Funding troubles ground fledgling airline Canada Jetlines
The saga behind the ultra-low-cost carrier that has been planning to launch since 2012 involves alleged corporate scheming
By Glen Korstrom | December 4, 2019
Canada Jetlines CEO Stan Gadek left the airline in 2018 to return to his consulting company | Chung Chow
Launching a new airline is no easy task, as Canada Jetlines executives know well.
Starting in 2012, executives at the aspiring ultra-low-cost carrier (ULCC) have staggered between setbacks while struggling to secure financing for a capital-intensive takeoff.
The venture suffered bad timing as well as what significant shareholders allege was corporate scheming by a competitor – actions that prompted Jetlines to launch a lawsuit seeking US$27 million in compensation. Through it all, Jetlines’ executives have kept an optimistic face despite serious logistical hurdles.
The saga began seven years ago when CEO Jim Scott – now the CEO at Flair Airlines – became interested in ultra-low-cost carriers, which have low base fares but charge passengers for checked bags, carry-ons and other extras.
“We did a feasibility study on whether there could be a third airline in Canada to service the [ULCC] market,” Scott told Business in Vancouver on November 25. “Canada Jetlines was built out of that.”
He and others, such as vice-president of strategic planning Dix Lawson and chief commercial officer David Solloway, who later became president, drafted a proposal for investors by late 2013 and launched a seed-financing round that ended that December. They began with the goal of $1 million, but they raised $4 million – a great start.
They bumped the offering price and launched a second financing round, aiming to raise $25 million in 2014.
Solloway told BIV that the team secured $18 million of that goal but that the commitments to provide capital were contingent on Jetlines raising $25 million. When that objective failed, all the promised capital fell through.
“The price of oil tumbled – it was terrible,” Solloway said. “Most of the Canadian investors and private bankers, all the funds, etc., were all heavily invested in Canadian resources. They saw half of their wealth disappear. That was the big blow to Jetlines.”
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