Canada’s Ultra-Low Fare Airline

Request for Minister Exemption on Foreign Ownership




June 13, 2016

Canada Jetlines Ltd. (Jetlines) confirms that on May 16, 2016 it submitted to the Honourable Marc Garneau, Minister of Transport, a request for issuance of an exemption order pursuant to subsection 62(1) of the Canada Transportation Act. Jetlines is specifically requesting an exemption from the current 25% foreign voting interest limit and the permission to have up to 49% foreign voting interest. This request was made to facilitate investment into Jetlines by international investors that specialize in investing in and supporting start-up Ultra Low Cost Carriers (ULCC) throughout the world.

Transport Canada has confirmed the receipt of the exemption request and Jetlines has been in regular dialogue with Transport Canada and the Office of the Minister of Transport through face-to-face meetings, telephone conversations and emails. As part of the review process Jetlines has submitted detailed information regarding its business plan and the specific details of the intended foreign investors.

Jetlines has provided the Government with detailed submissions regarding why the exemption order will be in the public interest including:

i. Better Connectivity. Better air connections between Canadian communities that are currently not served or under-served (e.g. Hamilton, Kitchener-Waterloo, Winnipeg, Prince George).

ii. Reduced Airfare for Canadian Consumers. The ULCC model will allow travelling Canadians to save up to 30% “net” on airfares. The traveling public would have access to a pricing range not currently provided.

iii. Increased Competition. Jetlines would provide true competition by operating flights into airports that can presently support that air service, but have been unsuccessful in soliciting the two major Canadian carriers to enter their market. Also, in many markets the public would have the choice of flying on a jet instead of only a turbo-prop aircraft.

iv. Encourage Consumers to Fly from Canada. Repatriation of the high percentage of Canadian passengers seeking low cost air service from US carriers and bring the associated revenue and economic activity back to Canada.

v. Increase Air Travel in Canada. Stimulating up to 10,000,000 new Canadian air passenger trips per year that are predominantly complementary and adjunct to those serviced by incumbent national carriers.

vi. Creation of New Jobs. Every 1,000 new passengers into the market supports 3.3 new jobs and contributes CAD $750,000 to the national GDP (10 million passenger trips would potentially result in 33,000 new jobs and CAD $7.5 billion to GDP).

vii. Balanced Air Service Policy. Secondary airports, various Chambers of Commerce and the Canadian travelling public would have their needs met with Jetlines offering service to the secondary markets and at a reduced ticket price. This would ensure an air service policy that is seen to address all Canadians, not just the need of major city centres and two major airlines. The previous air policy appeared to focus on protecting the major carriers during times of restructuring and a return to sustainable profitability, which has now occurred.

viii. Ensure Financial Fitness in Canadian Air Policy. With full CTA financial fitness, Jetlines provides a better air policy than any attempts by Indirect Service Providers’ (air service resellers) to enter the same market without proper funding. Such added risk may result in sudden cancellation of service after tickets have been purchased, thus inconveniencing the traveling public.

ix. Protection from Possible Improper Foreign Government Subsidies. The conditions proposed by Jetlines would provide protection to the Canadian airlines that possible improper foreign government subsidies and associated airlines would not enter the market.

x. Provides Improvements to the Public During any Consultation Process. Although Jetlines’ position is that enough consultation has occurred on this issue, an exemption will demonstrate government action in improved air policy during any lengthy consultation process.

Jetlines:


Estimates the demand for lower airfare in Canada equals a market of 10 million new passenger trips per year flying domestically, to the USA, Mexico and the Caribbean;

Believes that this 10 million passenger market is currently unserved;

With a clean sheet opportunity, has the ability to structure its costs as a ULCC airline to dominate this 10 million passenger market, which equals 60 new Boeing 737-700 aircraft;

Is led by a knowledgeable management team with Canadian and international experience who understand the airline industry and is supported by an accomplished Board of Directors;

Plans to offer base airfares significantly lower than those of major existing carriers in Canada;

Intends to offer high levels of service with on demand in-flight service;

Plans to, where possible, use non-major airports in Canada to attract new passengers;

Has signed a definitive purchase agreement with The Boeing Company to acquire up to twenty-one (21) Boeing 737 MAX aircraft for delivery commencing in 2021. The Agreement includes five (5) firm orders, purchase rights for an additional sixteen (16) 737 MAX and some conversion rights to the 737-8 MAX aircraft; and

Has constructed a detailed 40 aircraft route structure model and business plan to cover the first eight years of operations; and

Jetlines has completed Phase 2 of a four phased approach to establish Canada Jetlines as the first Ultra Low Cost Carrier (“ULCC”) airline in Canada:

Phase 1 – Feasibility and Initiation;

Phase 2 – Planning and Development;

Phase 3 – Plan Execution (build-out); and

Phase 4 – Operations.

Jetlines is currently in the process of securing institutional funding for Phase 3 and 4.

Media


* To clarify, costs are on a CASM basis (cost per available seat mile) and for the same time period WestJet’s cost is 13.7 cents.