Tag: Airbus A220

Air Canada announces establishment of Airframe Maintenance Centres of Excellence with AAR in Trois-Rivières and Avianor in Mirabel

Provided by Air Canada/CNW

MONTREAL, Feb. 24, 2020 /CNW Telbec/ – Air Canada has entered into letters of intent with each of AAR Aircraft Services Trois-Rivières ULC (“AAR”) and Avianor Inc (“Avianor”) regarding long-term agreements for airframe maintenance, subject to completion of its planned merger with Transat, A.T. These long-term agreements would enable each of AAR and Avianor to develop Airframe Maintenance Centres of Excellence in Quebec for the aircraft types within their areas of expertise, both stimulating new investment in aerospace in Quebec and creating more high-quality aircraft maintenance jobs.

The larger combined Airbus A330 fleet of Air Canada and Air Transat would enable Air Canada to move wide-body A330 maintenance work for both airlines from abroad to AAR in Trois-Rivières, in addition to maintaining and expanding AAR’s airframe maintenance work in Quebec on the A320 family, including all new A321 neo aircraft.

In addition, Avianor would establish a new Centre of Excellence for Air Canada’s new Airbus A220 fleet (formerly the Bombardier C-Series) in Mirabel, adjacent to Airbus’ manufacturing facilities.

The letters of intent are subject to completion of final agreements which will include terms generally applicable to airframe maintenance agreements of this scale.

AAR Aircraft Services – Trois-Rivières, Quebec

AAR currently performs airframe maintenance work in Trois-Rivières on Air Canada’s existing Airbus A320 fleet and Embraer E190 fleet (which is being phased out). 

Air Canada and AAR have entered into a letter of intent that, subject to completion of the Transat merger by Air Canada, requisite Board of Directors’ approvals and completion of final agreements, evidences the parties’ intent to enter into a 10-year renewable agreement for airframe maintenance of both Air Canada’s and Air Transat’s fleet of Airbus A330 and A320 family of aircraft (including the new A321neo) in Trois-Rivières, Quebec.

AAR intends to make the necessary facility infrastructure investments in Trois-Rivières to accommodate the new wide-body A330 work of the combined Air Canada and Air Transat fleets, given that there would be sufficient volumes of heavy maintenance work to support such an investment and to develop a Centre of Excellence. Through this agreement, it is expected that incremental aerospace jobs will be created in Trois-Rivières and AAR’s new capabilities should enable it to attract airframe maintenance work from other operators of the A330.

“From our very first project in Trois-Rivières, we’ve seen a strong commitment to quality, safety and operational performance,” said Rich Steer, Senior Vice-President, Operations at Air Canada. “With our largest hub a short distance away, we’re excited to have a trusted partner like AAR with a similar commitment to excellence, and also proud to be increasing heavy maintenance work in Quebec, especially on wide-body aircraft. This contract for additional work in Trois-Rivières represents a long-term investment in increased airframe maintenance in Quebec.”

“We are honoured to work closely with a highly regarded carrier like Air Canada for so many years and to be chosen as their maintenance provider for the A330 and A320 family fleet types,” said Chris Jessup, Chief Commercial Officer, AAR Corp. “AAR is proud to support the Canadian economy and to grow our overall footprint in Trois-Rivières, especially for the A330.”

AAR Aircraft Services is a full-service aircraft maintenance, repair and overhaul (MRO) provider, wholly-owned and operated by AAR Corp. with over 290,000 sf of facilities in Trois-Rivières, Quebec and Windsor, Ontario, along with facilities in the United States.  AAR took over Premier Aviation’s facilities in Trois-Rivières and Windsor in 2017. Since inception in 2002, the Trois-Rivières facility has experienced a steady growth of clients and services in general maintenance overhaul, modifications, refurbishment and paint requirements. In 2012, the Trois-Rivières facility started to perform MRO services for some of Air Canada’s Embraer fleet, including painting and supporting backshops. AAR expanded Trois-Rivières MRO competencies in 2017 by performing all MRO services on Air Canada’s Airbus A319, A320 and A321 aircraft. In September 2017, Air Canada awarded a 10-year contract to AAR for the maintenance of its 125 Airbus A320 and Embraer E190 single-aisle aircraft at the AAR facilities in Trois-Rivières, contributing to the continuance of 350 specialized jobs. This work was transferred to Quebec from AAR’s Duluth, Minnesota facility.

Avianor Inc. – Mirabel, Quebec

Air Canada and Avianor have entered into a letter of intent that provides for a 10-year agreement for airframe maintenance of Air Canada’s new fleet of Airbus A220 aircraft in Mirabel, Quebec. The agreement is subject to completion of Air Canada’s planned merger with Transat, A.T., and completion of final agreements. Air Canada has a firm order of 45 A220s with options for an additional 30 aircraft. Its initial aircraft entered into service in January 2020.

Avianor is well progressing in its study phase to construct a new 250,000-square-foot hangar in Mirabel in close proximity to the A220 manufacturing facilities of Airbus Canada (formerly the Bombardier facilities) in order to strategically position itself in the heavy maintenance, modification and completion of narrow-body aircraft and other key aircraft programs. The Air Canada work will position Avianor to attract airframe maintenance work from other A220 operators, as well to encourage other suppliers of the A220 to consider establishing operations nearby, thereby contributing to the establishment of a North American centre of excellence in Mirabel. 

Air Canada’s Senior Vice-President, Operations, Rich Steer, stated, “We have been very pleased with the work performed in Quebec by Avianor on Air Canada’s fleet over the last years. This contract assures Air Canada of a quality solution for our Airbus A220 heavy maintenance needs in Quebec through Avianor’s extensive and proven capabilities in this field.”

“This extended relationship with Air Canada shows the scale of technical support that Avianor offers in this competitive marketplace. To build great projects we always need to be surrounded by key players such as Air Canada and it goes without saying that we are extremely proud of today’s strategic announcement. We are thrilled to be working with Air Canada, in support of their expanded fleet and are grateful for their confidence. With years in the industry, we are confident in our ability to provide world-class quality, genuine partnerships and proven customer support while allowing ourselves to envision an enviable Centre of Excellence which could eventually regroup a variety of services such as maintenance, engineering, certification, education and training capabilities under one roof,” said Benoit Hudon, President & CEO, Aerospace & Ground Transportation Division of DRAKKAR, majority owner of Avianor.

