Several years ago Canadian upstart Jetlines embarked on a plan to raise millions of dollars by becoming a publicly-traded company, and to use that money to fund an ultra-low-cost airline.
On 28 February, after overcoming court battles, failed partnerships and numerous delays, Jetlines reached that goal by folding its business into an existing publicly-traded company called Jet Metal.
Many hurdles to launching operations remain, but the deal – called a "reverse takeover" – raised C$6.8 million ($5.1 million) and sets Jetlines up to secure millions of dollars in additional foreign financing, Vancouver-based Jetlines chief executive Jim Scott tells FlightGlobal.
Jetlines could possibly begin ultra-low-cost service sometime this year, but Scott cautions that the company will likely time its launch to coincide with a period of high travel demand.
"Technically we could do 2017," he says. "The question is, it is commercially the best thing to… start in November."
The takeover saw Jetlines merge with Jet Metal, a Vancouver-based public mining company that had been seeking to diversify, company officials have told FlightGlobal.
Privately-owned Jetlines had for several years sought merge with a publicly-traded "shell company", through which it could become public and tap securities markets, Scott says.
With the business combination, Jet Metal has assumed Jetlines' business, and also changed its name to Canada Jetlines, the company says in a 1 March media release.
Canada Jetlines' stock will begin trading on Toronto's stock exchange under the symbol "JET" on 7 March, Jetlines says in a media release.
"The [reverse takeover] was always something that was in the works," Scott says, noting that Canada's financial institutions were much more keen on funding a publicly-traded airline than they were a private carrier.
Jetlines initially sought to partner with Inovent Capital, but that deal fell apart in 2015 amid broader financial problems created by the decline in Canada's oil and gas industry, Jetlines executives have said.
Jetlines and Inovent ended up settling a dispute in court.
Then came the plan to merge with Jet Metal.
That deal too seemed to stall until early November 2016, when Canada's government granted Jetlines and another prospective carrier called Enerjet an exemption from a 25% cap on foreign ownership of Canadian airlines.
The exemption raised Jetlines' cap to 49% and had been advocated by King & Bay West Management, a company affiliated with Jet Metal.
Suddenly, Jetlines was open to foreign investment.
Jetlines raised the initial C$6.8 million on Toronto's stock exchange from the sale of nearly 23 million shares at a price of 30 Canadian cents each, the company has said.
That money will help fund aircraft acquisitions, personnel costs and expenses related to certification by Transport Canada – the "nuts and bolts of building an airline", Scott says.
The carrier expects initially to operate leased Boeing 737 Classics, though it has orders for five 737 Max and purchase rights for another 16 of those aircraft, Scott says.
Jetlines has studied Bombardier's CSeries, but concluded 737s are a safer bet.
"Everybody has a 737. If you get stuck somewhere, there's always someone that has a spare part," Scott says. "For a start up, you de-risk yourself by using an airplane that is in service in Canada."
In addition to the C$6.8 million, Jetlines already has investments valued at C$3 million, and Jet Metal has C$3.5 million – for a total of about C$13 million, Scott says.
By issuing all those Canadian shares first, Jetlines increased the amount of foreign investment it can receive without exceeding that 49% cap, Scott says.
The company expects the stock price will increase to where Jetlines will be able to raise an additional C$40 million from foreign investors – money it will use to launch operations.
Canadian regulations require that airlines maintain cash reserves adequate to fund operations for 90 days, which for Jetlines equates to about C$16 million, Scott says.
Also, Canada's air traffic control corporation Nav Canada requires that new carriers pay upfront 71 days of fees, which could be $500,000 for Jetlines, Scott adds.