Applying for Wet-Lease Approval

Table of Contents

Part 1 – Purpose of the Guide

Under section 60 of the Canada Transportation Act (CTA), the Canadian Transportation Agency (Agency) is responsible for approving wet-lease arrangements for all non-scheduled (charter) and scheduled air services to, from, and within Canada for the transportation of both passengers and goods.

This Guide details the Agency’s process for dealing with wet-lease applications, including the information required for the Agency to be able to approve wet-lease applications, the circumstances where the Agency may exercise discretion and also outlines the instances where formal approval by the Agency is not required.

1.1 Legislative and policy context

The Agency’s consideration of an application is governed by the CTA and the Air Transportation Regulations (ATR). If there is a discrepancy between the content of this Guide and any Canadian law or regulation, the legislation prevails.

In addition, on June 24, 2014, the Minister of Transport, pursuant to subsection 76(1) of the CTA, issued a direction entitled Ministerial Direction for International Service –Canada’s Policy for Wet-Leasing (Wet-Lease Policy). The Wet-Lease Policy applies to the assessment by the Agency of wet-lease applications where Canadian carriers propose to enter into wet-lease arrangements of more than 30 days with foreign carriers to provide international passenger services.

The Wet-Lease Policy criteria are as follows:

  • For wet-leases of more than 30 days, a number of aircraft equal to 20 percent of the number of Canadian-registered aircraft on the lessee’s Air Operator Certificate (AOC) at the time the wet-lease application is made may be wet-leased from foreign lessors.
  • If Canadian air carriers cannot enjoy reciprocal opportunities to wet lease in a foreign jurisdiction, the Agency should condition or deny an application involving a lessor from that jurisdiction.
  • Repeated wet-lease applications may be permitted as long as the 20-percent cap is not exceeded.
  • Applicants must provide a rationale for their applications. Applications will not be denied solely on the basis of this rationale as long as the number of wet leases is within the above mentioned 20-percent cap.
  • The renewal of an application for a short-term wet lease may be contemplated provided it is not used as a means to circumvent the above provisions.

1.2 Scope of the Wet-Lease Policy

The Wet-Lease Policy applies to wet-lease applications where a Canadian carrier (lessee) proposes to enter into wet-lease arrangements of more than 30 days with a foreign carrier (lessor) to provide international passenger services.

The Wet-Lease Policy does not apply to wet-lease applications:

  • for all-cargo services, regardless of the nationality of the carriers;
  • for a period of 30 days or less which are not a request for renewal, regardless of the nationality of the carriers;
  • for a domestic service;
  • between two licensed Canadian carriers;
  • between two foreign carriers; or
  • between a foreign lessee and a Canadian lessor.

Part 2 – The application

Subsection 8.2(2) of the ATR requires that both the lessee and the lessor file the application. In practice, one party files the application on behalf of both parties.

2.1 Filing deadline and service standard

Subsection 8.2(2) of the ATR requires that an application be filed with the Agency at least 45 days before the first planned flight.  If an application is filed less than 45 days before the first planned flight, the applicant should explain why the filing deadline was not met.

The Agency considers an application to be complete once all of the required information and documentation has been filed (see section 2.2).

The Agency acknowledges that in certain situations it may not be possible for the applicant to provide all of the required documents at the time of the application. The Agency is able to commence the processing of the application before the lessor has a Canadian aviation document in effect or insurance documentation is submitted (i.e., items 4c) and 4d) of section 2.2); however, no decision will be made in respect of proposed wet-leased aircraft until these documents are received and the application is deemed complete. Further, any application filed with the Agency that remains incomplete for an undue period of time may be returned by Agency staff to the applicant.

The Agency’s service standard for wet-lease applications is to process 85 percent of these applications within 15 business days of receiving completed applications meeting the requirements set out in section 2.2 below.

See Filing an application for details, including contact information.

2.2 Application content

Applications must meet the requirements set out in section 8.2 of the ATR, and must include the following:

  1. the name of the lessee
  2. the name of the lessor
  3. if applicable, the name of the charterer(s)
  4. for the proposed air service, evidence that:
    1. the appropriate licence authority is in effect. The lessee is the party responsible for holding the appropriate licence authority for the service to be offered.
    2. any applicable charter permit or authorization is in effect. The lessee is the party responsible for holding the appropriate charter permit for the service to be offered.
    3. the lessor has a Canadian aviation document in effect. While the lessor is not required to have a licence issued by the Agency, the lessor must have a Canadian aviation document.
    4. the prescribed insurance coverage is in effect (further details in section 2.2.1 below).
  5. a description of the air service to be offered, specifically:
    1. the aircraft type(s) to be provided.
    2. the maximum number of seats and the cargo capacity of the aircraft to be provided and, where applicable (for charters and blocked space arrangements), the maximum number of seats and the cargo capacity to be provided for use by the lessee.
    3. the points to be served.
    4. the frequency of service.
    5. the period covered by the proposed service.
  6. an explanation of why the use by the lessee of all or part of an aircraft with a flight crew provided by a lessor is necessary; and,
  7. if a Canadian lessee is applying for approval of wet-lease arrangements of more than 30 days with a foreign lessor to provide international passenger services, the information specified in section 2.2.2.