Avianor was recently acquired by the Drakkar & Partner’s Aerospace & Ground Transportation Division. Avianor specializes in maintenance, modifications and aircraft completion, including a highly skilled internal engineering support team. Avianor has positioned itself as a vertical integrator in the marketplace. The company occupies over 200,000 square feet of hangars, repair shops, fabrication facilities and warehouse space at Mirabel Airport (YMX) and employs more than 350 people.

In November 2019, Avianor reached a highly important milestone and has received Transport Canada (TCCA) approval to add the Airbus A220-100 and A220-300 to its maintenance capability list.

Airbus to invest up to $1.4-billion in A220 passenger jet program this year

News provided by The Globe and Mail – link to full story

ALLISON LAMPERT, MONTREAL, REUTERS – FEBRUARY 20, 2020

Quebec Premier Francois Legault, left, and Airbus CEO Guillaume Faury take a tour of the Airbus A220 assembly line in Mirabel, Que., on Feb. 20, 2020.GRAHAM HUGHES/THE CANADIAN PRESS

Airbus SE plans to invest between 500 million euros and 1 billion euros (C$715-million and C$1.43-billion) this year on its A220 passenger jet program, chief executive Guillaume Faury said on Thursday at the company’s A220 factory in Mirabel, just outside Montreal.

Earlier in February, Airbus raised its stake in the A220 program – known as Airbus Canada – to 75 per cent from 50.1 per cent after teaming up with the government of the Canadian province of Quebec to buy Bombardier’s 33.5 per cent stake.

With the deal, Bombardier exited the civil aviation industry and bolstered the European planemaker’s position in its ongoing competition with U.S. rival Boeing Co.

The A220, previously known as the C Series, is a 110-130 seater aircraft, a little smaller than Airbus’s mainstay A320 jet.

Airbus has been ramping up production of the A220 towards its maximum monthly capacity rate of 10 at its facility in Mirabel and to a monthly rate of four in Mobile, Ala., targets it hopes to reach by the middle of this decade.

Production in the United States has become more important for Airbus since the U.S. government slapped tariffs on jets made in Europe for purchase by U.S. airlines following a years-long tariff dispute.

Statement – Minister Bains comments on Airbus' increased stake in the A220 aircraft program

Provided by Innovation, Science and Economic Development Canada/CNW

OTTAWA, Feb. 13, 2020 /CNW/ – The Honourable Navdeep Bains, Minister of Innovation, Science and Industry, made the following statement regarding Airbus’ increased stake in the A220 aircraft program.

Air Canada Airbus 220-300

            “Our government has been steadfast in its support for the Canadian aerospace industry and its workers.

            “We welcome any investment in Canada’s vibrant aerospace sector and its skilled workforce. Aerospace is one of the most innovative and export-driven industries in Canada, having contributed over $25 billion in GDP and more than 210,000 jobs to Canada’s economy in 2018.

            “We have been in communication with Bombardier, the Government of Quebec and the CEO of Airbus, and we will continue to engage with all relevant parties to ensure that previous commitments are honoured. We also welcome the announcement of 3,300 jobs being secured in Quebec. This is a recognition of Canada’s world-class aerospace workers and demonstrates a commitment to supporting Canadian expertise and growing this important sector.”

Bombardier Announces Full-Year Financial Results

Provided by Bombardier Inc/CNW

  • Exit of commercial aerospace completed with sale of remaining interest in A220 partnership for ~$600M cash proceeds and the elimination of future investments of ~ $700M(1)
  • Pro Forma(1) cash on-hand of more than $4B, including all previously announced transactions, enhancing financial position
  • Company continuing to actively pursue strategic options to accelerate deleveraging
  • Fourth quarter, and full-year results in line with preliminary results previously announced
  • 2020 consolidated outlook: double-digit organic revenue growth(3) to more than $15B(1)
  • 2020 consolidated adjusted EBITDA margin(2) expected at ~ 7.0%, adjusted EBIT margin(2) expected at ~3.5%(1)
  • 2020 consolidated free cash flow(2) expected to be positive, excluding Residual Value Guarantee (RVG) payments(1)

MONTRÉAL, Feb. 13, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) today reported its fourth quarter and full year 2019 results, in line with previously announced preliminary results. The company also confirmed it is still actively pursuing options to accelerate deleveraging, strengthen its balance sheet and enhance shareholder value.

Sale of A220 Partnership Interest

Bombardier has entered into an agreement with Airbus SE and the Government of Quebec, under which Bombardier transferred its shares in the Airbus Canada Limited Partnership (ACLP) to Airbus and the Government of Quebec, improving Bombardier’s cash position. This includes cash proceeds of ~$600 million from Airbus, of which $531 million was paid upon closing with the balance to be paid over 2020-21, and the elimination of all future capital requirements for the A220 program, estimated at ~ $700 million.(1)

Bombardier will also transfer aerostructures activities and employees supporting the A220 and A330 in St-Laurent, Québec to Airbus subsidiary Stelia Aerospace. Finally, the agreement provides for the cancelation of 100,000,000 Bombardier warrants owned by Airbus.

Bombardier’s decision to sell its stake in the A220 partnership completes its exit from commercial aerospace, a significant undertaking. In 2016, Bombardier’s commercial aerospace business lost approximately $400 million and was consuming approximately $1 billion in cash. Addressing this challenging portfolio was a fundamental step in the Company’s turnaround plan.

“We are incredibly proud of the many achievements and tremendous impact Bombardier had on the commercial aviation industry,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “We are equally proud of the responsible way in which we have exited commercial aerospace, preserving jobs and reinforcing the aerospace cluster in Québec and Canada. And, we are confident that the A220 program will enjoy a long and successful run under Airbus’ and Québec’s stewardship.”

