Air Canada is abandoning its alliance with Skyservice Airlines to transform Skyservice's Roots Air into a low-cost carrier (Flight International, 8-14 May) and will instead launch its own discount airline.

Trading a low-cost concept for labour peace, Air Canada president Robert Milton says the airline has reached an agreement with its 3,600 pilots for them to fly the discount brand instead of Skyservice's lower paid labour. Air Canada pilots had opposed the use of non-union Skyservice pilots, but are expected soon to ratify the new agreement.

The discount carrier plans to launch by year-end using up to 20 aircraft, just short of the 23 aircraft flown by Calgary-based WestJet Airlines, Air Canada's main rival in the discount market. Plans to obtain the 20 aircraft have not been finalised, Air Canada says.

Roots Air was grounded less than six weeks after it began operations due to poor load factors on its Airbus A320 aircraft and after Air Canada signed a letter of intent to offer to purchase a 30% equity stake in Skyservice which also operates charters. The equity offer has since been withdrawn.

Milton says Air Canada and Skyservice will look at opportunities for the provision of third party services similar to those undertaken for other carriers.

Skyservice chairman and chief executive Russell Payson says he is disappointed with Air Canada's decision, adding that the Roots Air experience will dissuade him from re-entering the scheduled airline business for the foreseeable future. Roots Air's three Airbus A320s, two A330s and one Boeing 727-200 will be redeployed to Skyservice.

Source: Flight International