Tuesday, 29 October 2019

Canadian start-up, postpones start up after investors run

The Canadian start-up airline Jetlines loses SmartLynx and InHarv investments and is forced to postpone its proposed launch.

The future of the Canadian start-up ultra-low-cost carrier Jetlines looks less than certain as investors SmartLynx and InHarv ULCC Growth Fund have terminated their investment commitments in the airline. As a result, also gone are the two Airbus A320 aircraft SmartLynx was bringing to the deal and the December 17th lunch date has been kicked into the long grass and nobody knows when or if the airline will actually start flying.

Apparently, one of the main concerns of Jetlines management was investors believed the existing dominant members of Canada’s aviation scene would be aggressive once the company started operations. They said that its retained market analysis experts concluded:

Swoop is pricing lower than other airlines, and significantly lower than the other ULCC entrant serving Canadian and transborder passengers;

Empirical evidence suggests that Swoop is pricing below avoidable costs on the routes identified by the Competition Bureau in their current investigation; 

Empirical evidence suggests that Swoop is pricing below avoidable costs on routes other than those identified by the Competition Bureau in their current investigation;

Qualitative analysis of changes in service illustrates Swoop / WestJet’s rapid increase in capacity beyond what economic sense might dictate;

After Flair discontinued service to and from Hamilton, ON, Swoop maintained higher prices on the routes where Flair discontinued service than their other routes;

Although Jetlines’ avoidable costs will be lower than Swoop’s, empirical evidence suggests that Swoop is pricing below Jetlines’ avoidable costs as well — and is attempting to deter entry by Jetlines on its proposed routes.
In the opinion of Jetlines management the above factors all amount to an abuse of dominance. Senior representatives from the Company’s management team made multiple appearances before the Competition Bureau between January and July 2019.

Jetlines is now laying off almost all of the staff it only recently took on, with just a few core personnel staying on to try and secure other financings. The airlines CEO, Mr Javier Suarez, has resigned and all other contracts put on hold.

Mark Morabito, Executive Chairman comments, “It is very unfortunate that we have to postpone our launch date. We have built as much as anybody can without access to more capital. We have invested in bringing on board the most talented people who have done an incredible job putting together our operations manuals and systems, our brand, website and all other commercial components needed for launch.”

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