Flair Airlines preliminary decision by the Canadian Transportation Agency regarding ownership control
LOCATION: National
ISSUE/SOURCE: Flair Airlines - Preliminary decision from the Canadian Transportation Agency regarding control in fact.
DATE: May 2022
SUGGESTED RESPONSES
- Under the Canada Transportation Act, air carriers must be majority owned and controlled in fact by Canadians to maintain a licence to provide domestic air service.
- On March 2, 2022, the Canadian Transportation Agency (Agency) issued their preliminary determination that Flair Airlines does not meet these requirements and gave the carrier 60 days to respond to its concerns.
- Following Flair’s response on May 3, 2022, the Agency, published a notice on May 4, 2022, indicating that it is in the process of reviewing the documentation and arguments provided by Flair and should issue its final determination on June 1, 2022.
- The Agency is an independent quasi-judicial tribunal and regulator. This process is ongoing between the Agency and Flair, and it would be inappropriate to comment on it at this stage.
If pressed on Flair’s request for exemptions
- Transport Canada has consulted stakeholders on Flair’s request for an exemption and the department continues to examine this matter.
BACKGROUND INFORMATION
Canada’s foreign ownership requirements for air carriers:
- Most countries require their domestic airlines to be owned and controlled by nationals. Canada maintains similar practices, in part because not doing so would place our air carriers at a competitive disadvantage compared to foreign carriers, and place Canadians’ connectivity at risk.
- Under the Canada Transportation Act (Act), for an air carrier to have a licence to provide domestic service:
- 51% of its voting shares must be owned and controlled by Canadians;
- No more than 25% of its voting shares may be owned by any single non-Canadian; and
- It must be controlled in fact by Canadians.
- Control in fact refers to the extent to which owners exercise influence over a corporation. It is assessed by the Canadian Transportation Agency (Agency) on a case-by-case basis, taking into account a wide range of factors, including ownership, debt holdings, corporate structure, etc.
Flair Airlines and control in fact:
- Flair Airlines launched services as an ultra-low-cost carrier in 2017. It is partially owned by US-based 777 Partners, an investment firm specializing in ultra-low-cost carrier.
- Since the onset of the pandemic, Flair is understood to have depended heavily on financing from 777 Partners to remain viable, as well as to undertake aggressive expansion plans involving the purchase of new aircraft and opening of new routes.
- In late 2021, the Agency received a complaint that Flair was no longer controlled in fact by Canadians, which triggered an Agency assessment.
- On March 2, 2022, the Agency issued its preliminary decision, finding that Flair is currently not controlled-in-fact by Canadians, and gave the carrier 60 days to respond to its concerns. On May 3, 2022, Flair submitted its response to the preliminary determination issued by the Agency.
- On May 4, 2022, the Agency issued a notice that Agency members would review the submitted documentation and arguments and issue a final determination, on June 1, 2022, as to Flair’s “Canadian” status. Should the final decision determine that Flair is not controlled-in-fact by Canadians, Flair would immediately lose its licence and must cease operations.
Flair’s Exemption Request
- On March 28, 2022, Transport Canada received a request from Flair Airlines for a temporary 18-month exemption from ownership-related provisions in the Canada Transportation Act, in order to revise its corporate governance and financing structure to meet the requirements and maintain its domestic and international licenses.
- Transport Canada sought input from Canadian aviation stakeholders as part of its public interest assessment in response to the exemption request from Flair.
- No exemption is required prior to the Agency’s decision.