Jetlines loses SmartLynx and InHarv investments, postpones launch and reduces its activity until the Competition Bureau finalizes its WestJet investigation

28 octobre 2019

VANCOUVER, BRITISH COLUMBIA, Canada Jetlines Ltd. (JET: TSX-V; JETMF: OTCQB) (the “Company” or “Jetlines”) postpones launch date until Competition Bureau defines its position.

The Company advises that it has not satisfied the financing condition to secure $40 million in financing in addition to the funds committed by SmartLynx. As a result, SmartLynx and InHarv ULCC Growth Fund have exercised their rights to terminate their investment commitments. The Dec 17, 2019 Launch date will need to be postponed and the Company will not pay additional deposits and will therefore not receive their first two Airbus 320 it has planned to receive in November this year. No further date will be announced until funding is secured.

One of the principal concerns encountered by Jetlines team while engaging with investors is that they believe the existing dominant members of Canada’s aviation duopoly will react very aggressively once the company starts operations, and in fact have already done so in anticipation of Jetlines entry into the market. Specifically, Jetlines retained market analysis experts that concluded there is ample evidence to state that:

  1. Swoop is pricing lower than other airlines, and significantly lower than the other ULCC entrant serving Canadian and transborder passengers;
  1. Empirical evidence suggests that Swoop is pricing below avoidable costs on the routes identified by the Competition Bureau in their current investigation;
  1. Empirical evidence suggests that Swoop is pricing below avoidable costs on routes other than those identified by the Competition Bureau in their current investigation;
  1. Qualitative analysis of changes in service illustrates Swoop / WestJet’s rapid increase in capacity beyond what economic sense might dictate;
  1. After Flair discontinued service to and from Hamilton, ON, Swoop maintained higher prices on the routes where Flair discontinued service than their other routes; and
  1. Although Jetlines’ avoidable costs will be lower than Swoop’s, empirical evidence suggests that Swoop is pricing below Jetlines’ avoidable costs as well — and is attempting to deter entry by Jetlines on its proposed routes.

In the opinion of Jetlines management and its retained experts, the above factors all amount to an abuse of dominance. Senior representatives from the Company’s management team made multiple appearances before the Competition Bureau between January and July 2019.

 An Air Protest was staged in the month of July to motivate the Competition Bureau to define its position on the current investigation the Bureau is conducing on WestJet and Swoop. The Company believes further consolidation in the Canadian Airline Industry is making the market opportunity even bigger and has confidence in raising the money once there is a firm position by the Competition Bureau.

In order to conserve cash, the Company will lay off most employees except for a core team lead by the Executive Chairman who will continue meeting with investors trying to secure financing. The Company intends to rehire again employees once proper funding has been secured. In addition, the Company’s CEO, Mr. Javier Suarez, has tendered his resignation effective immediately. The Company will begin the process to identify a replacement CEO. Mr. Zygimantas Surintas has also tendered his resignation as a director of the Company.

Most contracts signed for airline systems have been put on hold and will be ready to be re-started once the airline is ready to launch. Similarly, all the manuals that have been submitted to Transport Canada in order to obtain the Airline Operators Certificate will be kept and updated as required.

Mark Morabito, Executive Chairman comments “It is very unfortunate that we have to postpone our launch date. We have built as much as anybody can without access to more capital. We have invested in bringing on board the most talented people who have done an incredible job putting together our operations manuals and systems, our brand, website and all other commercial components needed for launch.”

The Company also confirms that, further to its press release of 8 octobre 2019, the total amount of debt settled through the issuance of 738,094 shares is $195,595.

À propos de Canada Jetlines Ltée.

Canada Jetlines est en voie de devenir la première véritable compagnie aérienne à très bas prix du Canada (transporteur à très bas prix), et l’entreprise envisage d’exploiter des vols à l’échelle du Canada et de fournir un service ininterrompu du Canada vers les États-Unis, le Mexique et les Caraïbes. La société prévoit commencer à exploiter la flotte d’Airbus A320, l’aéronef le plus utilisé par les transporteurs à très bas prix dans le monde. Jetlines is led by a board with extensive experience and expertise in low-cost airlines, start-ups and capital markets. Le gouvernement du Canada a accordé une exemption sans précédent à l’entreprise, ce qui lui permettra de proposer des services de transport aérien locaux tout en étant détenue par des actionnaires étrangers jusqu’à concurrence de 49 %.

