The fate of Flair Airlines is caught up in stifling and outmoded federal airline regulations, and Canadians should be outraged at the prospect of losing yet another discount carrier.
At issue is whether Edmonton-based Flair is actually controlled by foreigners, in contravention of federal law, despite the airline’s claim of being 58 per cent Canadian owned. Specifically, the Canadian Transportation Agency suspects U.S. investment firm 777 Partners is actually calling the shots at Flair, even though it only owns a 25-per-cent stake.
It seems three of Flair’s five directors are – gasp – U.S. citizens who have connections to 777 Partners. What’s more, Flair apparently leases a number of planes from the Miami-based investment firm and owes it a whole whack of money.
Oh my swirls! An American private equity firm is investing in our airline industry and providing us with a lower-cost choice for air travel to Canadian, U.S. and Mexican destinations. Predictably, rival airlines are kicking up a fuss. But good luck trying to find a Canadian who thinks this is an actual problem.
This regulatory fiasco involving Flair is the latest example of how Canada’s outdated laws and regressive attitude toward foreign investment doom discount airlines, limit competition and harm ordinary Canadians who are fed up with overpriced air fares.
The blame for this mess lies squarely with Ottawa. Instead of opening up Canadian skies to real competition from foreign-controlled airlines when it had the chance, the Trudeau government opted to merely tinker with our foreign investment rules.
Back in 2018, the government raised the foreign investment limit for airlines to 49 per cent from 25 per cent. But it also ensured that international investors had no path to gaining control of a Canadian carrier.
Under federal law, no single foreign investor is allowed to own more than a 25 per cent stake in a domestic airline. Moreover, the law prohibits foreigners from effectively controlling a domestic airline in other ways (such as exerting undue influence over its decision making or by running its daily operations). In the CTA’s regulatory parlance, such scenarios are known as “control in fact.”
Therein lies the rub with the Flair case.
The CTA is giving Flair until May 3 to straighten up and fly right, or risk losing its operating licence. Flair, meanwhile, is asking Transport Canada for an 18-month exemption to address the regulator’s concerns.
Obviously, Ottawa should grant an exemption. It’s a reasonable request. Jobs are on the line and customers could be stranded by an abrupt shutdown. Moreover, Flair needs enough time to shuffle its board, tidy up its debt and resolve any other lingering concerns.
But this farcical flap over who controls Flair should also prompt Canadians to question why our country maintains such antiquated laws in this day and age.
It’s clear our government’s aversion to foreign investors makes no sense. So, if Ottawa is serious about increasing competition in the airline sector, it must relax the remaining foreign ownership restrictions for airlines that fly domestic routes.
No Canadian cares if Americans, or other foreigners for that matter, control airlines that service destinations within Canada. We just want to pay the lowest possible price for a ticket.
Australia and New Zealand have a 49-per-cent foreign-ownership limit for domestic airlines that fly internationally, but foreign investors are allowed to own up to 100 per cent of carriers that only operate on domestic routes.
The Competition Bureau has previously advocated replicating that model in Canada for domestic air service. And, of course, the 2008 Competition Policy Review Panel argued there’s “no evidence that foreign-controlled airlines would be any more or less inclined than Canadian firms in servicing Canadian routes.”
So why do our legislators still look askance at deep-pocketed foreign investors?
Canada should pursue a variation of the Australian and New Zealand policies – one that would allow smaller airlines such as Flair that fly within Canada, and to U.S. and international destinations, to be 100-per-cent foreign owned and controlled.
Really, the only airline that should be majority Canadian-owned is Air Canada. That’s still a point of patriotic pride for some – even if our flag carrier showed Canadians little loyalty during the COVID-19 pandemic.
Remember Canada 3000, Royal Airlines and Jetsgo? How many money discount airlines need to fail before Ottawa pursues policies that create real competition?
Canadians shouldn’t have to pay through the nose for air travel. We’ve suffered long enough. And after being stuck at home for the past two years, now is the time to demand change.
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