Tuesday, March 15, 2005

Crash And Burn, Stet And Repeat

Last week's sudden demise of discount airline Jetsgo took almost everyone by surprise, from employees left jobless to passengers left stranded.

Those who know Jetsgo's founder, Michel Leblanc, probably were not.

As Katherine Macklem points out in her Maclean's article:

Leblanc's aviation career took off in 1986, when he and two partners took over Quebecair, which had been put on the block by the Quebec government. Canadian Airlines (taken over later by Air Canada in 2000) bought a 31 per cent share in the regional carrier, but refused to go along with a scheme to expand into the Toronto-Montreal corridor. Leblanc and his partners then bought Canadian out, moved into that highly coveted market, and in 1991, drove the 1,000-employee airline to near collapse. He resigned.

Within the year, though, Leblanc was back. He launched Royal Aviation Inc. as a charter for vacation travellers. It grew quickly in the high-flying '90s, and in the spring of 2001, was sold to Canada 3000, another now-defunct airline. That deal included $84 million in shares for Leblanc and made him vice-chairman, a job he didn't hold long. Just months later, Leblanc was fired and sued by Canada 3000 for inaccurate profit projections. The allegations against Leblanc were never proven in court.

Never proven, because the lawsuit died with Canada 3000, and Leblanc used profits from the sale of his Canada 3000 shares to finance Jetsgo, of which he owned 90% of the shares when it went bust.

Without them, he might never have been able to gets Jetsgo off the ground. What knowledgable investor, seeing the airline industry tanking after September 11, would have invested one cent of equity in a new airline run by a man who crashed three of them in 10 years?

No comments: