NewLeaf faced with lawsuit, dire predictions ahead of take-off
Documents obtained by Global News raise more questions about the finances of NewLeaf, a new company offering Canadian travelers ultra low-cost airfares.
Winnipeg-based NewLeaf plans to begin flights next week, using a network of 11 secondary airports
But, a growing number of critics and former contractors wonder if the company is a gamble for consumers.
Marketing consultant Hessie Jones, who told Global News NewLeaf owes her $76,000, is now suing the travel company and its president, Jim Young.
And there are new details about an allegation from a second consultant, who said he invoiced for more than $55,000.
In an email from February, obtained by Global News, Young told the consultant, “My intention is to pay you once we have closed on the capital.”
That reference to raising money follows another email, to two supporters, in January.
In that email, Young referred to “… a $250,000 investor…who walked away from the table.”
Management analyst Joe D’Cruz, of the University of Toronto’s Rotman School of Management, suggested the new information is troublesome.
“It suggests the company is very thinly-funded,” he said.
D’Cruz called NewLeaf a “shoestring effort” and gives it less than a 25 per cent chance of succeeding beyond a year.
NewLeaf executive Dean Dacko declined to comment on the lawsuit and claims of a second unpaid contractor.
But, Dacko insisted no financing has fallen through and that NewLeaf has raised more than enough money.
And that might be true because the company is only a seller of tickets.
As such, it’s not forced to show cash reserves to regulators up front, the way full-fledged airlines are.
Still, the head of another discount start-up said deep pockets are crucial.
“Aircraft, mechanically, fail,” noted Jim Scott of Vancouver-based Canada Jetlines. “[There are] weather delays, you have to be able to take care of those passengers — and that costs a lot of money to take care of passengers when you’re starting up.”
NewLeaf is advertising even lower airfares for its’ first week of operation than originally posted. Dacko called it “an additional incentive for people to join us.”
Analysts say losses could accumulate in a hurry because there’s a built-in disadvantage from Boeing 737 jets.
The large jets are used by the company that will crew and fly the planes for NewLeaf, Flair Airlines.
Boeing 737’s are less fuel-efficient than the smaller planes that are flown by competitors like Porter Airlines.
NewLeaf also has limited travel routes, with no direct flights between large cities.
But with just a few days remaining before the scheduled launch date, July 25, Kelowna International Airport said it still hasn’t finalized arrangements with NewLeaf for things like financial deposits on landing fees. Airport director Sam Samaddar said NewLeaf promised it would deliver the deposit payment by Thursday.
© 2016 Global News, a division of Corus Entertainment Inc.