Q4 2021 Key Metrics
- Net income of $10.2 million, or $0.06 per basic share; a quarter-over-quarter increase of $1.0 million primarily due to lower impairment and expected credit loss provisions of $31.0 million in the Regional Aircraft Leasing (‘RAL’) segment in addition to increased revenue in the Regional Aviation Services (‘RAS’) segment, partially offset by a reduction in unrealized foreign exchange gains of $35.4 million.
- Adjusted net income1 of $21.5 million, or $0.12 per basic share; an increase of $13.8 million quarter-over-quarter primarily due to additional aircraft earning leasing revenue, lower depreciation, and a reduction in realized foreign exchange losses.
- Adjusted EBITDA1 of $90.5 million; an increase of $8.5 million over fourth quarter 2020 due to additional aircraft earning leasing revenue and a lower expected credit loss provision partially offset by decreased earnings due to a lower US dollar exchange rate.
- Collected approximately 83% (67% in Q2’21, 77% in Q3’21) of the RAL segment’s lease revenue recognized in the fourth quarter.
- Liquidity of $188.5 million.
2021 Year-End Key Metrics & Highlights
- Net loss of $20.5 million, or $0.12 per basic share; a year-over-year decrease in net income of $62.0 million primarily due to capacity purchase agreement (‘CPA’) restructuring costs of $58.9 million net of tax recoveries in accordance with the 2021 CPA amendments.
- Adjusted net income1 of $63.9 million, consistent with the prior year, or $0.37 per basic share.
- Adjusted EBITDA1 of $329.4 million; a decrease of $18.0 million over 2020, primarily due to lower lease revenue attributable to off-lease aircraft, negotiated lease amendments (including extensions) and decreased Fixed Margin, partially offset by additional aircraft earning leasing revenue and a lower expected credit loss provision.
- Revised 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 the sole provider of Air Canada Express services.
- Completed a public offering and concurrent private placement for gross proceeds of $145.1 million.
- Remarketed all 13 off-lease aircraft repossessed in 2020 by Chorus Aviation Capital (‘CAC’):
- two Dash 8-400s to Sky Alps of Italy.
- one Dash 8-400 to National Jet Express, a subsidiary of Australian aviation operator, Cobham Aviation Services.
- two Dash 8-400s to Waltzing Matilda Aviation of Boston, doing business as Connect Airlines.
- six ATR 72-600s to Emerald Airlines of Dublin.
- two CRJ900s to City Jet of Dublin (in February 2022).
- 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 Dash 8-100 and Dash 7 aircraft with new surveillance equipment.
- Awarded a new five-year contract extension 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.
- Established new three-year $75.0 million revolving committed credit facility, plus a $25.0 million uncommitted accordion.
HALIFAX, NS, Feb. 16, 2022 /CNW/ – Chorus Aviation Inc. (‘Chorus’) (TSX: CHR) today announced fourth quarter and year end 2021 financial results.
“I’m proud and encouraged by our accomplishments in 2021, especially in light of a prolonged pandemic. We strategically managed our liquidity through successful capital raises and reduced our net debt by approximately $240 million or 12% to recharge our financial flexibility. Further, our newly awarded specialized contracts and new aircraft leasing agreements served to strengthen our organization,” stated Joe Randell, President and Chief Executive Officer, Chorus Aviation Inc. “While airlines around the world are still challenged to return to pre-COVID-19 financial levels, our fourth quarter yielded positive returns to our shareholders of $0.06 in net earnings. Our employees have shown tremendous resilience throughout this crisis and have provided safe and high-quality services to our customers; I’m deeply grateful for their perseverance and dedication.”
“The CAC team has done well, in a challenging environment, remarketing all 13 aircraft repossessed in 2020, and collecting 83% of lease revenue recognized in the fourth quarter, an improvement over the previous quarter. Our Air Canada Express flying grew to 76% of pre-COVID-19 fourth quarter flying levels and is now projected to reduce in the first quarter due to the current decrease in passenger travel demand. While our flying activity under the CPA doesn’t impact our fixed fee compensation, it is indicative of the market sentiment on air travel. Voyageur is relatively unaffected by the pandemic and is executing well on the new contracts it was awarded in 2021. The momentum they gained last year will continue to positively impact earnings throughout 2022 and beyond. Our accomplishments over the last two years have proven we have the expertise and resilience to manage through this crisis and we are well poised to seize new growth opportunities,” concluded Mr. Randell.
As of December 31, 2021, Chorus’ liquidity was $188.5 million including cash of $123.6 million and $64.9 million of available room on its operating credit facility. Liquidity decreased from the third quarter of 2021 by $69.6 million primarily due to the redemption of $85.0 million principal amount of the 6.00% Debentures which was partially offset by a reduction in restricted cash.
