|Very concise post, the only thing I would disagree with is below. The nice thing about Canada is CCAA does not get you out of contracts unless you can prove they're are onesided in favor of the other company. I believe at best, CCAA might get the rates reset to what CR is trying to attain in the courts presently.
As for Jazz, it may ultimately take an AC CCAA filing to have the ability to outsource the current Jazz/Express flying to other bidders prior to 2020.
This is from 2009, but the context is much the same,
Jazz Air Income Fund
Jazz (JAZ.UN-SO) provides regional services for Air Canada. In a CCAA filing, the
key document governing the two companies’ relationship, the Capacity Purchase
Agreement (CPA), is subject to opening and negotiation. However, we believe a
bankruptcy court would have to find the contract well offside in terms of market
rates for operations and we believe Jazz provides service to Air Canada at rates
comparable to any of the U.S. regionals and typically exceeds them. Part of the
2010 rate reset process for the CPA already includes a benchmarking process on
cost to U.S. regional carriers.
We believe Jazz would also be ready to provide direct financing or would agree to
changes in the CPA that are mutually beneficial in order to avoid a CCAA filing.
One option for Air Canada in a CCAA filing could be to modify the existing scope
clause with its unions. The current scope clause limits the size, number and type
of aircraft and capacity Air Canada is allowed to contract to Jazz. Jazz has lower
labor costs and more flexible work rules than Air Canada. If the CPA was
terminated, we do not believe Air Canada would find it more cost effective to
internalize the operation.
The scale of services that Jazz provides Air Canada should also not be
underestimated. Jazz provides airport operations for all Air Canada destinations
in Canada other than the largest eight airports and provides service to 86 of 115
North American destinations. We believe the scope of the operation would make
it very difficult, if not impossible, to take over completely. As well, there is no
other entity in Canada with sufficient resources to operate 133 aircraft covered
under the CPA. Installing a transplant airline from U.S. regional airlines is a
possibility but it would certainly take time leading to severe disruption to
service, which we expect the government would not tolerate for long. We expect
Air Canada would not be able to reduce expenses materially in this scenario.
In the event of a strike, assuming Air Canada can maintain its customers
systems, Jazz would continue to operate. In previous labor actions, regional
carriers have typically seen their loads increase as they carry passengers
normally carried by the mainline.