The Ode: Skyservice Airlines (1994 - 2010)

It hung on longer than many, but what goes around eventually comes around in the vicious eat-or-be-eaten world of Canadian charter airlines.

Born to aviation entrepreneur Russell Payson in 1994, Skyservice Airlines survived longer than most in the treacherous charter industry, where you either feast on the carcass of your enemies or find yourself being eaten. Betrayal by a crucial business partner cast it to the wolves.

Sky Service FBO, an air ambulance and corporate jet service Payson founded in 1986, was built on the bankrupt remains of a firm he’d been involved in years earlier. He started the charter airline by leasing a pair of Airbus A320s during the winter and flying to sunny destinations for Sunquest Vacations. By offering a passenger experience superior to many of its competitors, Skyservice won business from Conquest Vacations and Signature Vacations. It flew to destinations in Canada, the U.S., Mexico, the Caribbean and Europe. “We have at any one time in this country six to eight charter airlines,” says independent airline analyst Rick Erickson. “There’s always one or two new entrants … eight to 10 years is about as long as most of them last.”

Tempted by the more profitable — and risky — scheduled business, Payson raised $35 million in 2000 and attempted to start an offshoot luxury airline for business passengers. Modelled after Richard Branson’s Virgin AtlanticAirways, Roots Air crew members wore uniforms provided by the Roots apparel company, which also furnished the lounges. It lasted just 39 days. Exhibiting an optimism common among aviation executives, Payson told the Canadian Press afterward: “Things have never looked better.”

Indeed, Skyservice’s growth continued, aided by its competitors’ excesses. After Canada 3000 (briefly Canada’s second-largest airline) collapsed in 2001, Skyservice deftly seized its business with Conquest.

Though Payson hoped for an initial public offering, he never quite managed it. Finally an escape route materialized in 2007, when Vancouver-based private-equity firm Gibralt Capital Corp. bought Skyservice for an undisclosed price. Gibralt deemed the company “well positioned to take advantage of numerous opportunities for expansion.” Payson, who kept his ambulance and corporate jet business, soon departed.

It was all turbulence from there. Air Canada and WestJet, Canada’s two largest airlines, muscled into the packaged tour market. With Transat AT, Skyservice, Canjet, Zoom Airlines and others already jostling for market share, things got crowded. Then the recession sent travellers packing, prompting massive dicounts. Zoom succumbed during the summer of 2008, but while Skyservice laid off employees, no amount of belt-tightening could eliminate its dependence on tour operators, which were also struggling. Conquest folded in April 2009. And then, last September, Signature Vacations merged with a competitor, Sunwing Vacations. Sunwing had its own charter airline; it only made sense that Signature would move its business to Sunwing’s 14 Boeing 737s once its contract with Skyservice expired in 2013, maybe sooner. Signature accounted for half of Skyservice’s business.

Its only other customer, Thomas Cook (Sunquest’s owner), provided breathing room by buying out its anxious lenders. But Skyservice was unable to find replacement customers — there simply weren’t any. Defeated, its directors and executives resigned on March 29, and its creditors tipped the company into receivership. More than 1,000 employees lost their jobs. “This is another flameout in the Canadian charter industry,” says Erickson with a shrug. “There will be more. And new entrants will show up.” Jazz Air feasted on the carcass, winning a two-year contract with Sunquest.