Acceleration of Deleveraging Phase of Turnaround

The sale of our interest in the ACLP, combined with the previously announced aerospace divestitures, will generate more than $1.6 billion in cash proceeds and eliminate close to $2 billion in liabilities and future commitments.  Liquidity remains strong, with Pro Forma cash-on-hand of more than $4 billion and $5.5 billion in liquidity, providing the necessary flexibility to complete the turnaround. Both the CRJ program sale to Mitsubishi Heavy Industries, Inc. and sale of the aerostructures business to Spirit AeroSystems, Holding Inc. are expected to close in the first half of 2020.(1)

As previously announced, the Company is actively pursuing options that would allow it to accelerate deleveraging, paydown debt and position the business for long-term success with greater operating and financial flexibility. This process remains ongoing, however the company does not intent to provide any further updates at this time.

Overview Financial Performance

Bombardier’s consolidated revenues for the year were $15.8 billion, highlighted by an 8.5% growth in business aircraft activities. The growth in Aviation revenues were offset by the lower contribution from commercial aircraft businesses following their divestitures. Revenues at Transportation also decreased, mainly due to contract estimate revisions.

Consolidated adjusted EBITDA and adjusted EBIT for the year were $896 million and $470 million, respectively, reflecting (i) improvements at Aviation as it exits underperforming commercial programs and ramps-up production on the Global 7500 aircraft; and (ii) additional charges and investments at Transportation to complete challenging projects. Reported EBIT loss for the year of $498 million includes a $1.6B impairment charge related to the ACLP investment.

Fourth quarter cash generation reached $1.0 billion, reducing free cash flow usage to $1.2 billion for the year.  Higher than anticipated cash usage was driven by additional investments made to address challenging rail projects, as well as, the deferral of deliveries, mainly at Transportation. Cash usage from operating activities amounted to $680 million for the full year.

2020 Outlook

Revenues from our sustaining business aircraft and Transportation activities in 2020 are expected to grow organically by double-digit percentage over the $13.7 billion revenues recorded from these businesses in 2019(1).  This strong growth is driven mainly from the acceleration of Global 7500 deliveries contributing to a total of 160 aircraft or more for the year at Aviation. The consolidated revenue growth is also supported by the ongoing production ramp-up of Transportation, driven by the solid orders from the past few years.

Adjusted EBITDA and adjusted EBIT are expected to increase to approximately 7.0% and 3.5% respectively, mainly from the acceleration of Global 7500 deliveries at Aviation and gradual margin normalization at Transportation. The adjusted EBIT margin expansion includes a higher amortization expense as Global 7500 deliveries increase. The full year outlook for earnings reflects the partial year contribution from ongoing divestitures of the CRJ program and Aerostructures businesses.(1)

Free cash flow is expected to be positive in 2020, excluding Credit and RVG payments. These residual liabilities related to the exit of commercial aircraft are estimated to be approximately $200 million for the year and are expected to be paid from the CRJ transaction proceeds.(1)

Aviation

Stronger Financial Performance as Aviation Reshapes its Portfolio

  • Revenues for Aviation totalled $7.5 billion for 2019. This reflects an 8.5% revenue growth from business aircraft activities and continued double-digit organic growth from aftermarket.
  • The segment achieved 175 aircraft deliveries during the year, comprised of 54 Global, 76 Challenger, 12 Learjet, as well as 33 commercial aircraft.
    °  The fourth quarter’s activity level was high, with deliveries reaching 52 business aircraft as Global 7500 deliveries accelerated.
  • Adjusted EBITDA margin was 10.8% for the year, up 200 bps driven by the exit of the Q400 and C Series programs. This profitability was nonetheless diluted in 2019 by CRJ activities, accounting for $1.2 billion in revenues for the year.
  • The adjusted EBIT margin of 7.1% is up 70 bps year-over-year, reflecting the early production ramp up and higher amortization associated with Global 7500 deliveries, as well as the dilution from commercial aircraft activities.
  • Business aircraft backlog increased slightly for the second consecutive year, reaching $14.4 billion at year end, while the CRJ backlog declined as production winds down.

Concentrating on Business Aircraft while Addressing Underperforming Programs

  • In February 2019, the Corporation acquired the Global 7500 aircraft wing program operations and assets from Triumph Group Inc. This transaction enabled the company to leverage its extensive technical expertise to support the ramp-up of the Global 7500 aircraft and secure its long-term success.
  • In March 2019, we concluded the sale of Business Aircraft’s flight and technical training activities to CAE Inc. for net proceeds of $532 million.
  • In May 2019, we completed the previously announced sale of the Q Series program assets, including aftermarket operations and assets, to De Havilland Aircraft of Canada for net proceeds of $285 million.
  • In June 2019, the Corporation entered into a definitive agreement with Mitsubishi Heavy Industries, Ltd (MHI) for the sale of its regional jet program for a cash consideration of $550 million payable upon closing, and the assumption by MHI of approximately $200 million of liabilities related to credit and residual value guarantees and lease subsidies. The transaction is currently expected to close by mid-year 2020 and remains subject to regulatory approvals and customary closing conditions.
  • In October 2019, the Corporation and Spirit AeroSystems Holding, Inc. (Spirit) announced that they have entered into a definitive agreement, whereby Spirit will acquire Bombardier’s aerostructures activities and aftermarket services operations in Belfast, U.K. and Casablanca, Morocco, and its aerostructures maintenance, repair and overhaul facility in Dallas, U.S. for a cash consideration of $500 million and the assumption of approximately $700 million of liabilities, including government refundable advances and pension obligations. The transaction is expected to close by mid-year 2020 and remains subject to regulatory approvals and customary closing conditions.

Positioned for Growth through certification and ramp up of New Programs and Service Network Expansion

  • Reaching full-scale production of the class-defining Global 7500 aircraft. With increased deliveries, the Global 7500 aircraft is expected to contribute significantly to revenues growth in 2020. As the aircraft progresses on the learning curve, it will also contribute to margin expansion.
  • Certified the new Global 5500 and Global 6500 aircraft, followed by the entry into service of the Global 6500 aircraft in 2019, offering customers the perfect combination of range, speed, field performance and smooth ride.
  • Continued and consistent growth of the aftermarket business, with further expansion of the service network in Singapore planned for 2020.

