After considering in a “preliminary determination” issued on March 3 that Flair may not be Canadian – which threatened its licence – the Canadian Transportation Agency (CTA) has just published its “final determination” concluding that, ultimately, Flair is truly Canadian!
Let's not forget that the Canada Transportation Act requires air carriers holding CTA licences to be Canadian. In its preliminary determination, the CTA identified a number of factors indicating that 777 Partners LLC (a non-Canadian company) may have de facto control of Flair.
Some of these factors include:
- control, by 777, of the board of directors of Flair,
- rights held by 777 greater than those granted to other shareholders,
- the active role of 777 in the management of Flair’s affairs,
- Flair’s reliance on 777 for financing and leasing aircraft.
- Changes were made by Flair
- The CTA gave Flair until May 3 to demonstrate how it is, in fact, Canadian.
Changes were made by Flair
In response, Flair indicated that changes had been made to its Unanimous Shareholders Agreement (CUA) as well as to its promissory note (governing the debt provisions between Flair and 777).
It was after assessing the totality of the facts that the CTA concluded that Flair had addressed the concerns raised in its preliminary determination.
In particular, the CTA concluded:
- whereas, as a result of the amendments to the provisions concerning the Board of Directors of Flair, in particular those on the composition and quorum requirements, Canadian shareholders now have the right to appoint at least half of the members on the board of directors, at least half of whom must be Canadian;
- whereas, as a result of the amendments to the AUC, 777 no longer holds sole rights as a shareholder;
- whereas Flair has demonstrated that through its operating activities it can generate positive cash flow, mitigating the fear that it will continue to depend on 777 for additional new funding;
- whereas Flair amended the promissory note agreement with 777 to ensure that 777 would continue to finance the debt until at least 2026, thereby significantly reducing the ability of 777 to influence Flair;
- Flair has proven that it can lease new aircraft without relying on 777.
The CTA notes that these elements represent a summary, not a complete list of reasons and conclusions.
It should be noted that despite the preliminary determination issued on March 3 by the CTA, Flair has always continued its activities, even multiplying the number of announcements.
Let's not forget that Canada’s major airlines took a position on this issue. NACC (National Airlines Council of Canada) and ATAC (Air Transport Association of Canada) publicly objected to Flair being exempted from the requirement to meet Canadian ownership requirements under the Canada Transportation Act (CTA).