CTA Rules Flair Airlines Is Canadian

The Canadian Transportation issued its final determination yesterday, finding that Flair Airlines is Canadian.

The CTA requires that air carriers holding certain licences issued by the Agency be Canadian, as defined in subsection 55(1) of the CTA. This is a requirement that must be complied with at all times.

On March 3, 2022, the Agency issued a preliminary determination that pointed to a number of factors which indicated that 777 Partners LLC (a non-Canadian company) may in fact have control of Flair.

Those factors included:

  • 777’s control of Flair’s Board of Directors
  • 777’s rights exceeding those granted to other shareholders
  • 777’s active role in the management of Flair’s business
  • Flair’s dependence on 777 for its financing and leasing of aircraft

The Agency provided Flair with a deadline of May 3, 2022 to demonstrate why it is in fact Canadian.

On May 3, 2022, Flair filed its response to the Agency’s preliminary determination which included, amendments to its Unanimous Shareholder Agreement (USA) and Promissory Note (governs the debt arrangement between Flair and 777).

After considering all of the facts, the Agency found that Flair addressed the concerns raised in its preliminary determination.

In particular it found that:

  • As a result of changes related to Flair’s Board provisions, including composition and quorum requirements, 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 to its USA, 777 no longer holds unique shareholder rights.
  • Flair has demonstrated it can generate positive cash flow from operations, alleviating 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 thereby considerably mitigating 777’s ability to exert influence over Flair.
  • Flair has demonstrated that it can lease new aircraft without having to rely on 777.