Air Canada (Montreal) said today that its amended and extended capacity purchase agreement (CPA) with Chorus Aviation Inc., parent company of Jazz Aviation LP (Halifax), has been concluded with all terms and conditions now met. The agreement provides both parties with greater stability and significant cost reductions through a better alignment of their interests.

The airline continued:

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 optimization 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.

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 expects Jazz will provide competitive costs and continued high service levels.

The highlights of the new CPA include:

Extension of the term by five years to December 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 which will provide improved service and greater efficiency through the addition of 23 Bombardier Q400 aircraft;

Reduction in Air Canada and Jazz costs derived from a combination of improved fleet economics, greater network flexibility and reduced operating and labour costs. This supports Air Canada’s cost reduction initiatives; and

Modification of Jazz’s CPA fee structure, moving from a “cost plus” mark-up to a more industry standard fixed fee compensation structure. This will provide more cost certainty and better align the cost reduction goals of both Air Canada and Jazz. This eliminates non-value added costs and the necessity of the 2015 benchmarking exercise.

As a result,  Bombardier Commercial Aircraft and Chorus Aviation Inc., parent company of Jazz Aviation LP announced today that they have signed a firm purchase agreement whereby Chorus will acquire 13 Q400 NextGen aircraft and options for 10 Q400 NextGen aircraft. Once delivered, the aircraft will be operated by Jazz under the Air Canada Express banner.

The Companies also announced Chorus and Jazz as the launch customer and operator for the industry’s first Dash 8-300 aircraft Extended Service Program that will extend the life of the Dash 8-300 turboprop to 120,000 flight cycles from the original 80,000 flight cycles.

Copyright Photo: TMK Photography/AirlinersGallery.com. Jazz Aviation’s Bombardier DHC-8-402 (marketed as the Q400) C-GGOI (msn 4381) arrives in Toronto (Pearson).

Air Canada aircraft slide show:

http://airlinersgallery.smugmug.com/Airlines-Canada/Airlines-Canada

Air Canada Express-Jazz aircraft slide show: