Jetsgo ceases operations; passengers stranded
Last Updated Fri, 11 Mar 2005 00:54:27 EST
CBC News

MONTREAL - Jetsgo, one of the country's upstart discount airlines, announced just after midnight Friday that it will stop all operations immediately.

Passengers are advised to make alternative travel arrangements as there will be no aircraft or staff available. Travellers looking to return from a trip must also book with other airlines.

"We deeply regret that this had to happen. The decision to cease operations was only taken after difficult deliberation. We are very concerned about our customers and the significant hardship that this action causes," said Michel Leblanc, President of Jetsgo, in a statement.

Leblanc founded the company in June 2002 from the ashes of Canada 3000 Inc., which collapsed after the Sept. 11 terrorist attacks caused a downturn in air travel.

The shutdown comes at the start of March break, one of the busiest travel times of the year.

In a news release, the airline said it will be asking the Quebec Superior Court to grant it bankruptcy protection.

The release blamed "difficult market conditions" for its action.

The airline, based out of Montreal, flew across the country. Although its primary business was between Canadian cities, Jetsgo also provided flights to New York City, Las Vegas and destinations in Mexico and Florida.

Jetsgo had recently filed a $50-million lawsuit against WestJet Airlines and two of its executives alleging that its competitor had managed to get information to "gain an unfair competitive advantage over Jetsgo and prey upon Jetsgo's business and operations by targeting both profitable and vulnerable routes, flight times and fares."

The company said it would keep the public informed of its re-structuring through its website as well as on RSM Richter Inc.'s website at www.rsmrichter.com. Further information may also be obtained by calling RSM Richter: 1-800-246-1125.

The company said clients who have paid for Jetsgo tickets should contact the Canadian Transportation Agency: 1-888-222-2592.

Jetsgo passengers seek flights, refunds
Last Updated Sat, 12 Mar 2005 15:35:44 EST
CBC News

http://img.photobucket.com/albums/v81/asiaglobe/vancouver/RIMG0012.jpg

MONTREAL - A day after the collapse of no-frills airline Jetsgo, other Canadian carriers are scrambling to find space for passengers stranded across North America.

On Friday, the Montreal-based company sought bankruptcy protection and grounded its fleet, with little or no warning to both customers and employees.
Waiting for a ride to Vancouver after the Jetsgo flight was cancelled, Pierre Trudeau airport, Montreal Friday.

Air Canada said it was deploying larger aircraft on a number of domestic flights to help Jetsgo passengers.

WestJet will offer reduced fares until Monday on markets served by both carriers, and CanJet has temporarily dropped the two highest-priced categories of seats on flight routes shared with JetsGo.

When Jetso suddenly ceased operations, an estimated 17,000 passengers were left stranded with useless tickets during the busy March break school holidays.

While the other airlines said they will do their best to accommodate these passengers, none has offered to honour Jetsgo tickets.

Jetsgo grounded for good?

Some airline industry analysts say there is little chance Jetsgo will fly again even if wins protection from creditors.

Karl Moore, a professor of management at Concordia University, says if the company does resurface, it'll do so under a new name.

"We might see [company president] Michel Leblanc come back; he's done it three or four times before, but we won't get the Jetsgo name, because it's been tarnished," says Moore.

Moore says even if Leblanc does decide to get back into the airline business, he could have trouble finding an investor willing to take a risk and lend him money.

The shutdown also dumped about 200 pilots into a limited job market. They were part of a workplace of 1,300.

Earlier this week, employees read a notice from Jetsgo, which warned of trouble with creditors.

Pilot Matt Kunz says in it, Leblanc said he would try get the airline flying again. Kunz, however, Kunz is skeptical that either employees or potential customers will take to skies with Jetsgo again.
Jetsgo employees at Pearson airport in Toronto after learning of the airline's demise.

"I certainly wouldn't as a paying passenger spend my hard earned dollars on a company that had just went bankrupt and could certainly do so again," he says.

In a court affidavit, the Montreal-based company said it lost about $55 million over the past eight months.

In a statement, Leblanc, who has founded or operated three other now defunct airlines in Canada, advised passengers to contact their travel agent or an alternative airline.

Credit card companies have promised to reimburse cardholders who purchased Jetsgo tickets but were unable to fly. Those who bought tickets through travel agencies in Quebec, Ontario and British Columbia are also entitled to refunds.

An airline addict hits his fourth wall
Teen flier turned industry entrepreneur Michel Leblanc has airlines in his blood
Even after his other carriers failed, he came back to try again
KEITH McARTHUR
With files from John Partridge, Jacquie McNish, Brent Jang
12 March 2005
The Globe and Mail

The clouds were already darkening around Jetsgo Corp. when Michel Leblanc rose on the morning of Feb. 24.

The airline he founded in 2002 was losing $10-million a month and was running out of cash to pay its bills. Transport Canada officials were increasingly concerned about Jetsgo's safety record.

And Clive Beddoe, the chairman of WestJet Airlines Ltd., had thrown down the gauntlet the previous week, with a very public warning that he was willing to sacrifice revenue to preserve WestJet's market share. Mr. Beddoe said Jetsgo was setting fares at ridiculously low levels, but he was prepared to match them if he had to.

If there's anyone who knows what an airline looks like in its final moments, it should be Mr. Leblanc, who has been involved in three airlines that didn't make it: Intair, Royal Airlines and Canada 3000.

But if Mr. Leblanc could see the vultures circling on Feb. 24, he sure didn't show it.

Instead, he announced an aggressive expansion of Jetsgo in Western Canada, adding flights to Regina and a marked increase in capacity on western routes.

“This is great news for consumers in Western Canada,” Mr. Leblanc said. “We began our strategic expansion last September and in January added five additional cities. It's been obvious from the response that consumers appreciate competition and the value it produces.”

He wasn't done. A week later, Mr. Leblanc announced that Jetsgo would add flights to Gander, Nfld., as part of its “ongoing commitment to the people of Eastern Canada.”

Jetsgo never made it to either Regina or Gander. Instead, the airline grounded its flights and filed for bankruptcy protection yesterday.

If airlines were like baseball, Michel Leblanc would have used up his three strikes before launching Jetsgo.

Like so many in the industry, Mr. Leblanc appears to be addicted to jet fuel, a serial airline entrepreneur who has been involved in three separate carriers that now litter the airline graveyard: Intair, Royal Airlines and Canada 3000.

Mr. Leblanc's track record is sure to raise questions about whether there are reasons for his dismal pattern, beyond simply bad luck. It also raises questions about whose job it is to protect the public from repeat offenders.

“This is an industry where there is a lot of irrationality and all of this stems from a basic human instinct, which is called the love of flying. There are individuals who are just absolutely fascinated with the idea that you can take a cigar-shaped tube and put it up 30,000 feet in the air and it will stay there and take you across the world,” said Joe d'Cruz, a professor who heads the aerospace management program at the University of Toronto's Rotman School of Management.

“The romance of aviation is just an incredible opiate and clearly Michel LeBlanc had one of the most serious cases of addiction.”

Associates say Mr. Leblanc is an extremely private man, a chain smoker with a thick Québécois accent, who tended to run his airlines as a one-man show.

His controlling role in the business, coupled with his reluctance to carry a cellphone sometimes created challenges, when important decisions could not be made without his blessing.

Even for those who know him well, Mr. Leblanc can be a difficult man to figure out. On the one hand, he likes spending his money on fast cars; on the other, he adopted two Mexican orphans with his wife, Louise Saumier, who was vice-president of marketing under Mr. Leblanc at Royal Airlines.

The former Cessna salesman is known as a tough negotiator, say those who have sat opposite him.

“He makes sure that he keeps you on the edge,” said Luc Filiatreault, chairman of NordTech Aerospace Inc., which performed maintenance, repair and overhaul for Jetsgo planes. “But my personal experience with him is that when he gives you his word, he keeps his word. I certainly never experienced any problems with Michel. He's a very astute business person.”

But others have raised questions about Mr. Leblanc's integrity.

In 2001, after Mr. Leblanc sold Royal Airlines to Canada 3000 for $84-million in stock, Canada 3000 turned around and sued Mr. Leblanc and another former Royal executive, alleging that they had overstated Royal's financial position in the days leading up to the March merger of the two airlines. The suit was never resolved.

Like many so many of his contemporaries in the airline industry, Mr. Leblanc was smitten with airlines at a young age.

He was born in Montreal in 1946, the son of used car salesman who loved planes so much that he sold his General Motors dealership for a Cessna dealership, which later opened a flight training school.

Mr. Leblanc's father took him on his first plane ride, on a Piper J3 seaplane, when he was seven years old. He got his student pilot's licence on his 16th birthday — the earliest possible date — and got his full private licence the day he turned 17 and a commercial licence the day he turned 18.

He took an MBA at the University of Buffalo before returning home to run the family business. One of his customers was Guy Bernier, who operated a crop-spraying business. The business did well enough, but Mr. Leblanc thought it could do even better. He went into business with Mr. Bernier in 1979, leasing larger planes to do tree spraying for the provincial government.

In 1986, he took on new partners and purchased Québecair, a money-losing regional carrier, from the provincial government. The airline grew quickly and profitably until Mr. Leblanc and his partners re-branded the airline Intair and launched flights against Air Canada and Canadian Airlines on the busy Toronto-Montreal-Ottawa triangle in February of 1990. By the end of the year, the airline had filed for bankruptcy protection.

A year later, Mr. Leblanc launched Royal, a charter airline affiliated with the tree-spraying business.

“For whatever reasons, these people who fail want to keep coming back,” said Ben Cherniavsky, an analyst at Raymond James Ltd. in Vancouver. “Once it is in your blood, there's a huge temptation to come back.”

The airline grew steadily, allowing Mr. Leblanc and his partners to do an initial public offering in 1993.

In August of 2000, after Air Canada acquired Canadian Airlines, Mr. Leblanc sensed that the public was hungry for competition. He boosted Royal's fleet and turned it into a scheduled carrier.

Early the following year, Canada 3000 swallowed Royal to become Canada's second-largest carrier. Mr. Leblanc was initially handed the vice-chairman's job at the merged airline and was put in charge of Canada 3000's domestic operations.

What followed was his sudden departure from Canada 3000 and a $45-million lawsuit. In a statement of claim, Canada 3000 sought $45-million in damages for “fraud, negligence, breach of contract, conspiracy” and fraudulent or negligent misrepresentation of Royal's financial statements and records.

“Leblanc [and other defendants] engaged in the aforesaid conspiracy in order to induce Canada 3000 to make its offer and complete its acquisition of Royal and to ensure that Canada 3000 offered the highest price possible for the common shares of Royal,” the claim alleges.

Mr. Leblanc disputed the allegations, and filed his own countersuit. But the dispute evaporated after Canada 3000 filed for bankruptcy protection in November of 2001, pushed over the edge by the decline in passenger traffic after the Sept. 11 terrorist attacks.

It wasn't long before he was back at it again. In April of 2002, Mr. Leblanc launched Jetsgo Corp., an airline in which he was sole investor.

From the outset, many in the airline industry were skeptical about whether Jetsgo would succeed.

At the time, Mr. Cherniavsky wrote in a research report: “For these guys to enter the market now, with fuel prices where they are, with prevailing economic uncertainty and high insurance premiums and no apparent excess of demand — all this puts the odds against them being around very long.”

Executives at other airlines referred to Mr. Leblanc's airline as “Jetsgone” and spread rumours that Jetsgo was losing money quickly and its monthly traffic statistics were unreliable. But Jetsgo grew rapidly and Mr. Leblanc was able to sell a 10-per-cent stake in the carrier to Fidelity Investments last year for $25-million.

In its court filing yesterday, Jetsgo said it made a slim profit of $781,000 for the fiscal year ended June 29, 2003. Then things started to turn sour. Jetsgo says it lost $9.6-million in the subsequent fiscal year, and $58-million over the last eight months.

Despite those losses, it's hard to know whether Mr. Leblanc made or lost money on the venture because it is a private company, said a government official who knows him.

“The problem with this company is that — because it was not a publicly traded company — you don't know what was going on. You don't know who has been paid what, what kind of returns have been taken out of the company.”

D&B Canada Ltd., a company that monitors firms' fiscal health based on lawsuits filed, how quickly they pay their bills and economic factors, said its data showed that Jetsgo's financial position worsened significantly last summer.

“Starting in about August or September of this year, we started seeing a decline in how they were paying their bills. Prior to that they were a decent payer, in line with the industry upper quartile,” said Lawrence Franco, president of D&B Canada.

That knowledge would have been helpful for D&B's clients, but it's little solace to the thousands of customers who have gambled on Jetsgo and lost.

Some industry observers say one solution would be to force airlines to keep passenger revenue in trust until they actually operate a flight.

Mel Fruitman, vice-president of Consumers Association of Canada, said the government needs to do a better job of protecting consumers.

“If they see a situation like this that is brewing . . . they should either step in and cause them to cease operations until they get their act together, or at minimum, they should be issuing warnings to consumers that this airline is in potential difficulty and be careful about booking with them,” he said.

Whether this would be enough to deter Mr. Leblanc from launching yet another carrier is unclear.

“He's more than a three-timer, I think he's a six-timer,” Michael Carney, a professor at Concordia University's John Molson School of Business, told Canadian Press.

“Can you guess the name of his next airline?”

Leblanc's grounded flights

Once tagged as a “serial aviation entrepreneur”, Michel Leblanc's latest airline stopped flying yesterday, stranding passengers and putting 1,200 people out of work. The Trois-Rivieres, Que., native had had a lifelong love affair with aviation – and a turbulent record of keeping his airlines aloft.

Intair, 1986-1990
Leblanc's title: President
Leblanc's ownership: Major investor

1986: Leblanc and some partners purchase Quebecair, a money-losing regional carrier, from the provincial government.

1989: They rebrand the airline Intair and launch service on the Toronto-Ottawa-Montreal triangle.

February, 1990: Leblanc boasts that Intair is already profitable on the triangle.

November, 1990: Intair files for protection from creditors under the Companies' Creditors Arrangement Act.

Royal Airlines, 1992-2001
Leblanc's title: Chairman and chief executive officer
Leblanc's ownership: 45% (in 2000)
April 29, 1992: First flight.

August, 2000: In response to Air Canada's acquisition of Canadian Airlines, Leblanc expands Royal and transforms it from a charter carrier into a scheduled airline.

January, 2001: Royal Airlines is acquired by Canada 3000.

Canada 3000, 2001
Leblanc's title: Vice-chairman and managing director of the airline's domestic schedule.
Leblanc's ownership: 14 per cent

June, 2001: Leblanc suddenly leaves Canada 3000

Aug. 14, 2001: Canada 3000 sues Leblanc for fraud, alleging he overstated the financials of Royal before the sale.

Nov. 9, 2001: Canada 3000 grounds its aircraft and places itself in bankruptcy two days later.

Jetsgo, 2002-2005
Leblanc's title: President and chief executive officer
Leblanc's ownership: 90% (in 2005).
June 12, 2002: First flight.

March, 2004: Leblanc sells 10 per cent of Jetsgo to Fidelity Investments for $25-million.

March 7: Nav Canada threatens to seize certain Jetsgo aircraft.

March 11: Jetsgo grounds all its planes, files for bankruptcy protection.

Anatomy of a failed airline
Headquarters: Montreal
Ownership: Michel LeBlanc, with Fidelity Investments holding 10%
Logo: Happy face
Slogan: Pay a little, fly a lot
Began operations: June 12, 2002

Passengers: Carried 280,000 a month to destinations across Canada, New York, Florida and the Caribbean

Employees: 1,200 people full-time, including 550 people inflight, 80 in maintenance, 350 for airport services and ramp operations, 220 people in marketing.

Financial results:

Earned $228.7-million for 12 months ended March 28, 2004
Lost $9.6-million in year ended June 27, 2004
Lost $33.7-million in six months ended Dec. 26, 2004
Lost $12-million in January, 2005
Estimates $10-million loss in February

Fleet:

14 MD-83 aircraft. Average age is 10 years; planes are now parked in Vancouver, Toronto and Montreal.

15 Fokker 100 aircraft, leased from American Airlines Inc.
Average age is 12.5 years; planes are now parked in Quebec City.

Ground facilities:

Leases office space near Montreal airport for its head office, reservations centre and accounting department.

Leases counter space in Montreal, Toronto and Ottawa airports

Leases hanger space at Toronto and Quebec City airports

Facilities in other cites outsourced to third parties on a pay-per flight basis

Very interesting reading about Michel Leblanc.

Ex-Jetsgo workers on prowl for jobs Bilingual staff in demand at rival airlines
13 March 2005
Winnipeg Free Press

Grant Robertson CALGARY--The airline industry is bracing for a flood of up to 1,200 job seekers after Montreal-based Jetsgo suddenly grounded its planes this week amid massive financial losses.

Some may find work at rival WestJet Airlines, with the Calgary-based carrier suggesting it may dip into the large pool of cast-off Jetsgo workers.

WestJet chief executive Clive Beddoe said the airline is looking to add new planes and delay the retirement of older aircraft by one or two years to fill the void left by discount carrier Jetsgo.

"Absolutely, we'll be hiring," Beddoe said, indicating WestJet needs to bolster its roster of bilingual employees, which are in high demand throughout the industry.

"They are more than welcome to apply to us. We certainly are willing to consider that possibility -- particularly the French-speaking ones, we're very keen to hire them."

Jetsgo, which halted operations early Friday morning, leaving an estimated 17,000 passengers with unusable tickets, has reportedly lost $55 million over the last eight months.

The airline's demise puts 1,200 employees in limbo -- including 550 operations staff, pilots and flight attendants, 80 maintenance personnel, 350 airport service and ramp workers and 220 administrative employees.

Some Jetsgo staff were employed by independent contractors who provide labour to the airline sector. Those workers could see their jobs shifted to other carriers as the industry heads into the busy summer travel season.

Wing Tips, a Calgary-based contractor of airline employees such as ticket staff and gate workers, hopes to move its 20 Jetsgo employees to contracts with international airlines.

As well, the planned expansion of Halifax-based CanJet into Western Canada in June will create more work in Calgary, Wing Tips owner Chris Richardson said.