Jetlines ability to sell tickets and launch airline service remains subject to the completion of the airline licensing process, the receipt of applicable regulatory approvals and the completion of financing.

For more information on Jetlines, please visit our website at www.jetlines.com.

AU NOM DU CONSEIL

"Mark J. Morabito"
Président exécutif

King & Bay logo   Canada Jetlines fait partie du groupe d’entreprises King & Bay. King & Bay est une banque d’investissement axée sur l’identification, le financement, le développement et le soutien d’occasions de croissance dans les secteurs des ressources, de l’aviation et de la technologie.

Pour obtenir de plus amples renseignements, veuillez vous adresser à :
Sans frais : 1-833-226-5387
Courriel : investor.relations@jetlines.com  

Mise en garde concernant l’information prospective

This news release contains "forward-looking information" concerning anticipated developments and events that may occur in the future. Forward-looking information contained in this news release includes, but is not limited to, statements with respect to (i) the commencement of operations and the success of expected future operations of the Company; (ii) the routes that Jetlines intends to service; and (iii) Jetlines ability to offer the lowest airfares in Canada.

In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects" "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or " or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. L’information prospective figurant dans le communiqué de presse est fondée sur certains facteurs et hypothèses touchant, notamment, l’obtention de financement pour démarrer des activités d’exploitation de compagnie aérienne, l’exactitude, la fiabilité et le succès du modèle d’affaires de Jetlines; la réception en temps opportun des approbations gouvernementales; le lancement en temps opportun des activités de Jetlines et la réussite des activités en question; les contextes législatifs et réglementaires des territoires où Jetlines exercera ses affaires ou ses activités; l’incidence de la concurrence et la réaction de la concurrence à la stratégie d’affaires de Jetlines; de même que la disponibilité des aéronefs. Bien que l’entreprise considère ces hypothèses comme étant raisonnables en se fondant sur les renseignements mis à sa disposition, ces hypothèses pourraient être erronées.

L’information prospective comprend des risques connus et inconnus, des incertitudes et d’autres facteurs qui pourraient faire en sorte que les résultats, le rendement ou les accomplissements actuels de l’entreprise diffèrent largement des résultats, du rendement ou des accomplissements exprimés ou sous-entendus dans l’information prospective. Such factors include risks related to, the ability to obtain financing at acceptable terms,  the impact of general economic conditions, domestic and international airline industry conditions, future relations with shareholders, volatility of fuel prices, increases in operating costs, terrorism, pandemics, natural disasters, currency fluctuations, interest rates, risks specific to the airline industry, the ability of management to implement Jetlines’ operational strategy, the ability to attract qualified management and staff, labour disputes, regulatory risks, including risks relating to the acquisition of the necessary licenses and permits; and the additional risks identified in the "Risk Factors" section of the Company's reports and filings with applicable Canadian securities regulators. There is no assurance that the closing of the Offering will occur. Bien que l’entreprise ait tenté de cibler les facteurs importants qui pourraient faire en sorte que les actions, les événements ou les résultats actuels diffèrent de manière importante de ceux décrits dans l’information prospective, il pourrait y avoir d’autres facteurs pouvant faire en sorte que les actions, les événements ou les résultats ne soient pas tels qu’ils ont été prévus ou estimés. Par conséquent, les lecteurs ne devraient pas se fonder indûment sur cette information prospective. L’information prospective est valable en date du présent communiqué de presse. Sauf dans les cas prévus par les organismes de réglementation des valeurs mobilières concernés, l’entreprise n’a aucune obligation de mettre à jour publiquement ni de réviser toute information prospective, de quelque nature que ce soit.

Ni la Bourse de croissance TSX ni l’organisme de réglementation affilié (au sens de la définition de ce terme dans les politiques de la Bourse de croissance TSX) n’attestent la pertinence ou la précision du présent communiqué ni n’acceptent la responsabilité quant à la pertinence et la précision de celui-ci. 

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