Flair/Lynx Merger

[JakeLRS]

I've heard on and off rumours for the past few months of something happening between these two carriers.

Today an article about this very subject:
https://www.theairlineobserver.com/p/a- ... dium=email

Tidbit of article:
FEBRUARY 8

Two small Canadian ultra-low-cost carriers are in advanced merger discussions, and the deal could be announced within weeks, two sources told The Airline Observer.

Flair, an airline part-owned by Miami private equity firm 777 Partners, would absorb Lynx, which is backed by Canadian investors and Bill Franke's Indigo Partners, according to the sources. Franke has been serving as chairman of Lynx’s board.

Really, Flair is going to the surviving entity?
I know what you're thinking because I had the same reaction. Flair has been in the news a lot recently, and not for good reasons. In December, three aircraft lessors sued 777 Partners and one of its sister companies, accusing them of missing lease payments on four airplanes. Those airplanes had been seized and repossessed from Flair in March 2023, a move that captured considerable attention.

Meanwhile, as you know, Indigo Partners has a strong track record with ULCCs outside the United States. But my sources tell me that Indigo Partners wants out of a market that is not performing to its expectations. One source noted that Lynx hasn't had a full-time CEO since September, when Merren McArthur returned to Australia to be closer to family. McArthur, who had run Tigerair Australia, joined Lynx in 2021, the year before Lynx's first flight (from Calgary to Vancouver).

[evilgravy]

Here's the whole thing. Not a whole lot of substance here if you ask me.

Dear readers,

Two small Canadian ultra-low-cost carriers are in advanced merger discussions, and the deal could be announced within weeks, two sources told The Airline Observer.

Flair, an airline part-owned by Miami private equity firm 777 Partners, would absorb Lynx, which is backed by Canadian investors and Bill Franke's Indigo Partners, according to the sources. Franke has been serving as chairman of Lynx’s board.

Lynx has nine Boeing 737 Max 8 aircraft, Transport Canada records show. Flair has 18 Max 8s and two Boeing 737-800s.

The airlines operate similar route structures: popular Canadian routes (both fly Toronto to Vancouver) as well as routes from Canada to the United States, with an emphasis on Sunbelt markets. While Flair has a sizable international network in Mexico and the Caribbean, Lynx’s first Canada-Mexico route is slated to begin next week: Toronto to Cancun.

Representatives from Flair and Lynx did not respond to my requests for comment on Wednesday.1

Really, Flair is going to be the surviving entity?
I know what you're thinking because I had the same reaction. Flair has been in the news a lot recently, and not for good reasons. In December, three aircraft lessors sued 777 Partners and one of its sister companies, accusing them of missing lease payments on four airplanes. Those airplanes had been seized and repossessed from Flair in March 2023, a move that captured considerable attention.

There have been other odd stories, too, such as the fact that Flair owes Canada's federal government $67.2 CAD million ($49.9 million U.S.) in unpaid taxes related to import duties on new jets. Reports also surfaced that 777 Partners is charging Flair exorbitant borrowing costs, up to 18 percent.

One person with knowledge of the Canadian market said he's surprised Flair, which started flying almost 20 years ago as a cargo and charter airline, is still around. "They should have died a decade ago," my source said. Flair adopted the ULCC model about six years ago.

Meanwhile, as you know, Indigo Partners has a strong track record with ULCCs outside the United States. But my sources tell me that Indigo Partners wants out of a market that is not performing to its expectations. One source noted that Lynx hasn't had a full-time CEO since September, when Merren McArthur returned to Australia to be closer to family. McArthur, who had run Tigerair Australia, joined Lynx in 2021, the year before Lynx's first flight (from Calgary to Vancouver).

Lynx has been relatively quiet about its plans in recent months, but in a June press release announcing McArthur's departure, the airline said the next CEO would "lead the airline through a rapid growth phase as it expands its fleet to 46 aircraft over the next three to four years."

What's wrong with Canada's ULCC market?
Canada's ULCC market is oversubscribed, so consolidation should not come as a big surprise.

WestJet folded Swoop folded last year, moving the airplanes and crews to WestJet. But Lynx, Flair and Jetlines are still trying to expand the ULCC model to a market that one source reminded me is a fraction of the size of the United States.

Market size is only one problem. Another issue is the seasonal shape of demand, with Canadians preferring to fly to escape the cold in winter, or to visit friends and relatives in summer. U.S. travelers have seasonal preferences, too, but at least the rest of the year, ULCCs can set up in very thick markets — think about how Frontier can launch Denver to LaGuardia and DFW to O'Hare — and still (mostly) fill its planes. Maybe Frontier’s fares will be crummy, but enough Americans want to fly year-round. Canada has fewer of these thick, city-to-city markets.