"The job market is dented, but I don't think anybody looking for work in our industry should be daunted," Richardson said yesterday.

"I see it as still a very, very vibrant industry . . . because whenever there's a failure, there's a success elsewhere. The traffic is going to go somewhere else."

The airline job market has been battered in recent years with thousands of layoffs at Air Canada and the collapse of Canada 3000 in 2001.

Richardson said Wing Tips was contacted just minutes before Jetsgo grounded its planes and told its contract had been cancelled. Ticket staff were told not to go to their booths.

-- CanWest News Service

Airline executives say fares bound to rise following Jetsgo failure
Sun Mar 13, 5:50 PM ET

OTTAWA (CP) - Top executives at Air Canada and WestJet say consumers can count on paying more now that their discount competitor Jetsgo has been forced into bankruptcy.

Robert Milton, CEO of Air Canada's parent company ACE Aviation Holdings Inc., said Sunday the Jetsgo failure is an example of what happens when an air carrier doesn't charge enough to cover its operating costs.

"This was inevitable," Milton said in a television interview. "When the fares are $49, or $1, it is too good to be true, and this is going to happen."

Milton said fares in the industry are sure to rise in future because they have been so artificially low for so long - an assessment shared by Clive Beddoe, CEO of WestJet.

Beddoe insisted, however, that the increases will be modest.

"Ultimately you have to make a profit," he said. "So costs to the consumer will climb somewhat, but in my view it doesn't have to climb very much for the consumer to be able to provide an adequate fare to the airline."

Beddoe was critical of Jetsgo for continuing to sell tickets right up to the eve of bankruptcy, when there was little chance they would ever be honoured.

"I suspect that the whole operation of Jetsgo was funded on advance ticket sales," he said. "There is a question whether or not there should be regulations to prevent that.

"It would certainly lead to a much more healthy industry. We would certainly be one that would support that."

Milton said he's "open to almost anything" to make sure travellers aren't stuck with worthless tickets if an airline goes belly up.

"If a fund was to be set up (or) whatever it might be to protect the consumer, we're fine with that."

He added, however, that any such move should be coupled with cuts in airport rents and security fees paid by air carriers if Ottawa wants to restore the health of the industry.

Transport Minister Jean Lapierre has been lobbying for rent and fee reductions but failed to convince his cabinet colleagues to take action in the recent federal budget.

Lapierre also came under fire when he admitted last week that he had contacted other airlines the day before Jetsgo declared bankruptcy but never warned the general public that anything might be afoot.

Lapierre has insisted he didn't know, when he spoke to Milton and others last Thursday, that Jetsgo would actually declare bankruptcy. Milton confirmed Sunday the minister didn't speak directly of an impending bankruptcy but was vague on exactly what he did say.

Beddoe said he didn't hear from Lapierre until after the bankruptcy was announced Friday, when the minister called to thank WestJet for helping to rescue stranded Jetsgo passengers.

Meanwhile, Prime Minister Paul Martin sympathized on Sunday with the thousands of passengers left stranded by Jetsgo and said "Air Canada and WestJet and everybody is trying to do their best."

When asked at the annual St. Patrick's Day parade in Montreal whether he could pass on the luck of the Irish to Jetsgo passengers, Martin said: "I tell you that's pretty tough."

Montreal Mayor Gerald Tremblay said the city will lose about 400 unionized jobs with the closure of the airline, founded by Montrealer Michel Leblanc.

"It's a big loss, but fortunately there are companies that are expanding such as Air Transat and Air Canada," said Tremblay, who was also at the parade.

Jetsgo has asked its 1,350 ex-employees to turn in their parking passes, pagers and other company goodies if they want their final paycheques.

The airline stranded 17,000 passengers across North America when it ceased operations at midnight Thursday night.

As all companies must to do when they seek bankruptcy protection, Jetsgo is offering to pay all back wages up to midnight Thursday when the airline grounded its 29 aircraft. It is also offering employees their 2004 and 2005 vacation pay and outstanding per diems, provided company property is handed over.

'When the fares are $1, it's too good to be true"
Rick Westhead and Isabel Teotonio
14 March 2005
The Toronto Star

For Ray Riar, the pilot of Jetsgo's last red-eye from Florida, the end came Friday at 2 a.m., just moments after he edged his 160-passenger Boeing MD-83 up to the gate at Toronto's Pearson International Airport.

A member of the doomed airline's ground crew leaned over the nosecone and rapped on the cockpit glass, not even waiting for the veteran pilot to shut down his jet's twin engines, still blasting whirlwinds of late-winter snow across the tarmac.

Riar cracked open the cockpit window and was handed a terse, one-page memo: Jetsgo, Canada's third-largest airline, had collapsed at midnight, just about the time Flight 481 was somewhere over the Carolinas. A company insider told the Star the sequence of events that led to the shutdown was triggered last Monday by Nav Canada - which provides navigation and other vital services - when it moved to seize Jetsgo's planes, although the issue was later resolved.

Within minutes of Riar being handed the memo, a scene from a Hollywood thriller unfolded. White Ford Broncos from the Greater Toronto Airports Authority zoomed onto the tarmac, encircling his jet and others in the Jetsgo fleet. The company, as it was doing at airports across Canada, was safeguarding its biggest assets, 14 Boeing MD-83 and 15 Fokker 100 jets, an aging fleet of leased and purchased planes.

Just hours earlier, around midnight Thursday, Jetsgo founder Michel Leblanc shocked the industry by shutting down the airline and preparing it for bankruptcy protection.

At the height of spring break, no less - already a chaotic time in the commercial airline business - he was grounding his planes, stranding 17,000 passengers in at least 30 cities across North America and the Caribbean.

"You mean we can't go to Disneyworld?"

That's all six-year-old Keegan could muster as his parents scrambled throughout Pearson Friday morning trying to make alternate arrangements to Florida.

"How come those bad people are able to do that?" Keegan asked his dad, Sean Mulroy, as his mom inquired about later flights with other airlines.

After all, his mom had called the airline at 6 a.m. to check if their flight to St. Petersburg was running on time. It was, apparently.

"I just don't understand how there are no regulatory guidelines to prevent something like this," said Lynn Mulroy. "It's just absolutely astounding."

Surely, she said, a large company has to know how much money it needs to keep itself afloat.

"If they knew even on Wednesday and said the last flights going out are on Thursday, at least that would've given people 48 hours notice to make alternative arrangements. But to leave everybody in the lurch like that is deplorable."

After leaving Pearson, the Toronto couple went directly to their travel agent and were stunned to find out that not even the tour operators or agents had been given advance notice of the shutdown.

Unable to secure another flight, they loaded up the car and set out for a two-day road trip, arriving late Saturday. By yesterday, they had actually made it to Disneyworld, leaving behind the turmoil created at Jetsgo's corporate head office.

Within 10 minutes of Flight 481 touching down at Pearson, the airports authority employees were locking Jetsgo staffers out of the airport's sensitive areas. Riar, like other Jetsgo pilots on that final night, wasn't even allowed to file what would be the airline's last log sheets and in-flight reports.

Leblanc's memo changed everything.

"Ray took the paper and basically read what it said," recalled Steve Jefferies, the flight's first officer. "It was pretty quiet after that."

It was hardly an end envisioned by Leblanc, the hard-driving entrepreneur who had dreamed of building a Quebec airline that would take on Air Canada and WestJet. At its peak, Jetsgo was carrying 280,000 passengers a month; in the remarkably short period of just three years, Leblanc seemed to have built a national airline.

But interviews and the company's own documents reveal Jetsgo, belying the trademark green smiley face painted on the tails of its jets, had been flying on a wing and a prayer for months.

Losses were mounting by the millions and its safety record was under scrutiny by Transport Canada and its arms-length inspection agency, the Transportation Safety Board.

When they finally pulled the plug, Jetsgo's executives sparked a bombshell that destroyed the travel plans of thousands. By the company's own account, Jetsgo executives knew last Monday they were in crisis. And, according to their court-appointed monitor, they began considering a shutdown on Wednesday. Yet the airline continued to fly passengers and sell tickets, right to the end.

Baggage handler Emil Spudic sensed something fishy Thursday night. Jetsgo's planes were landing at Pearson and, though scheduled to remain in Toronto for other fights, they were soon winging toward Quebec City. Almost empty.

It was the first hint that pandemonium was about to descend on Terminal 3, and in dozens of other airport terminals across the continent.

"After the shift (at 11 p.m.) I thought something was weird," said Spudic, adding that just before 2 a.m. he received a call at home from Jetsgo's Montreal headquarters, telling him not to come to work on Friday. "I've got no job now."

Some 17,000 people across North America had been counting on Jetsgo to take them on vacation or bring them home that Friday alone.

But Jetsgo, seeking bankruptcy protection, was about to be eradicated with breathtaking speed.

Jetsgo's logos were coming down at Pearson, blinking off computer screens in an instant. The same was happening at Montreal's Pierre Elliott Trudeau, as well as airports in the 28 other cities Jetsgo had served. Passengers couldn't find any Jetsgo personnel to help them handle the inevitable crisis such a failure would cause - never mind spring break.

Transport Minister Jean Lapierre says he was kept in the dark, too. But he had been talking to Air Canada's chief executive Robert Milton hours before Jetsgo foundered about the possibility of the national airline helping out if safety issues were to ground its upstart rival, says the minister's press attache.

"It was an open conversation, but it was nothing to do with bankruptcy," Irene Marcheterre said. She added the news, which she received in the dark early hours the next morning, came as a shock. "This is quite a coincidence, I'd say."

As Flight 481 shut down its engines that morning, disgorging its last sun-kissed passengers, the Jetsgo crew was stunned by what they encountered.

"It was complete, total shock," recalls Brian Hill, a Jetsgo pilot who had spent most of the five-hour flight from Florida sleeping in the 160-seat plane's passenger section.

Like most of Jetsgo's 1,350 employees, the 39-year-old Hill knew the Montreal-based discount airline was in a fierce dogfight with it competitors, WestJet and Air Canada. Yet he had no idea the airline was doomed.

Hill was still planning for the future, flying home after a three-day flight simulator course in Miami, where he'd practised emergency landing techniques in case a jet engine burst into flames. But by the time he left Pearson, GTAA officials were hastily placing new road-side signs around the airport: "JETSGO NOT FLYING."

Trying to save a three-month relationship with the woman he'd been dating in Calgary, Stan Mahabir was set to fly out of Toronto Friday afternoon in a last-ditch attempt to see if they could make their long-distance romance work. He was going to see her, and if his efforts failed he would gather up the belongings he'd left with her and head back home for good.

But as luck - and fate - would have it, he'd booked his fare on Jetsgo.

"I was supposed to be going on a date," said Mahabir of Pickering. "Not being able to get out there put the final nail in the coffin of the relationship."

Not only is he out a girlfriend, he's out $380 for the flight - neither of which he expects to recoup.

He had flown to Calgary often with WestJet, but decided this time to fly with Jetsgo because the airfare was $100 less.

"This teaches me for being a cheapskate."

But he admits he's also counting his blessings. He and a friend had been surfing the web Thursday night, comparing flight prices to Las Vegas for an upcoming stag party in July. Jetsgo had the best rates to Las Vegas and they were tempted to book but held off.

Michel Leblanc would have sensed for weeks that a perfect storm was forming, one that might destroy his empire in the sky. Ensconced in his Jetsgo headquarters, an unmarked warehouse in a low-rent industrial park in Montreal that once offered him views of his planes coming and going, he could not escape a host of grim facts.

Jet fuel prices had been soaring, due to the instability a half-world away in the Middle East. That had made the discount airline's bargain-basement fares - as low as $1, which had other airlines questioning his operation - even more difficult to sustain.

Meanwhile, back in the heart of Canada's oil patch, Clive Beddoe, chief executive of archrival WestJet, had sensed his competitor's weakness and was doing his best to match Jetsgo's prices and eat into Leblanc's business.

"WestJet had turned most of its attention to fighting Jetsgo," said a former Air Canada executive.

"He knew he couldn't knock off Air Canada, it's too big. But Jetsgo was vulnerable."

Leblanc alleges WestJet was fighting dirty.

In his petition to Quebec Superior Court for protection from creditors, he alleges that WestJet had engaged in corporate espionage. By hacking into Jetsgo's internal Website, he alleges, WestJet officials were able to determine Jetsgo's profitable routes and move to undercut the discount airline in those markets. WestJet denies the allegations.

Beddoe, whose feud with Leblanc is typical of the venomous airline business, isn't shedding any tears for his fallen competitor. He accuses him of duping 17,000 customers, many people on budgets, by selling them tickets that would never be honoured.

"It's very sad," Beddoe told CTV yesterday. "We had so many distraught people calling us when Jetsgo knew full well they were going to close down. That process doesn't happen overnight. It's a real question when a company takes money like that, knowing they cannot deliver the service."

Worse still, questions about safety had become a dark cloud engulfing Jetsgo.

After a series of safety concerns - including a near disastrous landing last January in Calgary when a jet inexplicably veered off the runway, leaving tire marks in the grass before taking off to try again - Transport Canada issued an "advance notice of suspension" on March 8, giving the airline until April 11 to improve its safety record.

The notice followed a directive last month that barred Jetsgo from flying above 29,000 feet because its flight manuals were out of date.

It was an expensive order, since flying at the lower altitude, where air resistance is greater, meant Jetsgo's older jets would burn up even more fuel than usual, increasing the company's losses.

As all the bad news buffeted Jetsgo, Leblanc admits he and his managers, back at its headquarters, were under immense pressure.

His business model - his fight plan to profitability - was based on stripping down the costs of flying as much as humanly possible. Jetsgo was designed to be the lowest-cost carrier in Canadian skies, run more with the philosophy of a bus line than an airline.

Unlike many other airline presidents, Leblanc eschewed flash. He boasted that his own office, in a dun-coloured two-storey warehouse beside a Quality Inn and surrounded by truck stops, cost him only $15 a square foot, a fraction of what it would cost to be in a slicker building. His pilots typically earned about $65,000 a year, far from the six-figure salaries of bigger carriers.

Leblanc's non-union staff also provided savings, even paying for part of their own uniforms - featuring a black leather jacket that Leblanc said saved him "a fortune in dry cleaning." And his customers were encouraged - by such things as painfully long waits on Jetsgo's telephone reservation line - to buy over the Internet. About 90 per cent of them did, meaning Lebanc didn't have to pay for the cost of printing tickets.

But by last Monday, it was clear Jetsgo's corporate flight plan to profitability was disintegrating, fast.

Jetsgo - his fourth airline attempt and 90 per cent owned by Leblanc - was burning money as fast as his aging jet fleet guzzled gas. Court filings show that the company, which had eked out a profit of just $781,000 in the fiscal year ending 2003, lost an estimated $22 million last January and February trying to stay aloft.

Things looked even bleaker in the six months ending Dec. 26, 2004, when Jetsgo lost close to $33.8 million. But when one of the creditors moved on the airline, Leblanc admits, he'd run out of options.

"For myself and the management team, the decision to cease Jetsgo operations has been extremely difficult to make," Leblanc confessed in a memo hastily issued to employees Friday after he grounded Jetsgo. "It was taken only after all other options had been exhausted."

In fact, Leblanc's memo confirmed that a liquidity problem was at hand; simply put, there wasn't enough money to pay for some of the airline's key but nervous creditors who had demanded payment.

"Unfortunately, one creditor in particular that has the power to stop all Jetsgo operation at once, exercised extreme pressure on our cash reserves last Monday, although aware of the disastrous consequences of such a drastic action would have forced each and every one of you," Leblanc lamented. "You don't deserve this."

Air Canada's CEO, Robert Milton, maintains Leblanc's business model was doomed, regardless of how much Jetsgo tried to trim the cost of flying.

"Their fares were extremely low, oil prices were extremely high and they weren't carrying a lot of passengers, so this was inevitable," Milton told CTV's Question Period yesterday. "When the fares are $49 or $1 it's too good to be true."

And it was, as 17,000 passengers soon found out.

Driving through blustery conditions, pushing deeper into the darkness, there was just one thing on their minds: the feel of the warm sand under their feet and the hot sun beating against their bodies.

Vivian DeLuca, Jennifer Hearn and Lynn Ouimed had packed their luggage into the car at 9 p.m. Thursday and headed straight for Pearson. The five-hour drive from Sudbury would be tiring, but the three teachers would soon be well rewarded in Cancun. Or, so they thought.

"We did everything we were told," said Ouimed. "We were advised to call ahead and we did - everything was fine."

But when they rolled into Terminal 3 in the wee hours of Friday morning, that wasn't the case.

Passengers were beginning to arrive at the airport, many with children in tow. After walking up and down the airport's halls, looking at different departure boards in disbelief, they discovered they were among the passengers left stranded by Jetsgo.

"We were shocked," recounted DeLuca. "I walked by the departures board and saw the flights were cancelled. My jaw just dropped."

With no Jetsgo employees in sight, they headed to the Sunwing Vacations counter where the tour operator assured them they'd get on another flight, albeit at 7: 30 p.m. They're now in Cancun.

"It's terrible. This is my first trip ever, my first time on a plane," said Hearn.

It's unclear how many creditors were pressuring Leblanc to come up with cash.

The Greater Toronto Airports Authority says the Jetsgo imbroglio was a surprise, given that the carrier had been up to date paying its aeronautical fees and was "just a few days late" paying its latest landingcharges, said GTAA spokesperson Connie Turner.

Turner wouldn't say how much Jetsgo owed the GTAA, but several airline analysts estimated the carrier probably paid the airport authority at least $2 million a month for its combined fees.

In its court filing, Jetsgo says Nav Canada moved last Monday to seize the company planes but that the issue was resolved. In his memo to employees, Leblanc says simply that an unnamed creditor tipped the scales, prompting the move.

A senior Jetsgo official told the Star that, in fact, Nav Canada's threats last Monday to seize the planes triggered the collapse of the airline. Then on Wednesday, according to an official of the court-appointed monitor, RSM Richter, the company began considering plans to shut down the airline and file for court protection from its creditors.

A Nav Canada spokesperson rejects that. "It wasn't us," John Morris said, adding that Jetsgo owed Nav Canada no more than $2 million.

