Chorus Aviation wins battle with Air Canada

Chorus Aviation has won a lengthy battle with Air Canada over the markups its charges on flights, but the larger war over long-term cost reductions in an increasingly competitive market remain unresolved.

MONTREAL — Chorus Aviation has won a lengthy battle with Air Canada over the markups its charges on flights, but the larger war over long-term cost reductions in an increasingly competitive market remain unresolved.

An arbitration panel on Tuesday supported Chorus’s contention that there was no justification for changing the current 12.5 per cent markup on how much its Jazz subsidiary receives from Air Canada. The ruling relieves Chorus from paying retroactive payments to the country’s largest airline (TSX:AC.B).

The two sides have battled over the permitted growth of controllable costs — including salaries and wages, maintenance and overhead — under their capacity purchase agreement or CPA. Both sides agreed to compare or benchmark Jazz costs in 2009 and later in 2015 to those of a specified group of similar operators in the U.S.

Chorus CEO Joseph Randell said the ruling means the company, which sells most of its fleet capacity to Air Canada, can “now move forward with certainty.”

“Our long-term partnership with Air Canada continues to be a core component of our business and we believe this ruling provides us with additional flexibility to continue to operate as an industry leader and deliver value for all our stakeholders,” he said in a news release.

The company plans to maintain its current 30 cents per share annual dividend as it review alternatives to enhance shareholder value.

Analysts said the ruling wasn’t a surprise, but Chorus continues to face the challenge of reducing costs, competition from WestJet’s Encore regional service and Air Canada’s threat to find an alternative carrier to Jazz service to the United States.

Randell said Chorus understands Air Canada’s desire to reduce costs and has “developed a framework of strategic options” to address Jazz’s cost structure. But unless the two sides can agree on changes, terms of the CPA remain in force until Dec. 31, 2020.

Chorus and Air Canada will begin negotiations next year to set CPA rates for 2015 to 2017.

“In line with Air Canada’s priority for cost reduction and sustainable profitability, Air Canada will both work with Jazz to explore cost reduction initiatives and continue to pursue its regional airline diversification strategy that includes the request for proposal process underway for certain existing U.S. regional transborder routes,” Air Canada said in a release.

Chorus’ (TSX:CHR.B) shares surged more than 28 per cent after the company announced its arbitration win.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

FILE - In this Aug. 11, 2019, file photo, an iPhone displays the Facebook app in New Orleans. Facebook says it’s going all in to block the spread of bogus vaccine claims. In practice, that means the social network plans to ban a new bunch of false claims in addition to the old bunch of false claims about vaccines or COVID-19 that it has already banned. (AP Photo/Jenny Kane, File)
Facebook says it will pay $1B over 3 years to news industry

Facebook says it will choose which publishers it will support

NDP leader Jagmeet Singh holds a press conference on Parliament Hill in Ottawa on Wednesday, Feb. 24, 2021. THE CANADIAN PRESS/Sean Kilpatrick
NDP will not trigger election as long as pandemic continues: Singh

NDP and Liberals both promised some kind of pharmacare program

Commander of the Royal Canadian Navy Vice-Admiral Art McDonald is seen during an interview with The Canadian Press in Ottawa, Wednesday, Dec. 11, 2019. Defence Minister Harjit Sajjan says Admiral Art McDonald has voluntarily stepped down as Chief of Defence Staff due to an investigation. THE CANADIAN PRESS/Adrian Wyld
Admiral Art McDonald steps aside as defence chief amid investigation

Lt.-Gen. Wayne Eyre appointed acting chief of the defence staff

Meteor spotted over Edmonton, Alta., on Feb. 22, 2021 by several, who took to social media to share their surveillance camera captures. (@KixxAxe/Twitter)
VIDEO: Fireball meteor streaks across sky, spotted by early-morning risers in Alberta, B.C.

Videos of the quick streak of light flashing across the sky before 6:30 a.m. MST

Photo radar cameras are supposed to “augment” the work of regular police officers, yet 91 per cent of speeding tickets in the province are connected to the devices. (Black Press file photo).
March photo radar locations

Photo radar, mobile units and intersection cameras will be in action

Mike Ammeter (Photo by Rebecca Hadfield)
Sylvan Lake man elected chair of Canadian Canola Growers Association

Mike Ammeter is a local farmer located near the Town of Sylvan Lake

FILE - The Paramount Pictures gate is pictured on Aug. 23, 2016, in Los Angeles. The studio is joining other major Hollywood studios in slashing the traditional 90-day theatrical window. ViacomCBS on Wednesday, Feb. 24, 2021, announced that the studio’s films, including “Mission: Impossible 7” and “A Quiet Place Part II,” will go to its fledgling streaming service, Paramount+, after 45 days in theaters. (Photo by Chris Pizzello/Invision/AP, File)
‘Mission: Impossible 7’ will hit Paramount+ even sooner

90-day theatrical window reduced to 45 days

Team Canada skip Kerri Einarson yells to her sweepers at the Scotties Tournament of Hearts in Calgary, Alta., Friday, Feb. 19, 2021.THE CANADIAN PRESS/Jeff McIntosh
Defending champion Einarson stays unbeaten in Tournament of Hearts

Players suggest a spectator-free debut made it less intimidating

Tiger Woods hits out of a bunker on the 17th hole on his way to winning the Canadian Open Championship at Glen Abbey in Oakville, Ont. on Sunday Sept.10, 2000. THE CANADIAN PRESS/Frank Gunn
‘The Tiger I know is a survivor and a fighter,’ Bill Paul weighs in on Tiger Woods

Woods was hospitalized after a single-vehicle crash near Los Angeles on Tuesday

Calgary Flames goaltender David Rittich (33) makes a save on Toronto Maple Leafs left wing Jimmy Vesey (26) as Flames' Christopher Tanev (8) and Joakim Nordstrom (20) defend during first-period NHL action in Toronto on Wednesday, February 24, 2021. THE CANADIAN PRESS/Frank Gunn
‘Misunderstood’ Nylander ties game late, scores winner as Leafs beat Flames 2-1 in OT

‘Misunderstood’ Nylander ties game late, scores winner as Leafs beat Flames 2-1 in OT

Team Canada skip Kerri Einarson yells to her sweepers at the Scotties Tournament of Hearts in Calgary, Alta., Friday, Feb. 19, 2021.THE CANADIAN PRESS/Jeff McIntosh
Young Quebec team in the hunt to join Einarson, Homan in Hearts’ championship round

Young Quebec team in the hunt to join Einarson, Homan in Hearts’ championship round

Most Read