JET Global Crossing Airlines Group Inc

NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR RELEASE TO U.S. NEWSWIRE SERVICES

Canada Jetlines Ltd. (JET: TSX-V) (the “Company” or “Jetlines”) is pleased to announce that it has entered into a subscription agreement (the “Subscription Agreement”) with SmartLynx Airlines SIA (“SmartLynx”) for financing commitments of up to $15 million (the “Offering”). SmartLynx specializes in full-service ACMI (Aircraft-Crew-Maintenance-Insurance) aircraft lease services and is the leading ACMI provider in Europe for Airbus A320 aircraft. SmartLynx aircraft has been utilized by major airlines including Norwegian, EasyJet, Thomas Cook and TUI.

“This financing transaction with SmartLynx provides further validation of the Jetlines business plan and the need for a true ultra-low cost carrier in Canada. This also provides endorsement from a seasoned European airline that flies aircraft for some of the most successful ultra-low cost carrier airlines in the world. We look forward to working with the SmartLynx group as we continue to build out the business plan in preparation for launch,” commented Mark Morabito, Executive Chairman of Jetlines.

Javier Suarez, CEO of Jetlines added “In addition to the great value added by the investment SmartLynx is making in Jetlines, having them as our partner brings in a good number of synergies that will translate into significant long-term operational savings. SmartLynx reputation and broad network will help Jetlines accomplish our near-term goals”.

Zygimantas Surintas, CEO of SmartLynx commented “Expansion of our operations into new markets is a strategic long-term priority for SmartLynx, and the Canadian market is among those we have been looking at for several years. We are excited about the opportunity for partnership with Jetlines – not only through SmartLynx’s investment but also through SmartLynx’s ability to contribute our years of experience in airline operations, aircraft leases, maintenance operations and other matters to help Jetlines succeed. The SmartLynx team believes in the ULCC model in Canada and hopes that it can play a part in bringing cheaper air travel to Canadians.”

Details of the Offering

The Offering will consist of 22,727,272 subscription receipts of the Company (“Subscription Receipts”) at a price of $0.33 per Subscription Receipt (the “Offering Price”), for gross proceeds of $7.5 million. The Subscription Receipts will be issued pursuant to the terms of a Subscription Receipt Agreement (the “Subscription Receipt Agreement”) between the Company, SmartLynx and an escrow agent. SmartLynx also has the option exercisable for a period of twelve months following the closing of the Offering to complete a second financing for variable voting shares for additional gross proceeds of up to $7.5 million at the discounted market price at the time it exercises its option (the “Option”).

Each Subscription Receipt will entitle SmartLynx to receive, without payment of additional consideration or further action on the part of the holder, one unit of the Company (each a “Unit” and collectively the “Units”), upon receipt by the escrow agent, prior to August 31, 2019 (the “Deadline”) of a release notice from the Company and SmartLynx (the “Release Notice”), confirming that: (a) the Company has raised additional gross proceeds of $40 million (the “Funding Milestone”) from a subsequent financing by May 31, 2019 (such completion date subject to waiver by SmartLynx); (b) the receipt by the Company’s subsidiary, Canada Jetlines Operations Ltd. (“Jetlines Operations”), of its air operator certificate from Transport Canada; and (c) no termination event has occurred.

Each Unit will consist of one variable voting share of the Company and one common share purchase warrant (each, a “Warrant”).  Each Warrant shall entitle the holder thereof to purchase one variable voting share of the Company at a price of $0.45 at any time up to 5:00 p.m. (Vancouver time) on the date which is 36 months from the closing date.

If: (i) the Release Notice is not delivered by the Deadline, or (ii) the Offering is terminated in accordance with the terms of the Subscription Receipt Agreement, then SmartLynx will be entitled to receive an amount per Subscription Receipt equal to the Offering Price and an entitlement to the interest earned thereon. Any shortfall will be funded by the Company. In addition, the Company is obligated to pay a termination fee of US$250,000 if the Company has not achieved the Funding Milestone by May 31, 2019 or commits certain other material breaches and SmartLynx terminates the Subscription Agreement.

The net proceeds of the Offering will be used to further the business objectives of Jetlines in launching an ultra-low cost airline carrier in Canada, including advancing the licensing process, augmenting the leadership team with operations and commercial personnel, branding and marketing activities, as well as advance internet, digital media and IT systems initiatives.

It is expected that SmartLynx will become an insider of the Company on conversion of the Subscription Receipts.

Details of the Commercial Arrangement

In connection with the Offering, Jetlines Operations and SmartLynx will enter into an agreement whereby SmartLynx shall provide ACMI (Aircraft-Crew-Maintenance-Insurance) services to Jetlines Operations during the following eight winter seasons. This agreement will allow Jetlines to increase its capacity in the market during the very busy Canadian Winter Season.  In addition, SmartLynx and the Company will enter into a two-year agreement that will provide Jetlines with services and certain proprietary software meant to support Jetlines during the early stage of their operations.