Jetsgo's petition for bankruptcy protection suggests considerable tension between the discount airline and Nav Canada over late payments.

"With its unsustainable operating losses and negative press coverage of the operations and financial viability of (Jetsgo), an increasing number of creditors began to take steps to demand payment and restrict credit terms. Jetsgo does not have sufficient funds to continue its operations," Jetsgo's lawyers said in its court filing.

"In particular, on March 7, 2005, NAV Canada commenced proceedings to seize certain aircraft," Jetsgo alleges.

"The matter was resolved and the application withdrawn."

Clearly, the resolution did not keep the airline - and its passengers - flying.

Maureen Boyle thought she'd been spared a colossal headache when she heard Skyservice was picking up part of Jetsgo's slack by flying a planeful of its passengers to Cozumel yesterday.

But the headache set in soon after arriving at Pearson airport at around 4 a.m. The Skyservice plane was scheduled to take off at 6: 10 a.m. And, to the relief of the estimated 200 passengers aboard, it did. The only problem is that after about 20 minutes of flight it was forced to return because of a mechanical problem.

"I'm frustrated," said Boyle yesterday at 5: 30 p.m., still waiting after a string of about half-a- dozen delays. "Everyone's frustrated, people feel like they've been strung along."

As she spoke of her frustration other distressed passengers were milling about the Skyservice counter wanting answers, demanding their money back and requesting their luggage be pulled so they could go home.

"We've been sitting here for 14 hours with multiple delays and this place is starting to go crazy" her husband Peter said.

"The only defence (Skyservice) has given us is that they're busy and that they did us a favour by picking up a planeful from Jetsgo.

"We're going to stick it out, we've already been here all day and made the investment."

The Boyles and their two daughters only had to stick it out for another hour.

The plane took off at 6: 30 p.m. By last night, the Boyles could see clear skies ahead, unlike Jetsgo, which is now mired in the courts.

It's up to Leblanc and his creditors whether Jetsgo will try to emerge from bankruptcy protection as a restructured company, or whether it might liquidate.

Airline industry lawyers say the only future Jetsgo flights will likely be to the Arizona desert, to join thousands of other mothballed planes in a storage facility. They suggest Jetsgo could by early April seek a bankruptcy order and begin liquidating its $75 million worth of assets.

But the airline business, like nature, abhors a vacuum.

Before the engines on Jetsgo's last airborne planes had even cooled, Air Canada and WestJet were circling the fallen airline, telephoning the Toronto airport authority, asking to take over Jetsgo's gate facilities and check-in areas, said the GTAA's Turner.

Jetsgo's eight grounded jets in Toronto are now caked in snow and ice, sitting at a remote part of Pearson's tarmac, as other airlines take over their gates.

An eerie calm has fallen over the airline's headquarters in Montreal, where computer screens, once humming with online Internet bookings, were all turned off.

A lone security guard sat at the front door, eating lunch.

"You won't find anybody here," he said, watching as Air Canada and WestJet planes soared off the runways of Pierre Elliott Trudeau International into a bright, blue and, for now, less-crowded sky.

Jefferies, the 35-year-old first officer on Flight 481, who has been with Jetsgo for a year after working as a flight instructor in Toronto, said he's in shock over the company's downfall.

"It didn't have to be like this," said Jefferies, who is still owed $17,000 of the $30,000 he had to put up to pay for his training.

"If they had enlightened us and told us what was going on, we would have flown for free for a month, or two months, or whatever it took."

2 a.m. showdown on the tarmac as last Jetsgo plane is boxed in

Ottawa grilled on Jetsgo
Tories ask what Transport Minister knew, and when
Chris Sorensen, with files from Paul Vieira
National Post
14 March 2005

As thousands of stranded Jetsgo passengers rebooked flights or cancelled travel plans over the weekend, new questions were being raised in Ottawa about the federal government's role in the discount airline's sudden collapse.

James Moore, the Conservative transport critic, lashed out at the Liberals yesterday, saying Jetsgo's abrupt demise was yet another example of the government's lack of support for Canada's battered airline industry.

In particular, he criticized Transport Minister Jean Lapierre for failing to make good on a pledge to freeze rising airport rents, which are often passed along to airlines and their passengers.

"Across the board, the Liberals need to re-examine their air policy," Mr. Moore said in an interview.

"When you have nine air carriers that collapse during a Liberal government, you would hope that at least one of them would serve as a wake-up call."

Mr. Moore called on the Minister to tell the public exactly what he knew about Jetsgo and when he knew it: "Yes, Jetsgo is a private company, but Jean Lapierre has a broader responsibility to the Canadian public.''

Jetsgo, launched by aviation entrepreneur Michel Leblanc just three years ago, became the latest in a string of airlines to disappear from Canada's skies when it announced shortly after midnight on Friday that it was ceasing its operations and filing for bankruptcy protection. Other recent failed airlines include Canada 3000 and Roots Air.

Jetsgo's abrupt shutdown left 1,200 employees jobless and an estimated 17,000 travellers stranded across the country. Some unlucky customers booked tickets with Jetsgo as late as 11 p.m. on Thursday -- an hour before it said it was grounding its planes.

Mr. Lapierre said on Friday the federal government would not compensate Jetsgo customers holding worthless tickets, noting it was a private company.

But some critics are wondering whether Ottawa could have done more to warn people of Jetsgo's impending crisis.

One Ottawa insider familiar with the matter said the Transport Minister's office was "scrambling" on Thursday after Transport Canada issued a 30-day directive earlier in the week that demanded Jetsgo fix several safety-related problems discovered during a recent inspection.

"The scrambling around Thursday afternoon was all about getting this order ready," said the source, who didn't want his name revealed. "They were basically saying, 'Shape up or we are shutting you down.' "

Transport Canada decided to take a closer look at Jetsgo after one of its planes skidded off a Calgary runway in late January -- just one of several recent incidents involving the airline's fleet of 29 jets.

In addition, Mr. Lapierre told reporters last week he placed a phone call to Air Canada chairman Robert Milton on Thursday night, prior to Jetsgo's announcement. The call, to discuss possible "scenarios" involving Jetsgo, was later downplayed by his office.

Mr. Milton dodged a question about the phone call in an interview on CTV yesterday. Asked whether Mr. Lapierre warned him that Jetsgo was about to pull the plug, he replied: "The issue was one of being in a position to anticipate."

Several passengers expressed anger over the fact that Jetsgo, known for its cheap $1 fare promotions and green happy face logo, had just recently announced a major Western expansion and continued to book tickets for all of its routes right up until its final hours.

"We would have advised our clients not to sell tickets," said Allison Eaton, a spokeswoman for Flight Centre, which said about 3,000 of its customers were affected by Jetsgo's collapse.

Jetsgo's bankruptcy protection filing, which was being considered as early as Wednesday, according to some reports, showed it had lost $55-million in the last eight months and was fending off payment demands from some of its biggest suppliers just days before it shut operations.

One Jetsgo worker, reached at home yesterday, said he had received a company memo that demanded employees return cell phones, pagers, laptops and security passes if they wanted to receive their final paycheque.

He said employees at Jetsgo's headquarters had suspected the company was in jeopardy since Christmas, when the airline suffered an operations meltdown because of winter storm in Toronto.

"Everybody was aware that things weren't going well, especially the finance people," said the man, who didn't want his name published. "We all had an idea that we were going to go down. We just didn't know when."

Jetsgo monitor says last paychecks will clear bank

MONTREAL, March 14 (Reuters) - The last paychecks issued to Jetsgo's 1,200 workers will be honored, the court-appointed monitor for the insolvent Canadian no frills airline said on Monday.

RSM Richter Inc. said Jetsgo had "administrative problems" with its bank on Monday morning, as the carrier's employees showed up at sites in Montreal and Toronto to collect and cash their last paychecks.

"We have now been advised that all problems have been sorted out and that checks will clear the bank," RSM Richter said in a statement.

Jetsgo, Canada's third-largest airline, stranded 17,000 passengers on Friday as it grounded its fleet of 29 jets just hours before obtaining court protection from creditors.

Privately owned Jetsgo, which began flying in mid-2002, filed for bankruptcy protection after losing C$55 million ($49 million) over the past eight months, leaving it with a C$19 million negative net worth.

Liabilities included C$48.5 million of unearned revenues from tickets sold to customers who had yet to fly with the airline.

($1=$1.20 Canadian)

Jetsgo sent jets to Quebec for safe haven from creditors
Under guise of ‘air worthiness' checks, company sought to protect its Fokkers
BRENT JANG
TRANSPORTATION REPORTER
15 March 2005
The Globe and Mail

A financially imperilled Jetsgo Corp. sent the bulk of its fleet of 15 Fokker 100s to Quebec City last Thursday night in a calculated effort to protect its prized assets from creditors.

Jetsgo pilots had been told to refuel and fly to Quebec City for “air worthiness” checks on parts, including engine thrust reversers, The Globe and Mail has learned. A Transport Canada official said no maintenance checks were ordered and airport and aircraft industry officials added that Jetsgo ultimately wanted to ensure an orderly return of its company-owned aircraft.

Four hours before Montreal-based Jetsgo announced its shutdown at around midnight Thursday, the discount carrier started transferring the Fokkers to its Quebec City hangar, keeping the planes away from creditors, such as authorities at Toronto's Pearson International Airport.

Insolvent Jetsgo, privately controlled by Montreal entrepreneur Michel Leblanc, filed for bankruptcy protection on Friday morning in the Quebec Superior Court.

Some of Jetsgo's Toronto-based pilots stayed overnight in Quebec City and then rode a Via train back to their Ontario home base, said one Jetsgo pilot familiar with the situation.

“The pilots were kept in the dark. They would not have flown the planes back to Quebec City if they knew the company was being shut down,” one pilot said.

Jetsgo had hired NordTech Aerospace Inc. to provide maintenance, repair and overhaul services in Quebec City for Jetsgo's fleet. NordTech itself is owed $2.5-million for work previously done on the fleet.

An industry source said yesterday that it made sense for Mr. Leblanc to protect his 15 Fokkers from creditors breathing down his neck and to worry less about the airline's 14 leased Boeing MD-83s.

The used Fokkers, with an average age of 12½ years, could be worth $750,000 apiece, depending on their condition, the source said.

Officials working for Pearson's operator, the Greater Toronto Airports Authority (GTAA), had phoned Jetsgo financial vice-president André Deslauriers early last week, seeking payment for landing fees and other charges, such as counter space.

Then GTAA chief financial officer Judy Fountain sent a so-called “arrears letter” to Jetsgo, demanding payment for overdue bills running into the millions of dollars, as did Nav Canada, the country's operator of air traffic control systems.

Nav Canada threatened to seize aircraft on March 7, but backed off after working out a schedule for payments in arrears.

Still, with other creditors attempting to tighten payment schedules, Jetsgo opted to set the wheels in motion that would lead to the 2½-year-old airline seeking court protection from creditors.

One by one, starting Thursday night and lasting through early Friday, the Fokkers owned by Jetsgo made a beeline for Quebec City, including planes from Halifax, Moncton, Ottawa, Montreal and Toronto.

Jetsgo's leased 160-seat Boeing MD-83s followed the usual pattern of parking overnight at Pearson, Vancouver International Airport and Montreal's Trudeau Airport.

Jetsgo bought the 100-seat Fokkers from American Airlines Inc. in February, 2004, and those aircraft would have been easier to seize, compared with getting into a battle over the MD-83s with Jetsgo's leasing company.

Around 9 p.m. last Thursday, GTAA staff began to notice a pattern across Canada of Jetsgo's Fokkers heading for a leased Quebec City hangar. It took them by surprise because on a normal night, those Fokkers would tend to park at whatever airport is listed as that flight's final destination.

By Friday morning, most of the Fokker fleet had made it to Quebec City, a court filing said. However, one Fokker was still in West Palm Beach, Fla., according to a GTAA official who didn't want to be named. Eight of Jetsgo's 14 MD-83s were stored at Pearson, while the remaining six were spread between Vancouver and Montreal.

The Fokker flights to Quebec City didn't appear on the schedule of regular routes. “They weren't on our boards, but they were flights put into the mix. They just had their pilots fly them back, so it wouldn't have been a flight for passengers,” GTAA spokeswoman Connie Turner said in an interview yesterday.

On Thursday night around 10 p.m., rumours ran rampant at Pearson that Transport Canada had ordered a special inspection of the Fokkers.

Airport officials believed the rumours had a grain of truth because the federal department had issued a 30-day warning notice to Jetsgo last Tuesday to ensure that its internal manuals would be updated. Transport Canada had uncovered deficiencies in the carrier's “organizational structure,” including managers being stretched too thin.

But Transport Canada didn't order any grounding or special inspection of Jetsgo's Fokkers, so “in hindsight, it was very clear that Jetsgo wanted those planes back in Quebec,” Ms. Turner said.

A Transport Canada spokeswoman confirmed yesterday that the government didn't force the Fokkers to fly to Quebec City.

Yesterday, Toronto-area Jetsgo employees showed up at a Pearson hangar to collect final paycheques. .

But as with so much of the Jetsgo saga, even the carefully planned final paycheques didn't go smoothly. Late yesterday, court-appointed monitor RSM Richter Inc. addressed concerns from employees who had run into problems cashing their cheques. “We have now been advised that all problems have been sorted out and that cheques will clear the bank,” RSM Richter's Yves Vincent said in a statement.

Jetsgo's fleet

Fokker 100s
Aircraft average age: 12-1/2 years

Bought: Signed deal with American Airlines Inc. on Feb. 4, 2004, to acquire 18 Fokkers.

Seats: 100 passengers
No.currently in fleet: 15
Location parked: Quebec City

Boeing MD-83s
Aircraft average age: 10 years

Leased: Received favourable leasing terms after terrorist attacks of Sept. 11, 2001.

Seats: 160 passengers
No.currently in fleet: 14
Locations parked: Toronto, Montreal and Vancouver

Airline passengers deserve protection
692 Words
15 March 2005
The Toronto Star Editorial

Super store or little store, online or over the phone, the first rule of shopping is so old that it still goes by the Latin, caveat emptor - buyer beware.

As every one of the 17,000 stranded Jetsgo passengers in 30 cities across North America and the Caribbean learned the hard way last week, there is always some risk involved when a consumer makes any purchase, although certain goods and services clearly carry much greater risks.

But the nature of a ticket on Jetsgo made for a double risk.

First, as a so-called low-cost carrier, Jetsgo carried the same risk as anything else bought "on the cheap." Buying a flight from Jetsgo was only slightly different from buying a "no-name" television set from a manufacturer that the consumer has never heard of before. The reason the circumstances at Jetsgo were "slightly different" from buying a TV from an unknown company is that in Jetsgo's case, chief executive Michel Leblanc already had a reputation for starting airlines that ended in failure. Before Jetsgo, there was Intair and Royal Airlines.

Second, there is special risk arising out the nature of the product. Unlike most purchases that are paid for when the good or service is actually received - a pair of shoes, a radio, a bag of groceries or a haircut - airline tickets are typically paid for weeks or even months before the customer actually boards the plane.

Airlines are not the only business that carries this time-delay risk. People who leave their money in a bank account also assume this type of risk. So do those who buy car or house insurance, the value of which lies in the ability to collect on claims made in the future. But bank depositors and people who buy insurance policies don't have to worry about a bank or insurance company failing because both industries collectively assume this risk in Canada. For banks, the federally run Canada Deposit Insurance Corporation guarantees every deposit up to $60,000, while the industry-funded Property and Casualty Insurance Compensation Corporation protects every policyholder and claimant from the failure of their insurer.

The key question is: If banks and insurance companies make provisions to protect their clients from business failures, why not airlines?

Aviation history over just the last four years shows they should. In 2001, glitzy upstart Roots Air lasted just six weeks before it was shut down. Canada 3000, which had swallowed up Royal Airlines, failed later that year in the aftermath of the 9/11 terrorist attacks. Even sturdy Air Canada operated under bankruptcy protection for 18 months before emerging last fall.

The bottom line is that Canadian airlines keep running into trouble and their customers often pay. But no one who bought a ticket last month, last week or, in the case of some Jetsgo passengers, last Thursday night should lose all their money. And no one should be stranded in Florida or anywhere else because an airline has suddenly folded.

The government and airlines should get together immediately and bring in measures to protect consumers from airline failures.

Airlines should be forced to create an insurance fund or hold money in trust to ensure all customers - not just those already protected by travel industry associations or credit cards - can get their money back quickly when planes stop flying. Such a fund also should make provisions to bring back passengers who are left scrambling to get home when an airline fails.

And in an ideal world, the airlines should seek a way for more reliable carriers - and their customers - to avoid paying an unfair amount into a fund that will be used only by clients of financially shaky airlines.

At least one airline executive is willing to look at all alternatives. Robert Milton, who runs Air Canada, says he is "open to almost anything" to protect consumers. Now let's see him, his rivals and Ottawa act.

It may be too late for angry Jetsgo passengers. But if recent history and Michel Leblanc are any indication, another Jetsgo is just a matter of time.

Demise of Jetsgo good for rival CanJet
Hamilton's airport also looks to hike business

But analysts say consumers will lose out


KEVIN MCGRAN
TRANSPORTATION REPORTER

The little guys — CanJet and Hamilton's airport — will sweep up the crumbs left from Jetsgo's demise in the short term and may reap larger rewards in future. And while analysts say the airline industry may be better off without Jetsgo, consumers are going to miss it.

CanJet will add a 10th plane this spring as it beefs up service to Calgary in May and Vancouver in June, the airline's chief operating officer, Julie Gossen, said yesterday.

But Gossen said there won't be any rush to expand quickly in the wake of Jetsgo's demise.

"We'll certainly look at things, and we always look at possibilities, but we've just decided to carry on with our business plan," Gossen said.

"We'll carry on with our summer schedule, and the enhancement, of course, in some of our existing markets with more frequency."

Halifax-based CanJet, now the Number 3 airline in the country, is working to establish itself as a national carrier.

The privately held company, a division of IMP Group Ltd., serves 16 markets in Canada and the U.S., leasing nine Boeing 737s.

