaller population, meaning low-cost airlines don’t work as well compared to those in the U.S. or Europe. Passengers are less willing to fly from Toronto to Calgary for four to five hours in a small seat with little service.

“I don’t see much of a future for smaller operators, other than niche players,” he said, citing Porter as an example.

Gradek also believes there is a lack of oversight of transportation companies like Jetlines by Transport Canada, which administers their licenses. He previously served on the Transportation Appeal Tribunal of Canada, a quasi-judicial federal body that holds hearings on Transport Canada decisions at the request of affected parties.

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He called for a revision of the minimum requirements for granting an operating licence to airlines. He also called for airlines to conduct financial and operational audits more frequently and to make these audits public.

“Canada Jetlines’ license to operate should have been reviewed months ago and, in my opinion, suspended because Canadians need an airline they can trust, that has a good management model and is financially stable,” Gradek said. “Our friends at Canada Jetlines had none of that.”

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