Flair Airlines owes $67 million in unpaid taxes as CRA opens door to seizure of carrier’s assets


Court documents show Flair Airlines owes the federal government $67.2 million in unpaid taxes, prompting the Canada Revenue Agency (CRA) to obtain an order to seize and sell the carrier’s assets.

The money concerns import duties on the twenty or so Boeing 737 Max jetliners that make up the budget airline’s fleet and “which were needed to meet travel demand in a post-Covid world” , said CEO Stephen Jones.

However, he said the Federal Court order obtained by the tax agency in November had no impact on the carrier’s operations, which have grown over the past year and intensified competition with competing airlines, and that the company has agreed to settle the debt.

“We have a mutually agreed upon payment plan with the CRA to pay these import duties, and we are up to date with that plan,” Jones said in an emailed statement to CBC News, adding that the terms of the agreement is confidential.

The CRA said it cannot comment on specific cases for privacy reasons, but seeks to make arrangements with a company “based on its ability to pay” before seizing income or taking other measures to recover the money.

“As a last resort, we may take additional recovery measures, such as seizing property or assets, to protect the interests of the Crown,” spokesperson Nina Ioussoupova said in an email to CBC News.

Flair planes seized last March

The Nov. 23 court order, first reported in the Globe and Mail, orders the “sheriff of Alberta or any civil enforcement agency” to seize and sell Flair’s property and assets.

The decision marks the latest chapter in a years-long struggle to remain solvent and compliant with regulatory rules, as the airline has repeatedly crossed paths with the courts.

Last March, Flair saw four of its planes repossessed in the middle of the night after aircraft leasing manager Airborne Capital claimed the company was routinely missing millions of dollars in rent over the course of of the previous five months.

WATCH | Four planes seized in the context of the commercial conflict with Flair Airlines:

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Some Canadians were left stranded after four of Flair Airlines’ planes were abruptly seized in a dispute with the company it leases them from. The airline was late with its payment, but says the decision was “totally unjustified”.

In response, Flair launched a $50 million lawsuit against Airborne Capital and three other leasing companies, arguing that the four companies’ continued demands for payment were “meritless.”

Flair has touted its accomplishments in recent months, boasting the nation’s best flight completion rate at 98 percent and on-time performance of 69 percent — a low figure globally, but solid compared to its Canadian competitors. It said it carried 296,000 passengers in December and 4.5 million in 2023, representing significant gains from the previous year.

But the ultra-low-cost carrier faces increased competition from WestJet – recently entrenched in Western Canada even as it shuttered its low-cost subsidiary Swoop in October – and low-cost rivals Lynx Air and Porter Airlines, both of which are expanding rapidly.

The increased focus on sun destinations this winter has also put Flair in direct competition with other airlines that continue to do the same, including WestJet-owned Sunwing Airlines and Air Transat.

Debt-riddled company struggles to stabilize its finances

Jones, the airline’s CEO, said Flair had run its operations smoothly, thanks to high passenger numbers for much of the past year, despite the debt-ridden company’s growing woes as it is still striving to stabilize its finances and gain consumer trust.

In 2022, the Canadian Transportation Agency prompted Flair to restructure its board of directors and revoke the shareholder rights of major investor 777 Partners in order to comply with rules regarding domestic ownership.

In addition, Flair must continue to make payments of more than US$7 million per month for the lease of its twenty Boeing 737 aircraft and manage loans amounting to between US$200 million and US$300 million, making import taxes on these same planes all the more difficult to pay. , Jones told the Canadian Press in August.

A man dressed in a suit holds a miniature model of an airplane.  The plane is white with lime green accents and has the word
Flair Airlines CEO Stephen Jones is shown in November 2023. He says a Federal Court order obtained by the Canada Revenue Agency in November has no impact on the carrier’s operations, which have grown over the past year and have intensified competition with rival airlines. (Peter Cowan/CBC)

He cited rates of 18 percent on loans made by 777 Partners, the Miami-based company that owns a quarter of the airline.

Interest is “non-monetary” – no monthly payment required – and only adds to the principal, he said last summer. “At some point there will be some form of reckoning, whether it’s a restructuring or something else.”

Meanwhile, a Facebook page dedicated to Flair’s passenger woes continues to record problems, but it features fewer complaints than in mid-2022, when travel chaos descended on an industry unprepared for the increase in demand for flights post-pandemic.

Flair aims to expand its fleet to 26 planes this year, up from 21 last summer.

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