Lynx Air Seeks Bankruptcy Protection Amid Financial Struggles

Lynx Air, operating from Calgary, has announced its decision to cease operations and file for bankruptcy, citing a series of financial challenges that have beleaguered the ultra-low-cost carrier (ULCC). These challenges include significant increases in jet fuel prices, a decline in passenger demand due to Covid-19, and the adverse impact of the Boeing 737 MAX grounding on its operational and financial performance.

In its court filings to the Court of King’s Bench of Alberta, Lynx Air disclosed substantial financial backing from Indigo Northern Venture LP totaling CAD71,242,031 (USD52.7 million) through promissory notes before its launch in April 2022. Despite additional debt financing amounting to CAD42,426,375 (USD31.4 million) provided by investors during 2023 and the start of 2024, Lynx Air struggled to generate enough cash to cover its operational costs.

The airline pointed to jet fuel costs, which were 50-100% higher than initially projected, contributing to unbudgeted expenses of CAD30 million (USD22.2 million). Coupled with passenger demand remaining subdued and the delayed start of operations due to the MAX grounding, Lynx Air faced insurmountable financial pressures.

The situation reached a critical point with Lynx Air receiving notices of default from several creditors, including Aeroports de Montreal and the Greater Toronto Airports Authority, regarding outstanding fees totaling millions of dollars. Additionally, notices from Delta concerning payments under the complete fleet services agreement and from the CGFC for de-icing services at Calgary airport further compounded the airline’s liquidity crisis.

As of December 31, 2023, Lynx Air reported liabilities of approximately CAD599,857,000 (USD444 million), with significant amounts owed to Indigo for promissory notes, aircraft lessors, and Canadian tax authorities, among others.

Lynx Air Holdings Corporation, the parent company of Lynx Air, is owned by a combination of entities, including a 25% stake by Indigo and a collective 70.58% ownership by Canadian investors such as Torquest Investors and Stepworth Holdings Inc. Enerjet SPV Inc. holds the remaining 4.42%.

The bankruptcy filing underscores the severe financial duress faced by Lynx Air amidst a challenging aviation landscape, marked by volatile fuel prices, pandemic-related disruptions, and regulatory obstacles. The ULCC’s move to seek bankruptcy protection reflects the culmination of these pressures, posing significant implications for its future operations and the broader Canadian aviation sector.