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Letter to the Minister of Transport

Below is a letter from Brian Jenner, president and CEO of the Helicopter Association of Canada (HAC) to the Honourable Lawrence Cannon, Minister of Transport.

Ottawa, October 19, 2007

The Honourable Lawrence Cannon
Minister of Transport
330 Sparks Street
Ottawa (Ontario)
K1A 0N8

Re: Ascent Helicopters Ltd. application for exemption from the requirements, under the CARs and
section 62 of the CTA, to be “Canadian”, in order to operate a domestic air service.

Dear Minister,

Applications for exemptions from the “Canadian” requirements of the Aeronautics Act and the
Canada Transportation Act usually lead to controversy over the degree of reciprocity that can
be expected from other countries. The application by Ascent Helicopters Ltd. (Ascent
Helicopters) is exceptional in that it brings into question the degree of fairness and equity
Canadians can expect from their own bureaucracy.

For the purpose of air service licensing and certification the Canada Transportation Act defines
“Canadian” as:
“a Canadian citizen or a permanent resident … or an entity that is incorporated
… that is controlled in fact by Canadians and of which at least seventy-five per
cent … of the voting interests are owned and controlled by Canadians;”
Historically most people clearly understood “Canadian” to mean that, in addition to having
Canadians in charge of its Board of Directors, an air service’s share structure must be 75%
Canadian owned, including unrestricted voting rights.

Based on the information presented by the Air Policy request for comments and reading
the law at face value, Ascent Helicopters Ltd. is obviously 100% Canadian owned,
managed and controlled. Information supplied by Air Policy also confirms that, under
the 75% ownership test, Ascent Helicopters was “Canadian” even when, in an earlier
application for licensing, a foreign citizen held 20% of the operating company’s shares.

Direct facts and the common understanding of the law notwithstanding, the Canadian
Transportation Agency (CTA) refused to issue Ascent Helicopters a domestic license
because, in the Agency’s opinion, the company is under “defacto” foreign control.

Apparently Ascent Helicopters presently leases aircraft from a Canadian leasing company
which is 50% foreign owned but 100% financed by a Canadian financial institution.
Based on the fact that the financing of the leasing company is guaranteed in part by a
foreign citizen, the CTA concluded that Ascent Helicopters is under defacto foreign
control.

That conclusion seems to be quite a stretch from the common understanding of what it is
to be “Canadian”. It is all the more troublesome in that the CTA refuses to state by what
measure financial considerations of a leasing company can constitute defacto control of
an air operator. In doing so the CTA has given a new, rather pernicious, meaning to the
words “controlled in fact by Canadians”.

HAC can not help but wonder how the Agency suddenly arrived at such an
unprecedented, counterintuitive and potentially grievous conclusion. Moreover the
Association has grave concerns with regard to just how this new unspecified foreign
financial liability factor may affect the “Canadian” status of existing helicopter operators
who have direct and indirect foreign financial ties.

Even more troubling, the Agency seems to have a double standard in the application of its
“defacto” control theory, one for the airline industry which, to say the least, relies
extensively on direct and indirect foreign financing and another for the helicopter
industry where some degree of foreign financial implication is also common practice,
albeit to a much lesser extent than the airlines. In the case of Air Canada the Agency
recognized that foreign financiers were not in a position to control meetings of
shareholders or directors, to approve business plans or control routes, scheduling and
fares. The Agency has now ignored quite similar considerations with regard to an indirect
financial implication in a helicopter air service.

Carried to its logical conclusion, the unacceptable precedent that has been created by the
CTA in its Ascent Helicopters ruling could cause havoc throughout the Canadian
helicopter industry. The Agency’s ruling could in effect mean that many Canadian
helicopter operators no longer meet the conditions of issuance for a Canadian licence.

Furthermore since the Aeronautics Act refers to “Canadian” as having the same meaning
as in the Canadian Transportation Act and since TCCA Policy Letter #117 defers the
evaluation of “Canadian” to the Canadian Transportation Agency, even unlicensed aerial
work (702) operators could lose their operating certificate, because of a mercurial
evaluation of their foreign financing. In parallel, under the provisions of NAFTA,
aerial work air services that are openly foreign owned and controlled can operate in
Canada without bureaucratic hindrance.

Given the grave implications of the Ascent Helicopters case HAC must strongly
disapprove the CTA’s foreign financial implications based interpretation of “Canadian”.
Given the independence of the Canadian Transportation Agency, the Association further
calls upon the Government to introduce legislation that would clearly prohibit
consideration of foreign financing, direct or indirect, in the evaluation of “Canadian” for
the purposes of licensing and certification of helicopter air services.

In the mean time, to protect Canadian operators from the potential loss of their license
and/or operating certificate because of an audit re-evaluation of their “Canadian” status,
based upon financial considerations, HAC supports circumvention of misguided CTA
decisions through exemptions to the “Canadian” ownership rule, provided applicants are
fully compliant with and continuously maintain their status of “Canadian” air service, as
per the traditional interpretation of what it is to be “Canadian”.

Finally, since holding an Air Operator Certificate is a prerequisite for the issuance of a
domestic licence, HAC also requests that Transport Canada Civil Aviation rescind or
amend Policy Letter #117 and provide its own assessment of who is “Canadian”, as per
the traditional understanding of the law.

Yours truly,
Brian Jenner, BA, MPA
President & CEO
CC: Directors & members

www.h-a-c.ca

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The CTA decision on Ascent Helicopters' licence application sets a dangerous precedent.