In 2021, Chorus managed its liquidity by:
- Entering into a new three-year committed operating credit facility in the fourth quarter of 2021 with a limit of $75.0 million plus a $25.0 million uncommitted accordion.
- Issuing $85.0 million aggregate principal amount of Series C Debentures for net proceeds of $81.2 million in the third quarter of 2021 and subsequently using the proceeds thereof to redeem $85.0 million principal amount of the 6.00% Debentures in the fourth quarter of 2021. As a result of this redemption, $115.0 million aggregate principal amount of the 6.00% Debentures currently remain outstanding.
- Completing a concurrent public offering and private placement of Equity Units and Series B Debentures for net proceeds of $138.1 million which was partially used to repay amortizing term loans on six aircraft totaling $71.7 million and deferred amounts owing under aircraft loans with its largest lender in the amount of $33.9 million in the second quarter of 2021.
Chorus anticipates having sufficient liquidity to fund ongoing operations, planned capital expenditures, and principal and interest payments related to long-term borrowings.
Fourth Quarter Summary
In the fourth quarter of 2021, Chorus reported adjusted EBITDA of $90.5 million, an increase of $8.5 million over the fourth quarter of 2020.
The RAL segment’s adjusted EBITDA increased by $5.9 million due to additional aircraft earning leasing revenue and a $3.6 million lower expected credit loss provision partially offset by lower lease revenue attributable to negotiated lease amendments (including extensions) and decreased earnings due to a lower US dollar exchange rate.
The RAS segment’s adjusted EBITDA increased by $2.6 million. The fourth quarter results were impacted by:
- an increase in other revenue due to an increase in third-party MRO activity, part sales and contract flying;
- an increase in capitalization of major maintenance overhauls on owned aircraft of $2.8 million; and
- an increase in aircraft leasing revenue under the CPA of $0.5 million primarily due to six incremental CRJ900s offset by the removal of the Dash 8-300 fleet and lower earnings of $1.1 million due to a lower US dollar exchange rate; offset by
- a decrease in Fixed Margin of $2.4 million in accordance with the CPA; and
- an increase in general administrative expenses attributable to increased operations.
Adjusted net income of $21.5 million for the quarter, an increase of $13.8 million due to:
- a $8.5 million increase in adjusted EBITDA as previously described;
- a decrease of $5.0 million primarily due to a decrease in unrealized foreign exchange losses on working capital and realized foreign exchange losses;
- a decrease in depreciation expense of $3.5 million; and
- an increase of $1.7 million related to gains on property and equipment and asset backed commercial paper; offset by
- a $3.8 million increase in adjusted income tax expense; and
- an increase in net interest costs of $1.1 million primarily related to interest on Series B Debentures and Series C Debentures offset by the repayment of certain aircraft financing.
Net income increased $1.0 million over the prior period due to:
- the previously noted increase in adjusted net income of $13.8 million;
- a decrease in impairment provisions of $27.0 million; and
- a decrease in employee separation program costs and signing bonuses of $1.0 million; offset by
- a decrease in net unrealized foreign exchange gains primarily on long-term debt of $35.4 million;
- a decrease in income tax recoveries on adjusted items of $3.2 million;
- an increase in lease repossession costs of $1.2 million; and
- an increase in Dash 8-300 inventory provision of $1.0 million.
Chorus reported adjusted EBITDA of $329.4 million for 2021, a decrease of $18.0 million over the same prior year period.
The RAL segment’s adjusted EBITDA decreased by $13.0 million primarily due to lower lease revenue attributable to off-lease aircraft, negotiated lease amendments (including extensions), and decreased earnings due to a lower US dollar exchange rate partially offset by additional aircraft earning lease revenue and a lower expected credit loss provision.
The RAS segment’s adjusted EBITDA decreased by $5.0 million due to:
- a decrease in Fixed Margin of $9.5 million in accordance with the CPA; and
- an increase in general administrative expenses attributable to increased operations; partially offset by
- a decrease in stock-based compensation of $5.1 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 $3.6 million primarily due to incremental CRJ900s, partially offset by the removal of the Dash 8-300 fleet and lower earnings of $8.5 million due to a lower US dollar exchange rate;
- an increase in other revenue due to an increase in third-party MRO activity, part sales and contract flying; and
- an increase in capitalization of major maintenance overhauls on owned aircraft of $1.9 million.
