Faced with empty seats and soaring costs, tiny Harmony Airways is headed for a forced landing early next month.
The privately owned boutique carrier announced Tuesday it is ending its scheduled flights to Toronto on Friday and all other scheduled flights by April 9.
Peter Buecking, a member of Harmony's advisory team, said the airline is not bankrupt and is restructuring as a going concern.
The four-plane, Vancouver-based carrier served popular U.S. holiday destinations such as Maui, Las Vegas, Palm Springs, Calif., and San Francisco.
But its expansion ambitions, including plans to fly into China, stumbled and billionaire Vancouver businessman David Ho, who founded Harmony in 2002, was unwilling to keep funding the operation.
Neither Mr. Ho nor acting president Kirk Henderson, who replaced previous chief executive officer Gary Collins in December, were at a news conference announcing the shutdown.
It was left to Mr. Buecking, an airline industry veteran who joined the company three weeks ago, to explain that Harmony will maintain full service until the last flight and issue full refunds for any bookings past its shutdown dates.
Most of the airline's 350 employees, who are not unionized, will be laid off but given generous severance packages and strong recommendation letters, he said.
Rumblings at Harmony surfaced last week when it confirmed it was not renewing the lease on one of its Boeing 757 jets.
In an era of no-frills carriers such as Westjet Airlines Ltd. and a restructured Air Canada, Harmony prided itself on offering passengers full-service flights.
Mr. Buecking said it became clear Harmony's business model could not be economically scaled up to an efficient size.
"It was a case of a full-service airline in a marketplace where it's difficult to price at a premium when you don't have the scale," he said. "It's possible to provide full service but you really need a big network, in my view."
Harmony also needed to attract a lot of profitable business travellers but did not fly to popular business destinations or offer frequent-flyer perks, he added.
Harmony had a clientele of about 10,000, said former general manager Brent Statton, who retired two weeks ago.
Its load factors ranged from more than 80 per cent on its popular holiday flights to 20 per cent on the Toronto run. Meanwhile, costs continued to rise, including a doubling of fuel prices since the airline was launched in November, 2002, Mr. Buecking said.
Harmony joins the list of defunct Canadian airlines, including Jetsgo, Canada 3000 and CanJet, which rose from Canada 3000's ashes but stopped scheduled service last fall and is restructuring as a charter carrier.
Airline industry analyst Warren Gill of Simon Fraser University said this announcement underscores the brutal nature of airline competition.
"Airlines are not generally profitable," he said. "You've seen the bloodthirsty competition of the truck carriers for the last 15 or 20 years."
The delay in Canada receiving approved-destination status from the Chinese government also cramped its plan for a partnership with a Chinese carrier to serve Beijing and Shanghai.
"It's an important reason," Mr. Buecking said. "I can't say it's the major reason."
Mr. Collins, former B.C. finance minister and one-time flying instructor, joined Harmony in December 2004 to oversee the airline's expansion. He quit last December to pursue other opportunities and later joined a private investment firm.
Analysts considered Harmony's plans risky at the outset and Mr. Buecking seemed to confirm that.
"This was a niche airline that if the operating costs in the environment were lower and there wasn't as much capacity put in by the competitors, it's possible it could have grown, particularly if it could have exercised its right to China ..."
Mr. Buecking said Harmony will hang on to two of its planes while it considers various options, including resurfacing as a charter carrier or a provider of aircraft - crewed or uncrewed - to other airlines.
He declined to discuss specifics, saying Harmony wants to spent the next two weeks focusing on serving its remaining customers.
Mr. Buecking also declined to discuss Harmony's financial situation because it is a private company. He did say it dismissed the idea of seeking court protection from its creditors, mainly because Mr. Ho himself is the main creditor.
An heir to the Hong Kong Tobacco Co. fortune, Mr. Ho also owns a Vancouver luxury car dealership and a golf course.
He launched Harmony in 2002 as My Airways, named in honour of his mother, then changed it to HMY and finally Harmony.