NewLeaf Travel Company, the new Canadian discount airline that launched Jan. 6, has had to postpone its plans to begin operations in February and will refund any reservations while its licensing is reviewed.

In a release today, the new air service said its position was "ambiguous" while the Canadian Transportation Agency reviews licensing of indirect air service carriers.

NewLeaf had a charter arrangement with Kelowna, B.C.-based Flair Airlines Ltd., with Flair holding the CTA operating licence, while NewLeaf sold the seats.

The transportation agency is reviewing whether persons who do not operate any aircraft, but market and sell air services to the public, should be required to hold a licence directly.

"Now, there is ambiguity in the air as to whether we need to amend the relationship with our air service provider, or whether we need to have a licence ourselves. While Canada has many other indirect air service providers, NewLeaf is in a unique position as we are the first large-scale [indirect provider]," said NewLeaf CEO Jim Young. "We welcome a regulatory system in which businesses like ours can thrive in Canada as they do in other countries."

But Alexandre Robertson, a spokesman for Canadian Transportation Agency, told CBC News Monday evening that the agency has been conducting the review since the fall. That process has not changed and is continuing, he said.

NewLeaf and other carriers operating under the indirect model were allowed to proceed pending the review.

The consultation will continue until Jan. 22. Robertson couldn't offer a precise time when the results of the consultation would be available, but he said the agency "will be moving quickly."

"The requirements and the agency's approach has been clear from the very beginning," Robertson said Monday evening.

Refunds coming 

Young said the airline aims to resume taking reservations in the spring, but would refund all credit card charges so customers could make alternative travel arrangements.

Young said the fledgling airline was seeing huge demand and had thousands of bookings. Everyone who booked should get a refund within the next 72 hours, he said Monday.

It was offering flights to seven Canadian cities, starting Feb. 12: 

  • Abbotsford, B.C.
  • Halifax
  • Hamilton
  • Kelowna, B.C.
  • Regina
  • Saskatoon
  • Winnipeg.
NewLeaf CEO Jim Young

NewLeaf CEO Jim Young said he didn't want passengers to be making hotel and other arrangements, then discover the airline couldn't operate. (CBC)

In a news conference from Winnipeg, Young said NewLeaf had an agreement from the CTA in December to operate with Flair as the licensed carrier. He said the review the agency is conducting creates too much uncertainty.

"We didn't want to get into a situation where we were getting closer to operating our services and have to cancel at that time," Young said.

"We don't know what will happen when the review is completed," he added.

The CTA has never before agreed to allow a large passenger carrier to operate under an indirect licence held by another party — in fact, in 1996 it turned down a proposal from Greyhound Airlines to operate under an indirect licence.

Since NewLeaf launched, the agency has faced complaints from competing airlines and from consumer advocates.

"There are a lot of naysayers who don't want to see us in business," Young said.

New terms

Jack Branswell, a spokesman for the Canadian Transportation Agency, said it would be acceptable for Flair to set air carrier rates and offer seats for sale as it is "the licensed carrier in this situation."

It is calling for comments on a review that could set new terms for NewLeaf.

Jetlines and Jet Naked, two other discount carriers hoping to launch in Canada, are both in the process of applying for a carrier licence, something that requires a lot of up-front capital. 

Corrections

  • The Canadian Transportation Agency is a quasi-judicial tribunal and economic regulator that operates independently of Transport Canada. An earlier version of this story confused the agency with Transport Canada. An earlier version of this story also said the CTA had previously given an all-clear to NewLeaf's proposed business model before the airline launched. In fact, the agency says, pending the review, all companies that bulk purchase and resell tickets to the public were not required to seek licences if they met certain criteria.
    Jan 18, 2016 9:35 PM ET