Flair sues leasing company for seizing aircraft after the airline missed rent payments

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Embattled Flair Airlines is suing a leasing company and others for seizing four aircraft after the Edmonton-based discount carrier fell behind in rent payments.

Flair, in a statement of claim dated March 14, alleges Airborne Capital and four other companies conspired to repossess four Boeing 737 Max aircraft without warning and despite assurances from Flair the overdue payments were coming within days.

The lawsuit, filed in the Ontario Superior Court of Justice, contains unproven allegations. The suit alleges breach of contract and good faith, and negligent misrepresentation, among other accusations.

The move comes days after Airborne seized the aircraft at airports in Toronto, Edmonton and Waterloo, Ont., early Saturday morning.

Airborne said in a statement on Tuesday it took back the aircraft after a five-month period in which Flair “regularly” defaulted on its lease agreements and fell behind by millions of dollars. “Terminating an aircraft lease is always a last resort, and such a decision is never taken lightly. In this case, following numerous notices to Flair, it again failed to make payments when due and Airborne took steps to terminate the leasing of the aircraft,” Airborne said.

In addition to Airborne, Flair’s lawsuit names three Irish leasing companies – Columba Lights Aviation Ltd., Corvus Lights Aviation Ltd., and MAM Aircraft Leasing 4 – and one entity it dubbed ABC Corp. Flair alleges it is owed $50-million by Airborne and $50-million from ABC Corp.

The suit alleges ABC Corp. encouraged Airborne to break the Flair lease, and enter and sell or rent it the planes.

Airborne declined to comment on the lawsuit, and pointed to its statement on Tuesday that said, “Airborne Capital strongly rejects the allegations that have been made by Flair Airlines in recent days in relation to four Airborne-managed aircraft.”

Flair alleges the seizures took place despite its assurances to Airborne that it would pay the money the following week. Flair is seeking damages for lost profit, harm to its reputation and incurred costs, in addition to punitive damages.

“The defendants’ actions … were malicious, high-handed and showed a reckless disregard for the rights and interests of Flair,” Flair said in its statement of claim.

“The lessors sent agents to seize the Aircraft in the middle of the night as passengers were boarding planes for spring break vacations,” Flair alleges. “The lessors gave Flair no notice whatsoever, which precluded Flair from notifying passengers or making alternative arrangements for its scheduled flight plans. To the surprise and disruption of Flair, its crew members, the airport authorities and passengers, the lessors’ agents showed up to seize the aircraft without warning, unnecessarily and unlawfully ruining the travel plans of Flair’s passengers.”

The Globe and Mail has reported Airborne and another leasing company, Bank of China Aviation, had been shopping around a total of 11 Boeing 737 Max planes rented by Flair. Flair chief executive Stephen Jones has said the amounts owing on seven of those were paid, and that there was about $1.2-million outstanding on the four that were seized.

Flair had 19 leased 737s before the seizures, and has added three backups and another short-term lease to resume its schedule this week. Mr. Jones has assured employees and customers the company is viable.

At a Flair employees’ meeting on Monday, Mr. Jones assured them their paycheques were safe. Asked if he planned to fight back “in the media” and “in the court of public opinion,” Mr. Jones said, “Hell, yes. We’ve been a little bit restrained so far, but the gloves are coming off.”

He told employees he believes one of the two big Canadian airlines – based in Calgary – conspired to have the planes seized for its own use. “This sort of dark ops stuff can take us out and we’re going to call that out publicly,” he said.

Calgary’s WestJet Airlines is the second-biggest in the country although Mr. Jones did not name it. WestJet declined to comment.

The Globe has reported Flair’s U.S. investor, 777 Partners, sold five new 737 Max 8 aircraft, painted in Flair colours, to leasing company Babcock and Brown Aircraft Management. The planes have since been leased to airlines in Canada and Europe. The investor, 777 Partners, did not respond to e-mailed questions.