One-time charter carrier Canada 3000 has bought struggling low-fare start-up CanJet. The move bolsters its bid to establish itself as the second Canadian major behind Air Canada, which took over former rival Canadian Airlines last year.

Toronto-based Canada 3000 became the country's second largest carrier with its recent purchase of Royal Airlines (Flight International, 6-12 February), taking its fleet to 34 aircraft, with 10 on order. The addition of Halifax-based CanJet via an all-stock deal worth C$7 million ($4.55 million) plus unspecified liabilities, subject to regulatory approval, adds six Boeing 737s leased from US Airways.

Canada 3000 president Angus Kinnear says the twin purchases will increase competition with Air Canada - although the flag-carrier will still control 80% of the domestic market. "It's giving us the ability, with a combined fleet, to serve many markets that we couldn't have thought of doing for at least the next couple of years," he says.

Canada 3000 is also pursuing a narrowbody maintenance deal with CanJet parent IMP Group which could see the latter take over repairs currently performed in Europe.

The CanJet take-over eases the pressure on Calgary-based WestJet Airlines, which is now competing in the crowded east Canadian market - although another carrier, Roots Air, has just launched a business-oriented service between Toronto, Calgary and Edmonton.

Analysts say the take-over may mark an end to the current phase of Canadian restructuring, and bring stability to a market disrupted by a fares war.

"CanJet has been very vocal about its financial problems, and when an airline is distressed, it tends to disrupt the entire industry because of discounting," says James David of UBS Warburg. "By taking over CanJet, Canada 3000 has created a larger presence in the domestic market, and eliminated the possibility of someone else taking over the carrier."

Source: Flight International