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HMCS Chicoutimi caught fire while sailing to Canada in 2004. (CBC)

Repair work on the fire-ravaged HMCS Chicoutimi won't start until 2010, leaving the Canadian navy short by one submarine and raising concerns about whether the vessel will ever be returned to service.

The Department of National Defence announced Friday that repairs to Chicoutimi will be delayed for another four years so that the money that would have gone into repairs can be spent elsewhere, including on two of Canada's other submarines.

"This will improve our ability to get Victoria and Corner Brook back into service and better position the navy to have two boats fully operational in 2009," the navy said.

The decision means the Chicoutimi won't be operational until 2012, compared to a previously announced launch date of September 2007.

Only one of Canada's four submarines, HMCS Windsor, is now able to go to sea. Sister ships HMCS Corner Brook and HMCS Victoria have been out of service for several years.

The federal government originally said it paid a good price for the four British diesel-electric Upholder-class submarines in a 1998 deal. But they have been plagued by problems, including rust, flooding, faulty valves and a dent in a hull that have delayed their launch and sent costs soaring.

Chicoutimi caught fire in October, 2004, as it was sailing to Canada from Scotland for the first time. The fire was blamed on an electrical malfunction after salt water poured down the open hatch of the submarine.

Lieut. Chris Saunders, a 32-year-old father of two from Halifax, died of smoke inhalation.

Following the fire, the submarine was carried on a transport ship to Halifax, where it has been sitting in dry dock since last spring.

The extensive repairs to Chicoutimi will be done at the same time as a scheduled two-year refit, saving Canada millions of dollars, Peter Haydon of the Centre for Policy Studies in Halifax said Friday.

"You might look at it as quite a positive sign because they're not going to can the whole program, which was one of the rumours going around," Haydon told the Canadian Press. "It confirms the continuance of operating submarines."

However, sources inside the navy say the decision has raised serious concerns about the future of Chicoutimi, which was supposed to be back in operation by September 2007 following repairs.

Some estimates put the cost of repairing the used vessel at about $100 million, far more than originally expected to rehabilitate the sub, upgrade the electronics and install Canadian equipment on the British-built vessel.

The military has already spent about $25 million assessing the damage and removing some materials destroyed in the blaze.