Canada Jetlines to go public in reverse takeover as it races to be first ultra-low cost carrier to take off

In the wake of NewLeaf Travel Co.’s failed attempt to launch service recently, Canada Jetlines Ltd. revealed Wednesday intends to go public because it aims to be the first ultra-low-cost airline out of the gate.

Jetlines can place around the TSX Venture Exchange inside a reverse takeover of Jet Metal Corp., a junior uranium explorer, with the dpo expected to occur between May. The Richmond, B.C.-based airline had intended using this route earlier, but held off due to market uncertainty. Strong signals from investors prompted it to resume its course.

According to terms of the arrangement, each 1.5 share of Jet Metal will convert to one share of the new company, that will list underneath the same symbol, JET. Each Jetlines share is going to be treated as 1.5 shares from the new entity. The transaction is susceptible to TSX approval.

Jetlines chief executive Jim Scott said once the company released a proposal for shell companies, several came forward. Last Thursday the board of directors selected Jet Metal, which owns uranium properties in Newfoundland and Wyoming.

Jet Metal shares have not traded since Jan. 15, when talks began with Jetlines.

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Scott said part of what made Jet Metal appealing was its $2 million in cash on hand, as well as its $5 million in assets that will be converted to cash.

“What we [also] liked about this particular shell is that it included a management team that concentrates on incubating new [start-ups),” Scott said within an interview. “They have a tremendous vision of how to invest in the rest of the market portion of the airline.”

To that end, Scott said the organization will turn its attention to securing the funding it requires and expediting the regulatory licensing process. As part of those efforts, Jet Metal will attempt to raise up to $6 million using a private placement.

The Canadian Transport Agency has told Jetlines that it needs $40 million in funding before it can operate. Indeed, as part of the regulator’s “financial fitness” test, it requires a new carrier to prove it can operate for 3 months without producing any income.

Jet Metal will assume two seats on the new company’s board. Because of administrative restructuring, Jetlines president David Solloway will be leaving the organization.

Jetlines promises to launch service out two primary hubs, in Vancouver and Hamilton, in addition to a secondary base in Winnipeg, having a promise to provide fares 40 percent less than competitors. Its route map spans across Canada, and includes several destinations in California, Florida and Mexico.

On Jan. 18, NewLeaf announced it had been suspending tickets sales less than fourteen days after it began to do so, while it waited for the CTA to accomplish a review of the way it issues licenses. NewLeaf was initially supposed to be in the skies last Friday.

The CTA has not announced its decision. Its public consultation ended Jan. 22.