Jazz Air (QK, Halifax) and Air Canada (AC, Montréal Trudeau) have concluded an amended Capacity Purchase Agreement whose duration is set to run through to the end of 2025. The new CPA, which includes provision for a new tentative labour agreement reached between Jazz and its pilots, aims to provide both parties with significant cost reductions while strengthening their relationship over the long term.
"Provisions within the new CPA will contribute significantly to ensuring Jazz is a formidable cost competitor in the regional sector over the term of the new CPA, thereby enabling Jazz to bid for new regional flying for Air Canada on a more competitive basis," Jazz parent, Chorus Aviation, said in a stock market filing.
The new CPA aims to improve Jazz's fleet economics and network flexibility while reducing operating and labour costs. In line with these objectives, Jazz's fleet is to be modernized and simplified with its thirty-four Dash 8-100s and twenty-five CRJ200s to be replaced with twenty-three Dash 8-400s. Overall, its fleet is to shrink from the current 122 aircraft to 101 by the end of 2020, and 86 by the end of 2025.
"The transition to newer and more efficient larger gauge aircraft significantly helps to reduce per seat operating costs. The up-gauging of aircraft results in a reduction of seat capacity of less than 4% by 2020, and is further reduced by less than 9% by 2025."
Jazz's CPA fee structure will also transition from a "cost plus" mark-up to a more industry standard "fixed-fee" compensation structure. In addition to streamlining their cost-evaluation processes, the move will also offer both carriers more cost certainty and better align their cost reduction goals.
"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."
The CPA also has provision for the 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's operating costs. According to the Air Line Pilots Association (ALPA) pilot union, a new collective labour agreement has been reached and which will run for 11 years. Its terms have yet to be divulged.
The CPA is subject to a number of terms and conditions, including the ratification of a new tentative agreement reached between Jazz and its pilots, represented by the Air Line Pilots Association (ALPA), and approvals by the carrier's respective boards.
