Notice to Industry: Canada’s Policy for Wet-leasing
This notice is to inform the industry of a Wet-Lease Policy issued by the Minister of Transport on August 30, 2013.
This Policy will now guide the Agency's consideration of wet-lease applications where Canadian carriers propose to enter into wet lease arrangements of more than 30 days duration with foreign carriers to provide international passenger services.
Wet-leasing is a practice in the aviation industry whereby one air carrier (the lessee) obtains aircraft and flight crew from another carrier (the lessor) to operate services offered pursuant to the former's (the lessee's) licence. The lessor is in operational control of the flights while the lessee is in commercial control of the flights. This practice is subject to Agency oversight.
3. Agency role
As an economic regulator, the Agency is responsible for approving wet-lease arrangement applications pursuant to section 60 of the Canada Transportation Act. Applications must meet the requirements set out in section 8.2 of the Air Transportation Regulations (ATR).
4. New requirements from Policy
The new Wet-Lease Policy will be applied by the Agency to applications of 30 days or more duration currently being considered by the Agency and all new applications received on or after the release date of the Policy.
The Policy specifies that the number of aircraft wet-leased by Canadian carriers for more than 30 days from foreign carriers for international passenger services is subject to a cap. The cap is set at 20 percent of the number of Canadian-registered aircraft on the lessee's Air Operator Certificate (AOC) at the time the application is made. For the purpose of this Policy, small aircraft are excluded from the determination of the number of Canadian-registered aircraft on the lessee's AOC. Small aircraft is defined as an aircraft equipped for the carriage of passengers and having a certificated maximum carrying capacity of not more than 39 passengers.
The Agency intends to strictly apply the cap. Accordingly, the applicant (lessee, lessor, or both) must provide evidence that if the application were to be approved, the number of aircraft wet-leased (including any other aircraft wet-leased by the lessee which are subject to the cap) would not exceed the cap at any time.
The applicant shall also provide a rationale as to why the proposed wet-lease arrangement or its renewal is necessary.
In keeping with the new Policy, the Agency:
- will not deny an application solely on the basis of the rationale for the use of foreign aircraft with flight crew, as long as the cap is not exceeded; and,
- may renew approvals of wet-lease applications of more than 30 days as long as the cap is not exceeded.
Furthermore, the Agency considers it appropriate that the approval of wet-lease applications targeted by the Policy be of a fixed duration, i.e., not open-ended.
In keeping with the Policy, the Agency must ensure that applications for the renewal of a wet-lease of 30 days or less are not being used to circumvent the requirements of the Policy. Accordingly, any application where the circumstances are not exceptional, as described below, or where the period of renewal sought is in excess of 30 days, considering both the initial and subsequent periods of approval, will be subject to the cap.
In exceptional circumstances, renewal of a wet-lease arrangement for a period of no more than 30 days may be approved as an extension to a short-term arrangement, if the applicant demonstrates 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.
Exceptional renewals will only be granted when the applicant has clearly met its burden of proof. The Agency intends to provide notice of applications to the industry whenever an application for an exceptional extension is requested.
5. Applications not affected by the new Policy
The Policy does not affect current requirements for the processing of wet-lease applications:
- for all-cargo services, irrespective of the nationality of the carriers;
- of 30 days or less which are not renewed, irrespective of the nationality of the carriers;
- for a domestic service;
- between two licensed Canadian carriers;
- between two foreign carriers; or,
- between a foreign licensee and a Canadian lessor carrier.
6. Requirements that will continue to apply for all applications
In all cases, the applicants must provide the documentation and information required by the ATR, in particular a rationale as to why the proposed wet-lease arrangement is necessary.
The Agency will continue to consider for all wet-lease applications that:
- lessees have the appropriate licence authority and Canadian Aviation Document;
- the insurance arrangements between the parties meet the prescribed requirements;
- the arrangement includes conditions to ensure that the identity of the aircraft operator is disclosed to the passengers; and,
- notification requirements are met.
The Agency may make an approval subject to conditions or may deny an application if the Agency is not satisfied that Canadian carriers enjoy reciprocal opportunities in the jurisdiction of the foreign lessor.
The Agency intends to publish a wet-lease application guide, which will reflect the new Policy. The industry will have an opportunity to comment before the guide is finalized. Until it is published, any questions related to new applications subject to the new Policy can be directed to the Manager, International Agreements at 819-997-1237.
For further information
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