Skyservice has struggled with debt after being purchased three years ago in a leveraged buyout by private equity firm Gibralt Capital Corp. of Vancouver. The airline faced an “excess capacity” - essentially empty seats on its aircraft - as consumers cut back on vacations during the recession. It had been attempting to negotiate cost-cutting measure with its employees but was not able to reach a deal.

Travel Industry Today was told that the carrier had an $8.6 million loan called by the bank in February. That debt was apparently taken over by Thomas Cook and came due March 30.  

Skyservice had told Thomas Cook that it might not be able to both continue operations and pay the $8.6 million of debt on Tuesday, according to court documents filed Wednesday.

On Wednesday morning, Thomas Cook petitioned the courts to put the company into receivership.

Sunquest had booked more than 165,000 seats on Skyservice between February and April.

Sunquest spokesman John Lute said the company took on the debt to protect passengers from an operational disruption at the airline.

``They were hoping to do what they could to keep Skyservice flying and they took on that debt, which basically got Skyservice time.'' Said Lute.

Concerns were raised earlier this year about whether the airline could maintain its business with key customer Signature Tours, after it merged with Skyservice competitor Sunwing earlier this year giving Signature its own flying capability.

Skyservice says it will work with the company's tour operator customers and other lift providers to ensure that passenger issues are resolved promptly.

In a media release outlining the situation Sunquest said, the only Sunquest flights affected by the Skyservice shut-down originate in Toronto or Winnipeg, and represent less than a third of the remaining flights for Sunquest’s winter programme which ends April 30.

No flights were scheduled for today and replacement flights for the coming days have been arranged with other carriers, principally Air Transat and Enerjet.

“We are focused on minimizing disruption to our customers, not only those currently at their destination but also those scheduled to travel over the coming days and weeks,” said Michael Friisdahl, chief executive officer, Thomas Cook North America.

“The loss of Skyservice is regrettable for us and the Canadian travel industry,” Friisdahl said.

Apparently other tour operators using Skyservice for lift were advised only Wednesday morning of the situation.

Sunwing Vacations had contracted a small number of seats on eight flights in April from Skyservice.

Currently they are finalising arrangements to protect customers on those flights, and suggest checking the tour operators website directly where information regarding the new arrangements will be posted as soon as it becomes available.

TICO said Skyservice is an airline and as such, not registered with TICO. However, there is consumer protection available under the Ontario Travel Industry Act, 2002.

Registered Ontario tour operators (travel wholesalers) who packaged Skyservice flights or sold air only with Skyservice are required under the legislation to provide alternate replacement travel services or a full refund to the customer

Since 1995, Skyservice has operated aircraft for Canadian tour operators between Canada and destinations in the Caribbean and Mexico.