Order No. 2022-A-22

BACKGROUND

The applicant has applied to the Canadian Transportation Agency (Agency) for a licence to operate a scheduled international service, large aircraft, in accordance with the air Transport Agreement between the Government of Canada and the Government of the United States of America signed on March 12, 2007 (Agreement), to be operated on a code share basis only on aircraft of another licensed carrier.

The applicant has also applied, pursuant to section 80 of the CTA, for an exemption from the application of subparagraph 69(1)(a)(iv) of the CTA.

Subparagraph 69(1)(a)(iv) of the CTA require that the applicant meet the prescribed financial requirements, before can be issued a scheduled international licence, large aircraft.

The applicant states that it seeks the exemption from the application of subparagraph 69(1)(a)(iv) of the CTA as the air services under this licence will only be offered on a code share agreement basis utilizing aircraft operated by another licensed air carrier and, as such, the applicant will not operate large aircraft or incur the costs associated with operating large aircraft.

ANALYSIS

Code sharing is an arrangement between two air carriers, where one carrier sells transportation services under its own code and licence on a flight operated by the other licensed carrier.

The financial requirements is a market entry requirement. Compliance with this requirement is intended to ensure that licences are issued to applicants that are financially fit and adequately financed, through a combination of equity and other sources, at the inception of the proposed air services. Under the financial requirements test, the applicant is required to demonstrate that it has sufficient funding in place, without taking into account any revenue from operations, to meet the costs associated with starting up and operating the air service for a 90-day period.

As the applicant will be providing its air services using large aircraft exclusively through code share arrangements with other licensed carriers, the applicant will not be incurring the capital and operating costs typically associated with starting-up and operating an air service. In this case, the aircraft and the associated investment to operate the air service is largely borne by its code-share partner(s).

The Agency finds compliance with the financial requirements, in this case, to be unnecessary.

Accordingly, the Agency, pursuant to paragraph 80(1)(c) of the CTA, exempts the applicant from the application of subparagraph 69(1)(a)(iv) of the CTA.

The Agency is satisfied that the applicant meets all the others applicable requirements of section 69 of the CTA.

ORDER

The Agency issues the licence, subject to the following conditions:

1. This exemption is limited to the applicant offering its international services, large aircraft, on a codeshare basis only utilizing aircraft operated by another licenced air carrier.
2. The Licensee is authorized to operate, through code sharing, scheduled international services on the routes set out in the Agreement.
3. The applicant must apply for a new license and meet applicable financial requirements should it wish to operate large aircraft in its own right
4. Pursuant to subsection 71(1) of the CTA, the scheduled international licence is subject to the conditions prescribed by the Air Transportation Regulations, SOR/88-58.
5. The scheduled international services are to be conducted in accordance with Agreement between the Government of Canada and the Government of the United States of America signed on March 12, 2007 (Agreement).

Prior to operating air services using large aircraft, other than through a code share arrangement utilizing another air carrier's aircraft, the applicant is required to obtain the appropriate licence authority from the Agency prior to operating such services, including meeting the prescribed financial requirements.