Air Canada to issue RFP for regional transborder flying

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Air Canada will issue a request for proposals (RFP) for regional flying on certain transborder routes as it continues to take steps to lower costs and stay competitive with US-based airlines.

“Select” Canadian and US regional carriers will be able to bid for the transborder flying, which starts in mid-2014, says Air Canada in a release. The RFP would cover existing regional routes, says the airline, however it has not named specific cities.

"The launch of a request for proposals is an important next step in our regional airline diversification strategy and ongoing cost transformation program," says Kevin Howlett, Air Canada’s senior vice-president, regional markets in a release. He adds that “as low cost operators continue to grow in the rapidly evolving North American regional markets, it is critical for Air Canada to take the necessary steps to ensure its cost structure in these markets is also competitive”.

A decision to align with a US-based regional carrier would be significant for Air Canada, which has historically contracted with other Canadian carriers for its short-haul services. Four airlines partner with the mainline carrier for these services today.

Halifax-based Jazz Aviation performs a majority of the regional flying under the Air Canada Express banner. It operates Bombardier Dash 8 Q400s, Bombardier CRJ200 and CRJ700s and smaller Dash 8-100 and -300 turboprops.

“We would welcome the opportunity to bid on this work and remain open and willing to discuss all opportunities with Air Canada,” the airline tells Flightglobal.

Jazz and Air Canada have a capacity purchase agreement that runs through 2020 with “several” guarantees, says the regional airline, including one that requires that Jazz operate a minimum of 122 aircraft.

Sky Regional operates five 70-seat Q400 aircraft out of the Billy Bishop Toronto City airport and in February begun service with 15 Embraer 175 regional jets on mostly transborder routes to the northeastern USA. Exploits Valley Air Services (EVAS) Air Charters and Air Georgian also perform service for the carrier with smaller 18-seat Beechcraft 1900D aircraft.

Air Canada has worked to diversify its regional fleet since last July, when the carrier reached an agreement with its pilots union that allowed for it to expand its relationships with more regional partners. This allowed Air Canada to transition the E-175s to Sky Regional from its mainline fleet, which it completed earlier this month.

That contract allows Air Canada to operate up to 60 76-seat jets at the regional level, said the carrier’s president and chief executive Calin Rovinescu told investors last November after the agreement was finalised.

In June, Air Canada told investors that an array of fleet moves and cost-savings initiatives could shave 15% off of its 2012 cost per available seat mile. This follows a previous programme launched in 2009 that brought Canadian dollar (C$) 530 million ($519.9 million) in annual savings by November 2011.

In the second quarter, Air Canada spent 4% more on its capacity purchase agreements, which totalled C$276 million. This was attributed to increased block hours flown by Sky Regional, higher rates under the flying agreement with Jazz and unfavourable currency impacts.

To stay competitive, Jazz Aviation’s parent company Chorus Aviation has also trimmed costs, done by consolidating its heavy maintenance lines and opening a new operations centre. Its chief executive and president Joseph Randell told investors that “dramatic changes” were required for Jazz to remain relevant in the competitive regional environment.