A recent government order has made Air North shareholders ineligible for a 25 per cent territorial tax credit.
In February, under the Yukon Small Business Investment Tax Credit, the shares had been authorized for the tax credit.
In March, the airline sold 636 shares valued at $7,500 each.
Monday, the tax credit authorization was repealed by order of the superintendent of securities.
Air North responded to the news by offering its investors an additional four round-trip flight credits. Those credits are a one-time only deal.
Coupled with the original annual offer of two round-trip flights, Air North shareholders will now be entitled to a total of 14 round-trip flights through the deal, which is redeemable in five years.
However, the company has also cancelled a four per cent annual cash dividend it promised in the original share agreement.
Shareholders will probably accrue greater value from the additional flights than they would have through the tax credits, which had an estimated value of $1,875, said airline vice-president Murray Leitch.
Air North had been the first participant in the Yukon Securities Act, and the sudden repeal was attributed to a need to “iron out some bugs, as you must do with any new legislation,” said Leitch.
The airline had been hit with an overwhelming demand when the shares were first offered in March.
In less than three days, all 636 offered shares had been snapped up by Yukon investors.
This white-hot demand may have prompted the Yukon government’s change of face.
“Due to the overwhelming interest we had in the shares, it became apparent to both of us that we had to come up with an alternative plan,” said Leitch.
“There were also some concerns that the arrangement may have affected the formal funding agreement with the feds; it was also an issue of the timing of when Air North could get the proceeds,” said airline president Joseph Sparling.
“It was important to Air North that it could get the proceeds to use this year, not having to wait until 2013.”
“The change came about for a variety of reasons,” said Leitch.
Shares sold for the 2008 and 2009 tax years will still be honoured, but shareholders for the 2010 through 2013 tax years will be given the option of either cashing in their current shares for a full refund or transferring them into the new share offering.
“We’ve had a number of calls into the office, but not one of them has been, ‘I want my shares back;’ they all want to know how soon they can transfer their shares and when they can start flying … Yukoners’ appetite for shares of Air North is still very good,” said Leitch.
The new shares will permit Air North to move on with its fleet modernization plans, specifically the purchase of two new aircraft to service the company’s northern and southern routes, said Sparling.
The aircraft are expected to offer the company increased cargo capacity, increased passenger capacity and lower fuel burns, he said.