Delta Air Lines has cut short a contract to have some of its planes serviced in Canada and will shift the work to Hong Kong and U.S. providers, according to reports in The Atlanta Journal-Constitution.
The scuttled deal was with ACE Aviation Holdings Inc.'s aircraft maintenance unit in Vancouver, British Columbia. It will mean the loss of 700 jobs.
"We are not in a position to meet Delta's cost expectations," said Chahram Bolouri, chief executive officer of the Air Canada Technical Services unit, in a statement. The five-year contract, signed in March 2005, is being terminated three years early.
Montreal-based ACE Aviation, owner of Canada's biggest airline, said when the Delta contract was signed that it was worth about $300 million in revenue. The agreement called for the maintenance, repair and overhaul of Atlanta-based Delta's fleet of more than 200 Boeing 757 and 767 aircraft.
The aircraft maintenance company, also known as ACTS, announced that of the 1,000 employees at the company's Vancouver centre, about 700 jobs currently supporting the Delta contract will be eliminated starting in June.
The company told The Canadian Press that the Vancouver maintenance center will be down to about 300 employees by this fall. They will handle ongoing airframe, heavy maintenance and related activities.
''We have worked really hard at this relationship very successful and it was difficult to meet the requirements from Delta, who was looking to reduce their costs,'' said ACTS spokeswoman Ann-Marie Gagne in a phone interview with CP.
''We're going to be working closely with the union in the coming weeks to see how the circumstances can be mitigated as much as possible.''
Delta's top maintenance executive, Tony Charaf, said Tuesday that Delta may send more work to China in the future but will also use other suppliers. He said Delta was unable to reach an agreement with the Canadian supplier on "commercial terms" but didn't elaborate.
"We have both agreed that this relationship is not working for them and it's not working for us," he told The Journal-Constitution.
Delta will send 11 of its fleet of 106 Boeing 767 aircraft to HAECO, a Hong Kong maintenance provider, and have others serviced in the U.S., Charaf said. He said the Chinese company, which also does work on Continental, Northwest and UPS jets, began work on the first Delta jet this month.
ACE has been trying to sell stakes in its maintenance business in a private sale, expected to close by the end of June. The maintenance unit, which also has contracts with JetBlue Airways and US Airways, employs 3,800 people in Montreal, Toronto, Winnipeg and Vancouver.
