National Post (National Edition)
Montreal’s FlightHub owes over $19 million to creditors
‘Robust’ restructure plan in place
Travel site FlightHub owes over $19 million to creditors including Google, Bell and several Canadian tech companies.
Quebec’s Superior Court has ordered the Montreal-based company to contact creditors and provide them with a process to seek payment as part of an ongoing restructuring process.
“Our management team and external advisers have devised a robust plan to restructure our company over the next 3-6 months and we anticipate emerging from the process stronger than before,” reads a letter sent by FlightHub COO Christopher Cave to creditors, adding that the firm’s operations will stay unaffected and it will continue to bring in new sales.
In May, The Logic reported that FlightHub, which sells discount flights, hotel rooms and cruises, had been granted creditor protection and owed about $36 million to two numbered companies on which its executives are directors. The $19 million-plus in debt, which FlightHub owes to 115 groups, is separate. It includes almost $5.7 million owed to Google, about $856,000 to Montreal firm Voyages à La Carte and just under $228,000 to Bell.
Canadian tech companies, including Montreal-based Nuvei, Mississauga-based Applied Electronics and Montreal-based Fibrenoire are also listed as creditors. FlightHub declined to make an executive available for an interview or directly respond to a list of emailed questions, including how much money its creditors were requesting or how it intends to emerge from creditor protection as a viable firm.
“We are not able to provide any additional information at this point regarding the restructuring process beyond what is publicly available in court records,” said communications director Melanie Tabet.
The firm’s difficulties extend beyond the money it owes. FlightHub’s lawyers said it’s being “harassed” by the City of San Francisco, attorneys for which appeared in front of the United States Bankruptcy Court in the District of Delaware on June 17 to ask for the right to continue its lawsuit against the company for allegedly “swindling its customers for years” using deceptive marketing practices.
FlightHub succeeded in getting a stay on that lawsuit until Aug. 1, but San Francisco is looking for damages of US$2,500 per violation. As FlightHub’s lawyers put it at the hearing seeking to block the lawsuit, “This is serious. This is a question of whether my client is able to restructure in bankruptcy or if they end up liquidating.”
FlightHub operates under the name JustFly in the United States. Asked if San Francisco intends to continue its lawsuit once the company’s restructuring is completed, Meiling Bedard, a spokesperson for City Attorney Dennis Herrera, said that the bankruptcy proceedings “had the unfortunate effect of staying our litigation while the bankruptcy plays out.”
FlightHub was the first Canadian tech company during the pandemic to be granted protection under the Companies’ Creditors Arrangement Act (CCAA), a federal law allowing firms that owe over $5 million to restructure. It’s since been joined by semiconductor developer Peraso Technologies and 18 other non-tech firms.
The federal Competition Bureau is also investigating FlightHub for allegedly engaging in deceptive marketing practices. “The Competition Bureau’s investigation into Flighthub’s marketing practices is ongoing” throughout the CCAA proceedings, said spokesperson Marie-Christine Vézina. The U.S. Department of Transportation is also investigating FlightHub.
At the June 17 hearing, the City of San Francisco’s lawyers said FlightHub has “been willing to carve out the Department of Transportation for purposes of the regulation, up to and including any penalties that may be imposed, save the enforcement of that judgment. And we don’t understand and we don’t believe that the People of the State of California should be treated any differently in this case.” The Department of Transportation declined to comment.
On June 19, the Superior Court of Quebec ordered that FlightHub could continue processing chargebacks from credit-card companies, despite the fact that its creditor protection allows it to not return money to customers. Chargebacks have become a major source of tension for airlines, as many companies offer consumers credits for future travel in lieu of refunds. Air Canada alone had $2.6 billion in “prepaid passenger income” as of the end of March. FlightHub did not respond to questions about how much money it has processed under chargebacks.
In addition to its regulatory challenges and debt, FlightHub was facing financial difficulty prior to the pandemic. The company brought in as much as $250 million in annual revenue between 2017 and 2019, but its net earnings decreased from $18.5 million to $10.9 million over that same period. For the five months ended Dec. 31, 2019, FlightHub posted a net loss of $4.2 million on $84 million in revenue. It’s not the only Canadian travel-tech company facing challenges. In April, The Logic reported that airline-ticket-purchasing app Hopper made “significant” layoffs.