Link to full press release

Airbus and the Government of Québec become sole owners of the A220 Programme as Bombardier completes its strategic exit from Commercial Aviation

Provided by Bombardier Inc

  • Bombardier transfers its remaining interest in Airbus Canada Limited Partnership (Airbus Canada) to Airbus SE and the Government of Québec
  • Airbus now holds 75 percent of Airbus Canada with the Government of Québec increasing its holding to 25 percent for no cash consideration
  • Bombardier work packages for the A220 and A330 will be transferred to Airbus, through its subsidiary Stelia Aerospace, securing 360 jobs in Québec
  • Bombardier will receive US$591M, net of adjustments, of which US$531M was received at closing, and is released of its future funding capital requirement to Airbus Canada
  • Over 3,300 Airbus jobs secured in Québec

AMSTERDAM, Netherlands and MONTREAL, Feb. 13, 2020 (GLOBE NEWSWIRE) — Airbus SE (EPA: AIR), the Government of Québec and  Bombardier Inc. (TSX: BBD.B) have agreed upon a new ownership structure for the A220 programme, whereby Bombardier transferred its remaining shares in Airbus Canada Limited Partnership (Airbus Canada) to Airbus and the Government of Québec. The transaction is effective immediately.

This agreement brings the shareholdings in Airbus Canada, responsible for the A220, to 75 percent for Airbus and 25 percent for the Government of Québec respectively. The Government’s stake is redeemable by Airbus in 2026 – three years later than before. As part of this transaction, Airbus, via its wholly owned subsidiary Stelia Aerospace, has also acquired the A220 and A330 work package production capabilities from Bombardier in Saint-Laurent, Québec.

This new agreement underlines the commitment of Airbus and the Government of Québec to the A220 programme during this phase of continuous ramp-up and increasing customer demand. Since Airbus took majority ownership of the A220 programme on July 1, 2018, total cumulative net orders for the aircraft have increased by 64 percent to 658 units at the end of January 2020.

“This agreement with Bombardier and the Government of Québec demonstrates our support and commitment to the A220 and Airbus in Canada. Furthermore it extends our trustful partnership with the Government of Québec. This is good news for our customers and employees as well as for the Québec and Canadian aerospace industry,” said Airbus Chief Executive Officer Guillaume Faury. “I would like to sincerely thank Bombardier for the strong collaboration during our partnership. We are committed to this fantastic aircraft programme and we are aligned with the Government of Québec in our ambition to bring long-term visibility to the Québec and Canadian aerospace industry.”

“I am proud that our government was able to reach this agreement. We have succeeded in protecting paying jobs and the exceptional expertise developed in Québec, despite the major challenges we faced in this regard when we took office. We have consolidated the government’s position in the partnership, while respecting our commitment not to reinvest in the program. By opting to strengthen its presence here, Airbus has chosen to focus on our talents and our creativity. The decision of an industrial giant like Airbus to invest more in Québec will help attract other world-class prime contractors,” the Premier of Québec, François Legault, stated.

“This agreement is excellent news for Québec and its aerospace industry. The A220 partnership is now well established and will continue to grow in Québec. The agreement will allow Bombardier to improve its financial situation and Airbus to increase its presence and footprint in Québec. It’s a win–win situation for both the private partners and the industry,” pointed out Pierre Fitzgibbon, Minister of the Economy and Innovation.

With this transaction, Bombardier will receive a consideration of $591M from Airbus, net of adjustments, of which $531M was received at closing and $60M to be paid over the 2020-21 period. The agreement also provides for the cancellation of Bombardier warrants owned by Airbus, as well as releasing Bombardier of its future funding capital requirement to Airbus Canada.

“This transaction supports our efforts to address our capital structure and completes our strategic exit from commercial aerospace,” said Alain Bellemare, President and CEO Bombardier, Inc.  “We are incredibly proud of the many achievements and tremendous impact Bombardier had on the commercial aviation industry.  We are equally proud of the responsible way in which we have exited commercial aerospace, preserving jobs and reinforcing the aerospace cluster in Québec and Canada.  We are confident that the A220 program will enjoy a long and successful run under Airbus’ and the Government of Québec’s stewardship.”

The single aisle market is a key growth driver, representing 70 percent of the expected global future demand for aircraft. Ranging from 100 to 150 seats, the A220 is highly complementary to Airbus’ existing single aisle aircraft portfolio, which focuses on the higher end of the single-aisle business (150-240 seats).

As part of the agreement, Airbus has acquired the Airbus A220 and A330 work package production capability from Bombardier in Saint-Laurent, Québec. These production activities will be operated in the Saint Laurent site by Stelia Aéronautique Saint Laurent Inc., a newly created subsidiary of Stelia Aerospace, which is a 100 percent Airbus subsidiary.

Stelia Aéronautique Saint-Laurent will continue the production of the A220 cockpit and aft fuselage production, as well as A330 workpackages, for a transition period of approximately three years at the Saint-Laurent facility. A220 workpackages will then be transferred to the Stelia Aerospace site in Mirabel to optimize the logistical flow to the A220 Final Assembly Line also located in Mirabel. Airbus plans to offer all current Bombardier employees working on the A220 and A330 work packages at Saint-Laurent opportunities around the A220 programme’s ramp-up, ensuring know-how retention as well as business continuity and growth in Québec.

At the end of January 2020, 107 A220 aircraft were flying with seven customers on four continents. In 2019 alone, Airbus delivered 48 A220s, with the further ramp-up to be continued.

For more information about A220-Family

Chorus Aviation Announces Fourth Quarter and Year-End 2019 Financial Results

Provided by Chorus Aviation Inc/CNW

A year of outstanding accomplishments

Q4 2019 Financial Highlights and Accomplishments

  • Net income of $36.6 million, or $0.23 per basic share, a period-over-period increase of $34.4 million.
  • Adjusted net income1 of $23.3 million, or $0.15 per basic share, a decrease of $12.0 million due to expected reductions resulting from the 2019 amendments to the Capacity Purchase Agreement (‘CPA’) (the ‘2019 CPA Amendments’) offset by growth in the Regional Aircraft Leasing segment.
  • Adjusted EBITDA1 of $88.6 million, a decrease of $3.4 million.
  • Increased the committed leased fleet to 64 aircraft, representing growth of 60% year-over-year.
  • Added new aircraft type through a sale leaseback transaction with airBaltic for five new Airbus A220-300s.
  • Added Croatia Airlines as a new airline customer to the leasing portfolio.
  • Extended three aircraft lease agreements with Aeromexico Connect and completed an additional sale leaseback transaction with IndiGo for two new aircraft.
  • Completed the Extended Service Program (‘ESP’) on three additional Dash 8-300s, bringing the total number of ESP aircraft generating leasing revenue under the CPA to 13.
  • Established a regional aircraft parts depot in Dubai, UAE, enhancing Chorus’ ability to market its parts provisioning and sales offering internationally.

