MONTREAL — Air Canada and Chorus Aviation Inc. have extended a purchase agreement by 10 years that will see Chorus subsidiary Jazz Aviation LP continue to provide Canada’s biggest airline with regional service through to 2035.
Analysts say the deal will quell concerns around Chorus’s future after Air Canada announced last February it would expand its Rouge fleet and fly the lower-cost airplanes on Canadian regional routes — Jazz’s traditional stomping grounds.
Chorus says the agreement, announced Monday, will grow its revenues by $940 million for a contracted total of $2.5 billion in aircraft leasing and fixed fees over the next 17 years. The deal also amends a 2015 agreement by lowering the fixed fees and incentive revenue Chorus receives by about $50 million annually.
Under the new contract, Air Canada will make an equity investment of $97.3 million in Chorus, giving the carrier about 9.99 per cent of Chorus’s Class A and Class B voting shares, cumulatively.
Chorus aims to put some of the proceeds from the investment to its leasing business, facilitating the purchase of new, larger-gauge aircraft, including nine CRJ900s in 2020.
Chorus, a Halifax-based holding company, saw its stock shoot up 15 per cent to $7.21 from $6.29 in midday trading following the announcement.
Companies in this story: (TSX:AC, TSX:CHR)
The Canadian Press