Maintenance and Manufacturing Staff Instructions (MSI) No. 5

Subject: Number: MSI 5
Air Operator Mergers Revision No: 0
  Number of Pages:  
File No:  AARP-5009-3-5 Issue Date: 97-05-20

1. Purpose

1.1   To provide guidance to regional personnel, enabling the continuance of existing privileges during air operator organizational changes.

2. Background

2.1 Air operators may need to respond to market forces through  mergers, takeovers or similar organizational changes. While the eligibility for continuation of Transport Canada approvals is not automatic, the economic viability of an organization can depend upon continuance of existing approvals during organizational changes.

2.2 The continuance of approvals and the eventual establishment of additional approvals requires co-ordination within Transport Canada and may involve several Regions and Headquarters involvement. The geographic locations of the organizations involved and the nature and extent of approvals and delegations held by the company or companies will determine the extent of Transport Canada involvement.

2.3 Changes to company infrastructure affecting company approvals and delegations may be expected during:

  1. Changes to the organization responsible for operational control;
  2. Changes in nature and function of business (introduction of charter operation, operation of lease aircraft, contract maintenance, etc.); and
  3. Changes in aircraft, equipment and facilities.

3. Definitions

3.1  Controlling Certificate Holder  - refers to the air operator who will emerge as the surviving entity following the merger; and who will be issued the new Air Operator Certificate.

3.2  Principal Maintenance Inspector  (PMI) - refers to the Airworthiness Inspector responsible for the airworthiness surveillance of a particular air operator.

4. Notification of Proposed Merger

4.1  PMIs, through their contacts with affected air operators, shall verify all merger reports obtained from media sources. The controlling certificate holder should be advised of the necessity to formally notify Transport Canada as soon as merger plans have been formulated.

4.2   PMIs should be aware that merging air operators may incorporate immediate changes that could invalidate the conditions specified in their Air Operator Certificates. These changes could possibly happen prior to formal notification to Transport Canada. This may occur where a small air operator is merging with a large air operator and is not fully aware of the requirements of CAR 706. Examples of such changes include the elimination of key maintenance personnel or the introduction of unapproved maintenance schedules.

4.3  As soon as PMIs become aware of organizational change proposals, the Director, Maintenance and Manufacturing shall be notified and the internal coordination process will be initiated to provide affected parties with the opportunity to declare an interest.

5.  Procedure for Handling Mergers

5.1  Mergers involving air operators that are geographically located within one given Region will be handled by the assigned PMIs within that Region. Mergers involving air operators from more than one Region or those for which the Chief, Airline Inspection Division is the OPI, will be coordinated with the Director, Maintenance and Manufacturing.

5.2   Mergers or organizational changes involving companies holding engineering delegations shall be coordinated with the responsible Regional Airworthiness Engineer (RAE). Where two or more Regions are involved or where the changes affect the basis for engineering delegations, the Chief, Programs Division shall be informed.

5.3   Following notification of the proposed merger, the responsible Region or the Director, Maintenance and Manufacturing, as applicable, will  establish lines of communication between affected Regions and assigned PMIs, and coordinate with the Chief, Airline Inspection Division to determine the identity of the controlling certificate holder and the location of the main base of operations;

5.4  The responsible Region shall assign the necessary PMIs, and brief the controlling certificate holder, to ensure that applicable regulatory requirements are incorporated prior to finalizing the program.

Note:  Confirmation should be obtained from the controlling certificate holder that all merger information will be kept current.

6. Transition Plans

6.1  Surveillance of company operations is especially important during the transition phase. A transition plan must be submitted for prior approval by Transport Canada. The controlling certificate holder shall be requested to provide a transition plan that will identify changes to those programs that will require approval e.g., operations specifications, maintenance schedules, inspection and training programs, manuals, minimum equipment lists, record keeping systems and personnel qualification programs.

6.2  The transition plan should provide the details of how and when operations specifications, maintenance schedules, training programs, manuals, record keeping systems and key maintenance personnel responsibilities will be merged.

6.3  Each air operator must continue to operate in accordance with its current Transport Canada approval until a new approval is granted for the programs identified in the transition plan.

6.4   The following or similar maintenance related information should be included in the air operator's transition plan:

  1. The appointment of a company maintenance representative responsible for the transmission of merger related information to Transport Canada;
  2. The maintenance schedules to be used and any interim procedures associated with the amalgamation of these schedules, including the completion of any Supplemental Structural Inspection Document items;
  3. Interim procedures to be used for training to ensure that maintenance personnel remain qualified, including changes to training programs, retention of training records and the scheduling of training in the integrated program;
  4. Procedures for the completion of existing and proposed engineering activity either delegated or autonomous;
  5. Interim procedures for technical records and planned changes for integration of record keeping systems;
  6. Procedures for the integration of maintenance control manuals (MCM), aircraft maintenance manuals, minimum equipment lists and any other maintenance related manuals;
  7. Changes of responsibility for reliability programs, maintenance agreements, evaluation programs etc.;
  8. Changes to maintenance facilities and equipment. (i.e. establishment of alternate bases of operation);
  9. Procedures for the combining of parts and material inventories and component certification; and
  10. Changes relating to the phasing of aircraft into the Controlling Certificate Holder's maintenance program.

7.  Transition Plan Review

7.1   A complete review of the transition plan shall be conducted following submission of the plan. The review shall ensure that the plan:

  1. outlines a logical sequence of events; e.g., approval of modified operations must occur prior to their use;
  2. provides for continued compliance with the Canadian Aviation Regulations and associated standards; and
  3. provides reasonable target dates and ensures that upon completion of the activity, all superseded material will be removed; e.g., following approval of the new MCM, the old MCM will be removed from service.

7.2   Sufficient airworthiness staff shall be assigned to monitor the implementation of the transition plan.

7.3  Following the review, the controlling certificate holder shall be advised of the transition plan acceptability. Necessary meetings should be arranged to resolve any problem areas. If problem areas cannot be resolved, the controlling certificate holder shall be formally notified of the unacceptability of the transition plan, this notification will specify any unacceptable items.

7.4  Should the controlling certificate holder be unwilling to submit a transition plan or resolve any disputed areas of a transition plan, the assigned PMIs shall increase surveillance of the respective air operators. If non compliance is discovered, standard auditing and enforcement procedures will apply.

7.5   Copies of the transition plan (including amendments) will be distributed to all airworthiness personnel directly involved with the merger process. Following a satisfactory completion of the transition plan, the approvals sought by the controlling certificate holder will be issued in the normal manner. These may include but are not limited to the Air Operator Certificate, operation and maintenance specifications, MCM, operations manual, minimum equipment lists, contract agreements, training programs, personnel qualifications, etc.

8.  Post Merger Audit

8.1  Following a satisfactory completion of the merger, an initial audit of the new air operator will be conducted. A reasonable time period (6 months) should be allowed to give the new air operator an opportunity to resolve any post merger problems. Frequency of subsequent audits will be conducted in accordance with the Manual of Regulatory Audits.

9.  Effective Date

9.1  This instruction comes into effect 20 June, 1997.

10.   HQ Contact

10.1  The responsible officer indicated below may be contacted for information regarding this MSI:

R. Rose, AARPC
Aircraft Maintenance & Manufacturing Branch
Phone: (613) 952-4375
Facsimile (613) 952-3298

D.B. Sherritt
Acting Director, Maintenance and Manufacturing