Sky Regional to YTZ for AC

[chockalicious]

AIR CANADA TO COMMENCE TORONTO CITY AIRPORT FLIGHTS IN FEBRUARY 2011

MONTREAL, Oct. 4 /CNW Telbec/ - Air Canada today announced that it has settled the terms of a long term Commercial Carrier Operating Agreement (CCOA) with the Toronto Port Authority (TPA), operator of Billy Bishop Toronto City Airport. Conclusion of the agreement is subject to certain conditions, including agreement with the lessor of terminal space, City Centre Terminal Corp. (CCTC), for lease of space at the airport. In addition, the airline has entered into a letter of intent for the leasing of aircraft and has finalized arrangements with a regional carrier to operate flights from the Toronto Island airport beginning in February 2011.

Air Canada's initial schedule will offer customers the choice of up to 15 daily non-stop flights from Billy Bishop Toronto City Airport, in close proximity to downtown Toronto, to Montreal Trudeau International Airport.

"We are very excited to return to Toronto City Airport in the coming months," said Ben Smith, Executive Vice President and Chief Commercial Officer. "These arrangements mark solid progress as we work to develop a unique product tailored to meet the diverse needs of travelers between Canada's two largest cities. Our customers have told us they want an airport option close to downtown Toronto to complement our Rapidair service which offers flights up to every 30 minutes at peak times."

Flights will be operated with Bombardier Dash 8 Q400 turboprop aircraft. Air Canada has signed a letter of intent with a lessor for the five aircraft that will be operated on the Toronto City Airport-Montreal route. Formal terms and conditions of the lease agreements are expected to be finalized in the coming weeks.

Following a competitive bid process to select a Canadian regional operator for these aircraft, Air Canada has concluded a capacity purchase agreement with Sky Regional Airlines Inc., an associated company of Skyservice Business Aviation. The regional carrier will sublease and operate the Dash 8 Q400 aircraft on behalf of Air Canada. Selection of Sky Regional Airlines was based on a number of criteria including a competitive cost structure, a proven track record in customer service excellence and experience maintaining Dash 8 Q400 aircraft. The selection of Sky Regional Airlines to operate these flights has no impact on Air Canada's commercial arrangements with other regional carriers including Jazz Air LP with which Air Canada maintains a strong commercial relationship.

Air Canada is actively engaged in talks with the airport terminal owner, City Centre Terminal Corp. (CCTC), towards an agreement to lease terminal facilitates that will accommodate the new service.

Dash 8 Q400 aircraft are modern and environmentally-friendly, employing state-of-the-art equipment and technology. They are capable of steep approach and reduced engine RPM landings to minimize operating noise. It is also the most fuel-efficient aircraft in its class, burning less fuel per seat than most regional jets and narrow-bodied aircraft. The Q400 aircraft's revolutionary Noise and Vibration Suppression (NVS) system results in the quietest turboprop interior in the industry. It is powered with Pratt & Whitney Canada (PWC) turboprop engines.

About Sky Regional Airlines, Inc.

---------------------------------

Sky Regional Airlines Inc. is an associated company of Skyservice Business Aviation, a proven Canadian aviation service provider with over 400 employees dedicated to uncompromising service and unparalleled safety and security, the pillars upon which Skyservice Business Aviation was built.

Skyservice Business Aviation provides Canada's premiere fixed base operations, private charter services, managed aircraft, air ambulance and maintenance support for commercial and private air transportation.

As one of the largest and most successful corporate and regional aircraft services and management companies in Canada, its highly skilled technicians have extensive experience in providing support and heavy maintenance services to a variety of regional aircraft including the Dash 8 Q400 aircraft. With over 400,000 square feet of facilities in Montreal, Toronto and Calgary, the company is committed to ensuring all aspects of its operations meet the highest standards.

[Seeker]

Hey! They can't do that. ACPA still hasn't given it's approval!

[dagger]

Hey! They can't do that. ACPA still hasn't given it's approval!

Actually they have. If I were ACPA, I'd be cheering this on.

http://www.theglobea...article1742152/

[Seeker]

Actually they have. If I were ACPA, I'd be cheering this on.

http://www.theglobea...article1742152/

I'm not sure if I'm cheering it on as there's pros and cons but I know if I was a Jazz pilot I'd be concerned about this development.

