Flair Airlines can keep flying in Canada, regulator rules

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Flair Airlines Ltd. can continue to fly domestically following a ruling by the Canadian Transportation Agency (CTA) Wednesday, ending months of speculation about the future of the discount carrier.

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The Edmonton-based airline, which offers cheap fares and no-frills service for flights throughout Canada and to destinations in the United States and Mexico, had been facing the possibility of losing its domestic operating licence over concerns it had violated Canadian foreign-ownership rules.

“We’re thrilled to receive the positive decision today from the CTA which reinforces that Flair is a Canadian airline,” said CEO Stephen Jones at a press conference Wednesday.

“The question has been answered. It’s done.”

A preliminary investigation by the CTA in March found evidence the company did not meet the requirements for Canadian ownership of a domestic airline. Under federal law, at least 51 per cent of a domestic airline’s voting shares must be Canadian, and no more than 25 per cent of voting interests can be held by a single non-Canadian company or person.

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The regulator was concerned over Flair’s partnership with Miami-based 777 Partners LLC, which owns a 25 per cent stake in the airline. The CTA pointed to the U.S. investment firm’s control of the board of directors and suggested it had “control in fact” of Flair since the airline depends on it for financing and the leasing of aircraft. The private equity firm was also believed to be playing an active role in the management of Flair’s business.

Flair had requested a temporary exemption from the ownership rules in order to take steps to address the CTA’s concerns. The company promised to overhaul its board of directors, and said it would refinance the balance of the company’s reportedly sizeable debt to 777 Partners.

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In the decision released Wednesday morning, the CTA said it was satisfied with the changes Flair had made.

“The (CTA), after considering all of the facts together finds that 777 is not in a position to exercise control in fact over Flair,” the ruling said. “Moreover, with the changes to the corporate governance structure, Flair is controlled in fact by Canadians… the Agency finds that Flair is Canadian.”

The company, which launched in 2005 as a charter operator before transitioning to scheduled service in 2017, was struggling in 2018 when its U.S. backers stepped in to provide a financial lifeline. With the help of 777, Flair aggressively pursued market share and expanded service even as the COVID-19 pandemic battered large incumbents like Air Canada and WestJet Airlines Ltd.

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Prior to its regulatory troubles, Flair had announced plans to expand its fleet to 30 aircraft by mid-2023, increasing to 50 by 2025.

Aviation observer and McGill professor Karl Moore said this week he wouldn’t be surprised if the regulator was prepared to show some flexibility at a time when the travel industry is still recovering from the devastating impacts of the COVID-19 pandemic.

“Really you have two dominant players and most Canadians would realize that it’s not a lot of competition compared to the U.S. or Europe or Asia,” Moore said.

“CTA and Canadians want them to solve the problem because they want more competition.”

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