Air Canada regional partner Sky Regional will cease operations on March 31 following the flag carrier’s decision to end the airlines’ capacity purchase agreement (CPA) and transfer Sky’s 25 Embraer E175s and pilot roster to Jazz Aviation. Air Canada said on Monday it would revise its agreement with Jazz to allow that regional airline to fly all Air Canada Express regional operations. The revisions to the CPA remain subject to Jazz reaching a labor agreement with the Air Line Pilots Association.
“Despite a very successful 10-year relationship, Air Canada has advised us that they have made the difficult decision to terminate our capacity purchase agreement as of March 31, which will result in the transfer of our 25 Embraer aircraft to Air Canada,” Sky Regional CEO Russ Payson said in a written statement. “Sadly, as a result, we will be forced to shut down our operations, despite our many adjustments in the face of the various travel restrictions imposed by governments, thus far without any sector-specific support.”
Calling Sky Regional “a Canadian success story,” Payson added that the airline remained on a “solid growth trajectory” before the pandemic, when it employed 800 people. Sky Regional also lays claim as the North American leader in E175 dispatch reliability and the first airline on the continent to win certification for iPad use in the cockpit.
“I am extremely proud of Sky Regional’s record, and its outstanding, innovative and dedicated team; and it is hard to reconcile the tragedy of today’s announcement given the strength and success of our organization,” Payson concluded.
For Air Canada, the realignment will help reduce operating costs and cash burn by consolidating its regional operations with one provider, said the airline. As a result of the CPA revisions and consolidation of regional flying, Air Canada expects to realize $400 million in cost reductions over the 15-year term of the agreement ($43 million per year until 2026 and $18 million per year thereafter). Along with increasing near-term cost certainty and reducing Air Canada’s overall regional flying compensation, the revised CPA will lower future contractual capital expenditure and leasing costs by about $193 million, estimates the airline.