In the battle for regional travellers, Chorus Aviation Inc. believes its fleet is diverse and strong enough to withstand new competition next year from WestJet Airlines Ltd.
Through its Jazz Aviation LP unit, Chorus operates 125 planes under the Air Canada Express brand to 83 destinations in Canada and the United States, Chorus chief executive officer Joseph Randell said Tuesday during a conference call with analysts.
“We’re able to efficiently serve a lot of markets,” Mr. Randell said, emphasizing that Chorus doesn’t require an extreme makeover to take on WestJet. “We’ve got a lot of flexibility in terms of the aircraft type, the aircraft size, whereas WestJet is planning just to fly 40 of a large turboprop aircraft.”
Under a capacity purchase agreement, Halifax-based Chorus is paid by Air Canada to operate a wide range of regional routes. In effect, Chorus serves as a charter airline for Air Canada, collecting fees through the pact.
Early last year, Air Canada and Chorus held a combined domestic market share of 56 per cent while WestJet had 36 per cent. Air Canada Express began to replace the Jazz brand name last year in a process that is forecast to be finished by 2016.
Calgary-based WestJet has two aircraft models on the shortlist for its new regional subsidiary, which will require up to 40 turboprops – the Canadian-built Bombardier Q400 or the French-Italian ATR 72-600 series. WestJet will select the winning bidder by mid-2012 and plans to take delivery of several of the new planes when it kicks off its subsidiary’s short-haul flights in late 2013.
Mr. Randell said he will be working with Air Canada to help evaluate potential changes, though it’s Air Canada’s responsibility to make commercial decisions on revising Chorus’s route map. “WestJet’s announcement is of great interest to us and, of course, to Air Canada,” he said. “Suffice it to say, it is a significant factor and we’ll be watching this very closely.”
While WestJet will introduce service to communities currently underserved or neglected, Chorus’s reach already extends to dozens of smaller airports, with 99 of the 125 planes in its fleet seating 37 to 50 passengers.
By contrast, WestJet is aiming to order turboprops that would seat 68 to 74 people, depending on the configuration.
National Bank Financial Inc. analyst Cameron Doerksen said Chorus is facing pressure from Air Canada to reduce fees collected under the capacity purchase agreement. A dispute over how much Air Canada should pay will go to arbitration in June and a decision is expected by mid-August.
Chorus posted a $68.1-million profit last year, up 22 per cent from $55.9-million in 2010.
RBC Dominion Securities Inc. analyst Walter Spracklin said Chorus already operates 10 Bombardier Q400s and will add another five of the turboprops by July, with an option to order 15 more Q400s. “We note that with a multiple fleet type, Chorus Aviation is in a good position to help Air Canada respond to route reallocations,” Mr. Spracklin said in a research report.
Chorus Aviation (CHR.B) Close: $3.83, up 10¢
WestJet Airlines (WJA-T) Close: 13.65, down 30¢
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