Flair files $50M lawsuit against leasing companies over airplane seizures

The Flair Airlines plane seizure drama is escalating to a tune of $50 million dollars.

That’s the amount in damages the Edmonton-based low-cost carrier is seeking in a lawsuit it filed on Wednesday (March 15) against several plane-leasing companies over the "unlawful" seizure of four of its aircraft last Saturday (March 11) after the carrier fell behind in its lease payments.

The filings in Ontario Superior Court state that New-York based hedge fund and aircraft lessor Airborne Capital Inc., and other affiliated corporations, "secretly" found a better deal for its Boeing 737 Maxes with a third party and then "set Flair up" for default, amounting to an illegal termination of leases.

READ MORE: Rivals “want us out,” says Flair CEO; Airborne rejects allegations

"The seizures were orchestrated in a bad faith and malicious manner that inflicted the maximum possible harm on Flair, including by interfering with its passenger relationships and trust," the claim reads, as reported by CBC News.

"The lessors sent agents to seize the aircraft in the middle of the night as passengers were boarding planes for spring break vacations."

"People want us out of business"

Appearing at a news conference earlier this week, Flair’s CEO Stephen Jones accused two major Canadian airlines (which he did not name) of poaching his aircraft and pushing Flair out of Canada’s highly-competitive air travel market.

“We've come in and upset the cozy duopoly, and as a consequence people want us out of business,” said Jones on Monday (March 13). “And we do believe that there were negotiations going on behind the scenes between one of the majors and the lessor to hurt Flair by them offering probably above-market rates for the aircraft we've been leasing.”

“While I'm not going to name names or cite evidence, I believe that there is much more to this picture than the surface that you see.”

Several Flair flights were cancelled as a result of Saturday’s seizure  – just as the busy March Break travel period was ramping up.

The action impacted service on four Boeing 737s - two at Toronto Pearson, one in Edmonton and one in Waterloo, ON - which represents a fifth of the carrier's 19-plane fleet. 

As a result, about 1,900 Flair customers experienced cancellations. Jones said about 420 of them rebooked within three days, while others opted for reimbursement.

If the four seized airplanes cannot be returned, Flair may be forced to rethink its summer expansion plans.

“We will need to either get other aircraft in, but this is relatively short notice, or we will need to adjust the schedule, I guess is the harsh reality," Jones said.

Strange & unusual?

Previous interviews with Jones revealed that Flair owed about US$1-million in back payments after the carrier fell behind on its leases after a tough winter on some routes.

This week, the CEO called the seizure an unusual action.

READ MORE: Flair falls behind on leases, has 4 planes seized during March Break rush

"A million dollars, while it’s a lot of money, is less than half one-day sales for us, so it's not that we were desperately short. We were in communication with them, I was talking to the head of Airborne on Friday, saying, 'You’ll be paid on Monday,' and then this happened in the middle of the night on Friday night," he told reporters.

Jones said it’s not unusual for airlines to make payments on leases a few days late, but noted that in his two decades in the business, he's never seen a leasing company seize planes.

"We think that the seizure of these aircrafts was connected to conversations with another airline," Jones said. "As a lessor the last thing you want to do is take back aircrafts unexpectedly and be stuck with them, so it’s pretty clear they had somewhere else to put these aircrafts.

Millions owed, says lessor

But Flair’s lessor sees it differently.

In a statement to PAX on Tuesday afternoon (March 14), Airborne Capital said it "strongly rejects” Flair’s allegations.

The company said the leases were terminated following a “five-month long period, during which Flair was regularly in default of its leases by failing to meet its payments when due.”

Payment arrears reached “millions of dollars,” Airborne said, and despite repeat requests, “missed payments and lease defaults persisted."

The lessor said decisions to terminate leases are “never taken lightly,” but noted that it had a legal obligation to "seek to mitigate losses flowing from Flair's default."

Flair, however, argues that it received no notice, claiming that it had no way of properly alerting customers ahead of the seizure.

Agents representing Airborne Capital arrived at airports in Toronto, Edmonton and Waterloo, Ont., at 3 a.m. ET on Saturday to confiscate the registration certificates and technical logs on board, Flair said.

None of the allegations in Flair's lawsuit have been tested in court.

Turbulent skies  

This latest saga represents yet another obstacle for Flair Airlines, which last September, announced plans to become Canada's third-largest domestic airline by this summer and expand its fleet to 30 aircraft by the end of 2023, serving 70 routes.

The carrier has faced high-profile challenges, including a months-long battle last year over whether its ties to a Miami-based investor violated rules restricting foreign entities to no more than 49 per cent ownership of a Canadian airline.

That dispute ended when the Canadian Transportation Agency ruled that Flair was Canadian and could keep its licence after the airline reworked its board to ensure that at least half of its directors were Canadian. 

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