Edmonton

Regulator rules Flair Airlines is Canadian, meaning the upstart carrier can keep its licence

The Canadian Transportation Agency says Flair Airlines is Canadian. The ruling means the Edmonton-based upstart carrier can keep its operating licence.

Canadian Transportation Agency had been investigating Flair's partnership with Miami-based investor

Larger airlines called upon the transport minister to rule against Flair Airlines. (Submitted by Flair Airlines)

Flair Airlines celebrated a major win Wednesday as a federal regulator ruled the upstart carrier is Canadian.

The decision by the Canadian Transportation Agency (CTA) means that Edmonton-based Flair can keep its operating licence, bringing an end to Flair's months-long battle to clarify its ownership and governance structure or lose its right to fly in this country.

It also renders irrelevant Flair's earlier request for an 18-month extension in order to comply with the rules.

"The decision that is coming out today is very clear, it's black and white," said Flair Airlines chief executive Stephen Jones at a news conference held in Edmonton just minutes after the regulatory determination was made public.

"Flair is Canadian — there's no halfway road, there's no conditions."

Flair Airlines launched in 2004 as a charter airline and began offering regularly scheduled service in 2018.

In the past year and a half, the airline has been in aggressive growth mode, stating publicly that it wants to expand its fleet to 50 aircraft within the next five years as it seeks a larger customer base of travellers seeking low-cost, no-frills travel options.

But Flair has come under scrutiny from the CTA, which has been investigating to determine if it complies with rules around foreign ownership of Canadian airlines.

Legislation allows no more than 49 per cent ownership of a Canadian airline by foreign entities, and the Canada Transportation Act also states no one foreign player can own more than a quarter of a carrier, or exert effective control over it.

That put Flair's relationship with Miami-based investor 777 Partners under the microscope. In a preliminary determination in March, the CTA found Flair may not be "controlled in fact" by Canadians and said 777 Partners holds a "dominant"' influence over the carrier.

Flair was given until May 3 to address the issues and prove its Canadian-ness.

In its determination Wednesday, the regulator stated Flair has in fact done just that, by rejigging the composition of its board so that at least half of the directors will be Canadians. In addition, 777 Partners will no longer hold any unique shareholder rights.

The CTA said Flair has also demonstrated it can generate positive cash flow from its operations, alleviating concerns it would be financially dependent on 777 going forward.

The airline is also refinancing the debt it owes to 777 to ensure debt funding will be available until at least 2026, which the CTA said considerably mitigates "777's ability to exert influence over Flair."

Flair currently leases six of its 14 aircraft from 777 and the rest from U.S.- and Ireland-based companies. Jones said Wednesday the airline has informed the CTA that going forward, a portion of its leases will be stand-alone with no links whatsoever to 777.

"We've gone through line by line and addressed [the CTA's concerns]," Jones said. "Ourselves and 777 Partners have made significant concessions and changed things to make sure our position is without doubt — we are a Canadian airline."

In March, two airline associations representing Air Canada, WestJet and 30-odd other carriers called on Transport Minister Omar Alghabra to reject Flair's exemption request and warned that a green light would set a "troubling precedent."

But Jones suggested opposition is a "natural reaction" to the competitive threat he believes Flair poses to the industry.

"There's been such a cosy duopoly here for so long, that whenever you stir the pot, whenever you spoil the party ... of course people are going to be upset," he said.

Corrections

  • A caption on this story previously stated that larger airlines called upon the Canadian Transportation Agency to rule against Flair Airlines. The caption has been amended to state that the airlines called on the transport minister.
    Jun 01, 2022 5:49 PM MT

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