Chorus Aviation Announces Second Quarter 2021 Financial Results

Q2 2021 Key Metrics

  • Net income of $21.5 million, or $0.12 per basic share; a quarter-over-quarter decrease of $7.6 million primarily due to the continued impact of COVID-19 on results related to off-lease aircraft, negotiated amendments to certain lease agreements including extensions, the 2021 CPA amendments and lower unrealized foreign exchange gains of $10.7 million.
  • Adjusted net income1 of $11.4 million, or $0.06 per basic share; a decrease of $10.3 million quarter-over-quarter primarily due to the previously noted impact of COVID-19 on results and a reduction in earnings due to a lower US dollar foreign exchange rate.
  • Adjusted EBITDA1 of $76.9 million; a decrease of $14.2 million over second quarter 2020.
  • Liquidity of $177.9 million.
  • Collected approximately 67.0% of the Regional Aircraft Leasing segment’s lease revenue in the second quarter.

Recent Accomplishments

  • Revised capacity purchase agreement (‘CPA’) with Air Canada, enhancing Jazz’s position as the exclusive Air Canada Express operator of 70-78 seat regional capacity until the end of 2025 with the addition of 25 Embraer 175s to the Covered Fleet, and is currently the sole provider of Air Canada Express services.
  • Completed a public offering and concurrent private placement for gross proceeds of $145.1 million.
  • Remarketed three Dash 8-400s to two new leasing customers, Sky Alps of Italy (two aircraft) and one Dash 8-400 to National Jet Express, a subsidiary of Australian aviation operator, Cobham Aviation Services.
  • Secured a three-year contract with Purolator for air cargo charter services, executing on Chorus’ growing capabilities in this market segment.
  • Awarded a three-year contract to upgrade and modify Transport Canada’s National Aerial Surveillance Program fleet of three Dash 8-100 and one Dash 7-100 aircraft with new surveillance equipment.
  • Awarded a new five-year contract to provide fixed-wing air ambulance service for Ambulance New Brunswick further extending its 25-year relationship.
  • Awarded, in partnership with General Dynamics Mission Systems – Canada, an eight-year contract for the in-service support of the Canadian Armed Forces manned airborne intelligence surveillance and reconnaissance program.
  • Executed long-term leases with Connect Airlines for two off-lease Dash 8-400s, marking the successful placement of all Dash 8-400s repossessed in 2020 and reducing the number of off-lease aircraft from 13 to eight.

HALIFAX, NS, Aug. 11, 2021 /CNW/ – Chorus Aviation Inc. (‘Chorus’) (TSX: CHR) today announced second quarter 2021 financial results.

“Our second quarter delivered net earnings of $0.12 per basic share or $0.06 on an adjusted basis. We are managing our business well through these unprecedented times and continue to report positive financial results. While our second quarter earnings were negatively impacted by certain aircraft being off-lease, negotiation of certain lease amendments including extensions, the 2021 CPA amendments, and a lower US dollar exchange rate, I am pleased with the progress made in reducing debt and the stability we are seeing in lease rent collections,” stated Joe Randell, President and Chief Executive Officer, Chorus Aviation Inc.

“On the leasing front, with the addition of Connect Airlines of Boston as a new leasing customer, we’ve now remarketed all of our off-lease Dash 8-400 aircraft. We repossessed these aircraft in 2020 and reconfigured them for return-to-service at our facilities in North Bay and Halifax. I’m proud of our team’s collaborative efforts in finding opportunities and delivering integrated solutions to place these assets with new customers in this very challenging environment.

“Our recent contract awards at Voyageur have expanded our reach into cargo operations and special mission work in the aerospace and defense sectors. Work under our new contract with Transport Canada has begun and we anticipate beginning to generate revenue at the end of the third quarter. Our new partnership with General Dynamics Mission Systems – Canada is in the initial stages as we prepare for the first aircraft arrival scheduled in September with the expectation of being fully operational by the third quarter of 2022.

“The transition of the E175s into the Air Canada Express fleet is progressing very well, and we anticipate completing the induction of these 25 aircraft by the end of this month. We’re very pleased to be recalling employees as regional flying resumes.

“Overall, I’m pleased with how we’re navigating through this ongoing crisis. We’ve created additional balance sheet flexibility by significantly reducing our adjusted net debt, and we’re successfully remarketing off-lease aircraft by putting these assets to good work with new customers,” concluded Mr. Randell.

Liquidity

As of June 30, 2021, Chorus’ liquidity was $177.9 million including cash of $142.4 million and $35.5 million of available room on its operating credit facility. Liquidity increased from the first quarter of 2021 by $6.6 million due to:

  • positive cash flows from operations of $15.0 million;
  • receipt of the net proceeds from the 2021 capital raise of $138.1 million;
  • increase in cash due to changes in both restricted cash and security deposits and maintenance reserves of $18.8 million; offset by
  • additions to property and equipment of $10.6 million primarily arising from investments in the reconfiguration of off-lease and re-leased aircraft;
  • debt repayments of $154.7 million related to scheduled repayments of $49.1 million, early repayments of amortizing term loans on six aircraft totaling $71.7 million and the repayment of all deferred amounts owing under aircraft loans with its largest lender in the amount of $33.9 million.

Repayment under these secured debt facilities brought the carrying value of Regional Aircraft Leasing segment’s (‘RAL’) nine unencumbered aircraft to approximately $140.0 million (US $110.0 million).