Adjusted net income of $63.9 million was unchanged from 2020 due to the following items:
- a decrease of $11.7 million in realized foreign exchange losses and increased unrealized foreign exchange gains on working capital;
- a decrease in depreciation expense of $9.6 million; and
- an increase of $4.0 million related to gains on property and equipment and asset backed commercial paper; offset by
- an $18.0 million decrease in adjusted EBITDA as previously described;
- an increase in net interest costs of $5.6 million primarily related to the Series B Debentures, the Series C Debentures, increased indebtedness under credit facilities and additional debt related to aircraft purchased since the second quarter of 2020; and
- a $1.9 million increase in adjusted income tax expense.
Net loss of $20.5 million, a decrease of $62.0 million over the prior period due to:
- one-time restructuring costs of $80.7 million related to the 2021 CPA amendments;
- a change in net unrealized foreign exchange primarily on long-term debt of $41.4 million;
- an increase in lease repossession costs of $5.7 million; and
- an increase in Dash 8-300 inventory provisions of $1.0 million; offset by
- a decrease in impairment provisions of $47.3 million;
- an increase in income tax recoveries on adjusted items of $14.8 million; and
- a decrease in employee separation program costs, exclusive of the cost attributable to the pilot early retirement program and signing bonuses of $4.9 million.
Consolidated Financial Analysis
This section provides detailed information and analysis about Chorus’ performance for the three months and year ended December 31, 2021, compared to the three months and year ended December 31, 2020. It focuses on Chorus’ consolidated operating results and provides financial information for Chorus’ operating segments.
(See cautionary statement regarding forward-looking information below)
Chorus’ business model does not directly expose it to the market risks ordinarily faced by airlines; however, substantially all of its revenue is derived from airline customers, through the CPA and its leasing of aircraft to airline customers globally. Although the COVID-19 pandemic continues to impact airlines due to the emergence of the Omicron variant, demand for passenger air travel continued to increase throughout 2021 with the global roll-out of vaccines and proof of vaccination assisting the recovery.
Regional Aviation Services:
In the fourth quarter of 2021, Jazz operated at approximately 76% of its fourth quarter 2019 (pre-COVID-19) levels. Provided the public health impacts of the COVID-19 pandemic do not worsen and travel restrictions are not increased, Jazz’s first quarter 2022 flying is expected to operate between 50% to 65% of its 2019 (pre-COVID-19) levels. In 2022, Jazz expects its aircraft leasing revenue under the CPA and its Fixed Margin revenue to be US $114.7 million and $65.7 million, respectively.
Voyageur continues to perform overseas humanitarian flights, cargo services, and the air ambulance operation in New Brunswick. Voyageur’s contract flying, charter sales and MRO services revenues began to increase in 2021. The momentum is expected to be sustained with the addition of the four new long-term contracts which will begin to positively impact Voyageur’s earnings throughout 2022 and beyond. Voyageur represents less than 10% of Chorus’ consolidated revenue and net income.
Regional Aircraft Leasing:
In February 2022, CAC executed short-term leases for two CRJ900s to CityJet. Both aircraft are anticipated to be delivered in the first half of 2022. In August 2021, CAC executed long-term leases for six ATR72-600s to Emerald Airlines of Dublin, Ireland. Two of the aircraft were delivered prior to yearend and the remaining four deliveries are expected in the first half of 2022. One Dash 8-400 on lease to Philippine Airlines is expected to be returned in the first quarter of 2022 as a result of the airline’s recent restructuring under Chapter 11 of the United States Bankruptcy Code.
Following the onset of the COVID-19 pandemic, CAC received requests from substantially all of its customers for some form of temporary rent relief, as they coped with an unprecedented reduction in demand for passenger air travel. Under rent relief arrangements, certain of which include lease term extensions, the repayment of the deferred amounts typically coincides with the lease term extensions. As of December 31, 2021, CAC’s gross lease receivable was $84.0 million (US $66.3 million) (December 31, 2020 – $56.3 million (US $44.2 million). The gross lease receivable may increase to approximately $90.0 million (US $70.0 million) by the end of 2022 due to rent relief arrangements and potential delays in payments.
As of December 31, 2021, the net lease receivable, after an expected credit loss provision, was $76.8 million (US $60.6 million) (December 31, 2020 – $48.3 million (US $38.0 million)). CAC’s lease deferral receivable exposure is also partially mitigated by security packages held of approximately $26.8 million (US $21.1 million) (December 31, 2020 – $30.7 million (US $24.1 million)).
Chorus collected approximately 83% of its lease revenue recognized in the fourth quarter, up from 77% in the third quarter of 2021, from its lessees.
