Flair Airlines agrees to pay $67-million in unpaid taxes after court order

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The federal government has obtained a court order that allows it to direct the seizure and sale of Flair Airlines Ltd. property in Alberta to recoup more than $67-million in unpaid taxes.

Flair incurred the taxes from the import of 20 Boeing 737 Max aircraft, and has made arrangements to pay the amount owed, said Ashley Fields, a spokeswoman for the airline.

The ruling was issued by the Federal Court of Canada on Nov. 23, months after a leasing company repossessed four of Flair’s aircraft for missed rent payments.

Court documents obtained by The Globe and Mail certify that the Edmonton-based discount airline owes the Canada Revenue Agency $67,174,123.37, plus penalties, interest and other fees.

“We have a mutually-agreed-upon payment plan with CRA to pay these importation duties, and we are current with that plan,” Ms. Fields said in an e-mail on Saturday.

The court issued the writ of seizure and sale at the request of the government’s assistant director of revenue collections. The order directs the Sheriff of Alberta or other licensed agency to “seize and sell the real property or immovables and the personal property or movables within your jurisdiction of Flair Airlines Ltd.”

Ms. Fields did not comment on whether any Flair property has been seized and sold, but said the airline’s operations have not been affected by the court order, and the terms of the repayment agreement are confidential. Eighteen of the planes – all 737 Max models – were imported beginning in 2021, she said.

Kim Thiffault, a CRA spokeswoman, declined to answer specific questions on the matter, citing privacy laws.

Ms. Thiffault said the department’s collection policy is to resolve tax arrears in a “mutually satisfactory way” with payment arrangements based on a party’s ability to pay. “As a last resort, we may take additional legal collection actions, such as seizing property or assets to protect the interests of the Crown,” Ms. Thiffault said in an e-mail.

Flair flies 20 leased Boeing 737s to domestic, U.S. and tropical destinations. The airline was founded in 2005, and is partly owned by Miami’s 777 Partners, which has been the company’s main provider of leased aircraft and financing. 777 Partners did not respond to e-mailed questions on Saturday.

Flair’s tax situation unfolds as the airline industry’s recovery from the pandemic is well under way. Demand for air travel has recovered but airlines find themselves in tough competition as the economy shows signs of slowing and consumers face seat prices that have risen sharply in recent years.

Canada’s domestic airline industry is dominated by Air Canada, which accounted for almost half of the market in 2023, followed by WestJet Airlines’ 26-per-cent share, according to Cirium, an aviation data company. Flair has about 10 per cent of the domestic market.

In March, 2023, an aircraft leasing company repossessed four Flair Boeing 737 planes for non-payment of rent. Airborne Capital of Dublin seized the four aircraft at airports in Edmonton, Toronto and Waterloo, Ont. The leasing company said Flair failed to make payments worth “millions” of dollars over five months.

Before the seizures, The Globe reported, Airborne and another lessor, BOC Aviation, were offering a total of 11 of Flair’s 19 planes to other airlines.

Flair CEO Stephen Jones has said that part-owner 777 Partners repaid the amount owed on seven of the planes, which remain in Flair’s possession. Mr. Jones said Flair paid Airborne $4.2-million shortly before the seizures and promised another $1-million was coming before the planes were repossessed “in the dark of night.”

Airborne disputed Mr. Jones’s account, and said the missed payments were persistent.

The Canadian Transportation Agency in 2022 launched an investigation of Flair to ensure that 777 Partners was not exerting effective control of the airline, in violation of laws that require an airline be Canadian controlled. The CTA’s preliminary inquiry found that 777 Partners owned 25 per cent of Flair but held “dominant” influence as a major lender and provider of leased aircraft. Three of Flair’s five directors were tied to 777 Partners.

Foreign investment in a Canadian airline is limited to 49 per cent, or 25 per cent by one person. Additionally, foreigners cannot call the shots, something the CTA calls “control in fact.”

After Flair agreed to reduce its reliance on 777 Partners for financing and leases, and to add more Canadians to the board of directors, the CTA ruled that Flair was Canadian.

A CTA spokesman said on Friday that the agency “continuously monitors Flair for any change that may impact” its Canadian status. “The agency will take action if the situation warrants it, to ensure that Flair, as all carriers, uphold its licensing obligations,” Jadrino Huot said.

Megan Hall, a spokeswoman for Edmonton International Airport, where Flair has its headquarters, declined to comment on the airport’s financial arrangements with the airline.

Editor’s note: A previous version of this article incorrectly named Edmonton International Airport spokeswoman Megan Hall. This version has been updated.