Advertisement

Deadline arrives for Flair Airlines to respond to ownership concerns

Click to play video: 'Future of Flair Airlines still up in the air' Future of Flair Airlines still up in the air
WATCH: Future of Flair Airlines still up in the air – May 3, 2022

The deadline has arrived for Flair Airlines to respond to Canada’s transportation watchdog over foreign ownership concerns, but experts say we could be waiting weeks or months to find out the fate of the ultra-low cost carrier.

The Canadian Transportation Agency (CTA) found in a preliminary ruling released in March that Edmonton-based Flair might not be Canadian enough to qualify for its licences to fly in the country.

The watchdog set a May 3 deadline for Flair to formally respond to the concerns, giving the airline a 60-day window to get its balance sheets in order.

Click to play video: 'Edmonton-based Flair Airlines CEO claims licence safe as airline overhauls board, refinances debt' Edmonton-based Flair Airlines CEO claims licence safe as airline overhauls board, refinances debt
Edmonton-based Flair Airlines CEO claims licence safe as airline overhauls board, refinances debt – Apr 21, 2022

The CTA did not confirm whether Flair met this date on Tuesday, but said it would provide an “update” to the review on Wednesday.

Story continues below advertisement

The agency said a panel assigned to the case will review Flair’s submission and decide next steps from there, adding there is “no specific timeline” for when a decision will be made.

“The panel will consider all evidence and if it determines at the end of the process that Flair is not Canadian, Flair’s licences would be suspended,” a CTA spokesperson reiterated Tuesday.

Read more: Flair Airlines says it will keep operating in Canada. Here’s how

A spokesperson for Flair also would not confirm Tuesday whether the airline had submitted its response, saying instead that “the airline is working closely with the CTA to resolve the matter, but would have no further status updates.”

“I think we have to be patient. It’s likely to run for another few weeks or months,” Frederic Dimanche, a tourism industry professor at Toronto Metropolitan University, told Global News on Tuesday.

Am I safe to fly Flair this summer?

Despite the uncertainty surrounding the CTA’s decision, Flair’s CEO Stephen Jones has been adamant that the budget airline will be flying this summer.

Story continues below advertisement

In a press conference responding to the ownership concerns last month, he outlined all the steps the airline has taken so far to mitigate the perceived control its Miami-based investor, 777 Partners, can exert over the company.

Click to play video: 'Flair Airlines has amended shareholders agreement to address Canadian ownership rules: CEO' Flair Airlines has amended shareholders agreement to address Canadian ownership rules: CEO
Flair Airlines has amended shareholders agreement to address Canadian ownership rules: CEO – Apr 21, 2022

This includes shaking up its board of directors to dilute 777’s control and other governance changes.

The last piece of the puzzle, Jones said, was finding new sources of financing to cover the debt it took on from 777 Partners to survive downturns caused by the COVID-19 pandemic.

Flair has applied to the Minister of Transportation, Omar Alghabra, for an 18-month exemption to Canadian ownership rules while it looks to refinance this debt.

A spokesperson for Transport Canada said the ministry is “still reviewing” the request and has yet to make a recommendation to the minister.

Story continues below advertisement

“The minister will then make the final decision on the exemption request. There is no legislated timeline associated with these steps,” the statement read.

Dimanche says it “makes sense” to him that Flair could need the extra time to respond to the CTA’s concerns, as changes in a company’s governance structure, for example, don’t happen overnight.

McGill University management professor Karl Moore told Global News now is the “worst time in aviation history” to solicit more investment, thanks to the uncertain COVID-19 recovery.

For that reason, he said it’s understandable to give Flair a bit more time to refinance and meet Canadian licence standards, but added 18 months is a “long, long time.”

“I’m kind of torn on it. I would say give them a bit more time, a bit of flexibility, but you don’t give them forever,” he said.

The exemption might not ultimately be necessary if the CTA drags out its decision-making process on the actual ownership question, Moore noted.

If Flair is able to fix the watchdog’s concerns within the next few months, the final ruling might find the airline’s efforts enough to meet the letter of the law.

Moore also said that if Flair ultimately fails to prove its Canadian control and has its licence revoked, the government would give enough heads up for passengers to get refunds and book alternate travel arrangements.

Story continues below advertisement

That said, booking flights with a credit card and eyeing travel insurance are solid bets for anyone flying Flair this summer, he said.

“I think for the next while you can probably buy safely, but I would think about the insurance quite seriously.”

Click to play video: 'There is ‘zero chance’ Flair Airlines will lose license on May 3: CEO' There is ‘zero chance’ Flair Airlines will lose license on May 3: CEO
There is ‘zero chance’ Flair Airlines will lose license on May 3: CEO – Apr 21, 2022

Aviation industry urges crackdown on Flair

In the meantime, aviation industry groups want the book thrown at Flair for stepping over the line of foreign ownership.

Story continues below advertisement

The head of the National Airlines Council of Canada, which represents large players such as Air Canada, WestJet and other carriers, told Global News in a statement Tuesday that the industry’s post-pandemic recovery hinges on the “fair application” of Canadian laws and regulations, which are the “basis for the reliable, longstanding operation” of the aviation sector.

“Foreign companies that flout these basic rules threaten that confidence and place a great deal of uncertainty on travelers and those working in the sector,” said Suzanne Action-Gervais, interim CEO of the council.

She called on the CTA to “uphold” foreign ownership and control requirements and on Alghabra to reject Flair’s exemption request.

John McKenna, president of the Air Transportation Association of Canada, an industry group representing aviation industry players of all sizes, said in an interview that granting Flair an exemption would “create a precedent” that airliners of any size can skirt the law and get away with it.

The issue with Flair is not necessarily that its ownership is majority foreign or Canadian, it’s that it was the only airline in Canada that felt it could get funding from outside the country to survive the pandemic and deal with regulations after the fact, McKenna said.

He pushed back on the idea that Flair should continue flying because of the jobs and connections it provides to secondary markets such as Abbotsford, B.C., Waterloo, Ont. and Deer Lake, Nfld.

Story continues below advertisement

“The majority of airlines in Canada did not meet the threshold to get that government support. So they’re not alone. But nobody else drifted outside the law to survive. They did what they had to do. They cut down operations. They struggled through it,” he said.

“The fact that you’re offering a service to the community that would otherwise not have as much service or no service is not a reason to operate illegally.”

Click to play video: 'Flair Airlines forced to turn to shareholders for help because it didn’t get COVID-19 bailout: CEO' Flair Airlines forced to turn to shareholders for help because it didn’t get COVID-19 bailout: CEO
Flair Airlines forced to turn to shareholders for help because it didn’t get COVID-19 bailout: CEO – Apr 21, 2022

But Dimanche said the extra competition Flair provides to giants Air Canada and WestJet could be reason enough for the government to want to make accommodations to keep the budget airline flying.

For the same reason that Flair can play up its economic and consumer benefits to keep its licences, however, bigger industry players can point to the regulations as a hardline to maintain control over Canadian airspaces.

Story continues below advertisement

“If they have a chance to push that competitor down and to keep them at bay, basically they will do it,” Dimache said.

“So to me, it’s a fair game. It’s a business game.”

— with files from Global News’s Anne Gaviola

Sponsored content