Late last week The Canadian Transportation Agency (CTA)issued its preliminary determination that Flair Airlines may not in fact be controlled by Canadians and may therefore, not be “Canadian” as defined in the Canada Transportation Act.

Flair holds licenses authorizing domestic, scheduled international, and non-scheduled international air services, however, Pursuant to the Act, Flair must be Canadian to provide these air services.

Three requirements must be met for an air carrier to be considered Canadian:

1. the incorporation or formation requirement
2. the voting interest requirement
3. the control in fact requirement

For an enterprise to be considered Canadian, at least 51 percent of the voting interests need to be both owned and controlled by Canadians. Also, no single non-Canadian may hold more than 25 percent of the voting interests, directly or indirectly, whether individually or in affiliation with another person.

Additionally, to be Canadian, the company needs to be “controlled in fact” by Canadians.

‘Control in fact’ (also known as de facto control) differs from ‘control in law’(also known as de jure or legal control). Control in law is generally shown by owning enough shares to carry the right to a majority of votes. Control in fact goes beyond control in law as it includes the ability to exert control by any direct or indirect influence.

Although the term is not defined in the Act, the CTA considers control in fact to be:

“the power, whether exercised or not, to control the strategic decision-making activities of an enterprise and to manage and run its day-to-day operations.”

The Globe and mail published a statement from Stephen Jones, the airline’s chief executive officer, “Flair is completely compliant with all applicable airline regulations, including those dealing with Canadian control. “Flair is a private company, and while we have always and will continue to co-ordinate with all regulators as necessary, our shareholdings and financial affairs are confidential.”

The paper also reported that, “in November, Flair said it was 58 percent owned by Canadians. Three of Flair’s five directors are Americans who either own or are employed by 777 Partners, according to incorporation filings in British Columbia.”

Flair’s website notes it has added 13 Boeing 737 Max 8 aircraft to its fleet. Those planes are reportedly leased from 777 Partners. The website does not specify the current size of the fleet in total. Flair has said it wants to grow its fleet to 50 aircraft in 5 years.

The CTA says Flair must respond, no later than 60 calendar days from the date of issuance (March 3, 2022). At the end of the review process, the Agency will issue a final public determination with reasons and its conclusions, which will be posted on its website.

For more information on Canadian ownership and control check HERE.