A Jazz Air plane while still owned by Air Canada
As Canadian travellers bear the increased cost of airport fees, the Canadian airline industry could become less competitive, warns the chief executive officer of Jazz Air Income Fund .
Several airports will begin paying rent and policing costs to the federal government and some airports are passing on the costs to travellers, Jazz CEO Joseph Randall said on the company's third-quarter conference call Friday.
"At the end of the day, it's airline passengers that will bear these costs and as a result our industry could become less competitive on the global stage," Mr. Randall told analysts.
He noted that the Ontario government has proposed an aviation fuel tax while a federal excise tax on fuel already exists.
"We are doing our part, as are many carriers, to reduce our costs and improve efficiency. We need all stakeholders to make the same commitment."
However, airlines also have hit consumers with extra fees, too, for services such as preferred seating.
Jazz, the regional carrier spun off from Air Canada , reported Thursday that its third-quarter profit fell to $25.3-million, down 20 per cent compared to $31.7-million for the same quarter last year.
Jazz also said Friday that labour negotiations with its employees unions are advancing.
Mr. Randall said maintenance and engineering employees have ratified their collective agreement and the airports group is having a ratification vote on the agreement.
Negotiations are continuing with the remaining groups of crew schedulers, flight attendants, pilots and dispatchers, he added.
"We are well down the road in our labour negotiations," Mr. Randall told a conference call to discuss the financial results.
The fund said the last two months of the quarter include the financial impact of the amendments made to the capacity purchase agreement between Jazz and Air Canada, its former parent.
Air Canada now purchases essentially all of Jazz's capacity and uses the smaller airline to provide connecting flights between the main hubs and smaller destinations in outlying areas
Operating revenue fell 13 per cent to $379.7-million, compared with $437.4-million last year.
Jazz said the drop was primarily attributable to a $60-million reduction in revenue relating to pass-through costs under the capacity purchase agreement.
Mr. Randall said that Jazz is open to acquisitions and taking equity positions in other airlines to diversity its business.
"We have to actively pursue those opportunities to be open to them and ultimately what we're looking to do is to diversify our business and to provide a stronger company for all stakeholders going forward. I won't rule anything out."
He noted that publicly traded regional airlines in the United States have been diversifying their businesses in various ways.
Jazz was originally a wholly owned subsidiary of Air Canada. But, after Air Canada reorganized under court supervision, they became a separate subsidiaries of the same parent company. Later still, they became separate public companies but still maintain capacity sharing agreements.
Units in Jazz Air Income Fund were trading at $4.27, up 3 cents, in morning trading Friday on the Toronto Stock Exchange.