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Air Canada and Chorus Aviation Inc. (Chorus), parent company of Jazz Aviation LP (Jazz), confirmed on Feb. 4 that all conditions have been met and the previously announced amendment and extension of the capacity purchase agreement (CPA) between Air Canada and Jazz has become effective. As announced on Jan. 14, 2019, the improved CPA is effective retroactively as of Jan. 1, 2019 and extends to Dec. 31, 2035.
As part of the agreement to amend the CPA, Air Canada has also completed the $97.26 million equity investment in Chorus previously announced on Jan. 14, 2019. Air Canada has acquired 15,561,600 Class B Voting Shares in the capital of Chorus, representing approximately 9.99 per cent of the issued and outstanding Class A Variable Voting Shares and Class B Voting Shares of Chorus on a combined basis.
In total, the 17-year contract will provide Jazz $2.5 billion in minimum contracted revenues, of which $1.6 billion, or 65 per cent, will be generated from aircraft leasing revenue, supporting the continued transformation of Chorus’ business through the migration of CPA earnings to aircraft leasing. The amended CPA will provide for total incremental contracted revenue of $940 million ($310 million in fixed fees and $630 million in aircraft leasing under the CPA).
“Our improved CPA with Jazz, including our equity investment in Chorus, deepens an already strong partnership to the advantage of all parties and their stakeholders. It equips Air Canada with additional cost-effective means to compete in the all-important regional market segment and provides long-term stability to Chorus and Jazz. The ultimate beneficiaries of this agreement will be our customers, as it gives us greater flexibility to operate the aircraft best-suited to the communities we serve on convenient schedules, better connecting travellers to Air Canada’s global network,” said Calin Rovinescu, president and chief executive officer of Air Canada.
With this amendment, the parties will effectively address increased domestic and international competition, changing market demand, and fluctuating fuel prices, through significant changes that will modernize and up-gauge the fleet.
“We are extremely pleased and proud to have secured this long-term agreement with Air Canada,” said Joe Randell, president and CEO, Chorus. “The strong alliance with Air Canada ensures a joint strategic response to an ever-changing industry. The benefits for both parties are significant and position us well for the future.”