Explain it like im five,
What is a capacity purchase agreement? How does it work?
MC
CPA ELI5
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Monorail Conductor
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Re: CPA ELI5
Essentially an airline (like Air Canada) purchases all of the capacity on a subcontracting regional carrier (like Jazz, Sky Regional, EVAS, Georgian). AC in this example would be responsible for all marketing, ticket sales and possibly fuel and other costs as well depending on the contract. The CPA carriers would only be responsible for operating the flights to their destination. They have already been paid for all of the seats on their aircraft, therefore they don't assume any of the risks with regards to ticket sales. Since CPA carriers are already receiving a more or less fixed stream of revenue from the mainline carrier, their only way to increase their profit is to keep their costs down.
