Startup airline Canada Jetlines Inc. has asked the federal government for an exemption to the 25-per-cent limit on foreign investment in Canadian carriers, setting up an early signal of how Ottawa will respond to a report recommending that foreign investors be permitted to own up to 49 per cent of a Canada-based airline.
Vancouver-based Canada Jetlines, which wants to be an ultra-low-cost carrier, said it has identified an investor or investors prepared to help get the airline off the ground, but the limit on foreign investing needs to be raised.
The airline does not have permission to identify the group publicly, Canada Jetlines chief executive officer Mark Morabito said Monday.
The investor told Canada Jetlines: "'If you can show us this is going to happen any time soon, we're there,'" Mr. Morabito said. The foreign ownership limitation keeps global players from investing in Canadian airline startups, he said.
"It's too low – 49 per cent is still a restriction, but at least their vote when it comes to important corporate matters isn't diluted down to 25 per cent."
A report on Canada's transportation sector presented to the government earlier this year by former federal cabinet minister David Emerson said there is room for more competition in the airline business.
"Canada is the only major air market without an ultra-low-cost carrier," the report said. "Such carriers have been highly successful in every other major aviation market as they generate significant traffic, offer the best average returns on investment and provide increased connectivity and choice at lower prices."
Mr. Morabito noted that the federal government is permitted to provide exemptions to the limit.
While he hopes to have an answer on Canada Jetlines' request by Labour Day, he said Ottawa's response to the Emerson report will take longer because Transport Canada has announced its own study that will include consultations with provincial governments.
A spokeswoman for Transport Canada said Transport Minister Marc Garneau is authorized to provide an exemption when such a move would be in the public interest. The government is reviewing the request, she said.
Canada Jetlines is preparing a reverse takeover of Jet Metal Corp., a Toronto Stock Exchange-listed uranium exploration company.
In investor materials prepared for the merger vote next month, Canada Jetlines said it is prepared to purchase 24 Bombardier Inc. C Series airplanes that would serve its initial needs and another 16 of the Bombardier jets when growth targets have been reached.
"Management sees a strong value proposition for Canadian federal and provincial governments, Bombardier, Bombardier employees and the Canadian aerospace sector to pursue a predominantly Bombardier C Series fleet option," the airline said in the documents.
The plan calls for an airline with bases in Vancouver, Winnipeg and one of three southwestern Ontario cities of London, Kitchener/Waterloo or Hamilton by the third year of operations.
The route network calls for flights that would link Vancouver to St. John's via one of the Ontario cities; flights to Florida from Vancouver and southwestern Ontario; and departures to Anchorage, Alaska, California and Cabo San Lucas and Puerta Vallarta, Mexico, from the Vancouver base.
The airline noted that 4.8 million Canadians crossed the U.S. border in 2011 to take advantage of fares on U.S. airlines that are lower than those on established Canadian carriers.