Lynx Air blames everyone but itself for its demise

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Monette Pasher is president of the Canadian Airports Council.

It was heartbreaking to watch passengers deal with the sudden end of Lynx Air in recent days. Unfortunately, Lynx’s announcement this week about its imminent demise is not the first time an airline has gone under and it’s not likely to be the last.

There’s a wide genre of travel articles about what to do when your budget airline goes bust. Airlines are a low-margin industry, and disrupter companies tend to enter the market by trying to stimulate leisure travel. They offer amazingly low base fares, augmented by high hidden fees. If things break right, they buy enough market share and become established players. If they don’t, they exhaust their startup capital and flame out. For Lynx, that took two years.

The airline announced its departure with a news release congratulating itself for doubling its launch-day passenger volume and blaming a salad of economic “headwinds” beyond its control, including “rising operating costs, high fuel prices, exchange rates, increasing airport charges and difficult economic and regulatory environment.”

Not cool, for several reasons.

First, passengers need to come before blame. Despite announcing that it would continue flights through the weekend and make “every effort” to assist travellers, passengers have clearly come last in recent days. Rather than issuing refunds, Lynx left travellers to sort out refunds with their credit-card companies.

Second, nearly everyone in aviation could clearly see that charging passengers as little as a $39 base fare to travel by jet plane in 2024 is a fundamentally unsustainable way to run a business. It’s the equivalent of selling store-bought lemonade for five cents a glass. It doesn’t have to be $5 a glass, but it can’t be all but free.

Lynx passengers left scrambling after airline announces shutdown

Third, every carrier in Canada faces the same economic conditions, and many are operating profitably at a time of heightened travel demand. Labour and fuel cost what they cost. Exchange rates fluctuate. The regulatory environment is known. Lynx has been operating without a chief executive for nearly six months, but these are the macro conditions any airline CEO and leadership team should be capable of navigating on a daily basis.

And lastly, “increased airport charges” are such a small percentage in the financial health of any airline – especially an airline that isn’t financially sustainable to begin with. The most expensive airport charges in Canada are less than what Lynx charged passengers for a carry-on bag or a stroller. (Luggage fees are a cash cow for the global airline industry, driving US$33-billion in revenue last year.)

Canada’s airports occasionally catch flak for their fees, but it’s worth remembering that we operate non-profits with an excellent track record for keeping fees as low as possible while self-financing the infrastructure improvements and critical maintenance demanded by passengers and regulators.

Also, these critics often lump all airport fees together, when they should fairly be considered separately.

Aeronautical fees are charged to airlines to recoup service costs. Canadian aeronautical fees are highly competitive globally, having not kept up with inflation in recent years – in many cases, they are lower than what’s charged in other countries.

Airport improvement fees are charged to passengers for infrastructure and get attached to airline tickets. Taken in isolation, they are less competitive, especially when compared to U.S. airports. But it’s an apples-to-oranges comparison – Canadian taxpayers and the federal government do not contribute to infrastructure costs here, unlike U.S. airports, which are heavily subsidized by Washington. If fully calculated with federal taxes and fees, Americans pay more for their airports than Canadians do. Lower Canadian airport improvement fees would mean correspondingly higher Canadian taxes – there’s no escaping the cost of infrastructure, just how it gets paid.

Even if you take these two charges together – competitive aeronautical fees and improvement fees that substitute for tax hikes – they account for just 12 per cent of the average Canadian airfare, according to 2023 research by the Canadian Airports Council. A full 88 per cent of the ticket price is made up of the base fare, security charges, airline surcharges and ancillary fees, and taxes levied by the countries of departure and arrival.

No doubt that proportion was less than 88 per cent for Lynx, which wasn’t charging enough to stick around. But let’s not pretend that budget airlines are naive about the path to success. The startup playbook sometimes works and it sometimes doesn’t.

It’s true that Canada could do more to encourage disrupters in the airline sector. And this week’s flameout is terrible for jilted passengers. But responsibility for Lynx’s demise starts and ends with its business plan – not airport fees, or the same conditions all airlines face.