High oil price helped bring Scottish brothers� dream to an end
By Kenny Kemp

The flight path from Zoom to doom was an accelerated one. The rapid collapse of the Canadian-registered airline, owned by Scottish brothers John and Hugh Boyle, has resulted in misery and anger for thousands of holidaymakers.

Many Scots hit by the collapse have been returning home this weekend after finding alternative routes on scheduled airlines - often on flights costing hundreds of pounds more than they expected. Former Zoom customers have even accused the other carriers of making money out of the misfortune, with some flights costing £2500 for a single transatlantic fare.

While the collapse of Zoom highlights the precarious situation of some smaller low-cost airlines in the face of high oil prices and the credit crunch, airline industry insiders are surprised that Zoom went bust during the holiday season when revenues were highest.

Question marks have been raised over why it happened so quickly and without warning. And it also raises serious issues for the Scottish government's Homecoming in 2009, which was relying on thousands of Canadians heading to Scotland on Zoom flights to find their roots and renew family connections.

The Sunday Herald has discovered there were tell-tale signs that the airline was in financial trouble. The domino effect meant that once the creditors lost faith in the airline, it was only a short time before Zoom's ultimate failure.

Zoom owes its creditors in excess of £60 million, according to a list filed with the Office of Superintendent of Bankruptcy Canada. The debt includes £40m in "deferred revenue", which normally refers to money taken in advanced ticket sales but not yet paid out to creditors.

"The company is in the process of determining its next course of action in its reorganisation," according to filings. "At this time it is uncertain whether or not any flights will be resumed or the status of any refunds due passengers who have pre-paid flights."

The filings show that Zoom owed £1m to the operator of Pearson International Airport, £2m to the International Lease Finance Corporation, the world's largest aircraft leasing organisation, and £750,000 to Imperial Oil for aviation fuel, among others. In February, Zoom took delivery of a Boeing 757-200ER plane on a 56 month lease.

"We have done everything we can to support the airline and left no stone unturned to secure a refinancing package that would have kept our aircraft flying," Zoom co-founders Hugh and John Boyle said in their statement.

"Even as late as Wednesday hours before collapse on Thursday we had secured a new investment package, but the actions of creditors meant we could not continue flying." Hugh Boyle also said that he believed the majority of the 40,000 passengers affected by the collapse would get their money back.

But the die was cast for the Boyle brothers and their team when decisions were taken over the last 18 months to expand.

Zoom launched flights from London Gatwick to San Diego only two months ago, several years after BA pulled out. Airport officials there wooed the airline with about $300,000 in financial incentives, beating San Francisco and Seattle. Early this year Zoom started flying from Canada to Italy. Insiders say this was an extremely high-risk strategy in the current economic situation. Most airlines have been hedging the price of fuel as it has increased to $130 a barrel, but Zoom has not been able to hedge enough to keep its costs down.

At the start of last week Zoom was in difficulty. It had clocked up an outstanding bill of $400,000 at Calgary airport alone. When the pilots went to refuel their aircraft, the authorities refused to give them credit. From this point on it was difficult for the airline to move.

The Boyle brothers had been working to refinance the business to give them the cash to see them through until next year but their bankers, Bank of Scotland, are also facing tougher times and weren't convinced that it was a good bet.

But what has upset stranded passengers is the abysmal line of communications after the collapse of the airline. Canadian daily newspaper the Globe and Mail reported that an Edinburgh-based designer was the first to know. Xander Forsyth was one of 200 passengers packed into a room at the Halifax airport, where they were given little information. The paper said: "Mr Forsyth finally pulled out his iPhone and tapped the word Zoom into Google. And there it was - news that the budget carrier's entire fleet had been grounded over non-payment of fees. "With a slight fear of being tackled by police I hopped on the highest counter I could see and shouted out the news," the designer said.