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For Hugh and John Boyle, the sky was the limit for their startup carrier when oil prices were $24 (U.S.) a barrel in 2002, but their business model for Zoom Airlines has now collapsed under the weight of mounting fuel bills.
The Scottish-born Boyle brothers, veterans in the vacation industry, abruptly grounded the discount carrier on Thursday just minutes after insisting that Zoom could survive oil prices that have soared to $115 a barrel. The sudden shutdown leaves more than 700 employees without jobs, stranding hundreds of travellers and jilting creditors.
Co-founded in 2002 by the Boyles, the Ottawa-based carrier got crushed by high oil prices, a slumping economy that hurt fall bookings and fares as low as $99 (Canadian) one-way on transatlantic routes, before various taxes.
“They expanded too fast, too far,” said Robert Kokonis, president of airline consulting firm AirTrav Inc., noting Zoom's network had included eight cities in Canada and six in Britain, as well as Paris, Rome, San Diego, New York, Fort Lauderdale and Bermuda.
A Zoom airplane sits grounded on the tarmac at the Calgary International airport on Thursday. (Chris Bolin for The Globe and Mail)
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“We deeply regret the fact that we have been forced to cease all Zoom operations. It is a tragic day for our passengers,” the Boyles said in a statement from Britain.
“We are desperately sorry for the inconvenience that this will cause passengers and those who have booked flights,” said the brothers, who started British-based Direct Holidays in 1990 and sold it for $200-million in 1998.
Zoom had three 269-seat Boeing 767-300s and two 201-seat Boeing 757-200s registered in Canada, although industry observers said the carrier had two other planes at its disposal through its British arm.
Zoom took down its website Thursday afternoon, preventing consumers from making online bookings. Earlier in the day, a Zoom sales agent said bookings were still being accepted in the morning, despite dozens of travellers being stranded on various flights that had been delayed since Wednesday night.
“We have done everything we can to support the airline and left no stone unturned to secure a refinancing package that would have kept our aircraft flying. Even as late as [Wednesday] we had secured a new investment package but the actions of creditors meant we could not continue flying,” the Boyle brothers said.
Stubbornly high oil prices have wreaked havoc on airlines globally, forcing them to cut thousands of jobs and cancel or scale back routes.
Calgary Airport Authority spokesman Bryce Paton said Zoom owes $431,000 to his group, one of hundreds of creditors around the world. Creditors range from ground-handling firm Servisair Canada to aircraft lessors that put the squeeze on Zoom.
The suspension of online advance bookings followed a statement Thursday morning from Hugh Boyle, who had hoped to keep the airline's network of routes operating without disruption.
Zoom's British and Canadian operations “have sought creditor protection by filing legal notices of intention to appoint an administrator in both the U.K. and Canada,” Mr. Boyle said in the earlier statement. But by 1 p.m. ET Thursday, he and his brother backed down from the promise to keep flying.
“The suspension of operations is a result of the exceptionally difficult trading conditions which have affected all airlines over the last 12 months,” the Boyles said.
“We have worked hard over the last seven years to build up a successful business, but have incurred losses in the current year due to the unprecedented increase in the price of aviation fuel and the economic climate. The increase in the price of oil has added around $50-million to our annual operating costs and we could not recover that from passengers who had already booked their flights.”
Zoom confirmed that it had “experienced operational difficulties” on Wednesday night in Calgary related to a payment dispute with a lessor, affecting 69 travellers who were set to fly to Glasgow.
From Calgary and Ottawa to Halifax and Glasgow, passengers said they were shocked by the shutdown.
“We have just had to book three tickets through Toronto on Air Canada and British Airways at great expense,” said one angry consumer in Ottawa who scrambled to rebook flights for her family to Britain. “No offers of future flights, compensation or alternate arrangements were offered.”
National Bank Financial analyst David Newman said Zoom's demise comes as welcome news for tour operator Transat A.T. Inc.
Transat shares surged 16.8 per cent Thursday as investors bet that the Montreal-based company would help fill the void left by Zoom.
Air Canada said most of its flights will be packed over the coming days, but that the airline will do its best to accommodate Zoom's customers.
The Canadian Transportation Agency said consumers who used credit cards to pay for their Zoom tickets should contact financial firms to have charges reversed.
