Air Canada has confirmed it has amended and extended its capacity purchase agreement with Chorus Aviation, parent company of Jazz Aviation. The agreement provides both parties with greater stability and significant cost reductions through a better alignment of their interests.
Air Canada estimates the new agreement will result in approximately $550 million in financial value over the next six years as compared to the previous CPA, of which two-thirds will be in network optimisation benefits. The remaining benefits will be spread across several cost areas. Annual benefits in 2015 are expected to increase operating income by approximately $50 million as Air Canada implements the new CPA, increasing each year throughout the following five years.
"This milestone eleven-year agreement with Chorus Aviation represents another important step towards sustainable profitable growth," said Calin Rovinescu, president and chief executive officer, Air Canada.
"The agreement significantly increases our competitiveness in regional markets through lower unit costs and an improved product offering. The resulting stronger network will support our commercial strategy of expanding internationally and increasing connecting traffic through our hubs," he added.
The agreement also provides for long-term stability by eliminating the risks, uncertainties and set-up costs of a potential transition to alternative regional providers in 2021. Post 2020, Air Canada says it expects Jazz will provide competitive costs and continued high service levels.
The new CPA will now run to December 31, 2025. It will afford simplification and modernisation of the Jazz fleet which will provide improved service and greater efficiency through the addition of up to 23 new aircraft - 13 Q400 NextGen aircraft and options for 10 Q400 NextGen aircraft – which will fly under the Air Canada Express brand.
"The addition of these new Q400 NextGen aircraft will continue Jazz's fleet renewal program that began in 2011, and provide unit operating costs that are amongst the lowest of any regional aircraft," said Joseph Randell, president and chief executive officer, Chorus Aviation and Jazz Aviation.
"The addition of these efficient aircraft is an important component of our cost reduction plans and the amended Capacity Purchase Agreement ('CPA') with Air Canada. The Q400 NextGen airliner has proven to be an outstanding complement to our exclusive fleet of Bombardier turboprops and regional jets," he added.