MONTREAL – Air Canada said Monday it will expand its relationship with non-unionized Sky Regional Airlines to include routes to the United States.
The Montreal-based airline said it will transfer 15 of its Embraer 175 jets to Sky Regional, which will fly them under the Air Canada Express banner on short flights, mainly from Toronto and Montreal to cities in the northeastern U.S.
The change flows out of an arbitrated pilots contract that allows the airline to outsource more of its large regional jet business to regional carriers such as Chorus Aviation (TSX:CHR) and Sky Regional.
Sky Regional already operates flights using five Q400 turboprops between Montreal and Billy Bishop Toronto City Airport under the Air Canada Express name.
The transfer of the 15 regional jets is expected to be made between February and June 2013.
Air Canada (TSX:AC.B) announced the deal with Sky Regional as it also announced plans to add two new Boeing 777-300ER aircraft to its fleet next year as part a move to grow its international business.
The two new aircraft will bring Air Canada’s Boeing 777 fleet to 20 aircraft, including both the 300ER and 200LR models.
“The arrival of these new Boeing 777s, along with the 787 Dreamliners in 2014, will allow us to introduce new routes at the mainline carrier and release aircraft from our existing fleet to our new low-cost leisure carrier,” Air Canada chief executive Calin Rovinescu said in a statement.
“Air Canada’s mainline carrier will continue to grow internationally as we launch new routes, while the leisure carrier will pursue opportunities in markets where we are not adequately cost competitive under the mainline brand.”
Cameron Doerksen of National Bank Financial said Air Canada’s regional service move is a big boost to a Chorus competitor and positions Sky Regional to compete for future flying with Air Canada.
“We believe that Sky Regional has a lower cost structure than Chorus and will be well positioned to bid on any future opportunities with Air Canada,” he wrote in a report.
Doerksen said some observers believed the new pilot agreement would provide additional growth avenues for Chorus from the Embraer planes. But he thinks Air Canada will primarily replace Chorus’ 50-seat CRJ planes with Q400s and maybe CRJ705s.
On the Toronto Stock Exchange, Air Canada’s shares gained one cent to $1.28 in morning trading Monday morning. Chorus Aviation shares were unchanged at $3.80.