New Deals: Chorus Signs Agreements With Air Canada & Its Pilots

Open Jaw

The investors like it. Chorus Aviation stock surged 12.5% after its Jazz subsidiary signed a new 5 yr. deal with AC. Jazz added to the good news with the announcement that it has reached a tentative agreement with its pilots on a new contract.

YHZ-based Jazz provides the vast majority of AC’s regional lift under the Air Canada Express brand. The new agreement extends a deal which had been set to expire in 2020, through the end of 2025.

Highlights of the deal include:

  • A ‘pilot mobility agreement that’ provides Jazz pilots with access to vacancies at AC
  • Simplification and modernization of the Jazz fleet – in fact the fleet will be smaller by the end of the deal
  • Lower costs for both AC and Jazz through a “combination of improved fleet economics, greater network flexibility and reduced operating and labor costs”
  • Changes to Jazz’s fee structure, moving from a ‘cost plus’ mark-up to a fixed fee compensation structure.

Jazz says the amended agreement will allow it to increase the size of its aircraft while lowering its overall fleet size. For example, 23 new Bombardier Q400 turboprops will gradually replace 34 Dash 8-100 turboprops and 25 CRJ200s.

“The transition to a newer, larger gauge aircraft operation calls for a reduction in the Jazz fleet from 122 to an established minimum guarantee of 101 aircraft by the end of 2020 and 86 aircraft by the end of 2025,” Jazz said in a statement, adding, “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.”

Additionally, Jazz and Air Line Pilots Association (ALPA) leadership representing more than 1,400 Jazz pilots have reached a tentative agreement on a new labour contract that will extend for 11 years.

Chorus Aviation CEO Joe Randell said the combination of the deals with its pilots and AC provides “certainty [for] Jazz’s operations for the next 11 years” and “places Jazz in a more cost competitive position over the longer term.”

AC CEO Calin Rovinescu had this to say: "Our restructured capacity purchase agreement with Jazz represents another important milestone in Air Canada's ongoing cost reduction initiatives and the execution of our commercial strategy."

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