Airport Technology

Deals: Connect Airlines’ MoU hints at further major investment

While Connect is waiting on FAA approval no formal deal can be signed to codeshare or set up joint operations.

New regional Canada-US airline Connect Airlines could be in line for significant investment from a “major US airline,” according to correspondence between the company and the US Department of Transport (USDOT).

The letter explained how a memorandum of understanding (MoU) could transform the commercial relationship into an equity investment, depending on the results of Connect’s next funding round.

While the identity of the partner was not disclosed in the letter itself, there are hints the major player is American Airlines (AA).

In August 2021, company filings named AA as a partner and codeshare with the Toronto-based regional carrier.

While Connect is still waiting on FAA approval via its air operators certificate, no formal deal can be signed to codeshare or set up joint operations.

Why it matters

AA is the major US airline without a Canadian partner. Delta Air Lines codeshares with WestJet, and United Airlines has a joint venture with Air Canada.

This potential deal will not cause a major disruption to key international airports such as LAX or New York JFK. Connect aims to offer flights from Toronto’s Billy Bishop Airport (CYTZ) to cities such as Chicago and Philadelphia, where AA keeps its hubs.

Billy Bishop itself offers unique opportunities for Connect and AA - as a small island-located airport, it is only fit for turboprop aircraft. As such, no major US airline or subsidiary currently flies to CYTZ.

The detail

Once Connect receives FAA certification, it said it aims to raise $40m in a Series B equity round. While it has the paperwork to operate charter flights, it must convert this certification for scheduled commercial flights.

Connect stated in its communication with the USDOT, it said a “major US airline will become a shareholder in Connect with the stated intention of taking a larger position over the next three years”.

This fits AA’s business strategy, as it currently holds stakes in partner airlines, including Envoy, Piedmont Airlines, PSA Airlines, JetSmart and Gol.

AA’s chief revenue officer Vasu Raja said in 2022: “These partnerships are a means of being able to generate a massive amount of customer value… If we can create the biggest network for customers, everything kind of clicks into place from there.”