Jazz buys make return to Toronto Island likely
Last Updated: Tuesday, February 09, 2010 | 06:42 PM EST
Financial Post
Jazz Air LP, the regional affiliate of Air Canada, said it will acquire 15 Q400 NextGen turboprops from Bombardier Inc., increasingly the likelihood that the country’s largest carrier will return to the Toronto Island airport in the near future.
The news comes as the Toronto Port Authority, which oversees the operations of the Billy Bishop Toronto City Airport, finalizes its plans to attract new carriers to the island airport, including issuing a formal request for proposals in the coming week, said Geoffrey Wilson, TPA president.
Mr. Wilson said the process aims to allocate between 40 to 60 landing slots to other carriers, in addition to the 120 already claimed by Porter Airlines. “We’re welcoming all fair competition into the airport,” Mr. Wilson said.
Both Air Canada and its Star Alliance partner, Continental Airlines, have expressed interest in flying to the airport.
Peter Fitzpatrick, Air Canada spokesman, said the country’s largest carrier would like to return to the airport “as soon as possible.”
Air Canada has not flown into the island airport since it was evicted in 2006, prior to Porter Airlines making Billy Bishop its home.
Part of Air Canada’s plan to return to the island includes using the Q400s ordered by Jazz yesterday there.
The regional carrier announced its plans to acquire a fleet of larger turboprops last summer after it revised the commercial terms of its agreement with Air Canada. Jazz helped its larger partner avoid a creditor protection in exchange for a commitment to help with Jazz’s fleet renewal and other considerations.
The Q400, which lists at $29-million, is roughly 30% more fuel efficient than similar sized regional jets.
Jazz planned to begin phasing out ten of its older Bombardier regional jets [CRJs] at the end of last year, reducing its fleet size until the new turboprops arrive in May 2011, at which point another eight CRJs will be retired.
David Newman, National Bank Financial analyst, said the planes may allow Jazz to look for other partners outside of its agreement with Air Canada, which currently accounts for 99% of its revenue, possibly even WestJet Airlines Ltd. “This is how regional airlines industry works in the U.S.,” he said.
The news comes as Jazz reported a 40% decline in fourth-quarter earnings Tuesday. The carrier said its fourth-quarter net income fell to $20.8-million, down from $34.9-million for the same period last year. Operating revenue fell 10.6% to $351.2-million as a result of lower pass-through costs to Air Canada, a lower U.S. dollar, fewer flying hours and departures, and the reduction in the mark-up charged by Jazz through the CPA after its renegotiated agreement with Air Canada as part of the larger carrier’s restructuring last summer, the company said.
Financial Post
scdeveau@nationalpost.com
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