Calgary-based air industry analyst Rick Erickson said CanJet is taking a risk expanding west of Toronto, but slow and steady was the smart way to go about it.

"They have been advertising aggressively and I'm feeling a little better about them with Jetsgo gone," said Erickson.

"There is an opportunity for a small build-up. CanJet could conceivably do that. They are Atlantic Canada-based and are going to have to develop some kind of (national) track record."

Gossen said, "I think it makes sense, when a competitor leaves the market, we're bound to benefit in some of the markets."

Also benefiting from Jetsgo's demise is Hamilton's John C. Munro airport.


--------------------------------------------------------------------------------
`I think it makes sense, when a competitor leaves the market, we're bound to benefit'

Julie Gossen, CanJet chief operating officer

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CanJet and WestJet will be grabbing Jetsgo business and unlike Jetsgo, both operate out of Hamilton as well as Toronto's Pearson International.

John Gibson, vice-president of marketing for John C. Munro, said the airport will aggressively pursue a bigger slice of CanJet and WestJet business.

Gibson said it makes sense that low-cost airlines operate out of low-cost airports.

"The cost of operating at Pearson — just the basic airport fees — your costs are about $40 to $50 a passenger ticket more expensive," said Gibson.

"We're definitely pushing to get the low cost carriers to think of Hamilton to service the GTA," said Gibson.

Meanwhile, at Pearson yesterday, lawyers were preparing a claim against Jetsgo to be filed in bankruptcy court.

Pearson spokeswoman Connie Turner would not reveal how much Jetsgo owed the Greater Toronto Airports Authority.

Jetsgo accounted for about 7 per cent of all flights in Canada, but 14.6 per cent of domestic flights in and out of Pearson, according to Greg Hermus, associate director of the Canadian Tourism Research Institute.

Air travel fares declined 10 per cent in 2003 and 9 per cent in 2004, and were due to rise, Hermus said.

Now that Jetsgo's gone, fares will rise 5 to 10 per cent — with the remaining airlines scavenging Jetsgo's business.

"Something had to give," said Hermus, adding Jetsgo's demise, "should help the revenues of Canada's airline industry."

Erickson said consumers will miss Jetsgo.

"It really was a consumers' market. We've never had more choice. You could fly when you wanted at the price you wanted," said Erickson. "It's the air carriers who are going to have a good year and consumers won't have near the choice."

Jetsgo accused of running on airports' money: Improvement fees
Paul Vieira
16 March 2005
National Post

OTTAWA - Senior officials at the country's airports allege Jetsgo Corp. helped finance its day-to-day operations with money it collected on behalf of airports but failed to deliver to them in the weeks leading up to last Friday's collapse.

As a result of Jetsgo's demise, industry sources say, about 30 airports are owed between $6-million to $10-million in so-called airport improvement fees -- money used to finance, for example, new terminals and runways and pay off interest on bonds -- that make up part of the airfare.

"In my mind, this is not about money owed. It is a misappropriation of funds," said Paul Benoit, the president of the not-for-profit authority that manages MacDonald-Cartier International airport in Ottawa.

Jim Facette, president of the Canadian Airports Council, said he has not reviewed Jetsgo's books, but believes it is "entirely possible" the Montreal airline may have dipped into the pool of passenger airport fees.

Messrs. Benoit and Facette warn airports may be forced to raise the user fees they charge airlines if they can't recover the cash. Airlines, meanwhile, will likely pass on that increased cost to passengers through higher fares -- which have already gone up in the wake of Jetsgo's demise.

Passengers pay a so-called airport improvement fee each time they depart an airport. The levy, which ranges anywhere from $5 to $15, is incorporated in the cost of the airfare.

Under an arrangement between the airline industry and airports, the airlines, for a fee, agree to collect the improvement fee and send the cash to the airport 30 and 45 days after collection.

But airport insiders allege Jetsgo had failed to distribute the fee to airports as of early February. The total, say insiders who spoke on condition of anonymity, is somewhere between $6-million and $10-million.

This represents about one-fifth of the $48-million in "unearned revenue" Jetsgo has on its books, according to court documents filed with the Quebec court.

Mr. Benoit -- whose airport is owed just over $100,000 in improvement fees -- said he called Michel Leblanc, Jetsgo's founder, last Thursday to issue a so-called "demand of payment" notice requesting all outstanding bills -- including improvement fees -- be paid immediately. Otherwise, the airport was prepared to "withdraw" services for Jetsgo, such as the use of its terminal gates to load passengers.

The airline folded less than 24 hours after the notice was issued.

Millions of us benefited from LeBlanc's wager
Jetsgo was good for passengers, staff, suppliers and even the taxman
Financial Post
Diane Francis
15 March 2005

The collapse of Jetsgo Corp. left 17,000 travellers stranded and 1,300 unemployed, but its proprietor, Michel Leblanc, deserves credit for what he achieved during the airline's life.

Demands by the Tories and consumers' associations for Transport Minister Jean LaPierre to get the axe are totally off-base. The government did its job by imposing tough safety and financial measures that, in the end, became the straw that broke the camel's back.

But the whiners and critics fail to appreciate how beneficial Jetsgo has been.

Michel Leblanc is a decent guy who adopted two Mexican orphans a few years ago, and wagered his personal wealth in 2002 to create a new discount airline. He took a gamble, like all risk-takers, and, like many others in all kinds of businesses, he personally lost a bundle.

There are no tag days for him. He was a big boy and knew what he was doing. Such risk-taking is how jobs are created and services provided to consumers.

There are also no tag days for his suppliers, bankers and investors. They made tons of money along the way and knew, or should have known, the risks involved.

(Investment giant Fidelity invested millions to buy 10% of Jetsgo, but is also rumoured to own 25% of WestJet and nearly 10% of Air Canada, so it was an overall winner when the bankruptcy caused the other two airlines' stock to jump in value.)

Most importantly, Michel Leblanc's business benefited millions of people. Last year, Jetsgo flew three million passengers, and this year roughly 280,000 per month.

These people were given an opportunity for cheaper fares than they would have paid in the past or will in future, unless another Jetsgo starts up, which is unlikely for awhile.

Jetsgo saved other Canadian travellers millions more by forcing its competitors, such as Air Canada, WestJet and CanJet, to drop their prices too.

I only flew Jetsgo once and never again because it was jam-packed with parents and their youngsters, taking advantage of cheap fares. On a flight to Calgary last July, I sat beside a young mother from Montreal, with three tots, who said she could not have afforded to visit her brother during the Stampede if she hadn't been able to get such low fares from Jetsgo.

Michel Leblanc created 1,300 jobs in this country -- jobs that would not have been created had he not gambled. It's important to note that most workers have been paid up to the minute the company closed, along with the vacation pay they were owed.

Along the way, he also paid millions of dollars in interest payments to lenders, taxes to governments or to suppliers, who sold him everything from computers to paper clips, tools, marketing advice and aircraft.

The main victims in this case were the stranded travellers. Indications are that there will be reimbursements for most Jetsgo ticketholders.

Canadians have an unfortunate tendency to blame government, as well as turn to it for everything. But business failures occur every day as part of the free enterprise system, which demonstrably benefits everyone in our society, directly and indirectly. The facts are, benefits result from the actions of risk-takers like Mr. Leblanc -- even when they lose.

Michel Leblanc never wanted to go bust. He did his utmost to make Jetsgo viable. He wanted to create a service that made a profit by undercutting the competition. Instead, he ran out of money before the other guys did -- one of whom, Air Canada, was able to get out from under most of its liabilities by giving its employees, suppliers and investors a gigantic haircut as part of a bankruptcy protection restructuring.

Arguably, Michel Leblanc did more good, and dramatically less harm, than has Air Canada, which for decades has been a moribund, government-protected and flabby monopoly.

That's why it's sad to read the description of Mr. Leblanc's demeanour in the office Friday, which must have been one of the worst days of his life. "He was almost the same colour as his suit -- grey," said a Montreal staffer.

But to many more, like the young mom from Montreal that I flew with, Jetsgo's green happy-face logo will be missed and deservedly so.

Ottawa called on for action
Robert Benzie
15 March 2005
The Toronto Star

Ottawa has a responsibility to begin protecting travellers from Jetsgo-style airline failures, says Ontario Consumer Minister Jim Watson.

"At the provincial level, we have to be much more aggressive in pushing the federal government to work with us and adopt some of the policies that have worked in Ontario," the minister said in an interview from his Ottawa riding office.

"Consumer protection tends to take a bit of a backseat federally because it tends to be more of a provincial, front-line responsibility," he said. "It's no good to simply say that this is a private company. It's a private company that's heavily regulated by the federal government."

That's a veiled reference to federal Transport Minister Jean Lapierre's comments last week that "we're in a free-market economy and those things happen."

"The federal government has to take a much more aggressive stand in terms of monitoring, financially, airlines once they're in business," said Watson.

"I'm going to be writing later this week to both ... (Industry Minister) David Emerson and Lapierre, letting them know that in June when the consumer ministers meet (in Quebec City) we want to have the issue of protection of consumers from airline failures on the agenda."

Noting that Ontario has a compensation fund of $5 million per airline failure that pays out up to $5,000 per consumer, Watson said Ottawa has to follow suit.

"We have a mechanism in place, but really do need a national compensation fund that consumers pay into, and the money is held in trust because, sadly, this will not be the last airline that goes out of business," he said.

Watson said he was especially upset with Jetsgo's demise because the airline was selling March Break tickets even though it was headed for insolvency. "That's what gets my blood boiling - they were advertising up until the day before. They pulled the plug right before spring break, where they had a huge amount of money brought in on all these ticket sales," he said.

Also at Queen's Park, two former Ontario attorneys general now in opposition urged the Liberal government to investigate the possibility of fraud in the Jetsgo collapse.

That's because the troubled carrier was still advertising Thursday and taking flight bookings and payments hours before its announcement.

"It's obvious they knew while they were taking money from customers that they were not going to keep operating," said NDP Leader Howard Hampton.

"I am calling on the attorney general (Michael Bryant) and minister of consumer and business services to do their duty," Hampton said from his constituency office in Fort Frances.

"They should find out when Jetsgo knew it was going down," added Conservative MPP and lawyer Jim Flaherty (Whitby-Ajax).

Lapierre has said he was blindsided by Jetsgo's move Friday to file for bankruptcy protection.

At about 2 a.m. or 3 a.m. Friday morning, the telephone rang and woke up Lapierre's communications director Irene Marcheterre at her apartment in Ottawa with the news.

When she heard, Marcheterre said she wrote an email to her boss and sent it to him, then went back to bed.

"There was nothing we can do at 2 a.m. in the morning," she said. "The minister woke up and saw it on the news. That's the way he heard about it."

Lapierre phoned in to a departmental briefing at 7: 30 a.m. prior to the cabinet meeting. It was agreed Lapierre would emerge mid-meeting to talk to the media.

After addressing questions on Friday, however, Lapierre would not take any further queries on Jetsgo before leaving for a pre-planned trip to the Middle East.

with files from Les Whittington
and Tonda MacCharles in Ottawa

Safety issues dogged Jetsgo
One jet involved in eight 'incidents' In January, a plane veered off runway
Toronto Star
17 March 2005

As Jetsgo flight JG0191 from Toronto descended onto runway 34 in Calgary on Jan. 20, something went dangerously wrong.

"The aircraft departed the runway surface to the west and travelled for approximately 1,800 feet beside the runway before becoming airborne," a Transportation Safety Board incident report says. "The aircraft struck a runway hold sign ... resulting in some damage to the flaps and landing gear."

It was the most serious in a string of nearly 60 incidents the airline has suffered since 2002, including a steadily growing number of problems year by year, federal records show.

In 2002, Jetsgo had five incidents serious enough to be reported to TSB officials. That figure rose to 15 a year later and grew again to 32 last year. The airline had seven such incidents so far this year.

The Calgary incident triggered an investigation and an "advance notice of suspension" from Transport Canada, giving the airline until April 11 to address problems identified during an investigation.

"They had some deficiencies in their training manuals," says Transport Canada spokesperson Lucie Vignola. "Some of the information was incomplete. They'd grown fairly quickly so the structure they had in place couldn't, over the long term, sustain their fleet. This was our way of imposing a deadline for addressing these problems."

None of the incidents resulted in injuries. But TSB reports show no shortage of problems, some of them recurring.

Jetsgo shut down operations early last Friday morning, stranding 17,000 passengers across North America. The company filed for bankruptcy later the same day.

One Jetsgo plane had been involved in eight different incidents since September 2002, records show. The airline made repeated repairs and returned the aircraft to service only to see the problems recur.

For example, "acrid blue smoke" entered the cockpit and cabin of a Jetsgo DC-9-83 in Edmonton in January 2004, says an incident report.

"Passengers were rapidly deplaned" and the problem was later traced to a hydraulic oil leak. "The system was pressurized to check for leaks and the aircraft was returned to service," the report says.

The very next day, a flight attendant on the same plane out of Calgary "advised the captain that smoke and fumes were entering the cabin" at 4,000 feet, an incident report shows. "The cockpit door was opened momentarily in order to assess the situation and the decision was made to return to Calgary.

A maintenance examination showed that the plane's "right inboard flap actuator was leaking hydraulic fluid."

The incident reports also point to serious problems in mid-air.

On the same day as the near-disastrous landing in Calgary, pilots flying another Jetsgo plane out of Montreal had to return to the city for a maintenance inspection because they were "unable to maintain a stable flight path" using the aircraft's autopilot system.

"As the aircraft progressed in the climb, the crew noticed that the aircraft's pitch control began to progressively worsen," TSB reports show.

In February, a flight attendant on a Jetsgo plane out of Winnipeg noticed smoke in the cabin, an incident report says.

"The flight crew declared an emergency, executed an emergency descent," the report says. The landing was successful.

In one case last September, a Jetsgo flight departing a runway in Edmonton brushed within 600 feet of an incoming plane, the report says. A minimum of 1,000 feet is required.

In a flight between Montreal and Toronto a year ago, the navigation system on a Jetsgo aircraft became erratic, showing "various lines that were not related to the original flight plan."

Attempts to correct the problem led the plane's "primary flight display ... to fail momentarily, followed by erratic instrument indications, causing the crew to revert to basic instruments."

The flight returned to Montreal.

In a December 2004 flight from Toronto to Cancun, Mexico, "flames were observed coming from the engine," says an incident report. "The flight crew declared an emergency."

The flight returned to Toronto for the engine to be changed.

Airfares taking off in wake of Jetsgo's hard landing
Some tickets up 50%: Analysts say prices back to what they should have been
Peter Evans
17 March 2005
National Post

Prices for some airline tickets have risen by more than 50% less than a week after Jetsgo's demise, according to one major travel agency.

"We're seeing the effects already," said Allison Eaton, a spokeswoman for Vancouver-based Flight Centre.

Privately owned Jetsgo declared bankruptcy last Thursday night and ceased operations, stranding 17,000 flyers and leaving Canada with only two national carriers.

The Montreal-based airline founded by chief executive Michel Leblanc was known for discount fares -- sometimes even as low as $1.

But airlines and industry analysts say customers are not being gouged by recent price increases. They say Jetsgo's policy of aggressive price slashing was unsustainable.

"My sense is that prices have simply gone back to pre-Jetsgo levels," said Joseph D'Cruz, a professor at the University of Toronto's Rotman School of Managament.

"Prices now are what they should have been, had pricing been rational all along," Mr. D'Cruz said.

"We believe fares are more likely to return to levels that reflect the cost of providing the service," said Laura Cooke, a spokeswoman for Air Canada.

WestJet was singing a similar tune.

"The consumer got used to seeing the industry in terms of a permanent seat sale, but that simply wasn't sustainable," said Sean Durfy, a WestJet vice-president.

Mr. Durfy acknowledged that there may be some price increases during March break, but he predicted bargains would still be available.

"I would bet that if you booked your summer vacation today you could still find some pretty good deals."

Gauging price shifts during March break is a problem, Ms. Eaton said, because high demand can skew the numbers.

But prices for off-peak times of the year are showing a definite trend.

Last Wednesday, Jetsgo was charging $189 for an April 13 one-way flight between Montreal and Calgary, according to Flight Centre.

Calgary-based WestJet was also charging $189, while Air Canada was at $255.

Yesterday, WestJet's price for the same flight had leaped by 40% to $265. Air Canada matched WestJet's number.

Other popular routes paint a similar picture. Right before it went bankrupt, Jetsgo was charging $179 for a flight between Toronto and Vancouver on April 13. Prices for the two other airlines were the same.

But today, those same tickets cost $252 on Air Canada and $279 on WestJet -- 40% and 56% increases, respectively.

The cost of jet fuel has risen by about 65% in the past year, a factor that played a role in Jetsgo's woes, Mr. D'Cruz said.

"Jetsgo was pushing everybody's prices down," Mr. D'Cruz said.

"That, plus fuel costs, goes a long way to understanding the problem."

Mar. 18, 2005. 06:44 AM
'I'm still in a shocked state'
CEO apologizes to customers who suffered losses
Defends decision to stop operations, seek protection


SUSAN PIGG
STAFF REPORTER

MONTREAL—Jetsgo had been planning a "soft restructuring" — including the sale of five of its Fokker aircraft — when "drastic" payment demands from NAV Canada and three Canadian airports left the discount airline with no option but to shut down and file for bankruptcy protection, says founder Michel Leblanc.

The airline had been moving quickly to address training and safety concerns from Transport Canada, sales were strong, and while things were "tight," Jetsgo had about $15 million in the bank, Leblanc said in an interview at Jetsgo's headquarters.

But recent demands from NAV Canada — for what it says was more than $4 million in outstanding bills for air navigation services — and demands for about $3 million in landing and other fees from airports, including Pearson, would have left Jetsgo without enough cash to get through a week, Leblanc said.

While NAV Canada had threatened to go to court to seize aircraft or, in essence, shut Jetsgo down for the outstanding payments, the two sides agreed to a payment schedule March 7 that removed any threat to the airline, said John Morris, NAV Canada spokesperson.

"We're not responsible for the way Jetsgo manages its affairs. We're just one creditor among many. He can't really blame us for his problems."

