Air Canada and regional airline parent Chorus Aviation have agreed an extended capacity purchase agreement (CPA), with the flag carrier investing CAD$97.26 million (USD$74.2 million) in Chorus.
The equity investment, which was announced in January, amounts to 9.99 percent of Chorus stock.
The new capacity agreement extends a previous CPA by 10 years to the end of 2035, securing Jazz's place in Air Canada's regional network for the next 17 years, the airline said.
The CPA is worth CAD$2.5 billion over the 17-year contract, CAD$1.6 billion of that is aircraft lease payments, as Chorus migrates CPA earnings to aircraft leasing.
The amended CPA will provide for total incremental contracted revenue of CAD$940 million, CAD$310 million in fixed fees and CAD$630 million in aircraft leasing, Air Canada said.
As part of the deal, Chorus secures preferred partner status for the operation of aircraft with up to 50 seats and Air Canada will consolidate its existing CRJ regional capacity into Jazz.
“We are extremely pleased and proud to have secured this long-term agreement with Air Canada,” Chorus chief executive Joe Randell said. “The benefits for both parties are significant and position us well for the future.”
For Air Canada, the extended agreement provides projected annual savings of approximately CAD$50 million in each of 2019 and 2020, and cumulative savings of approximately CAD$53 million between 2021 and 2025, both compared to the previous 2015 CPA.
Air Canada chief executive Calin Rovinescu said the CPA and equity investment “deepens an already strong partnership to the advantage of all parties and their stakeholders. It equips Air Canada with additional cost-effective means to compete in the all-important regional market segment and provides long-term stability to Chorus and Jazz.”