Full-Year 2019 Financial Highlights and Accomplishments

  • Net income of $133.2 million, or $0.85 per basic share, a period-over-period increase of $65.7 million.
  • Adjusted net income1 of $96.2 million, or $0.61 per basic share, a decrease of $26.1 million due to expected reductions resulting from the 2019 CPA Amendments offset by growth in the Regional Aircraft Leasing segment.
  • Adjusted EBITDA1 of $341.7 million, an increase of $1.2 million.
  • Increased adjusted EBT1 in the Regional Aircraft Leasing segment to 22% of overall adjusted EBT.
  • Amended and extended the CPA with Air Canada to December 31, 2035.
  • Jazz pilots ratified their collective agreement with no strike or lockout provisions for the extended term of the CPA.
  • Completed Air Canada investment for gross proceeds of $97.26 million and raised gross proceeds of $86.3 million through a public offering of 5.75% Unsecured Debentures to support the growth of Chorus.
  • Executed a purchase agreement for nine CRJ900s that will earn leasing revenue under the CPA starting in 2020.
  • Completed the first sale of three leased Dash 8-400s, generating net proceeds, after debt repayment, of US $25.0 million for reinvestment in the Regional Aircraft Leasing segment.
  • Received numerous awards as a top employer in Canada, and named among Canada’s Safest Employers 2019, taking gold in the Transportation category.

HALIFAX, Feb. 12, 2020 /CNW/ – Chorus Aviation Inc. (‘Chorus’) (TSX: CHR) today announced fourth quarter and year-end 2019 financial results.

“2019 was a transformative year for Chorus creating significant value for all of our stakeholders. On total revenues of $1.4 billion, we generated adjusted EBITDA of $341.7 million.

We secured and strengthened our partnership with Air Canada by amending and extending the CPA for a further 17 years, providing a minimum of $2.5 billion in contracted revenues with opportunities to increase further. This was a critical accomplishment as it laid a strong, long-term foundation from which we continue to build and diversify our company. Air Canada’s $97.26 million investment in Chorus equity, which included a five-year hold period, further aligns our organizations and is a strong endorsement of our growth and diversification strategy.

Our group of companies performed very well, and most importantly, did so safely and with operational integrity. We carried just under 11 million passengers under the Air Canada Express brand, secured new contracted flying missions in several international markets, and established an aircraft parts depot in Dubai. 

We made significant advancements in maturing our business to become a worldwide provider of regional aviation solutions. We successfully raised $183.5 million in capital and secured a US $300 million warehouse facility to support our expansion in regional aircraft leasing. We now have a committed portfolio of 64 aircraft, a 60% increase over 2018, placed with 16 customers. We’re pleased with the returns we’re generating in our leasing business, which is delivering strong and consistent margins. Together with the aircraft we have leased under the CPA our committed portfolio comprises 1352,3 aircraft with approximately US $2.1 billion2,3,4 in future contracted lease revenue, making Chorus one of the world’s largest regional aircraft lessors. 

We remain confident that we can expand our leasing portfolio by up to 20 aircraft per year funded through a combination of debt and cash from operations. The timing of these future transactions will not occur on a consistent basis; however, we expect the majority will be executed in the second half of this year. The expected growth in aircraft leasing will more than offset planned fixed fee reductions in the CPA in 2020 and beyond.

I extend my thanks and gratitude to the Chorus team for making 2019 a standout year in our history, and I look forward to the many new, exciting milestones we’ll achieve together,” stated Joe Randell, President and Chief Executive Officer, Chorus.

Fourth Quarter Summary

In the fourth quarter of 2019, Chorus reported adjusted EBITDA of $88.6 million, a decrease of $3.4 million or 3.7% relative to the fourth quarter of 2018.

The Regional Aircraft Leasing segment’s adjusted EBITDA increased by $12.3 million primarily related to the growth in aircraft earning leasing revenue. The sale of three Dash 8-400s resulted in net cash proceeds of US $25.0 million and produced a strong internal rate of return since the acquisition of these aircraft. This disposal also produced an accounting loss related to the wind-up of the special purpose entities that lowered adjusted EBITDA and adjusted net income by $3.4 million and $1.3 million, respectively.

In line with expectations, the Regional Aviation Services segment’s adjusted EBITDA decreased $15.8 million. The decrease reflects the 2019 CPA Amendments which reduced the Fixed Margin and Performance Incentive revenue when Chorus moved to market-based compensation rates. Beyond the changes related to the 2019 CPA amendments, fourth quarter results were impacted by:

  • increased stock-based compensation of $6.0 million due to the change in the share price inclusive of the reduction related to the change in fair value of the Total Return Swap which was implemented in the fourth quarter of 2019: and
  • decreased capitalization of major maintenance overhauls on owned CPA aircraft over the previous period of $1.2 million.

Adjusted net income was $23.3 million for the quarter, a decrease of $12.0 million due to:

  • the $3.4 million decrease in adjusted EBITDA previously described;
  • an increase in depreciation of $6.6 million primarily related to additional aircraft in the Regional Aircraft Leasing segment;
  • an increase in net interest costs of $5.3 million primarily related to additional aircraft debt in the Regional Aircraft Leasing segment; and
  • an increase in non-operating costs of $2.5 million primarily related to the loss on disposal of an engine of $1.2 million and a change in foreign exchange losses of $0.8 million; offset by
  • a $5.7 million decrease in income tax expense resulting from lower adjusted EBT.

Net income increased $34.3 million primarily due to the change in net unrealized foreign exchange gains on long-term debt of $46.2 million offset by the previously noted $12.0 million decrease in adjusted net income.

Year-End Summary

Chorus reported adjusted EBITDA of $341.7 million for 2019, an increase of $1.2 million over 2018.

The Regional Aircraft Leasing segment’s adjusted EBITDA increased by $42.4 million was primarily due to the growth in aircraft earning leasing revenue.

In line with expectations, the Regional Aviation Services segment’s adjusted EBITDA decreased by $41.3 million, which reflect the 2019 CPA Amendments which reduced the Fixed Margin and Performance Incentive revenue when Chorus moved to market-based compensation rates. These reductions were partially offset by the implementation of the Controllable Cost Guardrail that mitigated the expected CPA margin shortfall resulting from reduced fees. Beyond the changes related to the 2019 CPA Amendments, 2019 results were impacted by:

  • increased stock-based compensation of $15.0 million due to the change in the share price inclusive of the reduction related to the change in fair value of the Total Return Swap which was implemented in the fourth quarter of 2019;
  • decreased capitalization of major maintenance overhauls on owned CPA aircraft of $1.9 million over the previous period; offset by
  • increased aircraft leasing under the CPA.

Adjusted net income of $96.2 million, decreased over 2018 by $26.1 million due to:

  • an increase in depreciation of $18.5 million primarily related to additional aircraft in the Regional Aircraft Leasing segment;
  • an increase in net interest costs of $15.5 million primarily related to additional aircraft debt in the Regional Aircraft Leasing segment; and
  • an increase in non-operating costs of $5.6 million primarily related to foreign exchange losses of $4.2 million in addition to a loss on disposal of property and equipment of $0.5 million; partially offset by
  • the $1.2 million increase in adjusted EBITDA previously described; and
  • a decrease in income tax expense of $12.2 million resulting from lower adjusted EBT.

Net income increased $65.7 million over 2018 due to the change in net unrealized foreign exchange gains on long-term debt of $90.8 million and decreased employee separation program costs of $3.1 million; offset by the previously noted decrease of $26.1 million in adjusted net income and increased signing bonuses of $2.0 million related to the Jazz pilot collective agreement.

Outlook

(See cautionary statement regarding forward-looking information below)

The 2019 CPA Amendments became effective on a retroactive basis to January 1, 2019. Further information concerning the 2019 CPA Amendments and the Air Canada Investment is contained in the Chorus’ Material Change Reports dated January 24, 2019 and February 13, 2019, which are available on SEDAR at www.sedar.com. The 2019 CPA Amendments resulted in a reduction in fixed fees starting on January 1, 2019, as Chorus moved to market-based rates under the CPA. The reduction was implemented by eliminating the Infrastructure Fee per Covered Aircraft and the Fixed Margin per Covered Aircraft (as this term was defined in the CPA) which were replaced with a single Fixed Margin. As a result, fixed fee revenue in each of 2019 and 2020 is anticipated to be $75.2 million per year as compared to $111.3 million in 2018. In addition, the maximum future available Performance Incentives reduce from $23.4 million in 2019 and 2020 to an annual average maximum available amount of $3.4 million for the full term of the CPA. The near-term reductions are more than offset over the term of the CPA by incremental contracted revenue secured with the extension of the agreement including fixed fees and aircraft leasing.

Aircraft leasing revenue under the CPA, which is included in the Regional Aviation Services segment, is expected to grow with the delivery of nine committed CRJ900s in 2020, three ESPs to be completed in 2020 and two remaining ESPs by 2022. The Regional Aircraft Leasing segment’s future revenue is expected to grow in 2020 and at a minimum Chorus will have 60 aircraft equivalent earning revenue during the year versus 43 in 2019.

With the addition of the aircraft under both the Regional Aircraft Leasing segment and the aircraft leasing revenue under the CPA, Chorus’ estimated future contracted lease revenue is approximately US $2.1 billion4. When the CPA fixed margin revenue of US $0.6 billion is included with the total future contracted revenue, Chorus’ future revenue approximates US $2.7 billion4. (see footnote 4 in the following table)

Capital expenditures in 2020, including capitalized major maintenance overhauls but excluding expenditures for the acquisition of aircraft and the ESP are expected to be between $38.0 million and $44.0 million. Aircraft related acquisitions and the ESP capital expenditures in 2020 are expected to be between $442.0 million and $452.0 million.

Capitalized terms used but not defined in the Outlook section have the meanings given to them in Management’s Discussion and Analysis (the ‘MD&A’) dated February 12, 2020, which is available on Chorus’ website (www.chorusaviation.com) and SEDAR (www.sedar.com).

The following table provides the number of closed and pending transactions announced to-date:

(expressed in millions of US dollars, except number of aircraft)

Customer2016 –
Q3 2019
 IncreaseTotal 2016 –
2019(2)
Aeromexico33
Air Nostrum44
airBaltic55
Azul Airlines55
CityJet22
Croatia Airlines22
Ethiopian Airlines55
Falcon
Flybe88
Indigo628
Jambojet44
KLM Cityhopper11
Malindo Air(3)44
Philippine Airlines33
SpiceJet55
Virgin Australia33
Wings Air(3)22
Total Regional Aircraft Leasing55964
Deal value US$1,335.0
Future Lease Revenues US(4)$960.0
Total Regional Aviation Services7171
Future Lease Revenues US(4)(5)$1,180.0
Chorus Total Aircraft1269135
Future Lease Revenues US(4)$2,140.0

Bombardier exits commercial aviation as Airbus, Quebec take remaining A220 stake

News provided by The Globe and Mail – link to full story and updates

Bombardier Inc. is pulling out of its joint venture with Airbus SE in a bid to save cash, closing the book on its failed big-league commercial aerospace ambitions as it reported a US$1.7-billion net loss for its latest quarter.

The Montreal-based multinational, which is working to sell one of its two big business units to fix an over-extended balance sheet, said Thursday it will exit a venture known as Airbus Canada Limited Partnership that builds the European plane maker’s A220 single-aisle jet.

The plane is the former C Series airliner developed by Bombardier at a cost of more than US$6-billion.

