Air Canada Jazz to close Hamilton operations end of July

Regional airline Air Canada Jazz (TSX:JAZ.UN) has begun to scale back its operations to tackle higher fuel costs by announcing plans to close its Hamilton operations at the end of July, a move that will affect 14 customer service agents.

"No other decisions involving Jazz services have been made or announced at this time," said airline spokeswoman Manon Stuart, adding that employees can seek to bump into other location as permitted in their collective agreement.

The move eliminates 10 daily flights between the airport west of Toronto and airports in Ottawa and Montreal.

It will have a minimal impact on the airport, whose largest airline is WestJet (TSX:WJA), said Hamilton airport spokesman Steve Howse.

With 50 per cent lower costs than rival Pearson International Airport, Hamilton is bound to be attractive to other carriers.

"We've already had inquiries into picking up those routes," Howse said.

Under a capacity purchase agreement in force until 2015, Air Canada can reduce the number of flying hours it purchases from Jazz by some 15 per cent below full capacity.

David Newman of National Bank Financial said the airline may seek to end leases of CRJ100-200 jets that burn more fuel.

Newman said that Jazz could also mitigate the financial impact with a hiring freeze, aircraft returns, lower maintenance expenses and more charter flying.

"While Air Canada's cuts are expected to be across the board and more focused on a reduction in frequencies, as opposed to eliminating routes, we believe that the most impacted routes at Jazz will be leisure routes and some U.S. business routes," wrote Newman.

Some of Air Canada's reduced capacity may come from shifting to smaller aircraft, such as the more fuel-efficient Embraer 190 jets, in soft leisure markets like Las Vegas.