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

(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 AC.TO
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 BBDb.TO .
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.