Canadian aviation industry opposes Flair Airlines’ bid for 18-month exemption from ownership rules

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A large swath of Canada’s aviation sector said on Tuesday it opposes Edmonton-based Flair Airlines’ appeal to the government to be temporarily exempt from Canadian ownership requirements.

The Canadian Transportation Agency has issued a preliminary finding that Flair might be controlled by a U.S. investor in violation of Canadian laws, and has given the airline until May 3 to make changes or face the possible loss of its operating licence. Flair has asked Transport Canada for an 18-month exemption to the regulations to address the regulator’s objections.

Two aviation industry groups, representing Air Canada AC-T, WestJet and several other companies, on Tuesday released a joint statement opposing Flair’s request for an exemption.

“If granted, this unprecedented request would allow Flair to continue operating outside the bounds of existing Canadian law, setting a troubling precedent while also threatening consumer confidence in the sector, at a time when the travel industry is working hard to provide a strong and sustainable future for air travel for Canadians,” said the statement from the National Airlines Council and the Air Transport Association of Canada.

Flair Airlines could lose operating licence after Canadian control of company questioned

To operate as a domestic airline, a company’s foreign investment cannot exceed 49 per cent or 25 per cent by a single entity. Nor can a non-Canadian exert control over the airline, a situation the CTA calls “control in fact.”

The CTA’s investigation found Flair’s 25-per-cent owner, Miami’s 777 Partners, holds “dominant” influence over the airline by being a large lender and provider of leased aircraft. Three of Flair’s five directors are connected to 777 Partners. “Flair’s dependence on 777 for financing, and 777′s ability and apparent willingness to exert its control over Flair, are strong indicators that Flair is controlled in fact by 777,” the CTA said in its preliminary decision released on March 3.

John McKenna, head of the Air Transport Association of Canada, said his members are not trying to shut down Flair, but want a “level playing field” as the sector tries to emerge from the deep financial losses of the pandemic. “We’re saying, ‘Play along by the same rules as everyone else,’” Mr. McKenna said by phone.

The National Airlines Council represents Canada’s biggest airlines: Air Canada, Air Transat, Jazz Aviation and WestJet. The Air Transport Association of Canada speaks for about 65 airlines and more than 100 related companies, including Porter Airlines, PAL Airlines and Nolinor Aviation.

The industry groups said their members are ready to mitigate the impact on workers and travellers of a possible shutdown or licence suspension of Flair by flying home stranded passengers or through other measures.

Tuesday’s joint release from the industry groups said domestic control of an airline is not merely “nice to have,” but an essential requirement that ensures the airline is committed to Canada, its routes and the industry’s viability.

“By failing to comply with basic, long-standing Canadian ownership and control rules, Flair places considerable uncertainty on the shoulders of travelers, potentially leaving them stranded without a backstop,” the group’s statement said.

Flair issued a statement accusing the industry groups of spreading fear and confusion in the marketplace.

“It’s no surprise that Canada’s big air carriers want Canadians to pay more for airfare, sow confusion with passengers and eliminate the competition,” the statement said. “No matter how much they want to take us down, Flair is here to stay.”

The airline, in its application to the government for the exemption, said the loss or suspension of its licence would be bad for travellers, its employees and contractors. Flair said its low fares offer affordable travel, and connect communities not well served by other airlines, and that it is confident it will address a majority of the CTA’s concerns by May 3. But it added: “There are a number of practical reasons why Flair requires more time to comprehensively address the CTA’s concerns, as Canadian air travel returns to normal levels following the challenges presented by the COVID-19 pandemic.”

Flair did not address requests from The Globe and Mail to explain these reasons.

Transport Canada is holding a public interest assessment on Flair’s exemption request, collecting submissions from interested parties. The deadline for submissions was on April 18.

WestJet, in its submission to Transport Canada on Flair, said it would be inappropriate for the transport minister to grant an exemption and intervene in the jurisdiction of the CTA, an independent quasi-judicial body.

“Other than its deliberate violation of the law, there is simply nothing unique about Flair,” WestJet said. “If Flair’s licence were suspended or cancelled, other Canadian airlines – that respect the legislative requirements for holding domestic licences – will fill the gap and provide comparable competition, local service and jobs.”

The CTA has declined to comment on Flair’s request to Transport Canada.

Flair’s chief executive officer, Stephen Jones, is scheduled to hold a web-streamed press conference on Thursday to address the CTA’s investigation.

The Globe has reported Flair owed $129-million to 777 Partners in late 2020. The investor took a stake in Flair in 2019. In early 2021, Flair said it would lease 13 Boeing 737 Max planes from 777 Partners, a fleet that would grow to 50 in five years.

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