2.2.1 Liability insurance coverage

The lessee must maintain passenger and third party liability insurance coverage (in at least the amounts set out in section 7 of the ATR) for a service offered by means of a wet-lease arrangement, either:

  1. through its own policy; or
  2. by being named as an additional insured under the policy of the lessor.

2.2.2 Submission of additional Information

Canadian applicants seeking to wet lease aircraft from foreign lessors for a period of more than 30 days must, at the time of filing their application, provide the following additional information:

  • evidence indicating that the number of aircraft to be wet leased by the lessee (including any aircraft already wet leased by the lessee which are subject to the cap) does not exceed the 20-percent cap (see 3.2) at the time of application.
  • a rationale as to why the proposed wet-lease arrangement or its renewal is necessary.

2.2.3 Renewing an arrangement of 30 days or less

The Wet-Lease Policy does not apply to wet-lease arrangements of 30 days or less. The Agency must ensure that repeated applications to renew a wet lease of 30 days or less are not being used to circumvent the requirements of the Policy.

Therefore, renewal of a short-term wet-lease arrangement for a period of no more than 30 days will be approved in exceptional circumstances only. That is, an extension to a short-term arrangement will only be considered if the applicant demonstrates to the Agency’s satisfaction that:

  • the need continues to be short term in nature;
  • the need continues to be due to an unexpected event; and
  • alternative measures to avoid renewal of the arrangement could not reasonably be taken.

The Agency intends to inform the industry whenever an application for an exceptional extension is requested (see Notice to industry).

Part 3 – Agency process for approving wet-lease applications

3.1 Agency considerations

In approving wet-lease applications, the Agency will consider whether Canada’s legislative and policy requirements are met.

In keeping with the Wet-Lease Policy, as long as the 20-percent cap at the time of application is not exceeded, the Agency:

  • will not deny an application solely on the basis of the provided rationale for the use of foreign aircraft with flight crew; and
  • may renew approvals of wet-lease applications of more than 30 days

3.2 Calculating the number of aircraft which may be wet leased

The following formula will be used to calculate the maximum number of aircraft that the Agency can authorize based on the 20-percent cap. Note that small aircraft, defined in the ATR as aircraft equipped for the carriage of passengers and having a certified maximum carrying capacity of not more than 39 passengers, are not included in this calculation.

Formula

Maximum number of aircraft that can be considered for wet-lease approvalFootnote 1 = [A x 0.2 ] - B

Formula elements:

  1. The total number of medium and large aircraft on the AOC of the lessee at the time of application.
  2. The total number of aircraft wet leased from foreign lessors for which Agency approval was previously granted for a period concurrent with the period of the proposed new wet-lease service.

3.3 Notice to industry

Under the Wet-Lease Policy, the Agency should condition or deny an application if Canadian air carriers do not enjoy reciprocal opportunities to wet lease in a foreign jurisdiction. The Agency intends to notify the industry in Canada of an application for any wet-lease approval when it deems, at its own discretion, there to be potential issues with respect to reciprocity or other matters not yet addressed by the Agency.

When providing notice to industry, the Agency will state why it is doing so, the period of time available for comment, and will also provide a copy of the applicant’s application, to allow for industry to comment.

The Agency may only rule on matters that fall within its regulatory purview. For example, Agency approval of wet-lease applications does not extend to the use of foreign flight crew or of dry-leased aircraft.

3.4 Conditions and duration of approval

Approvals granted by the Agency under section 8.2 of the ATR for wet lease arrangements are subject to the following standard conditions which highlight key regulatory requirements that apply for the duration of the approval:

  1. The lessee must continue to hold the valid licence authority.
  2. Commercial control of the flights must be maintained by the lessee. The lessor must maintain operational control of the flights and will receive payment based on the rental of aircraft and crew and not on the basis of the volume of traffic carried or other revenue-sharing formula.
  3. The lessee and the lessor must continue to comply with the insurance requirements set out in subsections 8.2(4), 8.2(5) and 8.2(6) of the ATR.
  4. The lessee must continue to comply with the public disclosure requirements set out in section 8.5 of the ATR.
  5. The lessee and the lessor must advise the Agency without delay of any changes to the information provided in support of the application.

The Agency may also impose specific conditions on its approval, and may deny an application if it is not satisfied that Canadian carriers enjoy reciprocal opportunities in the jurisdiction of the foreign carrier.

The Agency considers it appropriate that the approval of wet-lease applications be of a fixed duration (i.e., not open-ended).

3.5 Where to find Agency approvals

Agency determinations on air service applications are listed by year and by month in the Decisions section of the Agency Web site.

Part 4 – Exceptions and notification for temporary and unforeseen circumstances (section 8.3 of ATR)

Section 8.3 of the ATR outlines the instances where the formal approval for wet-lease arrangements referred to in section 8.2 of the ATR is not required. These can be divided into two categories: exceptions; and temporary and unforeseen circumstances.