The following table provides the number of aircraft that earn leasing revenue for completed transactions:
|Customer||Aircraft type||Q3 2021||Q4 2021||Total|
|Croatia Airlines||Dash 8-400||2||2|
|Ethiopian Airlines||Dash 8-400||5||5|
|Philippine Airlines(4)||Dash 8-400||3||3|
|Sky Alps||Dash 8-400||2||2|
|Waltzing Matilda||Dash 8-400||—||2||2|
|Total Regional Aircraft Leasing(5)||53||3||56|
|Total Regional Aviation Services(6)||Dash 8-400/CRJ900||48||—||48|
|Chorus Total Aircraft||101||3||104|
|(1)||On November 4, 2021, Aeromexico and CAC executed amended and restated lease agreements in respect of all three E190s currently leased by CAC to Aeromexico. These agreements (which became effective on January 31, 2022) reflect revised commercial terms negotiated by the parties following Aeromexico’s voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on June 30, 2020. On January 28, 2022, the U.S. bankruptcy court approved Aeromexico’s plan of reorganization, clearing the way for Aeromexico’s emergence from Chapter 11.|
|(2)||Consists of three ATR72-600s and two E195s.|
|(3)||CAC executed long-term leases for six ATR72-600s to Emerald Airlines. Two of the aircraft were delivered prior to year end and the remaining four deliveries are expected in the first half of 2022.|
|(4)||On December 31, 2021 Philippine Airlines successfully completed its restructuring under Chapter 11 of the United States Bankruptcy Code. Two aircraft have been retained under lease on revised terms and one is expected to be returned in the first quarter of 2022.|
|(5)||RAL executed leases for six aircraft remaining off-lease which are expected to be delivered in the first half of 2022: four ATR72-600s to Emerald Airlines and two CRJ900s under short-term leases to CityJet.|
|(6)||RAS segment breakdown includes the following aircraft earning lease revenue under the CPA: 34 Dash 8-400s and 14 CRJ900s.|
Capital expenditures in 2022, including capitalized major maintenance overhauls but excluding expenditures for the acquisition of aircraft are expected to be between $21.0 million and $33.0 million. Aircraft acquisitions and improvements in 2022 are expected to be between $5.0 million and $11.0 million.(1)
|(expressed in thousands of Canadian dollars)||Actual|
|Year ended||Year ended|
|Planned 2022(1)||December 31, 2021||December 31, 2020(2)|
|Capital expenditures, excluding aircraft acquisitions||15,000 to 21,000||7,019||11,727|
|Capitalized major maintenance overhauls(3)||6,000 to 12,000||20,296||7,529|
|Aircraft acquisitions and improvements||5,000 to 11,000||47,392||386,881|
|26,000 to 44,000||74,707||406,137|
|(1)||The 2022 plan includes reconfiguration costs on re-leased aircraft in the RAL segment which have been converted using a foreign exchange rate of 1.2678, the December 31, 2021 closing day rate from the Bank of Canada.|
|(2)||The 2020 actual includes the completion of two ESPs.|
|(3)||The 2022 plan includes between $2.0 million to $5.0 million of costs that are expected to be included in Controllable Costs. Actual 2021 and 2020 costs include $8.1 million and $6.1 million, respectively which were included in Controllable Costs.|
With the current recovery in passenger demand for air travel and further improvement expected, Chorus anticipates it will invest between $300.0 million to $400.0 million in its Regional Aircraft Leasing segment in 2022 financed through existing cash resources, capital raises, secured debt financing or a combination thereof.
About Chorus Aviation Inc.
Chorus is a global provider of integrated regional aviation solutions. Chorus’ vision is to deliver regional aviation to the world. Headquartered in Halifax, Nova Scotia, Chorus is comprised of Chorus Aviation Capital a leading, global lessor of regional aircraft, and Jazz Aviation and Voyageur Aviation – companies that have long histories of safe operations with excellent customer service. Chorus provides a full suite of regional aviation support services that encompassesevery stage of an aircraft’s lifecycle, including aircraft acquisitions and leasing; aircraft refurbishment, engineering, modification, repurposing and preparation; contract flying; aircraft and component maintenance, disassembly, and parts provisioning.
Chorus Class A Variable Voting Shares and Class B Voting Shares trade on the Toronto Stock Exchange under the trading symbol ‘CHR’. Chorus 6.00% Senior Debentures, 5.75% Senior Unsecured Debentures, and 6.00% Convertible Senior Unsecured Debentures trade on the Toronto Stock Exchange under the trading symbols ‘CHR.DB’, ‘CHR.DB.A’, ‘CHR.DB.B’, ‘CHR.DB.C’ respectively. www.chorusaviation.com
SOURCE Chorus Aviation Inc.