Wednesday, 7 August 2019

Canada's Jetlines insists SmartLynx funding is still proceeding.

Canada Jetlines, the firm that hopes to become an ultra-low-cost-carrier has issued another press release regarding its ongoing financing issues which still seem far from settled.  The firm insists that the previously announced $7.5 million financings from SmartLynx is still proceeding. Jetlines and SmartLynx agreed to restructure the financing such that it will be completed by way of a convertible debenture instead of subscription receipts. At the start of the year, Jetlines had debts of over $20 million. 

On December 11, 2014, the firm signed a massive purchase agreement with Boeing to acquire up
to twenty-one Boeing 737 Max aircraft which were scheduled for delivery from 2023. The deal was for five initial aircraft, with purchase rights for a further sixteen aircraft.  The Boeing Agreement contained a clause that stated that if Jetlines entered into an agreement to operate or purchase non-Boeing aircraft, the full 1% deposit -less any previous payments for all aircraft would be due and payable immediately. 

On June 12, 2018, Jetlines entered into an aircraft lease agreements for two Airbus A320 aircraft which were scheduled for delivery during 2019. Those leases were cancelled by Jetlines and the aircraft leasing firm kept the security deposits of US$2,190,000. 

So far, Jetlines has been lucky,  Boeing hasn't objected to the termination of Jetlines order with them, nor has it commenced legal proceedings over the 1% deposit clause.  However, should the planemaker come after Jetlines the viability of airline even getting off the ground would be called into question?

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