In February Jet Metal Corp. announced that it had entered into a letter of intent with Canada Jetlines Ltd. with respect to a business combination of Jetlines and Jet Metal. Jetlines is a start-up airline aiming to become Canada’s first ultra-low cost carrier. Jetlines is a corporation in the pre-revenue stage with its head office located in Richmond, British Columbia. Jetlines plans to operate scheduled point-to-point all-jet air service nationally with primary bases at the Vancouver International Airport and the Hamilton International Airport, with a secondary base at the Winnipeg International Airport (“YWG”). Jetlines plans to operate flights throughout Canada, the United States, Mexico and the Caribbean.
Jetlines will use the proven commercial aviation ULCC profitability model to attract new passengers with low airfares and plans to retain these passengers by demonstrating a passion for service. The proven ULCC model provides the capability for specifically designed airlines to reduce their costs in a manner that provides scheduled airline service at base airfares averaging 40 per cent below their nearest competitor thus creating new passenger demand by market stimulation. The worldwide success of other ULCC airlines such as Allegiant Air and Spirit Airlines in the United Sates, Air Asia in Asia, and Ryanair and EasyJet in Europe demonstrates the power of these ULCC airlines to attract and significantly stimulate passenger traffic and lead the markets they operate in while generating strong returns for shareholders.
On July 28 Jet Metal Corp. announced that, among other matters, Jet Metal shareholders approved the Transaction. All other matters that were subject to shareholder vote at the Meeting were also approved. The Company has also received conditional approval from the TSX Venture Exchange for the Transaction. All major conditions to the completion of the Transaction have now been satisfied, except for the completion of the concurrent financing.
Earlier on, Jet Metal and Jetlines have identified a foreign funding opportunity that will support the launch of Canada’s first true ultra-low cost carrier airline. This funding opportunity will facilitate the completion of the concurrent financing which is the last major condition to the closing of the Transaction. However, in order to complete this investment opportunity Jet Metal and Jetlines need an exemption order that would permit up to 49 per cent voting interests to be held by non-Canadians. Since February, Jetlines and Jet Metal have been engaged in extensive consultation with the government of Canada regarding an increase in the foreign ownership limit for a Canadian airline to 49 per cent. It is now clear that the Government needs more time to consult and consider a global change to the current 25 per cent foreign ownership limit. Jet Metal and Jetlines determined the best path forward was to proceed with an exemption order request.
As a result, on May 16, 2016 Jet Metal and Jetlines submitted to the Minister of Transport, a request for the issuance of an exemption order pursuant to subsection 62(1) of the Canada Transportation Act.
On June 16, 2016, Transport Canada started a consultation process with stakeholders that have an interest in the matter. Stakeholders were provided with a redacted copy of the exemption order requests and were invited to provide comments to Transport Canada. The comment period ended on July 7, 2016. At the end of the comment period, Jet Metal and Jetlines were provided with copies of all the stakeholder submissions.
Jet Metal and Jetlines were extremely pleased to see that a clear majority of the submissions received in the consultation process were supportive of the request for an exemption order. Further, the submissions came from across the country, and from a variety of stakeholders ranging from airport authorities, government officials, and local chambers of commerce. These submissions emphasized, among other things, the following key points:
• Airports and communities are un-served or under-served, resulting in reduced economic activity and a lost opportunity for job creation.
• The issues associated with lack of direct service as a result of the hub and spoke operations of the two major Canadian legacy airlines.
• There is room in the marketplace for a true ULCC with lower fares, with minimal impact to the legacy airlines.
• Confirmation of the lack of existing Canadian risk capital.
After the receipt of the stakeholder submissions, Jet Metal and Jetlines were given until July 15, 2016 to provide a response to the submissions. Jet Metal and Jetlines provided a response and this response was then sent back to stakeholders for final comments with a response deadline of July 28, 2016. That will conclude the process and Transport Canada will now provide a report to the Minister of Transport. The Minister of Transport will then make a final decision on the exemption order request.
“With this transaction Jetlines will have the working capital to move forward in earnest and we expect to be announcing a number of major developments in a timely manner”, says Jim Scott, President and CEO of Canada Jetlines.