[dagger]

I'm not sure if I'm cheering it on as there's pros and cons but I know if I was a Jazz pilot I'd be concerned about this development.

Fortunately for you, you don't have to worry.

[Guest rozar s'macco]

Nice timing! First day of main table negots. IN THE FACE!

[Seeker]

Nice timing! First day of main table negots. IN THE FACE!

In who's face? ACPA has been discussing this for quite some time and a recent membership poll gave support to the idea of adding a CPA agreement with another company. The short answer is that this is no surprise to ACPA members.

[Guest rozar s'macco]

We've known about it and have been discussing it for 5 weeks. We haven't agreed to anything. There is an outstanding grievance on the Q400 and this announcement creates another with regard to tier 2 flying. Until we ratify changes that make this flying legal, it's a gamble.

[Seeker]

We've known about it and have been discussing it for 5 weeks. We haven't agreed to anything. There is an outstanding grievance on the Q400 and this announcement creates another with regard to tier 2 flying. Until we ratify changes that make this flying legal, it's a gamble.

Ah, OK, I didn't know you were an ACPA member. You don't really think the ratification will fail do you? Yes, there is a grievance but that will fail. We'll be seeing Sky Regional pilots flying those Q400s in February - that's my bet.

[UpperDeck]

I'm increasingly puzzled. The AC guys here have periodically been posting their resentment of the AC CPA with Jazz based upon the assertion that indirectly, "they" are subsidizing Jazz operations. Were it otherwise, presumably there would be more money in the pot and hence available to meet ACPA demands.

And now we have AC entering into a similar agreement with another company and that process is supported by ACPA.

Is it or is it not "your" flying? If this operation out of the Island is successful, that success will result from taking market share from Porter (apparently insufficient to meet Porter's costs) and/or by tapping into a larger customer base. That larger base must consist of passengers who were choosing AC (or Westjet) over Porter and who were prepared to make the trek to Pearson. In other words, AC (through Skyservice) might be cannibalizing their own market---a market that currently uses aircraft now piloted by ACPA members. And what happens then? Reduced capacity out of Pearson---fewer aircraft; less AC pilots.

That was in large part what generated the "fear" within AC ranks as the company increasingly transferred flying to the regionals. This has a slight tinge of deja vu.

[props2you]

LOL, I'm sure ACPA was so quick to continue their hate-on for Jazz they didn't think through how this whole thing might play out and bite them in the ass. The only thing that will likely save them from their own stupidity is that Porter will go tits up pretty quickly and the whole YTZ operation will be shut down as soon as management deems the outcry won't be too great. You gotta wonder how much Jazz ever wanted to be part of this...

[Super 80]

The situation in which AC ultimately found themselves where YTZ is concerned owes largely to incompetence on the part of Jazz management which both got them thrown out on their ass and undermined them horribly in the subsequent litigation. Since Jazz pretty much accepted their looming eviction and didn't really telegraph back to Montreal what was going on.

[Fido]

...Selection of Sky Regional Airlines was based on.....experience maintaining Dash 8 Q400 aircraft. ...

What Q400's have they maintained?

[Super 80]

I believe Hydro-Quebec for one, probably others.

[Homerun]

Upperdeck, you've got it wrong. The issue with the Jazz CPA is the rate, $.28/asm, which is way above market. The flying they do is well defined in our contract and is not an isue. The CPA with Skyservice falls within that defined area (the q400 is a separate issue) and presumably the rate being paid to Skyservice will be substantially less than Jazz.

[Seeker]

I'm increasingly puzzled. The AC guys here have periodically been posting their resentment of the AC CPA with Jazz based upon the assertion that indirectly, "they" are subsidizing Jazz operations. Were it otherwise, presumably there would be more money in the pot and hence available to meet ACPA demands.

And now we have AC entering into a similar agreement with another company and that process is supported by ACPA.

