Jetsgo gets to keep airplanes

[Kip Powick]

A Quebec judge has dismissed motions from key creditors to seize and detain insolvent Jetsgo Corp.'s 15 company-owned aircraft, saying he doesn't want to jeopardize the airline's revival plans.

Nine Canadian airport authorities and Nav Canada, operator of the country's air traffic control system, had sought to gain control of Montreal-based Jetsgo's Fokker 100s. But in a judgment released yesterday, Chief Justice François Rolland of Quebec Superior Court ruled against the creditors.

“Allowing the seizure and setting money aside for the petitioners in these circumstances could jeopardize the restructuring and reorganization of Jetsgo,” the judge wrote in his ruling.

Jetsgo, controlled by founder Michel Leblanc, has protection under the Companies' Creditors Arrangement Act until May 13.

“Under the CCAA, the restructuring process and the general interest of all the creditors is to be preferred over the particular interests of a class of creditors,” Chief Justice Rolland said. “The court concludes that the authorization to seize and detain the aircraft could cause a prejudice such that any reorganization process might fail.”

Jetsgo ran a fleet of 29 aircraft. The Fokkers are currently parked in Quebec City, while 14 leased Boeing MD-83s are grounded in Toronto, Montreal and Vancouver.

“Jetsgo is trying to sell these 15 Fokkers but they may not be sold without the authorization of the court,” the judgment emphasized.

The Greater Toronto Airports Authority says it is owed $5.5-million by Jetsgo, while eight other airport agencies are seeking to recoup nearly $3-million in landing fees and airport charges. Those eight groups are in Vancouver, Calgary, Edmonton, Winnipeg, Ottawa, Montreal, Quebec City and Halifax.

Nav Canada is claiming $1.6-million in unpaid bills from Jetsgo.

Separately, Chief Justice Rolland ordered that a $5-million directors and officers (D&O) charge should remain in place but be limited to liabilities incurred after Jetsgo filed for bankruptcy protection on March 11. The D&O charge is designed to provide financial protection to directors against claims, and ensure key executives are retained through the bankruptcy protection process.

Court monitor RSM Richter Inc. “states that it is important that the D&O charge be maintained in order to secure the co-operation of Michel Leblanc in the restructuring efforts and in the orderly disposal of the assets,” the judge wrote.

Richter noted that Jetsgo has a $10-million liability insurance policy in place until July 9 that covers directors and officers.

Mr. Leblanc is listed as Jetsgo's lone director. He owns 90 per cent of Jetsgo while the Fidelity family of funds invested $25-million to hold a 10-per-cent stake.

Mr. Leblanc submitted a timetable to the court on Monday, outlining his strategy of resurrecting Jetsgo as a charter airline. Mr. Leblanc said that after meeting this week with tour operators, he plans to negotiate next week with lessors of the Boeing MD-83s and hopes to retain at least eight of the planes in a scaled-down operation.

An industry source said last week that Jetsgo's revival options include targeting sun destinations and also providing seasonal service to Atlantic cities such as Charlottetown.

But Calgary-based WestJet Airlines Ltd. announced this week that it will add Charlottetown to its flight schedule June 28 to Sept. 15.

“That's a total coincidence because we just happened to be in discussions with Prince Edward Island, and we were able to come up with a good operating model that allows us to go there for the summer,” Sean Durfy, WestJet executive vice-president of marketing and sales, said yesterday.