Tentative 11-yr labour deal for Jazz pilots key to new deal with Air Canada

MONTREAL — Air Canada affiliate Jazz Aviation has reached a tentative, 11-year labour agreement with its pilots union that will run until the end of 2025 if it is ratified.

Details on wages, working conditions or other terms of the proposed contract reached with the Air Line Pilots Association were not released.

The proposed contract is a key element in a revised arrangement with Air Canada (TSX:AC), which buys most of the capacity on Jazz planes to carry passengers between the main hubs and other smaller cities.

Air Canada chief executive Calin Rovinescu says the amended capacity purchase agreement with Jazz parent Chorus Aviation (TSX:CHR.A) will help the airline improve service for travellers.

It will also improve operational efficiency and help Air Canada compete more effectively in regional markets, he said.

"Our restructured capacity purchase agreement with Jazz represents another important milestone in Air Canada's ongoing cost reduction initiatives and the execution of our commercial strategy," Rovinescu said.

The new agreement between the airlines changes how the fees charged by Jazz are calculated from a "cost plus" mark-up model to a fixed-fee compensation structure.

The airlines said Jazz is expected to achieve similar returns to its current fee structure until 2020 and then there will be a reduction in the fixed fee compensation structure beginning in 2021.

The deal, which runs until the end of 2025, also gives Jazz pilots access to pilot vacancies at Air Canada.

Air Canada's own pilots ratified a 10-year contract last October that will run until September 2024, about 15 months before the Jazz agreement expires in December 2025.

Among other things, the Air Canada agreement with its pilots eases the way for the expansion of Air Canada Rouge — a lower-cost service targeted at the holiday travel market.

In addition to ratification of the pilot agreement, the new deal between Jazz and Air Canada is subject to approval by the boards at both companies and requirements of the pilot mobility agreement being met

The airlines expect the required approvals to be obtained by Feb. 1.