Airbus will pay Bombardier about US$600-million to increase its share in the venture to 75 per cent from just over 50 per cent and relieve Bombardier of further capital commitments in the program worth US$700-million, the companies said in a statement Thursday. The Quebec government will boost its share in the venture to 25 per cent from about 16 per cent for no cash consideration.

“This makes life easier for Airbus,” said Addison Schonland, an analyst at boutique aerospace consultancy AirInsight. “[Now they have] only one partner to consider.”

Investors and analysts had been anticipating the move after Bombardier issued a profit warning last month and said it was reassessing its ongoing participation in the venture amid the prospect of a delayed break-even timeline and lower returns.

The agreement, which takes effect immediately, brings to an end Bombardier’s involvement in commercial aerospace. It also marks a bitter end for the company’s effort to break the global commercial airliner duopoly held by Airbus and Boeing with the C Series.

The C Series, a single-aisle plane seating 100 to 150 people, was years late to market as well as over-budget and Bombardier misjudged how aggressive its rivals would be in trying to undermine its success. The effort left Bombardier hamstrung with more than US$9-billion in long-term debt that has triggered its slow breakup.

Over the past five years under Chief Executive Alain Bellemare, Bombardier has sold its waterbomber business, its Q400 turboprop unit, its CRJ regional jet franchise and its flight training business among other assets. Most important, it handed control of its cutting-edge C-Series airliner, now rebaptized the A220, to Airbus for a nominal sum in 2018.

The A220 is being hailed by operators and travellers alike for its quiet operation, fuel efficiency and cabin features. Since taking over the jet program, Airbus has generated cumulative orders of 658 units for the plane as of the end of January, 2020.

In recent weeks, Airbus asked Bombardier and Quebec, the third partner in the venture, to put more money into the partnership to fund a production increase. In the end, Bombardier decided it was unwilling to given its cash flow issues.

The agreement with Airbus is a largely a win for the government of Premier François Legault, who manage to secure more than 3,300 aerospace jobs in the province and protect its previous US$1-billion investment in the A220 venture. Although Quebec does not have to pay to increase its stake, it is understood to be responsible with Airbus for future funding for the program.

As part of the deal, Airbus has bought Bombardier’s work package production capability on the Airbus A220 and A330 jets. Airbus can buy out Quebec’s share in 2026, three years later than originally planned.

The announcement came as Bombardier reported a US$1.7-billion net loss for the fourth quarter of fiscal 2019 on revenue of US$4.2-billion. The company is struggling to complete several major rail contracts and has absorbed cost overruns and late-delivery penalties that have sucked up cash.

Nevertheless, the manufacturer said Thursday it has enough financial flexibility to complete its turnaround. It said it has pro forma cash on hand of more than US$4-billion and US$5.5-billion in liquidity.

The company is running simultaneous sets of talks in Europe and North America on selling either its rail or luxury-jet unit, according to information gathered by The Globe and Mail. Discussions have been held with France’s Alstom SA and Japan’s Hitachi on the train side and U.S. conglomerate Textron Inc. and private equity giant Carlyle Group on the plane side, sources confirmed.

The company has confirmed only that it is pursuing options that would allow it to pay down debt and fix its capital structure. It said Thursday the process remains ongoing but provided no update.

Bombardier nears deal to sell stake in Airbus A220 program

News provided by the Toronto Star – link to full story and updates

By Brendan Case, Bloomberg Fri., Feb. 7, 2020

Air Canada Airbus 220-300

Bombardier Inc.’s ill-fated foray into building jetliners may be nearing an end, and investors are applauding.

The company is in advanced talks to sell its stake in Airbus SE’s A220 program to the European aerospace giant, the Wall Street Journal reported Friday.

A deal for Bombardier’s 34 per cent holding in the venture could be reached as early as next week, the newspaper said, citing people familiar with the matter.

Quebec, which owns 16 per cent of the program, would retain its stake.

Walking away from the A220 would close the book on Bombardier’s involvement in an aircraft program in which the company invested more than $6 billion (U.S.) amid a series of development delays and cost overruns.

Bombardier, creaking under heavy debt and struggling to sell the all-new single-aisle plane, ceded control of the program to Airbus in 2018 while retaining a minority participation.

Financial terms of the Airbus-Bombardier deal couldn’t be learned, the Journal said.

The talks could still fall apart and the outlines of any agreements could change, the newspaper said.

Both companies are scheduled to report earnings Feb. 13.

Bombardier climbed 4.5 per cent to $1.49 (Canadian) at 3:34 p.m. in Toronto, reversing losses after the Journal’s story.

A sale of the company’s stake in the A220, which was originally known as the C Series, would also be a milestone for cash-strapped Bombardier as it weighs selling other key businesses in a potentially far-reaching revamp. Saddled with a $10-billion (U.S.) debt load, the Montreal-based company has held talks to combine its rail-equipment operation with France’s Alstom SA. It’s also exploring a sale of its private-jet unit to Textron Inc., the Journal reported earlier this week.Get more business in your inboxGet the business news and analysis that matters most every morning in our Star Business email newsletter.

Fresh Quebec cash injection in A220 program is ‘out of the question,’ Legault says

News provided by the Montreal Gazette – link to full story and updates

Quebec has no appetite for a fresh cash injection in the joint venture that builds the A220 jetliner, Premier François Legault said.

FRÉDÉRIC TOMESCO Updated: January 29, 2020

Quebec has no appetite for a fresh cash injection in the Airbus SE-led joint venture that builds the A220 jetliner at the former Bombardier Inc. factory in Mirabel, Premier François Legault said.

“It’s out of the question that we invest in this division,” Legault told reporters in Quebec City. He once again criticized the decision made by former Liberal premier Philippe Couillard to plough money into the aircraft program — formerly known as the C Series — instead of buying a stake in Bombardier.

Legault spoke a day after Economy Minister Pierre Fitzgibbon said Quebec was working with the companies to find ways of preserving aerospace jobs as well as the province’s US$1-billion investment in the A220. Fitzgibbon said he was hopeful of reaching a deal within about 10 days.

