Canadian start-up carrier Lynx Air attributes its descent into insolvency to factors including the grounding of Boeing’s 737 Max, Covid-19 travel restrictions and surging fuel prices.
That is according to court papers recently filed by Lynx, which is seeking protection from creditors after disclosing plans to cease operations on 26 February.
The court filings also reveal that the Calgary-based ultra-low-cost airline owes C$124 million ($92 million) to Indigo Northern Ventures, the firm led by longtime airline investor William Franke that helped Lynx get airborne.
Lynx on 22 February revealed its plan to halt operations.
Lynx now faces “imminent danger of a disorderly operational shutdown that will result in aircraft and passengers being haphazardly stranded across Lynx Air’s network”, the carrier warns in a 22 February filing with the Court of King’s Bench in Alberta. “Lynx Air is currently insolvent and has insufficient cash reserves to allow it to continue to fund its current ongoing operations.”
The carrier, an all-Boeing 737 Max operator, has asked the court to issue an order halting legal proceedings against it, and also to authorise it to temporarily retain assets and to carry on its business. Lynx seeks “an orderly wind down of operations while simultaneously maximising the value of [its] remaining assets”.
The airline launched flights in April 2022 with start-up funding that included C$71 million from Indigo Northern. Franke’s Indigo Partners holds interests in US discounter Frontier Airlines and Chilean low-cost carrier JetSmart, and formerly was the largest holder of Spirit Airlines’ shares.
Indigo Northern continued supporting Lynx during its first few years of operations, providing another C$22.3 million last year and C$20.1 million so far this year, court papers say. Lynx now owes Indigo Northern more than C$124 million, including C$24 million of interest.
Reached by FlightGlobal, Indigo declines to comment.
Lynx’ ended 2023 with C$429 million in assets and C$600 million in liabilities. Its debts include C$1.6 million owed to Aeroports de Montreal, C$2.4 million owed to the Greater Toronto Airports Authority and $3.3 million due to Delta Air Lines, which has been providing Lynx with engineering, maintenance and airworthiness support.
“DEVASTATED”
Lynx says its business was “devastated by significant increases in the pricing of jet fuel, sustained decreases in passenger demand as a result of Covid-19 travel restrictions, and the grounding of Boeing’s 737 Max from March 2019”.
The carrier says it delayed its launch of flights by three years, until April 2022, due to the grounding and pandemic. The grounding lasted 18 months, from March 2019 to November 2020.
Lynx notes that fuel prices began surging in 2019, and that prices at times in 2023 were double what it had planned, resulting in C$30 million of unexpected expense, court documents say. Lynx “encountered various unforeseen events which resulted in a shortfall in projected revenue, such that revenues being generated from operations were insufficient to sustain operations”.
Lynx is among a string of Canadian ultra-low-cost airlines to begin flying in recent years. Others included Flair Airlines and Canada Jetlines. Lynx operates nine 737 Max 8s and flies to 18 destinations, including 11 in Canada, six in the USA and one in Mexico.
