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Canada's business aviation sector enters the year at a pivotal moment. Regulatory reform by Transport Canada, intensifying sustainability obligations, continued fiscal uncertainty, and accelerating technological change are reshaping the landscape of the industry.
For stakeholders, particularly those operating cross‑border routes, 2026 will require heightened attention to tax planning, regulatory compliance, and contractual allocation of responsibility. This bulletin highlights the principal developments likely to affect the sector over the coming year and outlines why they matter from a legal perspective.
1. Fiscal Policy Uncertainty and Aircraft Ownership Structures
We already addressed in our last bulletin the possible implications of the 2025 Canadian Federal Budget on the aviation sector, notably for aircraft owners, operators, vendors, and infrastructure stakeholders[1]. One of the biggest impacts is the repeal of the Select Luxury Items Tax on aircraft valued over $100,000, and as a result we can anticipate more traction with respect to brand new aircraft sales in 2026.
In parallel, there is a strong advocacy movement for accelerated or full first‑year depreciation for business aircraft in order to restore Canada's tax competitiveness with the US on this matter. Such movement in part results from a growing desire to create a competitive cross‑border ownership ecosystem and operating structures in Canada, including trusts or leasing arrangements. While pressure on the Canadian government remains regarding this matter, major changes are unlikely to happen in 2026. Also, certain stakeholders have advocated that current tax treatment discourages fleet renewal and pushes transactions offshore, particularly affecting Québec and Ontario aerospace ecosystems.
Why does it matter legally? Any aircraft acquisition will increasingly require integrated tax and customs analysis, particularly for non‑resident owners or partial owners. Transaction documents shall be carefully considered to include tax‑change risk clauses as a way to hedge the financial risk related to a country's fiscal policy shifts.
2. Regulatory Modernization by Transport Canada Transport
Canada is advancing its broad regulatory agenda through 2025–2027, including amendments affecting: safety management systems ("SMS"), licensing process and its alignment with International Civil Aviation Organization standards. With such possible regulatory changes, we can expect mandatory updates to internal documentation and procedures of aircraft operators.
Why does it matter legally? Industry players must ensure timely revision of their operations manuals, training programs, and SMS frameworks. Foreign operators entering Canada must align with updated Canadian Aviation Regulations rather than relying solely on international standard or US equivalencies.
3. Labour Shortages, Risks of Workers' Strikes and Pilot Regulatory Risk
2026 will not be different from its predecessors when it comes to challenges related to human capital, persistent shortages of certain type‑rated pilots, and specialized maintenance personnel are still relevant. Regulators are persistent in their will to heighten their scrutiny of foreign pilot authorizations and licensing conversions, which adds to the challenges posed by worker mobility between Canada and the US, an issue that was not as apparent before.
Why does it matter legally? Standard aviation-related employment contracts for large-scale operating air carriers will increasingly intersect with immigration and regulatory law, in the event of a lack of verification and security, this may even result in a fleet being grounded due to non‑compliant crew qualifications. Workforce planning will also increasingly become a material operational risk for corporate flight departments.
4. Artificial Intelligence, Digitalization and Data Governance
The Canadian aviation industry is seeing increased adoption of AI‑driven maintenance tools, digital flight planning and route optimization systems for large and regional carriers as well as expanded uses of advanced data analytics for safety and operational efficiency. Many of these technologies are increasingly integrated into original equipment manufacturer platforms and third‑party maintenance systems.
Why does it matter legally? The increased use of AI tools, digital flight planning and automatization systems raises new legal debates, particularly with regards to the attribution of liability in the case of a faulty event involving several AI-using parties, many of such legal questions which remain unsettled. In parallel, there is a growing exposure to data protection and cybersecurity obligations notably with the implementation of Personal Information Protection and Electronic Documents Act (Canada) or the Act respecting the protection of personal information in the private sector (also called "Law 25"). This forces aviation-related corporations to disclose AI reliance in their contracts and implement robust frameworks to regulate their operations (and protect against the disclosure of confidential information), especially in the case of cross‑border transfer of personal information or data.
Conclusion
In 2026, business aviation in Canada will continue to offer strategic value but only when managed as a highly regulated multi-jurisdictional industry. Tax policy uncertainty, evolving regulatory frameworks and digital transformation together create both risk and opportunity. Early legal engagement with integrated advisory teams and proactive compliance planning will be critical to protecting asset value and operational continuity.
Fasken's national aviation team provides a wide range of legal services to Canadian and international companies operating in the aviation industry. Our lawyers have a deep understanding of the issues and intricacies of the aerospace industry, we have a proven track record in handling regulatory matters, litigation, and complex aviation-related transactions. We will gladly help you manage and resolve your complex legal issues efficiently and effectively.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
