Hundreds of travellers stranded as high fuel prices claim Zoom Airlines as a victim
Published Thursday August 28th, 2008
MONTREAL - The soaring cost of fuel and a weakened economy claimed its first Canadian airline casualty Thursday after discount carrier Zoom Airlines suspended its operations, stranding hundreds of passengers in Canada and Britain.
The Ottawa-based company suddenly cancelled all of its flights after those owed money by the airline took actions to get money owed to them.
Two-hundred and thirteen passengers were stranded in Halifax, when ground crews refused to release Zoom's aircraft because their company hadn't been paid $2 million owed, first learned of the airline's fate as they gathered in the airport's transit lounge.
"Confusion is reigning supreme," said Linda Bishop, on her way home from Britain.
"We just don't know how we're going to get there. ... You just have to pull out your credit card and hope you can pay at the end of the day."
In Scotland, the Civil Aviation Authority instructed the Glasgow airport authority to detain a Zoom Boeing 757 for non-payment of charges from Eurocontrol, the European organization for the Safety of Air Navigation, and NATS, the air traffic services provider.
Zoom said the economic downturn and the unprecedented rise in the price of aviation fuel had made it impossible for the privately owned company to continue operations.
"We deeply regret the fact that we have been forced to cease all Zoom operations," airline founders Hugh and John Boyle said in a statement.
"It is a tragic day for our passengers and more than 600 staff."
The brothers said they left no stone unturned to secure a re-financing package that would have kept the aircraft flying.
"Even as late as lunchtime today (Thursday) we believed we had secured a new investment package to ensure future operations but the actions of creditors meant we could not continue flying," they said.
"Having been unable to complete the investment package, the directors of Zoom had no option but to instigate insolvency/administration proceedings."
Even before the company issued its official announcement, passengers knew there were problems because their flights were cancelled. But it took several hours before Zoom confirmed it had suspended operations due to money problems.
A flight was grounded by court order in Calgary and another one was being delayed in Glasgow, Scotland.
Rising fuel costs added $50 million in operating costs for the airline in the last year, it said. Several U.S. carriers have been forced into bankruptcy.
Industry Minister Jim Prentice said Zoom's fate demonstrates the challenging circumstances facing the airline industry, especially with the rise in fuel costs.
"These are things that we're going to work through and if we find passengers in difficult circumstances everybody's going to have to work together to deal with that," he said in Inuvik, N.W.T.
At Halifax Stanfield International Airport, officials attempted to help stranded passengers reach their destinations with other airlines and provide food after the plane destined for Ottawa was grounded following a flight from London.
The Halifax airport authority is owed nearly $200,000 by Zoom for unpaid landing fees, gate fees and other expenses.
Peter Spurway, a spokesman for the authority, said late Thursday that Nova Scotia Supreme Court had granted a request for a hold order on a Boeing 737 still in Halifax.
The order means the jet can't leave.
"Our discussions with (Zoom) today led us to take this action," Spurway said of talks with the airline about its debt.
"We will just continue our discussion with Zoom over the next while to attempt to get this outstanding debt resolved."
The airplane is being held at the airport as we continue our discussions with Zoom."
In Calgary, dozens of passengers were transported to Vancouver by WestJet (TSX:WJA) on Wednesday afternoon after Zoom's Boeing 767 was grounded by a court order.
The Ottawa-based airline owes more than $400,000 to the authority that runs the Calgary airport, along with money to the airplane's owner, ground support and refuellers.
The owner of the Boeing 767 terminated Zoom's lease on the aircraft, said Wayne Reimer, Calgary airport's duty manager.
Airline analyst Jacques Kavafian said while fuel hit the seven-year-old carrier hard, its business plan relied exclusively on low fares that could easily be matched by larger competitors.
"Zoom was trying to get into a market that didn't exist really," the Research Capital analyst said in an interview.
The airline's demise should help Canadian rivals, especially charter operator Air Transat (TSX:TRZ.B) this coming winter, Kavafian said.
"One less player, less capacity, provided someone else doesn't jump in and fill the cap, it should be good for the remaining airlines, a small positive we think," he said.
Zoom's demise comes more than three years after Jetsgo suddenly ceased operations, stranding 17,000 passengers. Other Canadian airlines to fold are Canada 3000, Nationair and Royal.
Air Canada (TSX:AC.B) said it will help Zoom passengers returning from overseas by offering special one-way fares, even though it normally just sells return trips.
Regardless, most passengers will be on the hook for the cost of flights home. Some of those who paid with credit cards may be protected if they have insurance for these types of eventualities.
"If there's a message to come out of this, it's don't fly with cheap airlines - they might just go bust," said Julian Bishop, who was accompanying his wife Linda home .
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