[SOLVED] The discount airline Jetsgo Corporation began

The discount airline Jetsgo Corporation began operations in June 2002. Within two and a half years, it grew to become Canada’s third-largest airline, moving approximately 17,000 passengers per day on its fleet of twenty-nine airplanes, fifteen of which were company-owned Fokker F100s. With 1,200 employees, the company serviced twenty locations in Canada, a dozen in the Caribbean, and ten in the United States.
Jetsgo was a private company owned by Michel Leblanc. Leblanc had lived his life around airplanes. His father owned a flight school; he learned to fly at age sixteen. In his twenties, he was an aircraft salesman; in 1978,heco-ownedaneleven-airplaneforest- spraying business. From 1985 to 1990, he was a partner in Intair a regional airline in Quebec. In 1991, he and a new partner started Royal Aviation Inc., which he sold in 2001 for $84 million in stock to Canada 3000. Although he was subsequently sued by Canada 3000 for providing inaccurate financial information, the case was never tried because Canada 3000 went into bank- ruptcy protection in November 2001.
In June 2002, he launched Jetsgo. On Friday March 11, 2005, just before the busy spring-break travel week, Jetsgo entered bankruptcy protection, stranding thousands of passengers who could not return home and annoying those who could not leave on their spring-break holiday.
Throughout its short life, Jetsgo was plagued with both financial and mainte- nance problems. Leblanc kept operating costs low by doing the following:
• Paying low wages
• Making pilots pay for their own training
• Leasing old aircraft
• Minimizing spare parts inventory by flying only two types of airplanes: the McDonald Douglas MD-83 and the Fokker F100
• Promoting ticket sales through the Internet
Despite these cost saving moves, the company still had financial and maintenance problems. From 2002 to 2005, it filed a total of sixty incident reports with Transportation Canada. These included the following:
• Three months after it began operations, a plane had to make an emergency land- ing in Toronto because of a hydraulic fuel leak.
• In January 2004, smoke filled the passenger cabin of one plane due to a hydraulic fuel leak.
• In April 2004, a plane made an emergency landing in Winnipeg because of a clogged engine oil filter.
• In December 2004, a plane heading to Mexico had to return to Toronto after flames were seen coming out of an engine.
• In January 2005, a plane, landing in poor weather, slid off the runway in Calgary, hitting a runway sign before taking off again.
• In March 2005, a plane made an emergency landing in Columbia, South Carolina, because of incorrect oil pressure in an engine. It was the second such emergency landing for the plane due to oil pressures problems.
In November 2002, Transport Canada inspectors found twenty-three nonconformance items with the airline. In February 2005, Transportation Canada placed restrictions on Jetsgo and on March 8 said that operations would be suspended on April 9 if the maintenance problems were not fixed. Three days later, on March 11, the company ceased operations.
The company also had financial and cash flow problems. In the first three months of 2005, it lost $22 million. It fell behind in its payment to NAV Canada, which operates Canada’s air traffic control system. On March 7, 2005, Jetsgo had to write a certified check to NAV Canada for $1.25 million—a “hostage payment” according to Leblanc—to forestall NAV Canada from seizing some of the company’s planes. After it declared bankruptcy, Jetsgo was sued by NAV Canada for an additional $1.6 mil- lion for unpaid navigation services and $5.5 million by the Greater Toronto Air- port Authority for unpaid airport improvement fees, landing fees, terminal fees, and parking fees. Eight of the company’s leased aircraft were left in Toronto on March 11, while all of the company-owned Fokkers were flown to Quebec City and parked in a company-leased hangar.
Leblanc decided to close down operations commencing at midnight on Thurs- day, March 10, but would not make a public announcement until Friday. Meanwhile, he left the online booking system open. Also, on Thursday, supervisors told thirteen pilots to fly their Fokker airplanes to Quebec City for maintenance checks. Leblanc subsequently said that the “white lie” told to the pilots was justified so that all the company-owned aircraft could be kept safely in Quebec City. Leblanc felt it was bet- ter to have all the planes in one place, where they could be guarded, rather than be left at various airports across the country. “It was a white lie, but a necessary lie. You can’t tell them, or the job won’t get done. Half of them would have refused. The objective would not have been fulfilled and we would have had airplanes all over the damn place today and the estate of Jetsgo would not be protected.” The other two company-owned Fokkers were later moved to Quebec City.
The pilots and other employees were then phoned on Friday beginning at 12:30 a.m., waking many from their sleep, and told that the company was bankrupt and that they should stay away from the airports. Customers who arrived at the airports on Friday were abruptly told that operations had been shut down. Although he expressed regret that people’s travel plans had been ruined, especially before the popular spring break, and that there were many stranded passengers across North America, Leblanc was pleased that there was no unruly behavior. “Okay, on Friday morning, there were people who didn’t fly,” he said. “But did you see any air- port riots? Did you see 2,000 people in the terminal punching Jetsgo employees? No.” Afterward, Leblanc blamed NAV Canada and unfair competition from WestJet Airlines for causing him to close down his airline.
The stranded passengers had to make alternative arrangements to get home; some had to buy tickets on other airlines. West- Jet Airlines offered $35 standby fares to the stranded pilots, flight attendants, and maintenance personnel. Some travel agencies pro- vided refunds to their clients, and the Royal Bank said that anyone who booked a ticket online using a Royal Bank Visa card would be reimbursed by the bank. Nevertheless, critics have said that it was callous of Leblanc to have left the online reservation system open on Thursday when he knew that the reservations made that day would never be honored.
Questions
1. For many organizations, bankruptcy protection is just another operational and financial strategy. Discuss the ethical aspects of intentionally remaining silent, collecting money, and then suddenly announcing that the company is bankrupt.
2. Do you accept that the little “white lie” told to the pilots was justifiable?
3. Was it operationally wise for Jetsgo to keep the online reservation system open until the company officially declared bankruptcy? Was it an ethically correct or incorrect decision?
4. Should Leblanc have waited until the busy spring-break holiday period was over to then close down operations?

Question: The discount airline Jetsgo Corporation began