Is it or is it not "your" flying? If this operation out of the Island is successful, that success will result from taking market share from Porter (apparently insufficient to meet Porter's costs) and/or by tapping into a larger customer base. That larger base must consist of passengers who were choosing AC (or Westjet) over Porter and who were prepared to make the trek to Pearson. In other words, AC (through Skyservice) might be cannibalizing their own market---a market that currently uses aircraft now piloted by ACPA members. And what happens then? Reduced capacity out of Pearson---fewer aircraft; less AC pilots.

That was in large part what generated the "fear" within AC ranks as the company increasingly transferred flying to the regionals. This has a slight tinge of deja vu.

The flying that Sky Regional will do will come out of the Jazz share. While it might reduce the AC flying between Toronto and YUL it won't be an increase in the amount of flying was previously agreed to.

[dagger]

Ah, OK, I didn't know you were an ACPA member. You don't really think the ratification will fail do you? Yes, there is a grievance but that will fail. We'll be seeing Sky Regional pilots flying those Q400s in February - that's my bet.

Apparently the ratification succeeded because AC received ACPA's green light for this last week. I don't know how the acceptance was frame or couched, but for now at least, there is no issue, there is no conflict, about the new CPA.

Secondly, both AC and Jazz are telegraphing more AC ASM growth next year. So it's not like anyone at AC anyway is going to get laid off or have their career progression stalled because of this. What's stalling career progression/ambition at AC is the inability of Boeing to deliver the 787. There is a lot of good overseas growth stuff, some of it nice niche opportunities supported by alliances and restrictive bilaterals, that would make money with a short development curve if AC had the 787 and it lived up to its promised cost performance (not a given).

[GDR]

This from TD Waterhouse

Air Canada Returns To Toronto Island Without Jazz

Air Canada announced last night that it is scheduled to begin operating flights from

Billy Bishop Toronto City Airport (BBTCA) in February 2011. Air Canada has

entered and agreement to have Sky Regional Airlines operate 15 daily flights from the

airport on Air Canada’s behalf.

This news is not unexpected in terms of its impact on Air Canada due to the

award of 30 slots to the airline at the airport earlier in 2010 and the company’s

own admittance that certain customers would like the airline to offer service from the

airport given its downtown Toronto convenience.

However, it is unexpected that Jazz Air, Air Canada’s primary regional capacity

supplier, did not secure this contract through the existing CPA mechanism with

Air Canada, or an alternative means. Despite this, it has no impact on our financial

forecasts for Jazz Air. At this time, we have not been able to confirm that Jazz Air bid

for the contract. It was a competitive bid process initiated by Air Canada and it is

reasonable to assume that Jazz Air would have participated.

The start of service planned by Air Canada follows the settlement of terms for a longterm

Commercial Carrier Operating Agreement (CCOA) with the Toronto Port

Authority (subject to certain conditions). Air Canada has signed an LOI for the lease

of five Q400 Bombardier turbo-prop aircraft that will be operated by Sky Regional

Airlines. Sky Regional will sub-lease the aircraft from Air Canada and operate 15

daily non-stop flights from Toronto to Montreal on Air Canada’s behalf. This

compares to the 18 daily flights offered by the only current carrier, Porter Airlines

between the BBTCA and Montreal.

Given that we had assumed Air Canada would begin offering flights from the BBTCA

in 2011, the news has no impact on our financial forecast. Based on the limited

information available at this time regarding the competitive bid process, we believe

there were three primary potential outcomes from the process.

• Air Canada used the existing CPA contract with Jazz Air to provide the new

capacity. We believe this would have required paying Jazz Air a 5% mark-up on

controllable costs (4.8% margin on scheduled flight revenue) associated with the

capacity (block hours over 375,000 per year receive a 5% mark-up compared to

the 12.5% mark-up on block hours up to 375,000).

• Air Canada enters a new contract with Jazz Air for supplying the required

capacity. This may have been preferable to Jazz Air as it would offer the

potential for securing a higher mark-up than the 5% implied by the existing

CPA, but less attractive to Air Canada for obvious reasons.

• Air Canada awards the contract to another airline that puts forward a superior bid

to either alternative contemplated with Jazz Air, or any other airline may have

participated in the competitive process.