Stage length is also a concern. Canadians want to visit the sun in winter, and those are long flights that use considerable fuel and eat up airplane time. Even on a Max, Vancouver to Cancun is not cheap to operate.

Then there's market stimulation. Flair is selling a one-way $69 CAD fare from Toronto to Calgary during off-peak periods in March. The airline breaks it down this way: $18.94 for the fare, $8.05 for the security fee, $39.55 for a Toronto airport improvement fee, and $2.46 for a tax on the fare.

In the United States or Europe, ULCCs can stimulate demand by offering outrageously low fares — so low they can persuade travelers to make incremental trips — and the airlines still can make a decent margin. Such stimulation is almost impossible for some routes because of the taxes and fees.

In other markets, Flair makes an attempt, but the economics are ugly. Take the $18 CAD fare offered from Vancouver to Kelowna. According to the airline, the fare is $5.02 CAD. At that price, Flair has to sell a lot of ancillaries.

Finally, there's competition. Because Canadian ULCCs came later than European and U.S. ones, Air Canada and WestJet learned how to combat them. Air Canada has been effective in deploying larger airplanes with better unit costs and then allocating some seats for the cheapest fares to compete with ULCCs. Air Canada has also had success with Rouge, its low-cost subsidiary.

[Big Pistons Forever]

Personally I don’t see everyone surviving in the current market. The million(s) dollar question is given the geographical realities of Canada and the enormous government imposed overhead costs, is it even possible for a pure ULCC to exist in Canada

[fish4life]

I can’t see why Lynx would even want flair. Why would they saddle themselves with all that debt ?

[the_new_guy]

I can’t see why Lynx would even want flair. Why would they saddle themselves with all that debt ?

Full disclosure here, I'm a Flair pilot. I wouldn't be able to tell you why if the timing was different, but I can see a good reason in this case. It's all about timing.

Lynx, in terms of market and execution is about where Flair was a little more than 2 years ago. For all the Lynx folks out there, it's not an insult so if someone is feeling a little irritated just keep that in mind. Fleet wise, 2 years ago flair had between 10-12 tails.

Execution: Flair has only started really applying all of the ULCC revenu streams and principles late in summer '23. Which is stupid if you ask me because that's where at least half of our revenues come from and we weren't paying attention to it before. But now, every carry-on is charged, just about all of them are checked for size and if they don't fit they're checked and put in cargo, and BoB is pushed a lot more. The latter doesn't really make our revenues all that much more interesting, but carry-ons and checked bags make more money than most ticket fares for us.

From these 2 (market presence and execution) , Flair is more developed now than Lynx. But I agree that it wouldn't necessarily be that attractive for both company to merge if we didn't talk about timing. In this case, we now have a lot of competition in the market. When lynx started expanding in late '21-22, Porter wasn't expanding aggressively like it is now. Westjet didn't yet really regrouped out west concentrating the bulk of the operation there. Now the context is different, Porter is more of a threat operating the E2 with good wages and opening up shops everywhere, Westjet is heavy out west and is planning to grow further, AC wants to grow in the east, and Lynx is still only a 9 (or thereabouts) tails operator.

That's too many players for a small market and everyone is expanding. Furthermore, Lynx and Flair have the same business model, same type, Lynx is yyc and yyz based which flair also has 2 of its bases in, and both companies have similar expansion ambitions.

We're just pilots but we sometimes like to pretend we know the business more than the business men and women at the helm. If Lynx management and investors see a good opportunity in merging with Flair, they are more informed of the numbers than we are. They know better than we do. I'd say there's a good reason for it.

Just my opinion though

Cheers

[SkyBagPiper]

A merger would be simply catastrophic and I do not support it. Especially when the bigger company wanting the merger is riddled with financial problems.

Taking a step back before I develop more on the subject. It is finally time to see ULCC markets flourish in Canada. 600$ round trip from Toronto to Montreal is scandalous. It shouldn’t be more than 150$ round trip. Period. I’ve gotten tired of the two biggest airlines having monopoly of the skies in this country. We finally started to see changes with airfares.

Having said that. With mergers and all the other problems; we’re going to return to exactly the same pre-pandemic airline market. As Flair is not expected to last; especially being heavily under debt.

If the merger goes through; Flair will sink bringing Lynx with it.

Who are the winners in this game? A/C, WJ, TS.

It’s pathetic. Whoever is at the board of these ULCC absolutely did not analyse the past 30 years history of Canadian aviation. Because history WILL repeat itself if mergers happen.

[boeingboy]

It’s pathetic. Whoever is at the board of these ULCC absolutely did not analyse the past 30 years history of Canadian aviation. Because history WILL repeat itself if mergers happen.

