Saturday, April 14, 2012

Thomas Cook ends flight service deal with Jazz Aviation

Tour operator Thomas Cook Canada Inc. is making an early exit from its five-year agreement with Jazz Aviation this month due to market conditions, leav­ing Jazz with fewer choices to diversify away from its dominant customer.

Halifax-based Jazz has been operating a fleet of six Boeing 757 jets for the British vacation company since 2010 to sunny destinations during the winter season to the Caribbean, Mexico and Central America. The deal had another three years left.

“We are very disappointed that the current market conditions require Thomas Cook to restruc­ture its operations," Jazz chief executive Joseph Randell said in a news release.

“We enjoyed working with the Thomas Cook team and our employees can be proud of the solid operational performance and customer service they deliv­ered."

Jazz said it will cease flying planes for Thomas Cook at the end of April — the end of the tour company’s winter travel season.

That will leave the small air­line with fewer customers, tying its fortunes even closer to those of Air Canada , which has seen its reputation tarnished by dis­ruptive labour disputes in recent months.

Air Canada is by far the largest customer for Jazz, which pro­vides seating capacity to Cana­da’s largest airline under con­tract.

National Bank Financial ana­lyst Cameron Doerksen said Thomas Cook’s move is a “major step" back for Chorus Aviation ’s efforts to diversify away from Air Canada.

Chorus is the parent company of Jazz.

“We are not aware of any other major tour operator charter con­tracts up for bid in the next two years so it will be very challeng­ing to diversify away from Air Canada in the near-term," Doerk­sen said.

Jazz and Thomas Cook said they have reached a settlement for the termination of the flight services agreement, details of which remain confidential.

Thomas Cook said it needs to have more “flexible" arrange­ments.

“A change in market dynamics means that we need to introduce more flexible flying arrange­ments; the consequence of that is the decision to discontinue our dedicated fleet of 757 aircraft," said Dean Moore, chief executive officer of Thomas Cook North America .

U.K.-based Thomas Cook, Europe’s second-largest tour operator, has said it had been hit by several external shocks in the last few years. It suffered badly when the volcanic ash cloud from Iceland shut off European airspace in April 2010.

Thomas Cook has also said that last year’s Arab Spring polit­ical unrest resulted in a dramatic fall in travel to Middle East and North African destinations and that its operations in Britain and France had underperformed.

National Bank’s Doerksen said Thomas Cook’s decision to can­cel the arrangement with Jazz was based on its own needs.

“We stress that we believe that the decision by Thomas Cook to end its agreement is not a reflec­tion of Chorus’s service, but rather a reflection of Thomas Cook’s desire to gain more flex­ibility in its charter arrange­ments," he said in a research note.

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