Rather than risk flying thousands of passengers to March Break destinations and then leaving them stranded, Jetsgo decided it was best to ground its 29 aircraft, said Leblanc.

But as it was, 17,000 passengers were left stranded.

Faced with unrelenting competition from Air Canada and especially Calgary-based low-fare carrier WestJet, Jetsgo started running into a cash crunch last year, Leblanc said.

"Every second week since January, we were trying to raise our fares, and to no avail. WestJet would keep its prices down and Air Canada would keep its prices down. Basically, it was an all-out war between WestJet and Jetsgo and the deepest pockets won."

Last summer, Jetsgo was gearing up to go public with an initial stock offering, but alleges that WestJet had managed to access its computer data and began a "concerted, surgical attack" by shifting planes and cutting fares to put Jetsgo out of business — all of it part of a $50 million lawsuit. WestJet has denied this.

On Montreal routes, fares dropped more than $30 each way, says Leblanc, which, coupled with high fuel prices, saw Jetsgo losses soar. Potential investors got a letter warning them the airline was risky and a whisper campaign began, Leblanc says.

"If somebody's not doing their job in Ottawa, it's the Competition Bureau," says Leblanc, calling for an investigation of "predatory pricing" and what he fears will be price gouging by WestJet and Air Canada now that the really low-fare competitor is gone.

"I don't mind fair competition. I can take that. I certainly didn't factor into my business plan spying and lying and gossiping. I don't think we should have."

There are many in the industry, however, who put most of the blame squarely on Leblanc's shoulders, saying aged aircraft, coupled with too rapid expansion, a flawed business plan and a lack of respect for his strong competition doomed Jetsgo almost from the start.

Leblanc acknowledged that he may be to blame for absurdly low fares that put everyone in peril and aggressive expansion that "may have been what ruffled WestJet's feathers."

Yesterday, WestJet didn't return phone calls and Air Canada declined comment on Jetsgo's collapse.

"I'm still in a shocked state about the suddenness and the abruptness of it all. That's why I couldn't face the media earlier," said Leblanc, who admitted crying when he heard the radio announcement of Jetsgo's demise.

"Every human mind and soul has limits. I hit mine."

Leblanc has been called "a serial aviation entrepreneur" — "It almost sounds like serial killer," he jokes — because of his involvement in four failed airlines — Jetsgo, Intair, Royal Airlines and Canada 3000. He disputed the claim, saying Jetsgo is the first airline he's had to shut down.

"We brought in a level of competitiveness that will not come back. Going forward, I fear there will be a monopolistic situation with price gouging.

"What people think of me will depend on their own experience. Obviously, someone for whom we blew their spring break vacation will have a very nasty feeling. And I've got to live with that."

Transat's chief sees big gains from Jetsgo's departure: Tour firms scramble
Chris Sorensen
17 March 2005
National Post

In addition to stranding domestic passengers, Jetsgo's abrupt demise has left several tour operators in a lurch during the busy March break travel season.

Among the hardest hit was Sunwing Vacations, which relied on Jetsgo's planes to fly nearly 25% of its customers. Jetsgo Corp. suddenly ceased its operations last Friday and filed for bankruptcy protection, stranding thousands.

Sunwing said Jetsgo's demise forced it to cancel all vacation packages scheduled to fly out of Halifax and provide refunds to travellers.

"We are disappointed at the situation at hand," said Stephen Hunter, Sunwing's chief operating officer, in a statement. "However, due to the limited access to planes we are forced to cancel all scheduled trips from Halifax."

But bad news for Sunwing promises to benefit other tour operators who had limited exposure to the troubled discount airline. That includes Transat AT Inc., the country's largest seller of vacation packages and owner of Canada's biggest charter airline, Air Transat.

Jean-Marc Eustache, Transat's chief executive, told analysts during a conference call yesterday that Transat had only three charter flights booked with Jetsgo -- all of which were immediately rebooked following the discount carrier's collapse.

He said Jetsgo's demise will help Transat's bottom line by reducing competition on routes between Canada and Florida.

"We should improve in the Florida market because, as you know, Jetsgo was selling very cheaply there," Mr. Eustache said.

He added that Transat is in the midst of renewing a contract with WestJet to supply charter services, noting WestJet's recent decision, in light of Jetsgo's disappearance, to delay the early retirement of some of its older Boeing 737-200 aircraft. "I'm sure we will have all the flying we need with WestJet," he said.

Transat posted a loss of $1.8-million, or 8 cents a share yesterday, citing high jet fuel prices and pricing pressures in the key Ontario market. That's compared to earnings of $2.8-million (6 cents) during the year-earlier period. Revenues rose nearly 10% to $589-million. Mr. Eustache said a recent incident involving one of Air Transat's Airbus 310 aircraft -- the jet lost part of its rudder in mid-flight between Cuba and Quebec City -- gave him cause for concern, but isn't likely to have a material effect on the company's business.

The incident, which resulted in a Transat decision to temporarily ground its fleet, is being investigated by Canadian regulators. European plane-maker Airbus AS is recommending inspections of some 400 Airbus aircraft with similar rudders.

Jetsgo's turbulent descent
18 March 2005
The Toronto Star

Jan. 29, 2005: A Vancouver analyst calls Jetsgo "the weakest link" in Canada's airline industry, sending WestJet and Air Canada shares climbing.

Jan. 31: Jetsgo records its best-ever day of sales with $1.7 million in tickets.

Feb. 9: NAV Canada, which runs the national air navigation system, sends the first of four letters to Jetsgo demanding more frequent payment of bills after Michel Leblanc is quoted saying "we're not profitable." NAV, still hurting from the loss of more than $30 million by the failure of Canada 3000 and the creditor protection filing by Air Canada, warns Jetsgo has been in default since September. That means Jetsgo routinely had outstanding bills of more than $4 million, which violates NAV policies. Leblanc claims the airline owed $3 million for January and nine days of February.

Feb. 25: NAV sends "a very stern" letter saying Jetsgo still hasn't provided financial information and will be placed on weekly prepayments. It warns that outstanding bills must be paid on a schedule, earlier agreed to by Jetsgo, or NAV will withdraw services. Jetsgo officers call Leblanc while he is on vacation on March 2 and say the situation looks dire.

March 3: Leblanc can't reach NAV CEO John Crichton until March 4, when Leblanc offers to show NAV Jetsgo's financials.

March 4: Leblanc sends chief financial officer Andre Deslauriers to NAV's Ottawa office to sort out the payment issue. Deslauriers calls Leblanc, saying NAV has been reassured.

March 7: About 9 a.m. Leblanc gets a call from Crichton saying NAV is still very concerned about Jetsgo's liquidity. Leblanc says Crichton demanded $2.1 million by 5 p.m., and a prepayment of about $600,000 for navigational charges, or no flight plans would be issued. "We had the gun to our temple," says Leblanc. While Jetsgo had enough money, Leblanc refused to issue the full amount, calling it "a hostage payment." Jetsgo pays $1.25 million by noon and promises the rest by March 22 under payment agreement reached earlier with NAV. Crichton called to say NAV would seek court approval to seize Jetsgo planes.

March 8: Jetsgo suspects word has leaked out about the NAV dispute when it gets calls from three airport authorities, including Pearson, asking for immediate payment of $3 million.

March 9: Leblanc meets with lawyers at 10.30 a.m. While the airline has about $15 million in the bank, the sudden demands for cash mean it won't have enough to pay staff and cover other costs. By afternoon, a shutdown seems inevitable.

March 10: It takes managers just 45 minutes to agree that aircraft should be grounded. Leblanc meets with lawyers to draw up Jetsgo's court filing. Leblanc says he tried, later that night, to reach Transport Minister Jean Lapierre to alert him, and at 11: 45 p.m. left a message on the office voicemail: "I have some bad news to inform you about. Please call me back."

At midnight Leblanc issues a press release saying Jetsgo is ceasing operations, stranding 17,000 passengers and throwing 1,350 people out of work.

Navcanada threatened to pull plug on jetsgo
Saw airline as credit risk: Says discount carrier refused to supply information
Chris Sorensen
19 March 2005
National Post

NavCanada threatened to shut down failed discount airline Jetsgo Corp. because of its poor payment history, estimating the airline still owes its various suppliers as much as $64-million.

NavCanada, the not-for-profit air navigation service, says it deemed Jetsgo to be a serious credit risk in early February after several media and analysts reports questioned the airline's health.

As well, Transport Canada had begun looking into a botched landing by one of Jetsgo's jets in Calgary.

The incident, in which a Jetsgo plane skidded off a runway before taking off again and landing safely, occurred in late January.

"We were growing concerned about Jetsgo as a credit risk and we did not have access to Jetsgo financial information, unlike most of our larger customers who are publicly traded."

NavCanada says it decided to demand an immediate $2.2-million payment from Jetsgo, rather than allow it to continue with a $4-million credit limit, which NavCanada says Jetsgo had exceeded for the past six months.

However, NavCanada says Jetsgo refused to meet its terms, which included providing financial information about the discount airline.

NavCanada says it set a deadline of March 7 for payment of the amount, which had since grown by another $1-million.

NavCanada said it first threatened to deny Jetsgo its services, essentially grounding it, and later threatened to begin seizing Jetsgo aircraft.

Michel Leblanc, Jetsgo's founder and president, said in an interview this week that NavCanada's demands, which were met in an eleventh-hour arrangement on March 7, caught him by surprise and prompted other suppliers, including some of the country's airport authorities, to demand similar payments.

"I don't know what happened, but many creditors from the airport community started putting a lot of pressure on us."

Mr. Leblanc said the additional pressure forced Jetsgo into bankruptcy protection before it could complete a refinancing scheme. The decision to cease Jetsgo's operations was made shortly after midnight Friday, stranding 17,000 passengers.

Yves Vincent, a lawyer with RSM Richter LLP, the court-appointed monitor in Jetsgo's restructuring, said a creditors' list has not yet been finalized, but that total liabilities in the Jetsgo restructuring will be in the $100-million to $120-million range, before adjustments for claims resulting from Jetsgo's decision to cease operations.

NavCanada says Jetsgo stills owes it $1.6-million.

Competition bureau didn't do job: Jetsgo CEO
Chris Sorensen
21 March 2005
National Post

Michel Leblanc, the founder and president of failed discount airline Jetsgo Corp., recently spoke about the demise of his low-cost carrier in an hour-long interview with the National Post. During the conversation, he recounted the events that led to his decision to cease operations and file for bankruptcy protection -- a move that stranded some 17,000 customers across the country. But even before Jetsgo disappeared amid demands from creditors, there was abundant criticism of the privately-held airline. Several analysts suggested Jetsgo was selling fares that weren't enough to cover its costs. The following is an excerpt from the Post's interview where Mr. Leblanc responds to questions about the Jetsgo concept and why it ultimately failed to fly.

Q Mr. Leblanc, several critics have said Jetsgo's business model was flawed from the beginning. How do you respond?

A It wasn't flawed. We were basically implementing the same business model as WestJet. We achieved a lower-cost base, but the only difference is that we had weaker financial backing. And why? Because WestJet [through competitive tactics] derailed our planned IPO last year. And because we were not diligent enough in financing our Fokker 100 fleet.

- - -

Q Lets talk more about your aircraft, the MD-83s you launched with. Analysts said they were too big for the Canadian market.

A What is the difference between an MD-83 and a Boeing 737 like WestJet's? WestJet just ordered some 737-800s, which fly with 162 seats. Mine have 160 seats. But my base costs are lower, so my mission costs between, say, Toronto-Vancouver are the same as WestJet's. It doesn't matter. There's no difference.

- - -

Q So why wasn't Jetsgo successful?

A You know what killed Jetsgo? Predatory pricing. WestJet launched a massive attack against us last April and derailed our IPO. For the last six months they've kept their prices below costs. It's very easy to kill a competitor that way. All you've got to do is keep the price low. If I'm $10 more than WestJet, I don't sell a thing. You know who didn't do their job? The competition bureau.

- - -

Q So you're saying Ottawa played a role in Jetsgo's problems?

A No. Only the competition bureau. They should have a monitoring role as to what's going on in our industry. But they were asleep. Jetsgo's issue was not a cost issue. It was a revenue issue and revenues are predicated on competitors' behaviour. We should have been able to get an average fare of $250 for flying a guy from Toronto to Vancouver. But the pricing we had to match was getting us, what, maybe $150? That doesn't add up, does it?

- - -

Q I think I once flew Toronto-Vancouver for $159 on Jetsgo, before taxes.

A And why were we at $159? Don't you think we would have liked to get $279? We were there because Air Canada was at $169 and WestJet was at $159. Look today. Now that Jetsgo has disappeared, the lowest price you can find Toronto-Vancouver is $227. But there are very, very few seats. I looked yesterday in the computer and all the flights are priced at $289 and above.

- - -

Q What about the argument that there simply wasn't room for Jetsgo, that Canada has always been a two airline country?

A There had better be room. Because if you end up with just two airlines then you have a duopoly with price fixing and price gouging. You need a third player to make the competition system work.

- - -

Q You talked earlier about the similarities between Jetsgo and WestJet. But Jetsgo grew quickly whereas WestJet took something like eight years to expand across the country. Did you move too quickly?

A No. Look at JetBlue. Look at Ryanair. WestJet did it one way, but is that the only pattern? There's was nothing wrong with Jetsgo's growth. The problem was financing. It needed the proper financing. If we would have had $100-million in our bank account this wouldn't have happened. It basically boiled down to who had the biggest bank account.

- - -

Q What about the critics who said Jetsgo was living solely off advance ticket sales?

A We accessed financing when we could. But a pure part of this model is to sell cheap fares going forward. It's a part of the business model that's there to stimulate the market place. We need market stimulation to operate. WestJet has thrived on that for years. Every airline does advanced booking. It's part of our business.

- - -

Q Tell me what was so appealing to you personally about the Jetsgo concept?

A I was very enthusiastic and remain enthusiastic about the low-cost business model. It's the way of the future. The travelling public need to have reasonably priced air service. Two years ago, we were paying $400 one way between Montreal and Toronto. Today the competition has taken that price down to the $150 level, thanks to the low-cost model.

- - -

Q Knowing what you now know, is there anything you would have done differently with Jetsgo?

A I would have maybe looked earlier for financing. I think we should not have waited until April, 2004 to access either private or public financing.

- - -

Q Other than Fidelity Investments, who bought a 25% stake in your company, who else was backing you?

A Nobody. I founded Jetsgo from my own funds. I took the risk. Remember I started Jetsgo in January, 2002. That was three or four months after Sept. 11. You couldn't just go out and raise money at that time.

- - -

Q Have we seen the last of Michel Leblanc?

A Look, I'm an entrepreneur. If I see an opportunity, I will move on it. Anybody that puts millions of dollars of his own funds into an airline in the aftermath of Sept. 11 has to be an entrepreneur.

- - -

Q So if another opportunity came up in the airline industry, you would consider it?

A I would consider it. I know that I would.

'Poor management' cited for carrier's woes
Peter Brieger
21 March 2005
National Post

Jetsgo Corp.'s embattled president is responsible for the airline's collapse, but high taxes and airport fees are also to blame for denting airlines' balance sheets, says a new business leader poll.

Said another respondent: "Jetsgo's demise stems from a questionable business model. When the best thing you can offer is low fares and ridiculously cheap flights, your customers will only fly with you for that reason."

Mr. Leblanc has fought off such criticism, blaming nervous creditors for calling in Jetsgo's debt and rival WestJet Airlines Ltd.'s low prices.

But 89% of the poll's respondents believe "poor management" on Mr. Leblanc's part was responsible for Montreal-based Jetsgo's demise.

Jetsgo grounded its planes and applied for creditor protection earlier this month, leaving 17,000 people stranded in airports or holding worthless plane tickets.

About 86% of the survey participants also blame the carrier's directors and senior executives.

However, more than half the respondents -- 55% -- said the federal government and its arms-length agencies, such as metro airport authorities, must also be held responsible for imposing taxes, fees and rent that can add up to almost half the ticket price paid by travelers.

"The taxes and fees imposed by the government on air travel is crippling the industry," said one poll respondent.

In fact, 73% of those polled said the tax portion on now-usable tickets should be refunded to Jetsgo customers.

However, another executive said consumers "need to take some responsibility for their own decisions and protection instead of whining for government regulation at every failure.

"They were buying a lottery ticket and they knew it -- the hints were all over the place and now that they have lost they want taxpayers to subsidize them."

Poll respondents suggested all airline safety reports be made public, while carriers should be forced to prove they have enough money to pay for six months worth of operating expenses -- double the current requirement.

To keep the industry competitive and healthy, the poll respondents also suggested requiring advance ticket sales be put into a trust so airlines can't use that money to pay for current expenses, and letting foreign airlines enter the Canadian market.

The poll's respondents also said private airports would inject more competitive pricing into the sector.

"That is something that hasn't been discussed, but it's important to the business community," said Tamara Gottlieb at COMPAS.

"They are free marketeers who believe in the power of the invisible hand."

The poll, which surveyed 139 senior Canadian executives, is considered accurate within 8.3 percentage points, 19 times out of 20.

Jetsgo went bankrupt with $108M in unpaid bills
Airports, pilots, even 'M. Leblanc' owed money
Chris Sorensen
23 March 2005
National Post

Jetsgo Corp.'s accounts payable exceeded $100-million when it ceased operations and filed for bankruptcy protection earlier this month.

The court-appointed monitor in Jetsgo's bankruptcy protection says the failed discount carrier's outstanding bills, to be paid within one year, totalled at least $108-million as of March 11, when the carrier abruptly pulled the plug on its business.

The figures do not include money owed to employees or the companies that leased 14 MD-83 aircraft to Jetsgo.

Donna Mikov, a spokeswoman for Boeing Capital Corp., said yesterday a decision had yet to be made on what to do with six of Jetsgo's MD-83s owned by Boeing.

"We're currently in conversations with the company to discuss the next step," Ms. Mikov said.

Jetsgo, launched in 2002, left an estimated 17,000 passengers stranded or holding worthless tickets when it shut down to seek protection from creditors.

Michel Leblanc, Jetsgo's founder and president, said in a recent interview he plans to restructure the airline, but wouldn't provide any further details.

