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October 29, 2019 - 8:30 AM
VANCOUVER - Canada Jetlines Ltd. is postponing its planned December launch and laying off most employees after failing to secure $40 million in required financing and losing investment partners.
The company says the Dec. 17 startup of the ultra-low-cost airline will be delayed to an undisclosed date and it will not pay additional deposits to receive the first two Airbus 320 planes next month.
Jetlines says it couldn't satisfy financing conditions in addition to funds committed by SmartLynx. As a result SmartLynx and InHarv ULCC Growth Fund have exercised their rights to terminate their investment commitments.
The company says it has been difficult to engage investors because they believe WestJet Airlines, which owns discount carrier Swoop, will "react very aggressively once the company starts operations, and in fact have already done so in anticipation of Jetlines entry into the market."
As a consequence, it plans to reduce activities until the Competition Bureau finalizes its investigation into WestJet actions.
Canada Jetlines says a market analysis it retained has found evidence that Swoop is pricing significantly lower than other discount carriers and below avoidable costs on the routes identified by the Competition Bureau investigation.
It plans to conserve cash by laying off most employees except a core team led by the executive chairman, Mark Morabito, who will continue meeting with investors trying to secure financing. Chief executive Javier Suarez has resigned effective immediately along with board member Zygimantas Surintas.
"It is very unfortunate that we have to postpone our launch date," said Morabito. "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."
This report by The Canadian Press was first published Oct. 28, 2019.
Companies in this story: (TSX-V:JET, TSX:WJA)
News from © The Canadian Press, 2019