Canada Jetlines sues WestJet co-founder Neeleman over damaging interference

Canada Jetlines sues WestJet co-founder Neeleman over damaging interference

Canada Jetlines Ltd. says it is suing WestJet Airlines co-founder David Neeleman in the United States for allegedly interfering in the fledgling discount carrier’s efforts to get off the ground.

Executive chairman Mark Morabito said it launched legal proceedings in the U.S. district court in Connecticut against Neeleman, DGN Corp. and Breeze Aviation Group, for “tortious interference with business expectancy and violation of the Connecticut Unfair Trade Practices Act.”

In a statement of claim, it alleges Neeleman and his affiliates embarked on “a predatory scheme” to destroy the relationship between Jetlines and an international investment bank that ultimately terminated its help in raising new capital to start the airline.

It claims the defendants induced Jetlines CEO Lukas Johnson to participate in secret communications and meetings in order to lure him away to help Neeleman’s own new airline venture called Moxy, which is to be owned and operated by Breeze Aviation. The allegations have not been proven in court and Neeleman couldn’t be immediately reached for comment.

Jetlines said Johnson misled it and the bank about his commitment to the airline, its financing effort and launch and then resigned on Aug. 27, 2018, just as it was poised to approach prospective investors.

“Defendants conspired with Johnson to mislead Jetlines and the bank into believing that Johnson was fully committed to Jetlines’ future and to seeing its financing effort and operational launch through to their conclusion, even as defendants were working secretly with Johnson to engineer his departure at the point in time most likely to injure Jetlines,” said the court filing.

“Neeleman’s overriding purpose in that deception was to derail Jetlines’ relationship with the bank and thereby to delay and hinder Jetlines from obtaining new financing and commencing operations as a Canadian ULCC. In that, he succeeded.”

Johnson’s departure prompted the bank to immediately suspend efforts to get new financing for Jetlines, saying Johnson’s departure was a big blow to the company that may not be overcome. It terminated its support on Dec. 8, 2018.

“Neeleman’s intentional interference with Jetlines’ relationships with Johnson and the bank has caused substantial damage to Jetlines. Among other things, Jetlines’ reputation in the airline and financial industries, and with prospective investors was injured.”

The company said its inability to obtain crucial financings forced it to terminate aircraft leases, causing it to lose US$2.2 million in non-refundable deposits.

Vancouver-based Canada Jetlines announced last month that it was postponing its planned December launch and laying off most employees after failing to secure $40 million in required financing and losing investment partners.

The company has also said it has been difficult to engage investors because they believe WestJet Airlines, which owns discount carrier Swoop, will “react very aggressively once the company starts operations, and in fact have already done so in anticipation of Jetlines entry into the market.”

Canada Jetlines says a market analysis it retained has found evidence that Swoop is pricing significantly lower than other discount carriers and below avoidable costs on the routes identified by a Competition Bureau investigation.

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