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During the 1991 British Grand Prix race weekend at Silverstone, U.K., someone was flying a flag with the Ferrari logo that had an additional, shorter flag attached to its edge, as shown in this frame from around 1:18:30 in the the 2021 documentary Schumacher:

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I can't be sure, but it looks as if this may be an "official" flag put up by the venue or the race management, as it's attached to the structure of the stands (note that the pole, extending from the stands rail, also carries what looks like a loudspeaker).

The design on this second flag appears to be the "CHC" logo of the Montreal Canadiens ice hockey team, particularly as used on the home game uniform:

enter image description here

What's going on here? Does this logo also have some significance in racing, or for this particular race? Or is this just a fan randomly sewing flags together?

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It won't be an official flag. I have no source but I'm 100% confident that even back then venues would only erect signage for sponsors or their own advertising.

From first hand experience, back in the 90s the organisation of Grands Prix was less restrictive (I remember Belgian GP as late as 1998 having fan-constructed makeshift grandstands up near Les Combes). As a result, I fully believe that these are fan flags that have commandeered any available anchor to celebrate their favourite teams. In this case you likely have an ice hockey fan in the crowd too.

I don't believe that there was any overt link with Canada in 91 beyond the Canadian GP and a historic affection for the late Giles Villeneuve.

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