Jetsgo's books show the company was lent $3-million by "M. Leblanc."

Meanwhile, Toronto's Pearson International Airport, Jetsgo's main hub, is owed $4.3-million in airport improvement fees and other charges. The country's other airports are owed about $3.5-million, according to RSM Richter, the court-appointed monitor.

The Greater Toronto Airport Authority has filed a motion with Quebec Superior Court asking that a stay of proceedings order be lifted so that it can seize aircraft to cover its losses. As well, the airport said it is being forced to pay costs associated with six of Jetsgo's aircraft that are parked on airport property.

NavCanada, the country's provider of air navigation services, and two aircraft maintenance companies have filed similar motions. NavCanada is owed $1.6-million by Jetsgo.

Jetsgo is also on the hook for $40-million in "unearned revenues," which include advanced ticket sales and $11.5-million in "non-refundable passenger credits."

As well, Jetsgo owes its former pilots $2.8-million that stems from $30,000 "training bonds."

The $30,000 loans, a condition of employment at Jetsgo, were supposed to cover the cost of training pilots on Jetsgo's aircraft and prevent them from fleeing to other airlines.

However, critics charged Mr. Leblanc took advantage of pilots who were out of work after the collapse of Canada 3000, which purchased Mr. Leblanc's Royal Airlines in early 2001.

Aviation authorities seek right to seize Jetsgo's jets
NAV Canada, GTAA submit $7 million claims
Insolvent airline owes ticket-buyers $40.7 million
David Bruser
Toronto Star
23 March 2005

Civil aviation authorities are circling Jetsgo's downed aircraft, looking to seize part of the fleet as compensation for more than $7 million in fees the failed airline allegedly still owes them.

Both NAV Canada and the Greater Toronto Airports Authority have petitioned Quebec's Superior Court to lift a stay in Jetsgo proceedings and allow them to seize aircraft. But both could be eyeing planes from the same fleet of Fokkers grounded in Quebec City.

Although Jetsgo has eight 160-passenger Boeing MD83 planes at Pearson International Airport, those are under lease. The 105-seat Fokkers in Quebec City are fully owned, according to GTAA spokesperson Connie Turner.

"Those are the 11 planes we have searched and there are no liens against them. They're fully owned," Turner said. "We're asking them to lift an order to be able to seize those planes in Quebec City."

Jetsgo shut down March 11 and filed for bankruptcy protection, stranding 17,000 passengers across North America and the Caribbean on the eve of spring break. Jetsgo founder Michel Leblanc blamed the collapse on "drastic" payment demands from NAV Canada and three airports, including Pearson airport, and on Calgary-based WestJet's pricing.

Chief Justice Francois Rolland granted a stay of Jetsgo proceedings and property until April 11 and appointed RSM Richter as monitor. But NAV Canada and the GTAA want the stay lifted, the right to seize planes and RSM Richter to have the ability to sell the planes and pass the proceeds along, according to documents posted on the court-appointed monitor's website.

The GTAA, which is the not-for-profit lessee, operator and manager of Pearson International Airport, the main hub of Jetsgo's operations, claims the airline owes more than $5.7 million, the documents said.

The GTAA claims Jetsgo owes $2.5 million in "airport improvement fees," a nominal amount that the authority imposes on travellers to help pay for capital improvements such as road works and new runways and taxi ways.

That fee is levied by the GTAA but collected by airlines, which are then supposed to pass the money on to the authority, said the GTAA. It claimed in the document that the $2.5 million is an estimate because Jetsgo has not properly reported the fees since the beginning of the year.

The GTAA says that it is owed another $2.97 million for unpaid landing fees, employee parking, de-icing fees and other charges incurred by Jetsgo while using Pearson facilities.

Finally, the GTAA claims to have incurred $36,361 in charges safeguarding Jetsgo aircraft, equipment and leased premises since Jetsgo's collapse. The GTAA wants another $200,000 for ongoing costs piling up at a rate of $64,249 per month as the authority pays to park the planes and for other expenses relating to the MD83s.

"It's very costly to maintain the planes when they're on the ground. They obviously have to be moved, they have to be started up, things have to be checked," Turner said. "There's a series of maintenance checks that have to be done on an ongoing daily basis."

NAV Canada, which oversees air-traffic control, claims it is owed $1.6 million for air navigation services.

"As a result of NAV Canada's not-for-profit, cost recovery financial model, collection of invoices for navigation services is a critical aspect of its overall financial structure," according to the document provided by RSM Richter.

Though Richter says Jetsgo has 15 Fokker 100 jets, with one in repair, NAV Canada is targeting 12 for seizure, although it probably wouldn't need all 12 to recoup what's allegedly owed.

"We're owed $1.6 million, so those are the costs that we wish to cover," said NAV Canada spokesman Louis Garneau. "We're required to cover our costs and there are costs associated with providing air traffic services."

The GTAA is eyeing a similar-sized group of Fokkers, also in Quebec City, and it might be that the two aviation authorities are going after the same planes. "I'm sure we are," Turner said.

Jetsgo's fleet is aging and the airline has run into safety issues, but if the court allows the liquidation of the assets, the Fokkers could find a home.

"The demand for all kinds of aircraft is, quote, strong," said Research Capital Corp. analyst Jacques Kavafian. "I think there's a market. There's so many airlines around the world that some are bound to (be in) need."

Garneau said a Quebec court appearance is scheduled for tomorrow to set a hearing date. Lawyers for Jetsgo did not comment on the claims. In other documents released by Richter yesterday: Jetsgo owes $40.7 million for tickets held by passengers for flights scheduled after March 10, and $5.5 million for vouchers holders can use to buy a ticket within a year.

NordTech Aerospace Inc. and subsidiary ExelTech claim a total of $3.64 million for Fokker repairs and maintenance, and want their money before anyone moves the planes. NordTech is in possession of five Fokkers and ExelTech one Boeing and says the disassembled planes are occupying its hangars and preventing workers from taking on new jobs. The two companies claim to have laid off 161 workers as a result of losing Jetsgo's business, incurring $650,000 in severance obligations.

Nordtech claims that Jetsgo is trying to sell a Fokker to Ford Motor Co. for $3.5 million (U.S.) and that it wants NordTech to help deliver the plane.

Also available is a list of Jetsgo creditors claiming more than $5,000. The tally is six pages long.

Jetsgo proposes new flight plan
Court-appointed monitor files report 'I'm dumbfounded,' says one creditor
Tony Wong
Toronto Star
24 March 2005

Jetsgo - or some version of the failed airline - wants to fly again and a court-appointed monitor is proposing that as an option to creditors. But selling the idea faces a very bumpy ride.

"The objective would be to file a plan that will permit an airline business to continue as a growing concern," said a status report on the company released yesterday by RSM Richter Inc., the court-appointed monitor.

This restructuring plan "will present an opportunity for employment to potentially hundreds of individuals and will provide a financial recovery for the company's creditors superior to the result that they would achieve in bankruptcy."

Jetsgo Corp. suspended flights on March 11, just before March break holidays, throwing passenger plans into disarray and 1,325 employees out the door.

The company also has a formidable list of creditors lined up, with accounts payable of about $108 million.

Those figures do not include money owed to employees or companies that leased 14 aircraft to Jetsgo.

"I'm dumbfounded. I can't believe they'd be suggesting that," John Weerdenburg, vice-president and chief financial officer of Ottawa's Macdonald-Cartier International Airport Authority, said in an interview last night. "Who ultimately would end up trusting the son of Jetsgo?"

Weerdenburg said his airport was owed $220,000 by the company. "A lot of bridges have been burnt and the airports will want their money up front, to say nothing of the travelling public," he said. "If they're flying out of Ottawa airport they better have a pretty significant line of credit."

Whether the proposed restructuring gets the green light depends on court approval after stakeholders and creditors have had input. In its report, RSM Richter said it had had meetings with Jetsgo management to "consider options for a viable reorganization."

The monitor did not say what the new company would consist of, but did say that it planned to continue disposing of all of Jetsgo's assets, which includes Fokker aircraft, ground equipment and parts.

The company would instead lease aircraft with "negotiation of new terms with aircraft lessors premised on a different business model."

The monitor also proposed it would continue cancelling all contracts and eliminate the majority of airport leases.

It also said it would continue litigation against Westjet for alleged corporate espionage.

Acknowledging that the new plan may be a hard sell to creditors, the monitor said it would be premature to "determine whether a successful restructuring plan can be submitted to creditors, but the company is working diligently and in good faith in this regard."

I certainly wouldn't fly a resurrected Jetsgo. What a poor reputation they've gotten in so many different counts (safety, employment, financial stability). And rebranding? The only airline that I can think of that's rebranded successfully is ValuJet after the Everglades crash into AirTran in '96. I also remember reading that Canada 3000 was "poised" to retake the skies, they even had that on their website.
_____________________
Mar.*25, 2005. 01:00*AM
Could Jetsgo really fly again?
It would be good for competition

But would public trust the carrier ?

KEVIN MCGRAN
TRANSPORTATION REPORTER

Jetsgo may want to operate again, but whether the idea will fly with creditors and passengers is another question altogether.

While analysts say it would ultimately be a good thing for airline competition in Canada, it would be a hard sell to see Jetsgo and owner Michel Leblanc take to the air again.

"After what they did? Even if they changed names, all I can say is good luck," said Marc-André Charlebois, president and CEO of the Association of Canadian Travel Agents.

Jetsgo stranded 17,000 passengers, left 1,350 people jobless, owed more than $100 million and had faced questions of safety in the days before and after it filed for bankruptcy protection March 11, on the eve of spring break's travel season.

"Consumers would be well served by another low-cost operator, but (any new operator) better have a sound business plan and deep pockets," said Calgary-based airline analyst Rick Erickson.

He doubted Jetsgo could pull it off because Leblanc is now infamous for having been involved with four failed airlines — Intair, Royal, Canada 3000 and Jetsgo.

"Consumers are going say someone got burned last time around. Many are going to be wary," said Erickson. "Mr. Leblanc has got such a reputation ... it's going to be difficult for him to be involved with any aviation venture without widespread publicity."

Jetsgo has until April 11 to restructure itself and appease creditors. In a preliminary report filed yesterday in a Montreal court, Jetsgo proposed to sell its fleet of aircraft and to somehow fly again, saying creditors would be better off than having the company go bankrupt.

In court protection, a company gets time to reduce costs and lay out a new business plan for creditors to approve. Creditors can, in a successful restructuring, recover more than in an outright liquidation.

"The preliminary assessment from the company (management) is that they believe they can restructure," court-appointed monitor Yves Vincent, partner at RSM Richter Inc., told the Toronto Star. "They're saying to the court: `We think we've got permits, we've got experience, we've got a base of good employees. We think we can save this company.'"

But Jetsgo would need support from creditors. And yesterday in Montreal, creditors' lawyers were fighting each other.

Moneris Solutions Corp., a company that manages credit card transactions and is owed about $30 million, told a court hearing it opposes special status for creditors NAV Canada and the country's airports in getting Jetsgo's assets.

NAV Canada and the airports are invoking federal transport laws that grant them authority to either seize Jetsgo's aircraft or get money raised from the sale of its planes. The judge set April 12 as the start for a hearing on the request for seizure.

"In the meantime, Jetsgo is still in full control of all its affairs, is still dealing with all the issues of protecting the assets, dealing with the various stakeholders but there is no seizure on its assets," said Vincent.

The judge is also studying an offer by Ford Motor Co. for one of Jetsgo's 15 grounded Fokker 100 aircraft. Ford has offered $3.5 million to buy the plane.

The Greater Toronto Airports Authority claims Jetsgo owes $5.5 million. Eight other airports are together claiming nearly $3 million. NAV Canada, which operates Canada's air traffic control system, says it is owed $1.6 million.

Yesterday, passengers at Toronto Pearson International Airport were shaking their heads in disbelief.

"I would never consider (flying Jetsgo)," said Scott Reardon of London, Ont. "For what they did to everybody, they're history. Not a chance."

Elizabeth Berardi of Maple, who was on her way to Cancun, said she'd never fly Jetsgo now because it's "unreliable." Her mother, Patricia, wouldn't fly it either. "Would you?" asked Patricia Berardi. "There was no warning. If they would have at least helped out people, but they washed their hands and said que sera sera. That's not nice."

But emerging from bankruptcy protection and overcoming bad press is not impossible and may ultimately be worth it, said Randy Williams, president of the Tourism Industry Association of Canada, citing precedents at Air Canada and some American companies.

Williams worries consumers and the travel industry will pay higher prices without Jetsgo.

Most Jetsgo clients can get refunds
'Lots of money' in protection fund
James Daw
12 March 2005
The Toronto Star

Most airline customers stranded by the collapse of Jetsgo Corp. will be eligible for cash refunds, but not all and not automatically.

Visa, MasterCard and American Express have reassured cardholders they can claim a refund through their standard dispute resolution processes if they used their cards to pay for flights that have now been cancelled.

Holders of gold, platinum or travel cards may be covered by insurance, said Denis Dube of National Bank of Canada, issuer of the Jetsgo Gold MasterCard.

There will be time limits for submitting a claim, which must include the proof of a loss.

Some card issuers may make you wait until after your flight has been cancelled.

Spokespersons for Visa and American Express said they will reimburse only flight costs, not the price of an entire package booked at the time of flight.

All card issuers expect clients to first approach provincial travel protection plans for compensation if they booked through a travel agent.

Travel protection funds are available in Ontario, Quebec or British Columbia, for those who suffered losses after booking flights through a registered travel agent.

But there is still no federal plan to protect all airline customers nationwide, despite much discussion since the failure of Canada 3000 and bankruptcy protection filing of Air Canada.

Unprotected customers will become unsecured creditors of Jetsgo, which may be more than $41 million in the hole based on numbers reported yesterday by court monitor RSM Richter Inc.

"We have lots of money in our fund," said Michael Pepper, president of the Travel Industry Council of Ontario (TICO).

TICO's consumer protection fund has $27 million on hand, and Pepper said he expects the limits of $5,000 per passenger and $5 million per corporate failure will be sufficient to cover the claims from Jetsgo's Ontario customers.

"We are really happy the credit card companies are coming up to the plate on this," said Pepper. "But we are not happy about having to bail out airlines. There is no consumer protection (for airline customers) at the federal level and this gap has to be filled."

Airlines are permitted to accept consumers' money for future flights, but are not required to hold the money in a trust account or have sufficient capital to cover a shortfall, said Pepper.

----------

Jetsgo Corp. customers who want to claim refunds for cancelled flights have different options.

TICO: Those who booked through an Ontario travel agent may contact the Travel Industry Council of Ontario at 1-888-451-8426 or (905) 624-6241 or email: tico @ tico.on.ca

Card issuers: Those who paid using Visa, MasterCard or American Express cards may contact the card issuer, or the insurer of card benefits.

See your credit card, invoice or contract for information.

Richter: Court monitor RSM Richter will notify creditors as information becomes available. Check the website at http://www.richter.ca.

Jetsgo founder plans summer revival
Aims to sell planes to cut debt, use leased aircraft
Sources peg June 25 as target date
BRENT JANG
30 March 2005
The Globe and Mail

Jetsgo Corp. founder Michel Leblanc has devised detailed plans to get his insolvent carrier back in the air this summer, relying on aircraft sales to slash debt and counting on eight leased planes for the revival.

Less than three weeks after leaving thousands of travellers stranded, Mr. Leblanc has crafted an ambitious timetable to resurrect the airline, setting June 25 as the target for a rejuvenated Jetsgo's first flights using leased Boeing MD-83s, sources said yesterday.

“He's hoping to salvage some type of airline business because that's all he knows. He's trying to reinvent himself one more time and he would only use leased aircraft,” said one lawyer familiar with Jetsgo's comeback strategy under bankruptcy protection.

Mr. Leblanc confirmed yesterday that he and his management team are preparing plans to resume operations beginning in the busy summer season with a slimmed-down airline, but he declined to comment on specific target dates.

He said the silver lining from the bad publicity for Jetsgo is that Canadian consumers know the brand instantly, so the challenge will be to market a comeback theme.

“I admit that the Jetsgo brand has blemishes, but its awareness has picked up.

“So, there's a downside and a good side,” Mr. Leblanc said.

Jetsgo's fleet of 29 aircraft consists of 15 company-owned Fokkers, parked in Quebec City, and 14 leased Boeing MD-83s — eight in Toronto and the rest located in Vancouver and Montreal.

A key to rescuing the carrier will be persuading the lessors that it's best to stick with Jetsgo, rather than finding another airline to pick up the MD-83 leases.

Mr. Leblanc, who hopes to persuade creditors and consumers to give him another chance, said he expects that Jetsgo will sell off the 15 Fokkers and liquidate other assets under the supervision of court-appointed monitor RSM Richter Inc. Hours before filing for bankruptcy protection on March 11, Jetsgo supervisors directed the bulk of Fokker pilots to fly the aircraft to Quebec City, under the guise of maintenance checks, for safe haven from creditors.

Toronto law firm Cassels Brock & Blackwell LLP is the lead representative of the aircraft lessors. Eight to 14 MD-83s could form Jetsgo's reduced fleet, sources said.

Under the proposal to breathe new life into Jetsgo, the carrier's lawyers are expected next week to ask the Quebec Superior Court to extend the April 11 deadline for Jetsgo to file a plan of arrangement to reorganize the airline.

The Montreal-based company, controlled by Mr. Leblanc, would then hold discussions with creditors in the hope of filing its restructuring plan by May 15 and have creditors review that proposal in the first week of June, sources said.

The Jetsgo president said no decision has been made yet on whether to change Jetsgo's name and whether the restructured business should be a chartered or commercial carrier.

When the discount airline filed under the Companies' Creditors Arrangement Act nearly three weeks ago, 17,000 passengers were left stranded and more than 1,200 employees lost their jobs.

The Greater Toronto Airports Authority, overseer of Pearson International Airport, would want “stringent financial rules” in place before approving any Jetsgo reorganization plan, GTAA spokeswoman Connie Turner said.

She said Jetsgo decided against declaring bankruptcy, preferring to go the CCAA route to buy itself some time to regroup.