We are disappointed that a significantly smaller regional airline without an

existing commercial relationship with Air Canada could provide Air Canada with

a superior bid for the capacity. We believe the market could treat this news as a

signal that a rift is growing between Air Canada and Jazz and that the relationship

is under stress. We would consider such speculation to be unreasonable and unjustified. These are two

businesses which we believe have been adjusting to life as separate public companies and which now

have different shareholder bases to consider when making business decisions. Given the challenges that

Air Canada has faced in the last two years and the focus and prudence it has shown in making operating

decisions, we do not believe it would select a regional capacity supplier based on any factors other than

price, risk and normal business considerations.

Air Canada conclusion:

We are encouraged that Air Canada anticipates that 2011 demand will require additional regional capacity

to offer 15 flights per day between Toronto and Montreal on top of the 5% block hour increase required

from Jazz Air. We had been assuming that the 5% increase disclosed by Jazz and Air Canada would

include flying from the BBTCA beginning at some point in 2011. This new contract therefore puts a

small upward bias on our capacity (1.5% growth) and traffic estimates for Air Canada in 2011.

Jazz Air conclusion:

We have not factored any additional revenue growth into our Jazz Air forecasts beyond the 5% block hour

increase within the Air Canada CPA in 2011 and the growth implied by the Thomas Cook contract. We have

never recommended investors view Jazz Air as offering growth beyond the normal cyclical influences. We

have taken the view that any incremental growth would be relatively limited and that the real value in the

business relates to its risk profile and, in our view, secure $0.60 distribution. Therefore, this news does not

alter our investment view of Jazz Air, but does act as a reminder that the regional airline isn’t necessarily the

only option available to Air Canada as it looks to re-allocate short-haul capacity in the future.

[Guest rozar s'macco]

dagger, with my company hat on, this is a great move as it reduces the cost of regional feed. Jazz' rates are sky high, however at least the pilots there make a fair wage (B757 excluded). As Homerun states, Sky Regional's ASMs will come out of Jazz' cap space so technically there is no additional jeopardy to ACPA.

With my professional pilot hat on- not ACPA pilot, but professional pilot- this is an ominous move. As we know many of the ancillary costs associated with operating an airline in Canada are standard to each operator. Fuel, landing fees, aircraft rent, maintenance, catering, marketing, ground handling...and so forth. In the case of Jazz, most of that is flowed directly through to AC, which is why it is a potentially dangerous situation when somebody is allowed to compete on price. Because where does their pricing power come from if not anciallary costs- it comes from wages. Granted, there are a fair number of areas where wages at AC and Jazz are above standard (and not in the pilot groups, I should add) so this could be percieved as a shot across that bow.

Will ACPA be vindicated by our decision to throw "pilots" under the bus and side with "Air Canada"? As Air Canada employees, and pilots, we are understandably caught between a rock and a hard place. Helping our company reduce costs is paramount, but when that goal is achieved through a strategy of wage cuts, it becomes less clear as to what is the best long term position. Without Air Canada, we have no job. But without good wages, what's the point?

[GTFA]

"Jazz' rates are sky high, however at least the pilots there make a fair wage (B757 excluded)"

The rates that Jazz is being paid by AC reflect the level of service provided. Who can compete with that?

The "pilots" at Jazz are being paid industry standard rates. Ask Jazz, ask TC. This fact has been clearly explained and understood by the open-minded.

GTFA

[Seeker]

"Jazz' rates are sky high, however at least the pilots there make a fair wage (B757 excluded)"

The rates that Jazz is being paid by AC reflect the level of service provided.

GTFA

Nope, the rates being paid are a legacy from Milton's "Great Plunder." The Jazz employees are hard-working and professional but that has nothing to do with how the CPA rates were initially set or on how they were subsequently renegotiated.

[dagger]

dagger, with my company hat on, this is a great move as it reduces the cost of regional feed. Jazz' rates are sky high, however at least the pilots there make a fair wage (B757 excluded). As Homerun states, Sky Regional's ASMs will come out of Jazz' cap space so technically there is no additional jeopardy to ACPA.

