Air Canada, Jazz Aviation reach extended capacity purchase agreement

Air Canada and Jazz Aviation have reached an agreement on an amended and extended capacity purchase agreement, which provides for significant cost reductions for both parties, strengthens the relationship and better aligns their interests over the long term.

The new CPA, announced today, is subject to a number of terms and conditions, including the ratification of a new tentative agreement reached between Jazz and its pilots. It is anticipated that all such approvals should be obtained by Feb. 1.

Highlights of the agreement include:

- Extension of the term by five years to Dec. 31, 2025;

- Establishment of a pilot mobility agreement that provides Jazz pilots with access to pilot vacancies at Air Canada, thus allowing a significant reduction in Jazz operating costs;

- Simplification and modernization of the Jazz fleet;

- Reduction in Air Canada and Jazz costs derived from a combination of improved fleet economics, greater network flexibility and reduced operating and labour costs.

- Modification of Jazz's CPA fee structure, moving from a "cost plus" mark-up to a more industry standard fixed fee compensation structure.

While it is anticipated that Jazz will achieve similar returns to its current fee structure until 2020, there will be a reduction in the fixed fee compensation structure beginning in 2021. The new CPA affords Chorus the opportunity to provide more Jazz operated aircraft to Air Canada at market rates.

Further modernization of the Jazz fleet continues with the addition of 23 Dash 8 Q400 aircraft to gradually replace 34 Bombardier Dash 8-100 and 25 CRJ200 aircraft. The fleet will be transitioned from 122 aircraft to an established minimum guarantee of 101 aircraft by the end of 2020, and 86 aircraft by the end of 2025; the transition to newer and more efficient larger gauge aircraft significantly helps to reduce per seat operating costs, said Air Canada.