Flair Airlines: Is Canada’s Low-Cost Carrier in Trouble?

Canadian low-cost airline Flair Airlines recently announced an expanded winter schedule, just as it heads into its busiest summer ever.

On the surface, the airline appears to be doing well. It’s Canada’s third-largest airline, and claims to be the country’s greenest. And yet, over the last year, experts home and abroad have characterized Flair as being “on the verge of collapse,” and “in a death spiral,” pointing to the ongoing legal and financial troubles of its backer, 777 Partners. 

U.S.-owned 777 Partners is a private investment firm that owns shares in Flair, and owns Australian-based low-cost carrier Bonza outright. Bonza collapsed last month, leading many to look more closely at 777 Partners’ financial situation—and question Flair’s future in the process.  

777 Partners are facing several lawsuits 
Founded by Josh Wander and Steve Pasko in 2015, the firm expanded into aviation with its investment in Flair, helping shape the airline’s rebrand into a low-cost carrier. Then in 2021, the firm backed the new airline Bonza, which commenced operations in January 2023. 

Despite the (seemingly) promising start, trouble has been brewing behind the scenes at 777 Partners, culminating in dramatic headlines over the last few months. The first real signs of trouble emerged in March 2023, when baliffs seized four Boeing 737 MAX jets from Flair, citing several months of non-payment. The move raised eyebrows in aviation circles: It’s highly unusual for jets to be repossessed over lack of payment. 

In September, the firm drew more widespread scrutiny when it announced its intention to buy soccer club Everton, and rumors spread of financial woes and unpaid bills. In December, three separate aircraft lessors launched a lawsuit against 777 Partners over missed lease payments (for the aforementioned Boeing jets). 

Flair, meanwhile, was revealed to owe the Canadian Revenue Agency more than $67 million CAD in unpaid taxes, and in January, the feds began proceedings to seize assets.

Then, on April 30, 777 Partners abruptly pulled the plug on Bonza, suspending all flights and leaving many passengers stranded. Reports emerged that directors had received insolvency notices as early as April 16 but continued to sell tickets—a criminal offence that could result in jail time, if proven in court. 

Just days later in early May, one of the firm’s lenders launched a massive $600 million (USD) federal lawsuit in New York courts, alleging 777 Partners had engaged in a “yearslong fraud scheme worth hundreds of millions of dollars” (via New York Times). The court filing references 16 other lawsuits, all concerning unpaid debts and totalling approximately $130 million. The suit also names U.S. insurer Advantage Capital (ACap) as a defendant, alleging the company provided 777 with much of its funding through loans, thereby participating in “a giant shell game at best, an outright ponzi scheme at worst.” 

With Bonza down, what does this mean for Flair? 
Earlier this month, Flair Airlines confirmed that a “portion of the shares” owned by 777 Partners had been acquired by an unnamed lender, who would be providing “new non-binding debt funding.” This lender is believed to affiliated with Ireland-based AIP Capital, the leasing agency that landed a death blow to Bonza by repossessing its jets in late April. 

The relationship between AIP Capital, ACap, and 777 Partners is murky at best. When AIP Capital was announced in May 2023, the release stated the new company would exclusively manage 777 Partners’ aircraft assets.  

So has AIP taken over 777 Partner’s shres in Flair? AIP Capital’s managing partner Mathew Adamo told AFR Weekend, “AIP is not an affiliate of Flair, we are a lessor to Flair.” 

The Canadian Transportation Agency is currently investigating the new ownership structure to ensure it complies with Canadian ownership rules: no single foreign company or entity can own more than 25% of a Canadian airline, and total foreign ownership can’t exceed 49% (via The Toronto Star). The airline’s Air Operator Certificate, which it needs to fly, is at stake—but industry experts say it unlikely Flair will be grounded without notice. 

If the CTA does take action against Flair, the airline would be given time to get its structure in order before its certificate was revoked. And 777 Partners co-founders and managers stepped down following the Bonza turmoil. Still, the next few months will be key in determining whether Canada’s sole-surviving low-cost carrier will stick around.

Flair CEO Stephen Jones is bullish about the airline’s future. He recently told CBC News “We see the opportunity in getting more people off the couch… because affordability for travel in Canada has been a real problem.” 

While several experts have little faith in Flair, there are those who believe. Lori Ranson, a senior analyst for the Americas with CAPA Centre for Aviation, told the CBC that the company’s brand recognition and lack of competition give it an edge.  

“There’s a lot of history of low-cost and ultra-low cost carriers not really doing well in Canada, but I think Flair is trying to change the narrative,” said Ranson. “We just have to see how it’s going to play out.”