With my professional pilot hat on- not ACPA pilot, but professional pilot- this is an ominous move. As we know many of the ancillary costs associated with operating an airline in Canada are standard to each operator. Fuel, landing fees, aircraft rent, maintenance, catering, marketing, ground handling...and so forth. In the case of Jazz, most of that is flowed directly through to AC, which is why it is a potentially dangerous situation when somebody is allowed to compete on price. Because where does their pricing power come from if not anciallary costs- it comes from wages. Granted, there are a fair number of areas where wages at AC and Jazz are above standard (and not in the pilot groups, I should add) so this could be percieved as a shot across that bow.

Will ACPA be vindicated by our decision to throw "pilots" under the bus and side with "Air Canada"? As Air Canada employees, and pilots, we are understandably caught between a rock and a hard place. Helping our company reduce costs is paramount, but when that goal is achieved through a strategy of wage cuts, it becomes less clear as to what is the best long term position. Without Air Canada, we have no job. But without good wages, what's the point?

Your concerns are reasonable, but I think you have to ask yourself, who is leading the race to the bottom?

1. Is it non-union carriers who have lower costs, not entirely on wages but on total compensation? AC has a pension regime, that costs a bundle to keep adequately funded. What about those airlines that have lesser pension regimes (or none at all), lesser supplemental medical plans, etc.?

2. Is it startup carriers burning through investor money to try to establish themselves (at your expense)? If they have discovered a free market formula to operate profitably, than so be it. But what if their claims of profitability are bogus, and that the competitive impact on you is really a form of unfair competition because it is not sustainable?

Don't you have the right to force some free market principles on them?

My point is, the pilot work force is more elastic than demand. It may be that you can't provide every single commercial pilot with a mainline salary, pension and benefits without boosting fares to the point where some consumers, maybe a lot of them, toss in the towel. Maybe people should be paying more so you can be paid more, but you can't make that guarantee to every pilot at every airline from here to Podunk.

So I wouldn't trouble my professional head about it. The fact is, as I see it, in this instance, wearing your company hat can also help you enjoy wearing your professional hat. And the notion that you have an obligation to your entire profession, however romantic, is misplaced. I'd suggest to AC pilots that they should prioritize around issues like TC's duty day maximums which can lift the profession and ensure the highest level of safety. And you'd like have broad support within the pilot profession and the public. Or continue to make common cause the employer over federal overtaxation of airlines (and the airport rent gouge). That's a billion dollar item for AC and there is growing awareness of the issue in the public and media. Conversely, trying to coddle pilots at other airlines is a dangerous game. Their employers would screw you at the drop of a hat, with their pilots' full cooperation.

If the lynx gobbles the raccoon, so be it. Maybe the raccoon should have been more carefully about pissing away its millions.

[conehead]

If the lynx gobbles the raccoon,

[Guest rozar s'macco]

Coddle, hardly. You make a valid argument, but I think of it more like protecting our 6. Without tightening of the scope language that grants the regional carriers their ASMs, AC's forthcoming international expansion blows the cap space available to the moon. Presently it is 12:100 to our whole network. Unfortunately I can envision a scenario where we've added enough ASMs internationally for tier 2 regionals to operate the entire domestic network- within the cap! Throw in a future crisis du jour, 2 regionals to duke it out on price, and pretty soon we (mainline) have no narrowbodies anymore. Not like CR hasn't tried it before. Granted, this move doesn't look like that gambit, but it certainly plants the seed for it to happen on somebody else's watch should the going get too tough for the shareholders' liking.

edit: everything is negotiable. It's not like I'm ideologically opposed to my company making a profit. But when something as important as scope is in question, we'd better be talking serious compensation. Time will tell...

[props2you]

...Will ACPA be vindicated by our decision to throw "pilots" under the bus and side with "Air Canada"? As Air Canada employees, and pilots, we are understandably caught between a rock and a hard place. Helping our company reduce costs is paramount, but when that goal is achieved through a strategy of wage cuts, it becomes less clear as to what is the best long term position. Without Air Canada, we have no job. But without good wages, what's the point?

To borrow from the last line of Martin Niemöller's famous poem:

Then they came for me —

and by that time no one was left to speak up.