Flair Airlines' fate hangs in the balance as regulator set to rule on licence

The fate of one of the companies that dared to challenge Canada's airline duopoly could be decided today.

Canada's transportation regulator said in April that it would decide on June 1 whether the partnership between the two airlines violates foreign-ownership rules.

Domestic flights would be barred by a violation. The Canadian Transportation Agency said that a preliminary investigation raised questions about the nature of the partnership between the two airlines.

A promise to increase Canadian representation on the company's board of directors was one of the changes announced. The CTA will make a final decision by the start of June.

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.

The company's American backers hold a 25-per-cent stake. The CTA's investigation showed that the airline depended on U.S. investors for financing and the lease of aircraft. The private equity firm was suspected of being involved in the management of the business.

It isn't letting on if it's worried about the final outcome of the investigation.

Stephen Jones was expected to address the CTA decision at a press conference. There was speculation on social media that recent problems with operations and service cancellation could be related to the company's regulatory problems.

The airline has had a delay in getting aircraft from Boeing so that route will have to wait, according to Mike Arnot.

The upstart airline has aggressively pursued market share since it began offering scheduled commercial service in 2017, taking on debt to grow its fleet even during the pandemic when air travel had all but ground to a halt.

Some Canadians have cheered the carrier's progress through the recent regulatory hurdles, citing a desire to see more competition in a sector dominated by Air Canada and WestJet Airlines.

Karl Moore is an associate professor with the Desautels Faculty of Management at McGill.

Email: mpotkins@postmedia.com

The Financial Post is a division of Postmedia Network Inc.

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