Air Canada announced Monday an agreement to amend the Capacity Purchase Agreement (CPA) with Jazz Aviation LP, a wholly-owned subsidiary of Chorus Aviation Inc., under which Jazz currently operates certain regional Air Canada Express flights.
Through the revised agreement, Air Canada will transfer operation of its Embraer E175 fleet to Jazz from Sky Regional and Jazz will become the sole operator of Air Canada Express services. The revisions to the CPA are subject to Jazz reaching an agreement with the Air Line Pilots Association, International. If this condition is satisfied, the CPA will be amended on a retroactive basis to January 1, 2021.
“Air Canada is consolidating its regional flying with Jazz in response to the ongoing devastating impact of COVID-19 upon the airline industry,” said Richard Steer, Senior Vice President, Operations and Express Carriers in a press release.
Steer said the realignment of its regional services will help Air Canada achieve efficiencies and reduce operating costs and cash burn by consolidating its regional operations with one provider.
“By streamlining the regional fleet, this agreement will also position Air Canada to operate more competitively with a single provider as traffic returns following the pandemic,” he said.
Michael Rousseau, President and Chief Executive Officer of Air Canada thanked Sky Regional for the service it has provided to Air Canada and its passengers over the past decade, lauding them for their safety record, on time performance and cost management.
As a result of the CPA revisions and consolidation of regional flying, Air Canada expects to realize $400 million in cost reductions over the 15-year term of the agreement ($43 million per year until 2026 and $18 million per year thereafter.)
This savings include:
- Increasing near term-cost certainty as a result of the combined fleet under a single operator
- Reducing Air Canada’s overall regional flying compensation
- Creating related operational costs savings;
- In addition, the revised CPA will lower future contractual capital expenditure and leasing costs through a restructured CPA fleet, avoiding an estimated $193 million in future capital expenditures