CANADA AVIATION NEWS
- An aviation row has forced Canada to prepare the evacuation of a military base in the United Arab Emirates, a key supply route to Afghanistan, Canadian Defense Minister Peter MacKay said Monday.
"At this point, we will abide by the wishes of the Emirates, and that is that we will be leaving the base," MacKay was quoted by Canadian media as telling reporters in Kandahar, Afghanistan after negotiations between Ottawa and the UAE broke down.
The UAE had sought to obtain an increase in the number of flights between Canada and the Emirates, but with the talks ending without an agreement, Canada’s military base in the country looked set for closure.
"We are going through the various options that are before us right now, and we’ll continue to do our mission here in Afghanistan primarily and we’ll find other ways to support this mission through other hubs within the region," MacKay said.
At stake was a military base near Dubai known as Camp Mirage.
On Sunday, the UAE’s ambassador to Canada Mohammed Abdullah al-Ghafli said the Emirates was "disappointed" that protracted negotiations had floundered.
"The fact that this has not come about undoubtedly affects the bilateral relationship," he was quoted as saying by the official WAM news agency.
The evacuation orders came after the Canadian government balked at the UAE’s demands for more landing rights for its national carriers, Emirates Airlines and Etihad Airways.
"We’ll always act in Canada’s best interest," MacKay added, after thanking the UAE for its past support of Canada’s military operations in the country.
"And one thing I know about the Canadian forces, they’re very adaptable. They have alternative plans, they have contingency plans."
Canada’s Globe and Mail newspaper reported that Ottawa is now planning to relocate its forces, possibly to Cyprus, rather than agree to the UAE’s terms.
The Vancouver Sun said Canadian soldiers and pilots would have just 27 days to "pack up and clear out of Camp Mirage" after the negotiations collapsed.
UAE warns Canada ties may be hit by lack of air deal
Canada’s ties with the United Arab Emirates will be "affected" by the lack of an agreement to expand aviation links between the two countries, the UAE’s ambassador to Canada was quoted as saying Sunday.
"The UAE is disappointed that despite intensive negotiations over the last five years, the UAE and Canada have been unable to arrive at an agreement on expanding the number of flights between the two countries," Mohammed Abdullah al-Ghafli was quoted as saying by the official WAM news agency.
"The fact that this has not come about undoubtedly affects the bilateral relationship," the ambassador said.
The report said that the existing six commercial flights a week fell short of the economic needs and growth potential of both Canada and the Gulf state.
The Canadian embassy in Abu Dhabi could not be reached for comment on Sunday, while UAE foreign ministry officials were also not immediately available.
But according to Canadian media reports, the country may have to withdraw from a "secret" military base near the UAE transport hub of Dubai as a result of the disagreement.
"The Canadian government is now preparing to relocate forces from the United Arab Emirates to somewhere such as Cyprus rather than give in to what it considers unreasonable demands from the host country," The Globe and Mail reported on its website on Friday in reference to the commercial flights issue.
The Vancouver Sun said Saturday that "Canadian soldiers and aircrew have only 27 days to pack up and clear out of Camp Mirage, the not-so-secret airbase in the United Arab Emirates that Ottawa established seven years ago to support military operations in Afghanistan."
The daily’s website said the UAE suspended a memorandum of understanding on the base on Tuesday, after the Canadian government balked at a demand that "Dubai-based Emirates Airlines and Abu Dhabi-based Etihad Airways... each be granted daily flights between Toronto" and the UAE.
About 27,000 Canadians live in the United Arab Emirates, which is one of Canada’s biggest economic partners in the Middle East with bilateral trade valued at about 1.5 billion dollars per year, WAM cited Ghafli as saying.
About 27,000 Canadians live in the United Arab Emirates, one of Canada’s biggest economic partners in the Middle East with bilateral trade valued at about 1.5 billion dollars per year, according to UAE officials.
In a sign of tensions between the two countries, the UAE on Monday closed their airspace to a plane carrying MacKay, several Canadian media outlets reported.
The value of Jazz Air soared more than eight per cent in heavy trading Friday after the company said it will increase rewards to shareholders after converting later this year to a dividend-paying corporation called Chorus Aviation Inc.
"We have taken a responsible and balanced approach in setting our dividend policy to provide both investor income and allow financial flexibility to fund growth," chief executive Joseph Randell said in a statement.
"In fact, post-conversion, Chorus is expected to offer investors one of the highest dividend-paying stocks in the airline industry," Randell said.
The Halifax-based fund announced earlier that a typical shareholder in Ontario and Quebec would receive a higher after-tax return after the conversion, which will coincide with a change in federal tax rules early in 2011.
Although the income fund will change its corporate name to Chorus with the conversion, its planes will continue to be branded Jazz.
On the Toronto Stock Exchange, units in Jazz Air closed up 38 cents, or 8.15 per cent, at $5.04. The volume of trading was just over 1.6 million units, more than five times the daily average.
Airline analyst Rick Erickson said investors were likely reacting to the payout under the new corporate structure.
"When you look at the yield on that compared to the value of the share, it's about a little over 10 per cent," said Erickson of Calgary-based RP Erickson & Associates.
"It's a high yield," Erickson said.
The planned dividend policy of 60 cents per Chorus share annually represents 43 cents of after-tax income for a typical retail investor in Quebec or Ontario, versus the 32 cents after-tax equivalent income under the income trust structure.
The move to a corporate structure is being made in response to changes to the new tax rates for income trusts next year. The switch was announced in October 2006 and phased in over the last four years.
The conversion plan requires approval from at least two-thirds of Jazz unitholders scheduled for Nov. 9.
The aviation industry is experiencing a moderate rebound in travel demand, so the company will be able to sustain the payments after the corporate conversion, Randell said.
The change in the Jazz structure should go virtually unnoticed by the average traveller because they will still board planes that carry the well-known Jazz logo.
It's only the name of the airline's holding company that will change, said Jazz spokeswoman Debra Williams.
"The branding for our airline operations — Air Canada Jazz and Jazz — will not change," Williams said via email.
"Therefore areas such as aircraft livery, airport signage, uniforms etc. will not change as a result of corporate conversion, she said.
Erickson said it would have been a "very foolish" and expensive decision to change Jazz's name.
"I think Jazz if fairly well ingrained, if you will, on the part of Canadian consumers."
Randell described the conversion of the fund as "a significant step" in the evolution of the business that will support "our objectives of growth and diversification."
Randell said the new corporate brand name, Chorus, will reflect the "harmony, creativity, passion and collaboration" demonstrated by its employees.
Erickson said Jazz could eventually turn itself into a full-service airline and undertake sales, marketing and scheduling instead of just providing seat capacity.
He also said Jazz could take its model to other countries or regions, such as Europe, and provide capacity in those markets for growth.
Jazz Air Income Fund was created as a separate company after Air Canada (TSX:AC.A) was restructured under court protection.
Its airline, Jazz Air, primarily sells its capacity to Air Canada although it recently signed a multi-year deal to operate a six-plane fleet on behalf of Thomas Cook, a vacation supplier.
