Flair Airlines owes $67 million in unpaid taxes as CRA opens door to seize carrier’s property

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 for the seizure and sale of the carrier’s property.

The money relates to import duties on the roughly 20 Boeing 737 Max jetliners that make up the budget airline’s fleet and “which were needed to meet the travel demand in a post-COVID world,” CEO Stephen Jones said.

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

“We have a mutually agreed-upon payment plan with CRA to pay these importation duties, and we are current with that plan,” Jones said in an emailed statement to CBC News, adding that the terms of the deal are confidential.

The CRA said it cannot comment on specific cases for confidentiality reasons but that it looks to make arrangements with a company “based on their ability to pay” before it garnishees revenues or takes further steps to recover the money.

“As a last resort, we may take additional legal collection actions 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 repossessed last March

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

The writ marks the latest chapter in a multi-year struggle to stay solvent and within regulatory lines, as the airline 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 that the company regularly missed rent payments that amounted to millions of dollars over the preceding five months.

Flair Airlines’ flights cancelled after 4 planes seized in ‘commercial dispute’

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 on a payment, but says the move was ‘completely unwarranted.’

In response, Flair launched a $50-million court action against Airborne Capital and three other leasing firms, arguing that ongoing demands for payment from the four companies were “baseless.”

Flair has touted its achievements in recent months, claiming the top flight completion rate in the country at 98 per cent and an on-time performance of 69 per cent — weak globally, but solid compared with its Canadian competitors. It said it flew 296,000 passengers in December and 4.5 million in 2023, marking big gains from the previous year.

But the ultra-low-cost carrier faces increased competition from WestJet — newly retrenched in Western Canada even as it wound down low-cost subsidiary Swoop in October — and from budget rival Lynx Air and Porter Airlines, both of which are expanding swiftly.

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

Debt-laden company striving to stabilize finances

Jones, the airline’s CEO, says Flair has been running a smooth operation propelled by high passenger numbers for much of the past year, despite growing pains at the debt-laden company that’s still striving to stabilize its finances and gain consumer confidence.

In 2022, the Canadian Transportation Agency prompted Flair to rejig its board and revoke shareholder rights from top investor 777 Partners in order to comply with rules around domestic ownership.

Moreover, Flair must continue to make payments of more than $7 million US per month on its 20-odd Boeing 737 plane leases and manage loans amounting to between $200 million and $300 million US — making import taxes on those same jets all the tougher to pay, Jones told The Canadian Press in August.

He cited rates of 18 per cent on loans from 777 Partners, the Miami-based company that owns one-quarter of the airline.

The interest is “non-cash” — no monthly payments required — and merely adds to the principal, he said last summer. “At some point there will be some form of reckoning, whether it’s a restructure or whatever.”

Meanwhile, a Facebook page dedicated to Flair passenger woes continues to log issues, but it features fewer complaints than in mid-2022, when travel chaos descended on a sector unprepared for the surge in post-pandemic flight demand.

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