Following a lengthy review of Flair Airlines' ownership status, the Canadian Transportation Agency (Agency) determined on 01JUN that Flair is Canadian.
In a press conference shortly after the final determination was announced, Flair President and CEO Stephen Jones celebrated the ruling.
“Flair is Canadian,” Jones said. “This decision only cements that Flair is here to stay.”
Jones also thanked Flair team members for their resilience during the review period, as well as the Canadian government, particularly Transport Minister Omar Alghabra, for supporting competition in Canada’s airline industry.
To celebrate, Jones announced a 50 per cent sale on airfares for the next 48 hours.
As Open Jaw reported in APR, the CTA had determined that Edmonton-based Flair may be in violation of the law that requires it to be controlled by Canadians.
At issue was whether Flair Airlines Ltd.’s partnership with Miami-based investment company 777 Partners LLC violates Canada’s foreign-ownership rules.
CTA regulations say that a Canadian airline which flies domestically or internationally must be 51-per cent owned by Canadians, with no single foreign entity owning more than 25-per cent. Additionally, foreigners cannot exert control over the airline, a situation the CTA calls “control in fact”.
At the time, Flair was 25-per cent owned by 777 Partners, and its five-person board of directors includes three Americans who either own part of 777 Partners or are employed by 777 Partners.
Flair had previously denied any violation of Canadian laws but then made a number of changes to its board of directors to address the CTA’s concerns.
Flair has expanded its board of directors to nine members and 777 only represents two of those seats.
Answering a question about the changes to its ownership structure, Jones said: “We’ve always been a Canadian airline, it’s just a lot more clear now.”
When asked about the future of the airline, Jones said Flair would continue expansion through its fleet, its destination network and as a business entity.
Final Ruling
The CTA originally provided Flair with a deadline of 03MAY to demonstrate how it is in fact Canadian. On the same day, the carrier filed its response to the preliminary ruling which included amendments to its Unanimous Shareholder Agreement (USA) and Promissory Note (a document which governs the debt arrangement between Flair and 777).
After due consideration, the CTA found that Flair addressed its preliminary concerns. In particular, the agency found that:
- As a result of changes related to Flair’s Board provisions, Canadian shareholders now have the right to appoint no less than half of the Board, and no less than half of the members of the Board must be Canadian.
- As a result of amendments, 777 no longer holds unique shareholder rights.
- Flair has demonstrated it can generate positive cash flow from operations, alleviating CTA concerns it would be dependent on 777 for additional new financing.
- Flair has amended the Promissory Note Agreement with 777 to ensure that debt funding will continue to be available until at least 2026 therefore “considerably mitigating” 777’s ability to exert influence over Flair.
- Flair has demonstrated to the CTA that it can lease new aircraft without having to rely on 777.
