Jetsgo lost $55 million in the eight months before it abruptly shut down on Friday, stranding thousands of passengers and leaving its own 1,200 staff suddenly unemployed, court documents reveal.

The privately-owned Montreal discount airline lost $22 million between Jan. 1 and Feb. 28, according to the documents filed in Quebec Superior Court.

Karly Gaffney, 22, left, from Toronto, Canada and Bethany Lopez, 22, right, from Hamilton, Ont., stranded at the Los Angeles International Airport after Jetsgo shut down operations. (AP Photo)
Karly Gaffney, 22, left, from Toronto, Canada and Bethany Lopez, 22, right, from Hamilton, Ont., stranded at the Los Angeles International Airport after Jetsgo shut down operations. (AP Photo)

The company's president and majority owner, Michel Leblanc, said in the documents that "attacks" by competitor WestJet Airlines helped force Jetsgo to seek bankruptcy protection on Friday.

Jetsgo – Canada's third-largest airline with up to 10 per cent of the domestic airline market – was granted protection from its creditors until April 11.

Transport Minister Jean Lapierre told the House that the government wouldn't offer financial aid to Jetsgo ticketholders.
Transport Minister Jean Lapierre told the House that the government wouldn't offer financial aid to Jetsgo ticketholders.

"We deeply regret that this had to happen," Leblanc said in a statement issued earlier in the day.

"The decision to cease operations was only taken after difficult deliberation. We are very concerned about our customers and the significant hardship that this action causes."

But that's not how it felt to many of the estimated 17,000 passengers left with useless Jetsgo tickets after the company cancelled all its flights without warning.

Other airlines announced they would increase the number of available seats to accommodate the additional demand.

MasterCard Canada, Visa Canada and American Express have all said they will reimburse passengers who bought their tickets with their credit cards.

Some passengers may get their money refunded if:

  • They bought their ticket through a travel agency in Ontario, British Columbia or Quebec, which have compensation funds.
  • They used a credit card that offers travel insurance.

No federal refunds for Jetsgo tickets

Transport Minister Jean Lapierre said Friday that the federal government can do little to help passengers holding worthless Jetsgo tickets.

He said there would be no federal refunds for the tickets, but offered his sympathies to stranded passengers, many of them families starting March break. "There's not a taxpayers' cent that is going to get involved in this," Lapierre told reporters.

Prime Minister Paul Martin had little to add, calling the situation "very regrettable."

Jetsgo blames WestJet, alleging espionage

In its court filing Friday, Jetsgo said it was doing well until rival WestJet allegedly got into its computers in 2003. Jetsgo filed a $50-million suit against WestJet for corporate espionage last fall.

It also said WestJet's move from Hamilton airport to Toronto's Pearson airport had "a devastating effect."

However, Jetsgo had faced a number of problems during the past few months, including a severe winter storm over the Christmas holidays that forced it to cancel dozens of flights.

There were also mechanical issues, including a jet veering off the runway in Calgary and engine problems in Toronto.

Others blame management, deregulation

Analysts blamed poor management for the bankruptcy.

"Basically, Jetsgo embarked on a business strategy that was irrational," University of Toronto business professor Joseph D'Cruz told CBC Newsworld.

"It tried to grow by using fares that were below its cost of operation ... and so essentially it ran out of cash because of that."

Others blamed the fiasco on the federal government's policy of deregulation.

"The failure of Jetsgo is proof yet again that deregulation isn't working and that our airline industry is anything but stable," said Dave Ritchie, a vice-president of the International Association of Machinists and Aerospace Workers.

Leblanc founded the company in June 2002 from the ashes of Canada 3000 Inc., which collapsed after the Sept. 11 terrorist attacks caused a downturn in air travel.

Jetsgo had 29 aircraft flying to 20 destinations in Canada and nine in the United States and the Caribbean.

The company RSM Richter Inc. is acting as monitor during the bankruptcy.

Transport Canada warning issued

Lapierre said the shutdown had nothing to do with a 30-day directive his department issued to the discount carrier on Thursday, warning it to fix a series of problems. The airline had been told it would lose its operating certificate unless it complied with the order.

Lapierre said the problems his department was concerned about were such things as an emergency manual that had not been updated and incorrect emergency phone numbers.

"There were some safety concerns," he said, but none of the concerns would have caused the department to ground the airline before the 30-day period.

"There was no reason to prevent the company from flying. If there were any technical problems, I assure you, that company wouldn't be flying," he said.