“Frankly, we were quite surprised that they went under CCAA, considering that they shut down and they let their employees go,” Ms. Turner said.

“I just think it would be a hard sell for the whole industry just because of the damage to their reputation and leaving a lot of creditors hanging out there.”

The GTAA says it's owed $5.5-million by Jetsgo. The largest single creditor is credit card clearing agent Moneris Solutions Corp., which is owed at least $30-million.

Jetsgo would require safety approvals from Transport Canada, but Mr. Leblanc expressed confidence that he could get the green light from Ottawa since Jetsgo already holds certain operating certificates and licences.

A job fair, organized by the Toronto Board of Trade, will be held today for former Jetsgo employees. Mr. Leblanc said his scaled-down airline would need a smaller work force, and there are provisions to recall staff who belonged to the Teamsters Canada union, including flight attendants and ground crew.

One industry source said that while creditors are well aware of Mr. Leblanc's track record of heading or being closely linked with four airlines that didn't survive, the aviation entrepreneur could still win over some jaded creditors by stressing the prospect of redemption.

Jetsgo lost more than $55-million in the eight months prior to its grounding and has $108-million in liabilities, but Mr. Leblanc insists that with a new business model, a turnaround is in the offing.

“If we can craft a plan that makes sense commercially and brings back a business that's profitable, why not? We're looking at our strengths and weaknesses. We have to act responsibly. There's a good management team and there's a good fleet.”

Jetsgo revival idea not shot down: 'If the price is right, people will fly'
Wed Mar 30, 4:51 PM ET
GARY NORRIS

TORONTO (CP) - The prospect of Jetsgo Corp. rising phoenix-like from the ashes of its collapse encountered only muted skepticism among industry observers on Wednesday.

"If the price is right, people will fly," said one analyst, who asked not to be named, in response to a report that Jetsgo founder Michel Leblanc plans to get his insolvent airline flying again in June.



The 2 1/2-year-old airline left thousands of people stranded when it abruptly shut down on March 11, but observers suggested the flying public would be willing to book tickets again on a low-fare airline operated by Leblanc.



"He gave a lot of people a very good deal," the anonymous analyst noted, adding that thousands of Canadians were inconvenienced by Jetsgo's collapse but millions want cheap air travel.



Leblanc has set a June 25 target date to start flying again in a reduced fleet of leased Boeing MD-83s, sources reported.



An assistant to Leblanc said Wednesday he was granting no interviews but was preparing a news release for next week. She could not speculate on what it might say.



"There's no shortage in this country of aviation entrepreneurs, or of skilled workers to operate airlines," commented Rick Erickson, an independent airline analyst in Calgary.



He said June would be an ideal time to re-start the airline, catching the high-demand summer travel season, but he called Leblanc's reported launch date "very aggressive."



A restructuring under the Companies' Creditors Arrangement Act "could stretch on for quite a while yet, and it's not clear at all just how the creditors are going to line up on all of this," Erickson said.



"On the part of consumers, there's a general level of acceptance for cheap airfares," he added.



"Memories tend to be rather short in this business; there are always those discretionary travellers looking for the very cheapest price."



In terms of the value of Leblanc's Jetsgo brand, "at least he's got profile in the name - people know what Jetsgo's all about," Erickson said.



"But that's as much negative as it is positive."



Jetsgo had a fleet of 29 aircraft - 15 company-owned Fokker 100s, now parked in Quebec City, and 14 leased Boeing MD-83s.



Erickson doubted the elderly Fokkers would find a ready market, and a key part of Leblanc's plan would be to persuade the MD-83 lessors to continue doing business with Jetsgo.



Meanwhile, the Toronto Board of Trade said that almost 500 former Jetsgo employees attended a job fair Wednesday at the board's airport centre.



The job fair, the first ever organized by the Board of Trade, was said to have presented hundreds of potential jobs offered by 50 companies.




*






Jetsgo, with 1,200 employees, lost $55 million in the eight months ended Feb. 28, including $22 million since Jan. 1, according to documents filed in court.

It suffered a series of recent operational mishaps, stranding hundreds of people during Christmas blizzards and being investigated by Transport Canada over an eccentric landing in Calgary in January.

It encountered two separate engine problems during its final week, and Erickson observed that "Consumers are really going to have to be assured - if the federal regulator doesn't have to be assured as well - that there are financial resources behind this company."

Jetsgo jobless have high hopes
ANTHONY REINHART
31 March 2005
The Globe and Mail

The line outside formed early, like it might at a funeral home when a good friend dies young, without warning.

For the men and women waiting to file into a job fair at the Toronto Board of Trade Airport Centre yesterday, that's pretty much what it was — a chance to dress up, console each other and reminisce about their dearly departed jobs at the discount airline Jetsgo.

As he took his place in the long line of pressed pants and polished shoes, Liston Ramjit, a ramp technician and baggage handler, mused that maybe it's time to make a clean break from the airline racket. At 32, he's already an old hand, having worked for five carriers at Toronto's Pearson airport since 1990, three of them linked to Jetsgo's hard-luck founder, Michel Leblanc.

“I think I'm going to get out of it,” said Mr. Ramjit, a divorced father of two with support payments to make, and credit card bills on a steady ascent since Jetsgo ditched on March 11. “But it's hard to start a new career.”

That difficulty was evident yesterday inside the job fair on Dixon Road, where jet engines whined overhead as 500 grounded workers picked up applications from 50 prospective employers.

Exhibitors such as the Canadian Imperial Bank of Commerce and Danier Leather were reduced to thumb-twiddling as Jetsgo alumni flocked to the booths belonging to Air Canada and Skyservice, the only two airlines in attendance.

This was hardly a surprise; anyone who has faced a job search lately knows the value of previous experience. Still, there was more than pragmatism at play yesterday. Many confessed to the same head-in-the-clouds addiction to the airline business that observers attributed to their former boss, Mr. Leblanc, after he left 17,000 travellers stranded nearly three weeks ago.

“Once you get into the industry, it's very difficult to break away from it,” said Colleen Drouin, who was a baggage supervisor for Jetsgo's entire three-year run.

Ms. Drouin, 37, previously worked for two other airlines under Mr. Leblanc's troubled leadership: Royal Airlines, which operated from 1992 to 2001, and Canada 3000, which acquired Royal shortly before meeting its own demise.

Mr. Leblanc, who was chairman and chief executive at Royal, stayed on at Canada 3000 for just six months before a sudden departure in June, 2001. That August, Canada 3000 sued him for fraud, accusing him of overstating Royal's pre-takeover finances. Three months later, Canada 3000 went bankrupt.

Now, with travellers' tempers still warm over being stranded with no warning, Mr. Leblanc is talking about a Jetsgo revival, with fewer planes, by June 25.

To that, Ms. Drouin — a now-unemployed, married mother of four — said this: “I think it's great. It'll allow some of these people to get back to work.”

She described Mr. Leblanc as “a good person” for whom she would not hesitate to work again. She liked the flexible hours and two flight passes she got at Christmas.

Across the banquet hall, a 25-year-old woman stood at a counter, filling out job applications. Andrea, who would not give her last name, said she left a ground-based job at rival WestJet to be a flight attendant for Jetsgo.

Grounded after just two months on the job, she was nonetheless hooked by the allure of the travel industry.

“I would never go back to a desk job,” she said. “There's absolutely no way.”

She has no such objections to a Jetsgo revival, though.

“It would be such a great time, I couldn't say no,” Andrea said.

Candice Singh, 30, who worked the Jetsgo check-in counter, also hopes Mr. Leblanc will fly again.

“Yes, it was wrong,” Ms. Singh said of the sudden shutdown, “but while we worked there, he treated us well. I would give him a chance.”

As the crowd began to thin, Satoshi Takano stood by in a sharp navy suit, beaming a satisfied smile. Mr. Takano, an IT consultant and regular Jetsgo customer, set up a website for employees and organized the job fair as a goodwill gesture.

“I had to do something to show that there's hope,” he said with aw-shucks enthusiasm, moments after snapping a reunion-esque photo for a group of workers. “They touched a certain nerve in me.”

When told of their hopes for a Jetsgo revival, however, his smile waned, and he took on the tone of an undertaker faced with a grieving relative in denial.

“It's been a big emotional roller coaster for these folks,” Mr. Takano said quietly. “I hope the website will help them make some rational decisions, because I think it's very important for them to keep their options open.”

Jetsgo not jetsgone yet
Leblanc in hurry and there may be good reason
Chris Sorensen, with files from Wojtek Dabrowski
02 April 2005
National Post

Michel Leblanc's ambitious plan to resurrect Jetsgo Corp. by this summer is fast becoming a game of beat the clock.

The Jetsgo founder and chief executive has set a tentative date in late June to relaunch a pared-down version of his discount airline, which abruptly shuttered its operations on March 11 and filed for bankruptcy protection, stranding thousands in the process.

While Mr. Leblanc, who has previously been involved with two other failed airlines, acknowledges that some Canadians will grimace at the prospect of a Jetsgo summer sequel, he nevertheless maintains he has good reasons for moving quickly.

"The key driver is that we have a management team already in place and if we don't move fast some of them will leave," Mr. Leblanc said in an interview. "The second reason is that our aircraft lessors have financial objectives with their airplanes. Either they are going to fly again with Jetsgo, or they are going to go somewhere else. And once they're gone, they're gone."

However, industry sources say the ambitious timetable could also be designed to take advantage of federal regulations that will make it more difficult financially for Jetsgo to relaunch as time drags on.

At present, Jetsgo retains all of the certificates and licences needed to operate an airline in Canada. However, the airline is facing an April 11 deadline by Transport Canada to resolve several safety-related issues, or else risk losing its air operator certificate.

If that happens, it would trigger the suspension of various licences issued to Jetsgo by the Canadian Transportation Agency and start the clock ticking on a 60-day window to make a reapplication without having to undergo a financial fitness test.

The test, required of all new airlines by federal law, would require cash-starved Jetsgo to demonstrate it has enough start-up capital and liquid funds to cover the equivalent of 90 days operating expenses. That does not include revenue from advanced ticket sales.

"If his licences go into suspension he will have to pass that test again," said an industry insider, saying the amount could be as much as $10-million, depending on the size of the operation. "The financing they would have to accomplish to meet the requirements is a lot more than [Mr. Leblanc] thinks he needs to get back into the air."

Jardrino Huot, a spokesman for the Canadian Transportation Agency, said another scenario that could trigger the loss of Jetsgo's licences would be a lapse in the airline's liability insurance. According to recent monitor's report, the airline's current policy is effective until July 1, with a reduced quarterly payment of US$230,000 due yesterday.

Jetsgo owed more than $108-million to its suppliers when it filed for bankruptcy protection last month. As well, some of the airline's key suppliers, including the Greater Toronto Airport Authority, which manages the airline's former hub, are saying they would demand advance payments from Jetsgo if it were to resume operations.

Mr. Leblanc dismissed the prospect of a financial test as the reason for his hurry to revive his airline, but acknowledged he is working with Transport Canada to ensure Jetsgo's air operator certificate is not revoked. He also confirmed that Jetsgo's lawyers will ask a Quebec court to extend an April 11 deadline to file a plan of arrangement.

Mr. Leblanc was much less clear on the details of Jetsgo's new business plan, saying only that it would likely be a much smaller airline, consisting only of the company's leased Boeing MD-83 jets, that offered a mix of scheduled domestic and transborder service, as well as chartered international flights.

As part of the plan, Mr. Leblanc is trying to find buyers for his fleet of 15 Fokker 100 aircraft, which were flown to Quebec City on March 10 and secured by the company.

Mr. Leblanc said a restructured airline could still carry the Jetsgo moniker. "The brand is blemished. We understand that. But it also has a lot of awareness to it. Maybe now more than ever."

He added that his biggest challenge will be convincing creditors, some of which are owed millions of dollars, to support his plan. He gave himself a 50% chance of succeeding.

However, one source familiar with company's finances was not as optimistic, giving a revived Jetsgo only one in 10 odds of getting off the ground again. "He just created so much ill will by the way he went out of business," said the source.

"His problem is obviously with the public and the extent to which people are going to be willing to fly Jetsgo."

Court grants Jetsgo until May 13 to come up with plan to fly again
Fri Apr 8, 8:57 PM ET
KARINE FORTIN

MONTREAL (CP) - Jetsgo, the discount airline carrier that stopped flying last month, has been given until May 13 to come up with a plan to show it can get back in business.




*


Justice Francois Rolland of Quebec Superior Court granted the extension Friday. Jetsgo founder Michel Leblanc wants to get the insolvent carrier back in the air by June 23, in time for high-demand summer travel season.



The 2 1/2-year-old airline left thousands of people stranded when it abruptly shut down March 11, but some observers have suggested the flying public would be willing to book tickets again on a low-fare airline operated by Leblanc.



Yves Vincent, of court-appointed monitor RSM Richter Inc., said Friday that Jetsgo is on the verge of selling six of its Fokker 100 aircraft - a sale that could raise as much as $13.5 million.



Leblanc has reportedly begun talking with suppliers to assess the feasibility of relaunching Jetsgo.



Vincent said about 10 groups are ready to back Jetsgo if it can show that its business plan is solid.



The business plan is supposed to be sent to the concerned parties by April 30. If they approve, the plan will be presented to the court on May 13 and then, if the judge approves, delivered for creditor acceptance in the first week of June.



If Jetsgo doesn't meet the April 30 deadline, "it is dead," Vincent said.



So far, all the company's creditors, including Nav Canada and Transport Canada, say they prefer a restructuring to a bankruptcy.



But some creditors have special demands, including airport authorities that want to seize Jetsgo planes to pay off the money they are owed.



Jetsgo had a fleet of 29 aircraft - 15 company-owned Fokker 100s, now parked in Quebec City, and 14 leased Boeing MD-83s.



As well, pilots, who had to pay the company $30,000 for training, have filed a demand for repayment of the money, which was supposed to be reimbursed to the carrier's aviators during a two-year span.



After Jetsgo stopped operations, many pilots found themselves strapped for cash and want the court to ensure Jetsgo makes good on the amount, said Daniel Cantin, the pilots' lawyer.



Cantin cited the urgency of the situation Friday, noting the pilots are "facing demands from their own creditors."



Rolland said the parties will return to court next week to discuss bankruptcy issues.



The airline, which had 1,200 employees, lost $55 million in the eight months ended Feb. 28, including $22 million since Jan. 1, according to documents filed in court.



It suffered a series of recent operational mishaps, stranding hundreds of people during Christmas storms and being investigated by Transport Canada over a wild landing in Calgary in January.



It encountered two separate engine problems during its final week, and the federal government says in a court filing that Transport Canada inspections "revealed important deficiencies in numerous areas of Jetsgo's operations."

Jetsgo files new plan for smaller operation
Last Updated Mon, 11 Apr 2005 13:11:18 EDT
CBC News

MONTREAL - Jetsgo filed a new business plan with Transport Canada on Monday, in a move to address government safety concerns and resume flying with a smaller fleet of airplanes.

Under Jetsgo's new business plan, it will run a charter business with just eight MD-83 aircraft. The company's remaining 14 Fokker F-100 are being sold.

Jetsgo founder Michel Leblanc said the company will make corrections cited by the federal government before the airline shut down and went into creditor protection. Leblanc has set June 25 as his target date to get Jetsgo back in the air. Last week, a representative of RSM Richter, the monitor overseeing Jetsgo's bankruptcy proceeding, has said June 23 is the deadline for the carrier to resume flying to capture part of the summer travel season.

"[The business plan] details a change management program, a complete corrective action plan, including updating of all manuals, and outlines the additional management and resources that would be employed when, and if, we move to a 14 aircraft business model," Leblanc said in a release.

Transport Canada investigated Jetsgo for a variety of problems, leading up to March 11 when it ceased operations. After an incident on Jan. 20 when a Jetsgo plane veered off a runway in Calgary, Transport Canada ordered a review of the airline's flight safety program as well as its flight documentation and training records.

As a result of that review, Transport Canada found "deficiencies," and just days ahead of Jetsgo's shutdown gave the airline 30 days to address the problems.

Jetsgo said an internal review filed with Transport Canada found that expansion had put stresses on its operations. "Rapid growth meant that at some point of the operation, the structure and management in place were not able to sufficiently support the growing demand and hence, certain operational oversights occurred," the company said.

"The structure, operating within a 26-aircraft environment, was able to meet the minimum requirements during regular operations, yet struggled to sustain control during irregular operations, such as severe weather at major stations, or multiple aircraft swaps."

A major storm that hit Toronto just before Christmas 2004 forced Jetsgo to cancel dozens of flights, stranding thousands of passengers. Because its air crews were already at their maximum allowed flying hours, the recovery was slow and costly.

About 17,000 travellers were left stranded when Jetsgo shut down operations last month as its losses mounted.

Jetsgo hopes to fly again as charter carrier
By Ottawa Business Journal Staff
Tue, Apr 12, 2005 8:00 AM EST

The smiley face of Jetsgo could be back in Canadian skies by the end of June as a stripped-down charter airline.

Jetsgo is in the middle of bankruptcy proceedings, and has until today to satisfy Transport Canada that is had rectified a number of safety concerns, or face losing its operating certificate. Jetsgo owes millions to several Canadian airports and to Nav Canada, the company that operates the air traffic control system. Transport Canada is expected to announce today whether Jetsgo has met its requirements.

Jetsgo founder Michel Leblanc says the new airline would operate with 8 leased MD-83 airliners initially, eventually expanding its fleet to 14. It would likely target sun destinations. At least one analyst says the move is an admission that Jetsgo cannot compete with the likes of WestJet and Air Canada.

Meanwhile, the association representing Ontario travel agents says it opposes moves to help Jetsgo get back into the business. Michael Pepper of the Travel Industry Council of Ontario says there are inadequate financial safeguards to ensure the company does not collapse again, as it did just prior to the March school break.