The Company, Jetlines Operations and SmartLynx will also enter into a framework agreement (the “Framework Agreement”) in connection with the closing of the Offering that will govern aspects of the relationship between the parties. The Framework Agreement will cover matters including the right of SmartLynx to appoint a single Board member to the Company and Jetlines Operations, rights to participate on Board committees, arrangements regarding the review of aircraft leases, the grant of a pro-rata right to SmartLynx to participate in future financings and certain other rights detailing with operational and expenditure matters of the Company and Jetlines Operations.

The closing of the Offering is conditional on the satisfaction of conditions to closing contained in the Subscription Agreement, which conditions include, among other things, approval of the TSX Venture Exchange for the Offering and the execution of the Subscription Receipt Agreement and the execution of the agreements referred to above.  It is expected that the Offering will close on or before December 24, 2018.

About SmartLynx Airlines SIA

SmartLynx Airlines was founded in 1992 as a private airline. Today it is the leading ACMI (Aircraft-Crew-Maintenance-Insurance) provider in the EU on Airbus aircrafts. As an EU airline, SmartLynx Airlines complies with IOSA and EASA international quality standards, and has access to free route airspace. In 2019, SmartLynx’s fleet will consist of 20 Airbus aircrafts, flying routes in Europe and Asia. SmartLynx flight crew members represent more than 17 nationalities, speak multiple languages. The average experience of SmartLynx’s captains exceeds 5300 block hours and first officers exceeds 1900 block hours.

For more information on SmartLynx, please visit their website at www.smartlynx.aero

About Canada Jetlines Ltd.

Canada Jetlines is set to become Canada’s first true Ultra-Low Cost Carrier (ULCC) airline, with plans to operate flights across Canada and provide non-stop service from Canada to the United States, Mexico and the Caribbean. The Company plans to commence operations with the Airbus A320 fleet, the most widely used aircraft for ultra-low cost carriers worldwide. Jetlines is led by a board and management team with extensive experience and expertise in low-cost airlines, start-ups and capital markets. The Company was granted an unprecedented exemption from the Government of Canada that will permit it to conduct domestic air services while having up to 49% foreign voting interests.

For more information on Jetlines, please visit our website at www.jetlines.ca.

ON BEHALF OF THE BOARD

"Mark J. Morabito"Executive Chairman

Canada Jetlines is part of the King & Bay group of companies. King & Bay is a merchant bank that specializes in identifying, funding, developing and supporting growth opportunities in the resource, aviation, and technology sectors.

For more information, please contact:Toll Free: 1-833-226-5387Email: investor.relations@jetlines.ca

Cautionary Note Regarding Forward-Looking Information

This news release contains "forward-looking information" concerning anticipated developments and events that may occur in the future. Forward-looking information contained in this news release includes, but is not limited to, statements with respect to (i) the commencement of operations and the success of expected future operations of the Company; (ii) the completion of the Offering; (iii) the satisfaction of the conditions to closing of the Offering, (iv) the satisfaction of the escrow release conditions; or (iv) the use of proceeds from the Offering.

In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects" "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or " or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information contained in this news release is based on certain factors and assumptions regarding, among other things, the satisfaction of the conditions to closing of the Offering, the satisfaction of the escrow release conditions, the terms contained in the executed agreements to be entered into by the Company or its subsidiaries with SmartLynx, the receipt of financing to commence airline operations, the accuracy, reliability and success of the Jetlines’ business model; the timely receipt of governmental approvals; the timely commencement of operations by Jetlines and the success of such operations; the legislative and regulatory environments of the jurisdictions where the Jetlines will carry on business or have operations; the impact of competition and the competitive response to the Jetlines’ business strategy; and the availability of aircraft. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include risks related to, the ability to obtain financing at acceptable terms,  the impact of general economic conditions, domestic and international airline industry conditions, future relations with SmartLynx, volatility of fuel prices, increases in operating costs, terrorism, pandemics, natural disasters, currency fluctuations, interest rates, risks specific to the airline industry, the ability of management to implement Jetlines’ operational strategy, the ability to attract qualified management and staff, labour disputes, regulatory risks, including risks relating to the acquisition of the necessary licenses and permits; risks related to disputes under the agreement with Boeing to acquire 737-Max aircraft, and the additional risks identified in the "Risk Factors" section of the Company's reports and filings with applicable Canadian securities regulators. There is no assurance that the closing of the Offering will occur or if it does occur that the escrow release conditions will be satisfied or that SmartLynx will exercise the Option.

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information is made as of the date of this news release. Except as required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) has reviewed or accepts responsibility for the adequacy or accuracy of this release. 

Cautionary Statements Regarding U.S. Securities Act

No securities regulatory authority has expressed an opinion about the securities described herein. No Company securities have been or will be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or the securities laws of any state, district or commonwealth of the United States (as defined in Regulation S under the U.S. Securities Act). Accordingly, these securities may not be offered or sold, directly or indirectly, within the United States or to or for the account or benefit of any "U.S. Person" (as defined in Regulation S under the U.S. Securities Act), absent an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described in this news release in the United States or any jurisdiction where such offer or sale would be unlawful, or for the account or benefit of any U.S. Person or person within the United States.