Opinion by Brian Lilley • TORONTO SUN
An airline passenger passes by the new Lynx Air Boeing 737 on the tarmac at the Calgary International Airport in Calgary
When Lynx Air announced they were shutting down late last week, their court filings showed they owed more than $25 million in GST for importing aircraft. The news came as The Toronto Sun reported exclusively that Flair Airlines owed more than $67 million in GST for the same issue before the feds came knocking.
It seems that owing significant tax money to the federal government is something the airlines shared as they looked to merge recently.
Some details of the merger plan and the names of high-profile investors like Mitch Garber, minority owner of the NHL’s Seattle Kracken and a longtime Liberal donor, and Stephen Bronfman, Justin Trudeau’s chief fundraiser.
Combined, Lynx and Flair owed $92 million in GST payments before both companies eventually entered into repayment agreements.
While Lynx Air is shutting down, Flair struggles on.
According to the repayment plan Lynx agreed to with the feds, the airline was required to pay $100,000 per month at the start of December, January and February. On March 1, the payment was scheduled to increase to $200,000 and on April 1, to $700,000 per month.
Payments were supposed to continue and increase until the total value of $25,030,382 was paid in full by November 2026. It’s unclear what will happen to the monies owed now that Lynx has sought creditor protection.
The arrangement between CRA and Lynx, filed with their creditor protection pleadings, states that the amount owing was for the period between May 4 and Sept. 14, 2023. It was signed and dated Nov. 17, just six days before CRA got a court order to seize and sell Flair’s planes and other assets to recoup the $67 million it owes for failing to pay GST.
Readers who are also business owners were in shock at Flair being able to have $67 million owing in GST over several years.
“This is crazy, I own two restaurants and have had my account frozen three times over 10Gs in HST owing,” Tom wrote via email.
Others told stories of aggressive collection methods used by CRA that clearly did not apply to Flair or Lynx.
In their application to the court under the Companies’ Creditors Arrangement Act, Lynx interim chief financial officer Michael Woodward stated that the company owed various creditors $599 million but had just $429 million in assets. Listed among the creditors is a deferred tax liability of nearly $24.5 million, the remaining GST debt.
Whether that money will ever be collected, like the Flair money, remains to be seen.
Deep inside the CRA court filings submitted Thursday are some of the details of the rumoured merger between Flair and Lynx. The way the deal is described by Lynx, the plan sounds more like Lynx would be taken over by Flair and the money from the transaction would be used to pay off investors in Lynx, in particular the bridge financing loans provided.
Lynx was backed by Indigo Partners, an American firm headed by Bill Franke that has built and run low-cost airlines Frontier, JetSmart and Wizz Air. The Canadian investors included Torquest Partners, a Toronto-based venture capital firm, as well as Stephenson Management controlled by Mitch Garber, and Stepworth Holdings controlled by Stephen Bronfman.
Start-up airlines in Canada face a number of problems in getting up and running, including — as has been recently documented — outrageous taxes and fees charged by governments in Canada as opposed to other parts of the world.
The federal government will collect nearly $500 million in airport rents this year, which gets passed on to consumers in the form of higher ticket prices. Canada’s taxes on jet fuel are significantly higher than in the United States, even before the carbon tax and GST are added on top of the higher tax.
Security charges per passenger in Canada are also higher and are about to go up 33% on May 1.
There are many ways that the Trudeau government could act to make low-cost carriers viable in this country, but they haven’t shown a desire to do so.
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