Air Canada (AC, Montréal Trudeau) has signed a revised Capacity Purchase Agreement (CPA) with Chorus Aviation and will move all twenty-five E175s currently operated by Sky Regional Airlines (KV, Montréal Trudeau) to Chorus subsidiary Jazz Air (QK, Halifax). Sky Regional has since confirmed that as a result, it will cease all operations at the end fo the month.

"Air Canada is consolidating its regional flying with Jazz in response to the ongoing devastating impact of COVID-19 upon the airline industry. This necessary realignment of our regional services will help Air Canada achieve efficiencies and reduce operating costs and cash burn by consolidating its regional operations with one provider," Senior Vice President (Operations and Express Carriers) Richard Steer said.

The flag carrier said that besides providing near-term certainty and operational simplicity, the new CPA would also significantly lower operational costs. It expects to save CAD430 million Canadian dollars (USD340 million) in regional capacity expenses over the next 15 years and will also avoid CAD193 million (USD152 million) in contractual capital expenditures that would have been mandatory under the previous agreement.

According to the ch-aviation fleets advanced module, Sky Regional Airlines currently operates three ERJ 170-200LRs, two ERJ 170-200STDs, and twenty ERJ 170-200SUs on behalf of Air Canada. The aircraft are 14.4 years old, on average. Air Canada owns fifteen of these Embraer regional jets, while the remaining ten are leased, five each from Nordic Aviation Capital and GECAS, the ch-aviation fleets ownership module shows.

The revised CPA is subject to the approval of the pilots' union at Jazz Air. The deal, if approved by the union, will be retroactively valid as of January 1, 2021. Chorus Aviation told ch-aviation that the timeline for the transfer of the E175s has not been finalised as yet but that all 25 jets will join Jazz Air's fleet by the end of 2021 at the latest.

Sky Regional Airlines confirmed to ch-aviation that it will continue operating through the end of March 2021 and will subsequently cease operations. The airline does not operate any aircraft other than the E175s. It is a subsidiary of business charter specialist Skyservice Business Aviation, which operates a fleet of business jets and turboprops, including a single B737-500, and is the Canadian sales agent for Honda Aircraft.

The revised CPA also foresees the phasing-out of all Dash 8-300s operated by Jazz Air for Air Canada. The current agreement covers nineteen of the De Havilland Aircraft of Canada turboprops, all of which are owned by Chorus Aviation.

"Fifteen of [them] have undergone the Extended Service Program which prolongs their useful life by approximately 15 years. Chorus has the ability to sell or lease these aircraft or convert them for cargo operations," the holding said.

Chorus elaborated that the revised CPA would increase its fixed fee revenues related to E175 operations by CAD46 million (USD36.4 million) for the entire duration of the agreement. Jazz Air will therefore be Air Canada's exclusive provider of 70+ seat regional jet capacity at least through 2025. In turn, the removal of the Dash 8-300s will reduce lease revenue by approximately CAD56 million (USD44.3 million).

Jazz Air also operates fifteen CRJ200s and thirty-five CRJ900s on behalf of Air Canada. The airline phased out all Dash 8-100s in early April 2020, earlier than planned due to the pandemic.