At June 30, 2021, the Controllable Cost Guardrail receivable was $10.2 million over the agreed cap of $20.0 million and was paid in July 2021 in accordance with the 2021 CPA Amendments.

Second Quarter Summary

In the second quarter of 2021, Chorus reported adjusted EBITDA of $76.9 million, a decrease of $14.2 million relative to the second quarter of 2020.

The RAL segment’s adjusted EBITDA decreased by $9.4 million primarily due to lower lease revenue attributable to the continued impact of COVID-19 on results related to off-lease aircraft, negotiated amendments to certain lease agreements including extensions, and lower earnings due to a lower US dollar exchange rate partially offset by additional aircraft earning lease revenue.

The Regional Aviation Services (‘RAS’) segment’s adjusted EBITDA decreased by $4.8 million. The second quarter results were impacted by:

  • a decrease in Fixed Margin of $2.4 million in accordance with the CPA;
  • a decrease in capitalization of major maintenance overhauls on owned Covered Aircraft operated under the CPA of $0.5 million; and
  • an increase in general administrative expenses; offset by
  • an increase in other revenue due to an increase in third-party maintenance, repair and overhaul (‘MRO’) activity and contract flying; and
  • an increase in aircraft leasing revenue under the CPA of $0.3 million primarily due to nine incremental CRJ900s offset by the removal of the Dash 8-300 fleet and lower earnings of $3.7 million due to a lower US dollar exchange rate.

Adjusted net income was $11.4 million for the quarter, a decrease of $10.3 million due to:

  • a $14.2 million decrease in adjusted EBITDA as previously described;
  • an increase in net interest costs of $2.6 million primarily related to the 6.00% Unsecured Convertible Debentures issued in April 2021 and increased indebtedness under credit facilities added in the second quarter of 2020; and
  • a $1.4 million increase in adjusted income tax expense; offset by
  • a decrease in depreciation expense of $3.7 million;
  • a decrease of $2.2 million in realized foreign exchange and unrealized foreign exchange losses on working capital; and
  • an increase in gain on property and equipment of $2.1 million.

Net income decreased $7.6 million over the prior period due to:

  • the previously noted decrease in adjusted net income of $10.3 million;
  • a reduction in net unrealized foreign exchange gains on long-term debt of $10.7 million; and
  • a decrease in income tax recoveries on adjusted items of $3.0 million; offset by
  • a decrease in impairment provisions of $9.5 million in the RAL segment;
  • a reduction in net lease repossession costs of $5.3 million;
  • a reduction to the one-time restructuring costs related to the 2021 CPA Amendments of $1.1 million; and
  • decreased employee separation program costs of $0.4 million.

Year-to-date Summary

Chorus reported adjusted EBITDA of $160.9 million for 2021, a decrease of $18.7 million relative to the same prior year period.

The RAL segment’s adjusted EBITDA decreased by $18.9 million primarily due to lower lease revenue attributable to the continued impact of COVID-19 on results related to off-lease aircraft, negotiated amendments to certain lease agreements including extensions, an increase in the expected credit loss provision of $3.4 million and lower earnings due to a lower US dollar exchange rate partially offset by additional aircraft earning lease revenue.

The RAS segment’s adjusted EBITDA was consistent with the same period last year. The period-over-period results were impacted by:

  • a decrease in stock-based compensation of $7.0 million due to a decrease in the Share price inclusive of the change in fair value of the Total Return Swap;
  • an increase in aircraft leasing revenue under the CPA of $2.7 million primarily due to nine incremental CRJ900s, partially offset by the removal of the Dash 8-300 fleet and lower earnings of $5.5 million due to a lower US dollar exchange rate;
  • an increase in other revenue due to an increase in third-party MRO activity and contract flying; offset by
  • an increase in general administrative expenses;
  • a decrease in Fixed Margin of $4.8 million in accordance with the CPA; and
  • a decrease in capitalization of major maintenance overhauls on owned Covered Aircraft operated under the CPA of $3.0 million.

Adjusted net income was $27.1 million year-to-date, a decrease over 2020 of $18.3 million due to:

  • a $18.7 million decrease in adjusted EBITDA as previously described; and
  • an increase in net interest costs of $7.3 million primarily related to the 6.00% Unsecured Convertible Debentures issued in April 2021, increased indebtedness under credit facilities added in the second quarter of 2020 and additional debt related to aircraft purchased since the second quarter of 2020; offset by
  • a decrease in depreciation expense of $4.0 million;
  • an increase in gain on property and equipment of $2.1 million;
  • a decrease of $1.0 million in realized foreign exchange and unrealized foreign exchange losses on working capital; and
  • a $0.6 million decrease in adjusted income tax expense.

Net income decreased by $28.4 million over the prior period due to:

  • the previously noted decrease in adjusted net income of $18.3 million;
  • one-time restructuring costs related to the 2021 CPA Amendments of $80.7 million; and
  • an increase in net lease repossession costs of $1.8 million; offset by
  • a change in net unrealized foreign exchange on long-term debt of $34.8 million;
  • an increase in income tax recoveries on adjusted items of $18.3 million;
  • a decrease in impairment provisions of $15.5 million in the RAL segment; and
  • decreased employee separation program costs of $3.8 million, exclusive of the cost attributable to the pilot early retirement program.