Air Canada Jazz is eliminating 10 daily flights between the Hamilton airport, west of Toronto, and airports in Ottawa and Montreal. (Ryan Remiorz/Canadian Press)

Regional airline Air Canada Jazz has begun to scale back its operations to tackle higher fuel costs, announcing plans to close its Hamilton operations at the end of July.

The move will affect 14 customer service agents.

"No other decisions involving Jazz services have been made or announced at this time," airline spokeswoman Manon Stuart said Wednesday, adding that employees can seek to bump into other locations as permitted in their collective agreement.

The move eliminates 10 daily flights between the Hamilton airport, which is west of Toronto, and airports in Ottawa and Montreal.

The cuts are expected to have a minimal impact on the airport, whose largest airline is WestJet, said Hamilton airport spokesman Steve Howse. And he said with 50 per cent lower costs than rival Pearson International Airport in Toronto, Hamilton is bound to be attractive to other carriers, Howse said.

"We've already had inquiries into picking up those routes," Howse said.

Air Canada CEO Montie Brewer said Wednesday that Jazz and the regular Air Canada carrier are both making reductions to deal with fuel prices, but they won't necessarily use the same strategy.

"It's a reduction for both companies," Brewer said at a Merrill Lynch transportation conference in New York. "It's not distributed exactly the same way."

News follows Air Canada decision to cut 2,000 jobs

Air Canada plans to cut 2,000 positions as it trims its overall capacity by seven per cent, with domestic capacity falling by two per cent and capacity to the United States by 13 per cent.

Jazz, which was spun off from the main airline as part of Jazz Air Income Fund, operates scheduled passenger service on behalf of Air Canada. About 73 per cent of Jazz's capacity is flown domestically, with the balance on routes to the United States.

"We have every expectation that Jazz will be negatively impacted by Air Canada's capacity cuts, but based on the guidance Air Canada has provided, the cuts to Jazz will not be that severe," Cameron Doerksen of the investment bank Versant Partners wrote in a report.

Doerksen said it's possible that not all of Jazz's fleet types will be impacted equally. The Bombardier turboprop Dash-8s and 75-seat CRJ fleet are more cost effective and may not suffer the same reduction in use.

'They're just doing the easy stuff now': analyst

But analyst Jacques Kavafian of Research Capital Corp. said Jazz can't help but endure some impact as Air Canada looks to reduce costs.

"They're just doing the easy stuff now, but over time, the next few months, they will look at all their cost aspects and Jazz will not escape," he said.

Under a capacity purchase agreement in force until 2015, Air Canada can reduce the number of flying hours it purchases from Jazz by 15 per cent .

David Newman of National Bank Financial said the airline may seek to end leases of CRJ100-200 jets that burn more fuel. Newman said that Jazz could also mitigate the financial impact with a hiring freeze, aircraft returns, lower maintenance expenses and more charter flying.

"While Air Canada's cuts are expected to be across the board and more focused on a reduction in frequencies, as opposed to eliminating routes, we believe that the most impacted routes at Jazz will be leisure routes and some U.S. business routes," Newman said.

Jazz stocks, which have fallen by about 21 per cent in the last three months, were down five cents to $6.15 Wednesday on the Toronto Stock Exchange.