Flair Airlines celebrated a big victory on Wednesday when a federal regulator decided the starting carrier was Canadian.
The decision of the Canadian Transportation Agency (CTA) means that Edmonton-based Flair can retain its operating license, ending Flair’s months-long struggle to clarify ownership and control or to lose the right to fly in that country.
This also makes Flair’s earlier request for an 18-month extension to comply with the rules irrelevant.
“The decision that is coming out today is very clear, it is black and white,” Flair Airlines CEO Stephen Jones told a news conference in Edmonton just minutes after the regulatory decision was announced.
“Flair is Canadian – there is no halfway, there are no conditions.”
Flair Airlines began operations in 2004 as a charter airline and began operating scheduled flights in 2018.
Over the past year and a half, the airline has been on aggressive growth and has publicly stated that it wants to expand its fleet to 50 aircraft over the next five years as it seeks a larger customer base for passengers looking for low-cost, unlimited travel options.
However, Flair came under the control of the CTA, which investigated whether it complied with the rules on foreign ownership of Canadian airlines.
The legislation does not allow more than 49% ownership of a Canadian airline by foreign entities, and the Canadian Transportation Act also states that no foreign player may own more than a quarter of the carrier or exercise effective control over it.
This brought Flair’s relationship with Miami-based investor 777 Partners under scrutiny. In a preliminary ruling in March, the CTA found that Flair did not have to be “actually controlled” by Canadians, stating that 777 Partners had a “dominant” influence over the carrier.
Flair was given May 3 to deal with the problems and prove his Canadian character.
In a ruling on Wednesday, the regulator said Flair had in fact done just that by changing the composition of his board so that at least half of the directors were Canadian. In addition, 777 Partners will no longer have any unique shareholder rights.
The CTA said Flair has also shown that it can generate a positive cash flow from its operations, allaying fears that it will be financially dependent on the 777 in the future.
The airline is also refinancing the debt it owes to 777 to ensure that debt financing is available by at least 2026, which, according to the CTA, significantly reduces “777’s ability to exert influence over Flair.”
Flair currently leases six of its 14 aircraft from 777 and the rest from companies based in the US and Ireland. Jones said on Wednesday that the airline had informed CTA that in the future, part of its leases would be separate and would have no ties to the 777.
“It simply came to our notice then [the CTA’s concerns]”We and 777 Partners have made significant concessions and changed things to make sure our position is beyond doubt – we are a Canadian airline.”
In March, two airline associations representing Air Canada, WestJet and 30 other carriers called on Transport Minister Omar Alghabra to reject Flair’s request for an exemption and warned that a green light would set a “worrying precedent.”
However, Jones suggested that the opposition was a “natural reaction” to the competitive threat Flair posed to industry.
“There has been such a cozy duopoly for so long that whenever you stir a pot, whenever you ruin a party … of course people will be upset,” he said.
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