Delta Scuttles Jet Repair Deal

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.

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.

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 said.

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.

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