Lynx Air’s Last-Ditch Merger Attempt with Flair Airlines to Alleviate Shareholder Debt Unravels

In the face of mounting financial woes, Lynx Air, based in Calgary, engaged in preliminary discussions with Flair Airlines for a potential merger or acquisition. This strategic move aimed to mitigate substantial debt obligations to its 25% shareholder, Indigo Partners, as revealed by the Calgary Herald and corroborated by court documents. The urgent need for capital infusion led Lynx Air to explore this merger/buyout avenue in an effort to sustain its operations and manage the hefty debt load.

Despite its innovative approach to navigate through financial turbulence, Lynx Air was compelled to halt its services on February 26, succumbing to a myriad of economic pressures. The challenges cited included inflation, soaring fuel costs, adverse exchange rates, capital costs, regulatory expenses, and intensified competition within the Canadian aviation sector.

Lynx Air’s financial entanglements with Indigo Partners are significant, amounting to over CAD124.3 million (approximately USD91.3 million). This debt accumulation stemmed from Indigo Partners’ initial investment in Lynx Air’s inception and subsequent debt financing provisions. The airline’s financial obligations extend beyond Indigo Partners to include debts to the Canadian Revenue Agency, Delta Air Lines for maintenance services, various airports, aircraft lessors, and numerous trade suppliers.

The discussions with Flair Airlines, noted for its backing by 777 Partners, were highlighted in a court affidavit by Michael Woodward, Lynx Air’s interim CFO since March 2023. Woodward detailed the intricate dynamics of the proposed transaction, which included a term sheet signed on January 11, aiming to use the transaction’s proceeds to settle outstanding debts.

The affidavit sheds light on Lynx Air’s debt structure, revealing multiple promissory notes issued to Indigo Partners with high-interest rates, reflecting the airline’s desperate attempts to secure operational funding. These financial instruments included agreements from as early as December 2018, with amendments and additional agreements extending into early 2024, illustrating the airline’s escalating financial distress.

Despite the initiation of formal discussions with Flair Airlines and subsequent financial maneuvers to secure additional funding from Indigo Partners, Lynx Air’s efforts to find a sustainable solution were ultimately unsuccessful. The failure to finalize a deal with Flair Airlines, coupled with the inability to secure further capital or repay Indigo Partners, led to the cessation of Lynx Air’s operations.

Lynx Air’s operational shutdown marks the end of its attempt to establish a viable, low-cost carrier in the competitive Canadian market. Before ceasing operations, Lynx Air maintained a fleet of nine B737-8 aircraft, servicing a network that spanned across Canada, the United States, and Mexico. The airline’s focus now shifts towards liquidation, closing a chapter on its ambition to revive its fortunes through strategic mergers or acquisitions.