There has been much interest lately in the development of two
new players in the Canadian aviation scene. Canada Jetlines Ltd.
and NewLeaf Travel Company are hoping to capture a piece of the
commercial air travel pie by competing for passengers looking for
low-budget, no-frills air travel. NewLeaf has already begun seat
sales, with service to many smaller Canadian centres as well as the
Greater Vancouver and Greater Toronto areas. However, no new
airline enterprise can get off the ground without a bit of
turbulence. Both companies have faced early challenges while
navigating Canada's regulatory landscape.
NewLeaf's first flights touched down on July 25, 2016. This
came after several months of delay, stemming from a Canadian
Transportation Agency ("CTA") review of the company's
business model. Unlike traditional airlines, NewLeaf is not an
"air operator". NewLeaf has paired with Flair Airlines
Ltd., a Kelowna, B.C. based licensed air operator. NewLeaf acts
only as a ticket reseller of Flair Airlines services, and is
therefore not required to hold an air operator license.
After a lengthy review of this business model, the CTA confirmed
in a March 29, 2016 decision that NewLeaf was not
required to hold its own air operator license (the "CTA
Decision"). The CTA also concluded that the flying public
would be sufficiently protected because the actual operator, Flair
Airlines, was required to hold a valid license and have a tariff
that complied with legislative and regulatory requirements related
to consumer protection. The symbiotic relationship between the
companies relieved NewLeaf from an obligation to have its own
tariff, but the CTA noted that NewLeaf would not be permitted to
hold itself out as an airline.
Applications for judicial review and leave to appeal the CTA
Decision were then filed in the Federal Court of Appeal
("FCA"). The FCA, in brief reasons released on June 9,
2016, granted leave to appeal and directed that the appeal and
judicial review hearings be conducted together, and heard by the
same panel. Most recently, a party to the appeal applied to the FCA
for an injunction to ground NewLeaf until the company could post a
performance bond of $3.74-million. Hearings are still pending for
all matters. In the meantime, NewLeaf's fledgling operations
Canada Jetlines Ltd. is not yet off the ground and has also
faced challenges as it seeks financing for its final build-out and
launch of operations. In April 2016, Jetlines announced that it had
applied to the Government of Canada for an exemption from the
foreign ownership limit that exists for Canadian airlines.
Currently, section 62 of the Canada Transportation Act
requires that domestic air service in Canada must be operated by
Canadians, a term defined in section 55(1). Essentially, foreign
ownership must be limited to 25% of the voting interests in the
company. Additionally, the CTA monitors who has "control in
fact" of the airline. Strategic decision-making activities and
management of day-to-day operations must also be controlled by
Canadians. Interestingly, amendments to the foreign ownership
provisions have been in the works since 2009, but the amendments
are not yet in force. The amendments would raise the limit of
foreign voting interests in Canadian airlines from 25% to 49%.
Jetlines' application for exemption is to allow for 49%
foreign ownership of the company. In recent press releases, the
company has pointed to Transportation Minister Marc Garneau's
Canada Transportation Act Review Report, which was tabled
in February 2016, suggesting that its exemption would be in line
with the public interest issues identified in the Report. Neither
Jetlines nor the Minister has given a date by which a decision
regarding the exemption will be rendered.
It remains to be seen whether NewLeaf and Jetlines can surmount
these challenges as they vie to occupy the field of low-budget air
travel in Canada. Stay tuned for future blog posts on further
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