At all times, including when exceptions or temporary and unforeseen circumstances apply, the appropriate licence authority, charter permit or authorization (if applicable), Canadian aviation document and the required liability insurance coverage must be in effect.

4.1 Exceptions (no documentation required)

Approval by the Agency of wet-lease arrangements is not required when all of the conditions below are met.

  • both the lessee and the lessor are Canadian;
  • Both the lessee and the lessor are licensees; and
  • the air service to be provided is either a domestic service or an air service between Canada and the United States.

4.2 Temporary and unforeseen circumstances – Applicable to international services only (documentation required)

Approval by the Agency of wet-lease arrangements is not required when a temporary and unforeseen circumstance transpires within 72 hours before the planned departure time of a flight or the first flight of a series of flights that forces the lessee to use an aircraft with a flight crew provided by a lessor and the period of the wet-lease arrangement to address that circumstance lasts no more than one week.

In these circumstances, the lessee must notify the Agency of the proposed flight or flights. The notification must be given to the Agency before the flight takes place and must contain:

  1. a description of the temporary and unforeseen circumstance, and an explanation of why the lessee requires the use of aircraft with flight crew provided by a lessor;
  2. for the air service to be provided, either:
    1. a statement that the appropriate licence authority, charter permit (if applicable) and Canadian aviation document and liability insurance coverage are in effect, and that the liability insurance coverage is available for inspection by the Agency on request; or
    2. where use of the aircraft and flight crew does not require an Agency licence, a copy of the Canadian aviation document and the certificate of liability insurance;
  3. if applicable, where the aircraft to be used is larger than that authorized in the charter permit, a statement that the number of seats sold will not be greater than the number authorized in the charter permit;
  4. the name of the lessee;
  5. the name of the lessor;
  6. the aircraft type(s) to be provided;
  7. the number of seats and the cargo capacity of the aircraft to be provided;
  8. the date of each flight; and
  9. the routing of each flight.

No additional documents (e.g., evidence of insurance) are to be filed with the notification. An acknowledgement will be sent to the lessee once Agency staff have verified that the conditions of paragraph 8.3(1)(b) of the ATR have been met.

Part 5 – Informing travellers of wet-lease arrangements

To ensure that passengers are informed of the carrier they will be travelling with at all stages of the process, from planning to the time of travel, section 8.5 of the ATR requires a lessee to advise the public that it is providing an air service through wet lease arrangements.

The lessee is required to inform travellers, both before reservation (or at the time the wet-lease arrangement is entered into if a reservation has already been made) and at check in, of the identity of the person offering the service as well as the type of aircraft used, and must make this information available:

  • on all service schedules, timetables, electronic displays and any other public advertising of the air service;
  • for each segment of the journey, on all travel documents, including itineraries, if issued.

In the case of wet-lease arrangements to address temporary and unforeseen circumstances, the lessee must advise travellers at check in of the lessor, and is to make every effort to comply with the remaining public disclosure requirements.

Part 6 – Filing an application

When filing an application for wet-lease approval with the Agency, applicants should use the Wet-Lease Application Form.

6.1 Language of the application

Written information can be filed with the Agency in either English or French.

If information is filed in another language, it must be accompanied by a translation in English or French and an affidavit attesting to the accuracy of the translation.

6.2 Confidentiality

All information provided on the wet-lease application form is considered public information.

If there are information or documents presented in support of an application that an applicant contends are commercially sensitive or confidential, they should be clearly marked as such and should be submitted as separate documents.

In cases where the Agency determines that an application is exceptional (see section 4.2), it will include a copy of the application form when giving notice to industry for the purpose of seeking comment.

6.3 Withdrawing a filed application

An application may be withdrawn at any time by the applicant(s) before an Agency determination is issued.

6.4 How to file an application

An application, including all supporting documentation, should be filed with the Agency by e-mail at:  licence@otc-cta.gc.ca.  The Agency is committed to moving towards a paperless work environment and will therefore treat this as your official submission and you should not send a paper version.

6.5 Contact information

For further information, or if there are any questions with this Guide, please send an e-mail to: licence@otc-cta.gc.ca.

Definitions

Air Operator Certificate (AOC)
is a Canadian aviation document which authorizes the operation of a commercial air service.
Canadian aviation document (CAD)
is any licence, permit, accreditation, certificate or other document issued by the Minister of Transport under Part I of the Aeronautics Act to or with respect to any person or for any aeronautical product, aerodrome, facility or service.
Lessee
means the party to a wet-lease arrangement that obtains aircraft and flight crew from another carrier, and under Canada’s regulatory framework, is the holder of a licence (i.e., licensee) issued by the Agency under Part II of the Act. The lessee is also referred to in industry terms as the “marketing carrier.”
Lessor
means the person who provides an aircraft with flight crew to a lessee. The lessor is also referred to in industry terms as the “operating carrier.”
Wet leasing
is a practice in the aviation industry whereby one carrier (the lessee) obtains aircraft and flight crew from another carrier (the lessor) to operate services offered under the former’s licence. The lessor is in operational control of the flights, while the lessee is in commercial control of the flights.
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