Quebec drops suit as Air Canada agrees to service jets in province

QUEBEC CITY (Reuters) - Air Canada (Toronto:AC.TO - News) has agreed to service up to 75 passenger jets it is buying from Bombardier Inc (BBDb.TO) in the companies' home province of Quebec for 20 years, officials said on Wednesday.

Quebec will also drop a lawsuit 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.

A spokesman for Quebec Economic Development Minister Dominique Anglade said on Wednesday that the 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, which lost lower court decisions in Quebec Superior Court and the Quebec Court of Appeal on the issue, will now drop an appeal it filed last month with the Supreme Court of Canada.

Earlier on Wednesday, Montreal-based Bombardier announced it had signed a letter of intent to sell up to 75 CS300 aircraft to Air Canada for as much as $3.8 billion, based on the list price. The plane maker also said it will cut about 7,000 jobs over the next two years.

(Reporting by Kevin Doughtery in Quebec City and David Ljunggren in Ottawa; Editing by Paul Simao)