Brian Dunn/MONTREAL

Skyservice Airlines has suspended scheduled Roots Air flights and formed a strategic alliance with Air Canada. Roots Air will relaunch as a low-cost operator later this year.

The move comes just six weeks after the Toronto-based charter operator launched Roots Air with much fanfare offering three classes of service on domestic routes. Poor load factors, especially in business class, meant the airline couldn't fill its Airbus A320s as competition on domestic routes took its toll .

Roots Air will relaunch, as early as the end of July, as a low-cost, short-haul, trans-border carrier, says Skyservice chairman and chief executive Russell Payson. Air Canada is paying less than C$15 million ($9.75 million) for a 30% equity interest and 50% voting rights in Skyservice, says airline president and chief executive Robert Milton. Skyservice had an 80% holding in Roots Air, with the remainder held by Canadian retail group Roots.

With its stake in the repositioned Roots Air, Air Canada has abandoned any thoughts of starting its own discount operation.

Apart from Roots Air, the agreement gives Air Canada access to Skyservice's discount charter operations and fleet of corporate jets, two areas Air Canada wants to be involved with, says Milton. "United Airlines and British Airways said last week they were getting into corporate jets, a field we need to be in," he says.

As part of their agreement, Air Canada will provide Skyservice with aircraft maintenance, ground handling, information technology and revenue accounting.

Payson says the initial business plan is to add between five and 10 aircraft to Skyservice's existing fleet of six A330s and A320s in order to expand its charter operations and as many as 20 Airbus aircraft for Roots Air - 10 are already on order.

The partnership was announced the day Air Canada released its first quarter results showing a loss of C$168 million ($109.2 million) as opposed to a loss of C$33 million ($21.4 million) last year.

Source: Flight International