February 17, 2016 / 8:19 PM / 2 years ago

UPDATE 1-Air Canada gains as Quebec drops suit, Canada to ease some restrictions

3 Min Read

(Releads with Ottawa saying it could lift restrictions on airline, figures in U.S. dollars)

By Kevin Dougherty and David Ljunggren

QUEBEC CITY/OTTAWA, Feb 17 (Reuters) - Air Canada won a double victory on Wednesday when Ottawa promised to ease some restrictions on the carrier and the province of Quebec dropped a lawsuit against the airline after it ordered passenger jets from Quebec-based Bombardier Inc.

Air Canada wants an end to the 1988 Air Canada Public Participation Act, which limits foreign ownership to 25 percent.

It also obliges the carrier to maintain a head office in Montreal, service planes in locations across the country and operate in English and French, Canada's two official languages.

Federal Transport Minister Marc Garneau said Ottawa would "clarify this act" in order to "help Air Canada to respond more effectively to changing market conditions".

Garneau made the announcement shortly after Air Canada said it would buy up to 75 passenger jets from Bombardier and service them in the company's home province of Quebec for 20 years.

A spokesman for Garneau said Ottawa would not change the limits on foreign ownership or the obligation to operate in two languages and keep its headquarters in Montreal.

Instead, it would alter the act to help prevent lawsuits over where Air Canada planes are serviced.

Quebec will drop legal action it filed against Air Canada for not living up to a commitment to keep part of its aircraft maintenance operations in Montreal, the main city in the predominantly French-speaking province, Quebec Premier Philippe Couillard said in a statement on Wednesday.

A spokesman for Quebec Economic Development Minister Dominique Anglade said the provincial government had settled its case with Air Canada, in return for the airline agreeing to conduct maintenance on the CSeries jets in the province.

Air Canada CEO Calin Rovinescu said the Quebec government's decision to drop the lawsuit was part of the broader deal to purchase the CSeries and use a third-party Quebec supplier to perform all of the heavy maintenance on the aircraft.

"It was a good compromise," Rovinescu told reporters in Montreal. "We're obviously stepping up with a major order to support the industry, both in Quebec and in Canada. It was an important ingredient, but certainly not the determining one."

The 75 CS300 aircraft planes have a list price value of about $3.8 billion. The Montreal-based plane maker also said it will cut about 7,000 jobs over the next two years. (Additional reporting by Allison Lampert in Montreal; Editing by Paul Simao and Chizu Nomiyama)

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