Airlines in Canada are downright inferior, period. Look at all the major airlines that had gone bankrupt over the years (Canadian Airline, Canada 3000, Jetsgo, just to name a few, and even Air Canada is in trouble). In international surveys, not a single airline or airport in Canada has made it into the world's top 30. Vancouver's international Airport was the best airport in North America for 2004...well, big deal! North American Airports couldn't even make the cut for any top 30 airports in the world....sad indeed, considering how proud people in this part of the world are. Well, the government, true to obeying the "ideals" of capitalism, is not stepping in to interfere. Westerners had traditionally been criticizing the Asian political mechanisms, about how corrupt governments are, and how they interfere in ailing national airlines...but look at the results: Proud national carriers with bright futures. Maybe it is time the Canadian government steps in, and not let unions get an upper hand as greed by the unions always make airlines less competitive, provide less than satisfactory service (just ask around) and create losses in profits due to events like strikes, just to name a few. The business planners and CEOs are not any better (doubtful about the quality of Diplomas they get) If the Canadian government and businesses do not grow up and compete globally, then I am afraid for this country, and that does not restrict only to its airlines.

Jetsgo lands deal to sell 5 planes
Asks Quebec court to safeguard proceeds
BRENT JANG
27 April 2005
The Globe and Mail

Insolvent Jetsgo Corp. has struck a deal to sell five of its 15 Fokker aircraft, asking a Quebec court to safeguard proceeds from the planned sale at least until creditors' claims can be sorted out.

The prospective purchaser, AirFleet Credit Corp. of the Cayman Islands, has been negotiating for weeks with Montreal-based Jetsgo to acquire five Fokker 100s, according to new documents filed in court by the discount airline.

Jetsgo, which went under bankruptcy protection last month, wants Chief Justice François Rolland of Quebec Superior Court to authorize the transaction.

AirFleet expressed interest in buying several Fokkers before Jetsgo grounded its planes on March 11, and the two sides now hope to wrap up the deal, the filing said.

Privately owned Jetsgo, controlled by founder Michel Leblanc, bought the twin-engine Fokkers for $930,000 each from American Airlines Inc. in February, 2004.

The federal government is trying to recoup $3-million in security fees left owing after Jetsgo abruptly halted operations.

But Jetsgo's motion asks the judge to place at least $3-million in Fokker proceeds into the custody of court-appointed monitor RSM Richter Inc., pending a hearing into Ottawa's efforts to recover security fees.

Mr. Leblanc has said that he could have guided the carrier through a cash crunch if he had been able to sell several of the Fokkers before creditors tightened payment terms in early March.

Jetsgo has 15 company-owned Fokkers and 14 leased Boeing MD-83s in its fleet.

Jetsgo has yet to publicly release details of its restructuring plan, said Gerry Apostolatos, a lawyer who represents eight Canadian airport authorities owed nearly $3-million by Jetsgo.

“Gaining access to that business plan will allow us to assess the viability of this new business model. We're surprised that the debtor has not agreed to provide us with its comprehensive business plan when we're willing to sign confidentiality agreements,” he said in an interview.

How much AirFleet is willing to pay is undisclosed because Jetsgo has asked Chief Justice Rolland to seal the letter of intent signed April 19 by the two companies. To close the deal, Jetsgo said it will need to spend $100,000 on labour, fuel, spare parts and pre-inspection to fulfill that letter of intent, the court filing said.

Richter believes that AirFleet's offer is “commercially reasonable,” said Jetsgo's filing, which added that no individual or corporation related to Jetsgo will receive any benefits from Fokker sales.

This isn't about Jetsgo, per se, but it showcases the screwed up LCC market in Canada. How does WestJet lose money in a quarter when its pesky one-upper (or downer, I guess) go kaput?
_____________________
Apr. 27, 2005. 02:29 PM
Struggling WestJet loses $9.6M
BILL GRAVELAND
CANADIAN PRESS

CALGARY — Skyrocketing fuel prices and lower fares in a highly competitive domestic market resulted in WestJet Airlines Ltd. declaring a $9.6 million first-quarter loss today.
“I would like to thank the whole WestJet team of employees and shareholders for their patience, continued support and dedication throughout this entire challenging period,” said WestJet President and CEO Clive Beddoe in a conference call.

“I know that this has required that you maintain your faith in the fundamentals of our company which has been tested in this period of depressed earnings and depressed profit sharing.”

The Calgary-based carrier lost 7.6 cents per share, compared to a $512,000 profit, 0.4 cents per share, in the year-earlier period.

“It’s pretty much what we expected, regrettably,” said Beddoe of the normally slow travel period.

The result was well below a consensus analyst forecast gathered by Thomson One that pegged the company’s earnings at zero cents per share for the quarter.

It’s also the second consecutive quarter that the Calgary-based discounter has recorded a loss after nearly eight years of profitability.

“It’s been a bump in the road for the last six months as the irrationality of the market really reached a peak,” said Beddoe, referring to the rock-bottom prices brought about by the now-defunct Jetsgo .

“We expected that to happen. It’s classic of the winter months when we have a desperate competitor on the verge of bankruptcy,” he said.

The airline said it hopes to benefit in the coming months from the demise of Jetsgo. However, the effects of the price-war will linger into the second quarter of the year as a result of tickets purchased before Jetsgo ceased operations in March said airline analyst Rick Erickson.

“There’s an overhang of about a half million seats and those seats have not yet been flown and the yield on those was pretty pitiful,” said Erickson.

A second consecutive loss for the carrier would also be hard for WestJet to swallow, he said.

“I’m sure it’s certainly unprecedented for WestJet and they can’t be very happy about it,” he said.

Beddoe said he expected a growth rate of about 20 per cent for the remainder of the current fiscal year. But with prices 15-to-20 per cent higher since Jetsgo went under, it remains to be seen how many of the flying public will continue to travel by air.

“It’s a question of what price they will fly, at what price they will drive and at what price to they not travel at all,” Beddoe said.

“Certainly the cost of automobile transportation has gone up dramatically too with the price of fuel and people have to accept that in the same way they have to accept higher prices for flying,” he said.

There will still be discounted tickets at WestJet but they will likely be more seasonal and day-specific.

“There are certain days of the week and flights of the day that have weaker load factors on them where we could still justify offering some fairly deeply discounted fares,” Beddoe said.

Total revenues for the period grew to $295 million from $217 million in the year-earlier period.

Revenue per revenue passenger mile was 15.2 cents in the quarter of 2005, compared to 15.9 cents in the same period in 2004. Cost per available seat mile increased to 11.6 cents compared with 10.8 cents in prior-year quarter.

The Calgary-based airline can continue to make a limited amount of profit on domestic routes but the real potential for growth is in transborder routes to destinations in the United States said Erickson.

“My guess is we’re going to see a number of new transborder routes announced and they’re going to be scheduled routes — not the charter ones,” he said.

“They’ll probably have Las Vegas and they’ll probably do Hawaii as a scheduled destination — my guess is they’ll probably do Honolulu,” Erickson said.

On an available seat mile basis, WestJet’s fuel expense was 21.6 per cent higher in the first quarter of 2005 versus the first quarter of 2004.

Shares in the company (TSX: WJA) fell in afternoon trading on the Toronto Stock Exchange, dropping 62 cents, nearly four per cent, to $15.25.

Goodrich seeks liens against Jetsgo
Brent Jang
3 May 2005
The Globe and Mail

Goodrich Corp. is asking a Quebec court for the right to place liens against insolvent Jetsgo Corp., saying the discount airline owes it money for aircraft maintenance on landing gear. Goodrich said it has filed a motion “for the purpose of establishing and perfecting its lien and security interest” on landing-gear components in Jetsgo's leased Boeing MD-83s. Goodrich, based in Charlotte, N.C., said Montreal-based Jetsgo owes more than $690,500 under a services agreement. Privately owned Jetsgo sought bankruptcy protection nearly two months ago and is now trying to revive itself as a charter airline. GR (NYSE) rose 28 cents (U.S.) to $40.58.

Pilots slam Jetsgo president for bid to form new airline
4 May 2005
Winnipeg Free Press

Francois Shalom MONTREAL -- The Canadian president of the Air Line Pilots Association says it's "astounding" that Jetsgo Corp. president Michel Leblanc is even allowed to consider forming another airline.

"He is a repeat offender," Kent Hardisty said in an interview yesterday. "But nothing surprises us anymore.

"It's amazing to us, really, that even the opportunity (of forming another airline) is open to him, after his last failure.

"The only requirements for entry into this business are three months' working capital and satisfying Transport Canada's demands -- that's it."

Hardisty called the funding requirements "far too meek," arguing that launching an airline with an unsustainable business model undermines the whole industry's credibility andprofitability.

While the immediate result may be a boon to consumers -- rock-bottom plane tickets -- the eventual result is overcapacity and below-cost operations that threaten the industry.

He said the Canadian public ends up footing the bills for ill-financed projects, and that it makes no sense to allow an entrepreneur to repeatedly launch business ventures that keep failing -- at a high cost to travellers, suppliers and customers.

Jetsgo filed for bankruptcy protection March 11, with over $108 million in debts, having bled $55 million in the eight-month run-up to its grounding.

The discount carrier left 17,000 travellers in the lurch and threw 1,200 employees out of work.

Leblanc has since said he wants to relaunch a charter airline next month with eight of the former Jetsgo planes.

http://www.cardatabase.net/modifiedairlinerphotos/photos/big/00005163.jpg

Canada industry: Montreal-based airline collapses
2 May 2005
Economist Intelligence Unit - ViewsWire

COUNTRY BRIEFING

The airline industry was jolted in mid-March by the collapse of Montreal- based Jetsgo, the second-biggest discount carrier, following a fierce price war with its two bigger rivals, Air Canada and WestJet Airlines of Calgary. Air Canada and WestJet responded almost immediately by raising fares on many routes.

Jetsgo's demise, which left about 17,000 passengers stranded and 1,200 employees without jobs, has drawn conflicting responses for changes in government airline policy. Consumer advocates, supported by the New Democratic Party, have urged the federal government to tighten regulation of the airline industry and provide extra safeguards for passengers, similar to those coming into force in the EU. This group is also concerned that Air Canada and, to a lesser extent, WestJet will in future have a free hand in setting fares. However, the Liberal government is moving in the opposite direction, proposing to liberalise air traffic rules to encourage greater competition, including from US carriers.

Canada and the US recently began talks to expand their 1995 "open skies" agreement. The Canadian transport minister, Jean Lapierre, has indicated that he would have no objection to each country's airlines serving domestic routes in the other, and giving wider access to airlines from third countries. Mr Lapierre, who has emerged as a forceful advocate of further deregulation, has also proposed raising the foreign ownership limit on Canadian airlines from 25% to 49%. He has won support from Air Canada's chief executive, Robert Milton, who has described the existing US-Canada arrangements as "quickly becoming outdated". Air Canada currently has the most extensive services to the US of any foreign airline. The chances are slim, however, of airlines gaining unrestricted access across the border. Smaller airlines in both countries as well as trade unions would probably object strongly. A series of more modest steps towards liberalisation seems more likely.

Jetsgo packs its bags; scraps comeback
Accepts bankruptcy as creditors circle
By BRENT JANG
Saturday, May 14, 2005 Page B7
TRANSPORTATION REPORTER

The end is near for Jetsgo Corp. as the discount airline agreed yesterday to place itself into bankruptcy amid pressure from creditors to scrap its summer revival plan and liquidate its assets.

Jetsgo founder Michel Leblanc had submitted a revival timetable in a court filing on Thursday, but with creditors lining up to oppose his comeback strategy, the airline opted to declare bankruptcy.

As its court protection expired yesterday under the Companies' Creditors Arrangement Act, Jetsgo halted a frenzied two-month quest to re-emerge as a slimmed-down charter carrier. Under that protection, Mr. Leblanc proposed to lease eight aircraft for an airline geared toward tour operators, but that plan has fallen by the wayside with the voluntary bankruptcy filing.

Court-appointed monitor RSM Richter Inc. was poised to recommend that Chief Justice François Rolland of Quebec Superior Court extend Jetsgo's CCAA protection for at least another week. Jetsgo's lawyers, however, agreed yesterday to put an end to the scheduled airline founded in June, 2002.

Privately owned Jetsgo, controlled by Mr. Leblanc, stopped operations March 11, leaving tens of thousands of travellers with useless tickets. In the monitor's latest report, completed Thursday, Richter said the carrier wanted to file a plan under CCAA or a proposal under the Bankruptcy and Insolvency Act.

But Montreal-based Jetsgo's largest creditor, Moneris Solutions Corp., had heard enough. Moneris, a credit card clearing agent that is owed $45-million by Jetsgo, had effective veto power.

Mr. Leblanc needed the support of creditors behind two-thirds of the value of claims, voted on in person or by proxy. Without Moneris's backing, he would have won 58 per cent support at most -- not even subtracting other angry creditors whose patience was running out.

Moneris had been prepared to ask the judge to force Jetsgo into bankruptcy, while other creditors -- including the Greater Toronto Airports Authority, eight other Canadian airport agencies and Nav Canada, operator of the country's air traffic control system -- were expected to approve the move.

"Michel Leblanc gave up the ghost on Jetsgo, but I wouldn't be entirely surprised if he took another run at the airline business in some other incarnation," said Karl Moore, a business professor at McGill University.

Even if Mr. Leblanc had managed to persuade creditors to go along with the summer revival, he would have faced safety and regulatory hurdles from Transport Canada.

Jetsgo has arranged to sell seven of its 15 company-owned Fokkers and it needs to resolve its leasing obligations for 14 Boeing MD-83s.

"The trustee will proceed to liquidate the assets and distribute the monies," said Gerry Apostolatos, a lawyer who represents eight Canadian airport authorities owed nearly $3-million by Jetsgo.

Jetsgo's takeoff plans dashed by creditors
Leblanc runs out of time: At $45M, Moneris tops list of possibly thousands owed money
Mike King
14 May 2005
National Post

MONTREAL - Jetsgo Corp. founder Michel Leblanc's dream of relaunching his grounded airline this summer turned into a flight of fancy after he voluntarily signed and filed for bankruptcy yesterday.

Mr. Leblanc's plan to turn the discount carrier, which shut down unexpectedly two months ago, into a charter operation by June was dashed when some Jetsgo creditors forced his hand.

Moneris Solutions Corp., Jetsgo's largest creditor (owed $45- million), reactivated a bankruptcy application it filed in March in order to force insolvency.

Moneris was supported by Nav Canada and a consortium of nine Canadian airports including the Greater Toronto Airport Authority.

Lawyers for the various stakeholders, including those for Jetsgo and RSM Richter Inc. -- the court-appointed monitor operating under the Companies' Creditors Arrangement Act -- were given a recess by Quebec Superior Court Chief Justice Francois Rolland to discuss the application.

They returned less than a half hour later to inform the judge that Mr. Leblanc would be opting for bankruptcy.

There was speculation the oft-failed airline operator -- Mr. Leblanc was president of Royal Aviation that merged with Canada 3000 before it closed in the fall of 2001, and he headed Intair before its demise a decade earlier --didn't want to cede to certain conditions by creditors in order to win their support for an extension of the CCAA protection.

It was also likely Mr. Leblanc would have had to testify in the face of the bankruptcy application and to obtain additional time for his restructuring proposal.

RSM Richter now becomes the bankruptcy trustee under the Bankruptcy and Insolvency Act.

Montreal lawyer Gerry Apostolatos of Langlois Kronstrom Desjardins, representing eight of the nine airports, said there are possibly thousands of potential creditors.

When Jetsgo ceased operations March 11 and went under bankruptcy protection, it stranded about 17,000 passengers, laid off 1,200 employees and had debts in excess of $108-million.

Mr. Apostolatos said RSM Richter must evaluate who fits into the various categories including, but not limited to, super priority deemed trust creditors, secured creditors, preferred creditors and ordinary creditors.

He explained that ordinary creditors -- such as Jetsgo ticket-holders who haven't been reimbursed by other parties -- will likely be compensated on a pro-rata basis in the context of a distribution after the assets are liquidated.

Although he was at the Montreal courthouse during the morning proceeding, Mr. Leblanc eluded reporters and didn't return a call to his office.

Air fares climb in wake of Jetsgo's demise
But Air Canada and WestJet still face competition from CanJet, survey finds
14 June 2005
The Globe and Mail

Domestic fares at Air Canada and WestJet Airlines Ltd. have risen sharply since Jetsgo Corp. was grounded in March, but Canada's two largest carriers are facing price pressures from CanJet Airlines, a survey released yesterday found.

UBS Securities Canada Inc. tracked the ticket prices charged by Air Canada and WestJet, noting that both airlines have found relief from the fierce competition that prevailed earlier this year.

UBS said its survey shows that Air Canada's and WestJet's domestic fares averaged $234.34 in May, up from $234.04 in April and $215.39 in March. Average fares had dipped below $165 during the height, in late January, of the fare war that was sparked by now-defunct Jetsgo. The May average is a 42-per-cent jump from the January low.

Montreal-based Jetsgo halted operations on March 11 and declared bankruptcy in mid-May.

CanJet wasn't part of the UBS survey, but the Halifax-based discount carrier's June seat sale is driving down fares, notably a 3.5-per-cent decline last week.

Still, the general trend has been higher fares. UBS looked at key routes where Montreal-based Air Canada and Calgary-based WestJet go head-to-head, comparing WestJet fares with Air Canada's Tango tickets — the lowest fare category offered by Canada's flag carrier.

On the Toronto-Montreal route in May, Air Canada's fare averaged $155 for one-way tickets booked one month in advance, compared with $123.70 charged by WestJet. In January, fares for those flights averaged $115 at Air Canada and $73 at WestJet. The prices exclude taxes.

Air Canada and WestJet often have comparable rock-bottom offers, but once a limited number of sale-priced tickets are snapped up, consumers must pay more.

On the Toronto-Vancouver route in May, Air Canada's one-way ticket price booked a month in advance averaged $317.25 while WestJet's averaged $281.50. In January, fares for those flights averaged $254 at Air Canada and $202.50 at WestJet. Air Canada and WestJet executives say ticket prices prior to Jetsgo's demise were unsustainably low.

Undeterred by high operating costs and red-hot fuel prices, Jetsgo dropped fares to artificial lows to capture market share, they say. In May, Toronto-Calgary one-way ticket prices booked one month in advance averaged $280 at Air Canada and $245.61 at WestJet, up from January's average of $203.50 at Air Canada and $180.75 at WestJet.