About the only thing you got right. only the thing to analyze is the fact ULCC's don't work in this country for a few reasons....but some people don't seem to want to accept that and that's why you see company after company fail.

[thepoops]

A merger would be simply catastrophic and I do not support it. Especially when the bigger company wanting the merger is riddled with financial problems.

Taking a step back before I develop more on the subject. It is finally time to see ULCC markets flourish in Canada. 600$ round trip from Toronto to Montreal is scandalous. It shouldn’t be more than 150$ round trip. Period. I’ve gotten tired of the two biggest airlines having monopoly of the skies in this country. We finally started to see changes with airfares.

Having said that. With mergers and all the other problems; we’re going to return to exactly the same pre-pandemic airline market. As Flair is not expected to last; especially being heavily under debt.

If the merger goes through; Flair will sink bringing Lynx with it.

Who are the winners in this game? A/C, WJ, TS.

It’s pathetic. Whoever is at the board of these ULCC absolutely did not analyse the past 30 years history of Canadian aviation. Because history WILL repeat itself if mergers happen.

But yet you’ll take a $70 Uber to the airport. Shill

[cdnavater]

A merger would be simply catastrophic and I do not support it. Especially when the bigger company wanting the merger is riddled with financial problems.

Taking a step back before I develop more on the subject. It is finally time to see ULCC markets flourish in Canada. 600$ round trip from Toronto to Montreal is scandalous. It shouldn’t be more than 150$ round trip. Period. I’ve gotten tired of the two biggest airlines having monopoly of the skies in this country. We finally started to see changes with airfares.

Having said that. With mergers and all the other problems; we’re going to return to exactly the same pre-pandemic airline market. As Flair is not expected to last; especially being heavily under debt.

If the merger goes through; Flair will sink bringing Lynx with it.

Who are the winners in this game? A/C, WJ, TS.

It’s pathetic. Whoever is at the board of these ULCC absolutely did not analyse the past 30 years history of Canadian aviation. Because history WILL repeat itself if mergers happen.

You seem like the poor uneducated person ULCCs are targeting, 150 round trip from any airport in Canada to any other airport in Canada barely covers the fees and taxes, not to mention doesn’t cover the overhead cost associated with getting your ass in the seat let alone fly you there.
FYI, round trip bus or train is about 150, giver buddy!

[accountant]

Biggest winner in this will be Porter. Not AC or WS.

Merge Porter / TS, and then let that entity pick up the pieces and you have 3 incumbents. If Porter is adding as many tails as they think they can absorb the crews.

[dumbbell daddy]

I have zero affiliation with Flair but I find it funny. Every time people say Flair is done (are they really Canadian? planes being seized ect) sure enough.......they still keep flying.

[BTD]

I have zero affiliation with Flair but I find it funny. Every time people say Flair is done (are they really Canadian? planes being seized ect) sure enough.......they still keep flying.

That’s called survivorship bias. It is always the case for anything… until it isn’t.

For the record I’m not hoping for flair to fail.

[DanWEC]

I'm curious as to if the subsidy stops. Flair could go another 10 years just being propped up, who knows. The pockets are very deep and 777 must have a function for the money going to Flair. I think pilots there are safe for a few years at least anyways.

[dumbbell daddy]

I have zero affiliation with Flair but I find it funny. Every time people say Flair is done (are they really Canadian? planes being seized ect) sure enough.......they still keep flying.

That’s called survivorship bias. It is always the case for anything… until it isn’t.

For the record I’m not hoping for flair to fail.

No. It’s just typical pilots pretending to be smarter than they really are.

[JakeLRS]

https://www.thestar.com/business/discou ... 9.amp.html

Rumours about something being announced…tomorrow. Can you feel the love tonight? Flair PR isn’t denying it either.

Flair Lynx

[goingnowherefast]

Both companies have a similar business model. They both compete in an ultra thin margin area of the market. They both are short pilots and planes. Flair has experience in the industry. Lynx has more money.

There isn't room for both companies to exist with sufficient economics of scale to be viable. I think a merger is the best hope for either one to survive long term.

I also really don't want to see anybody laid off. It's bad for them obviously. Also, flooding the market with that many experienced pilots is bad for the job market.

[evilgravy]

Lynx has more money.

are you sure?

[TurkeyFarmYQX]

Nevermind then, Lynx is ceasing operations on Sunday.

[Chaxterium]

Nevermind then, Lynx is ceasing operations on Sunday.

That's what I'm hearing too. I hope all the crews land on their feet. Porter's about to get a bunch of resumes.

[El_Capitano]

Nevermind then, Lynx is ceasing operations on Sunday.

Source?