Bombardier is reassessing its ongoing involvement in the A220 venture. It vowed two weeks ago to disclose the amount of any write-down connected with the partnership when it reports financial results next month.

Quebec will need to write down the value of its own investment in the program, Legault said. He wouldn’t provide a figure, saying the government is still crunching the numbers.

In the meantime, Quebec is “following the file very closely,” the premier added. “We’re talking with the company, we’re talking with the Caisse de dépôt, we’re talking with eventual partners.”

With files from the Montreal Gazette’s Philip Authier

Bombardier back to the brink after rethinking Airbus A220 deal

News provided by BNN Bloomberg – link to full story and updates

Siddharth Philip and Paula Sambo, Bloomberg News, 16 January 2020

Watch: Link to Video

The Street Bombardier slashes outlook; pursues ways to boost balance sheetBombardier is cutting its full-year revenue and adjusted profit forecasts and warning of much deeper cash burn, mostly tied to setbacks in its rail division. The company is also considering pulling out of its A220 partnership with Airbus. Chris Blumas, portfolio manager at GlobeInvest Capital Management, weighs in on what he calls a “pretty dramatic turn of events.” 

Bombardier slashes outlook; pursues ways to boost balance sheet

Bombardier Inc.’s deal with Airbus SE to rescue its long-delayed and over-budget jetliner program was supposed to be a lifeline for the struggling manufacturer. Now the Canadian company is rethinking the joint venture, pushing the iconic train and plane maker to the brink once more.

The shares posted their biggest loss ever — Bombardier is almost a penny stock again — and bonds tumbled after the company said it was reassessing the A220 jet program with Airbus. Costs for the new plane are rising, and the goal of breaking even may come later than expected, likely prompting a writedown when Bombardier reports earnings next month.

“The joke continues,” said John O’Connell, chief executive officer of Toronto-based Davis Rea Ltd. “This company has been a disaster my whole career and I’m almost ready to retire.”

The possible retreat from the A220 program, formerly known as the C Series, could be another blow to Bombardier’s efforts to increase cash flow to help pay down its US$10 billion debt load. The company has already sold assets in recent years to tackle its debt, including pending deal for its CRJ jet unit with Mitsubishi Heavy Industries Ltd.

The C Series was originally pitched as a major breakthrough for Bombardier, providing a plane that was bigger than its traditional jets yet generally smaller than Airbus’s workhorse A320-family jets and Boeing Co.’s 737 planes. Yet program delays and cost overruns sent the investment soaring to US$6 billion, raising concerns about the debt, now rated six levels below investment grade.The Open Bombardier needs to ‘just deliver’ what they promise: McGill’s Karl Moore Bombardier needs to ‘just deliver’ what they promise: McGill’s Karl Moore

Karl Moore, professor of business strategy at McGill University, joins BNN Bloomberg to react to Bombardier slashing its outlook, warning on cash burn and considering pulling out of the A220 partnership with Airbus. He says that CEO Alain Bellemare has done an excellent job in a tough turnaround for the business.

Job Cuts

The delays and slow sales forced Bombardier to announce thousands of jobs cuts in 2016, with doubts over the future of the company pushing the stock to as low as 72 cents. The government of Quebec was forced to step in, investing US$1 billion for a 49 per cent stake in the C Series.

On Thursday, Bombardier tumbled anew, dropping 32 per cent to $1.22 at the close in Toronto. The shares are now at the lowest level in almost four years and the company’s market value is only about $3 billion (US$2.3 billion)..

The deal with Airbus was an elegant solution. Though Bombardier received no upfront cash for ceding its controlling stake, it allowed Bombardier to offload the risk and additional costs of developing the A220. But the latest financial plan calls for more cash to support the ramp-up, pushes out the break-even timeline, and generates a lower return over the life of the program, Bombardier said in a statement Thursday.

With few other assets left to sell, Bombardier may struggle to keep everything going. One of its two remaining businesses — rail equipment and private jets — may have to go, Karl Moore, an associate professor at McGill University in Montreal, said in an interview with BNN Bloomberg.

“Then you become a pure play of either transportation on the train side, or business jets,” he said. “It’s a big dramatic move for sure but one that might be necessary to solve the cash flow issue. I think that’s the question they’re giving some serious thought to right now.”

The potential end of Bombardier’s involvement in the A220 program is combining with continued woes in the company’s rail business to undermine a once-great name in manufacturing.

The company said fourth-quarter sales would be US$4.2 billion, trailing the lowest analyst estimate in a survey by Bloomberg. The results were dragged down in part by new challenges in the company’s rail division. Bombardier said it would take a US$350 million accounting charge because of problems in London, Switzerland and Germany.

Liquidity remains strong, with year-end cash on hand of roughly US$2.6 billion, Bombardier said. But the company is considering alternatives to accelerate its deleveraging and strengthen its balance sheet.

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Bonds Resilient

“The final step in our turnaround is to de-lever and solve our capital structure,” Chief Executive Officer Alain Bellemare said in the statement. “We are actively pursuing alternatives that would allow us to accelerate our debt paydown.”

For Mark Carpani, a partner at Ridgewood Capital Asset Management, a larger selloff on the bonds could be a buying opportunity.

“Despite the equity reaction, the debt has a high probability of being paid in the short term,” he said.

The company’s 7.85 per cent bonds due 2027 fell 6.8 cents, the most on record but remain well above distressed levels at 95.3 cents on the dollar, yielding 8.8 per cent, according to Trace data. The US$1.5 billion in notes due 2025 dropped 5.7 cents to 96.3 cents on the dollar to yield 8.4 per cent, the highest since Oct. 31.

The company is scheduled to report full earnings Feb. 13.

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Commercial-Jet Retreat

Airbus said it would continue funding the A220 program “on its way to break-even.” The European aerospace giant owns a 50.01 per cent stake in the regional jet, with Bombardier retaining 31 per cent and state-backed Investissement Quebec holding some 19 per cent.

Bombardier agreed to fund cash shortfalls for the program up to a maximum of $350 million in 2019, and $350 million cumulatively in 2020 and 2021, according to a press release announcing the venture in June 2018. Any excess shortfalls would be shared by the shareholders, the statement said.

Quebec’s economy and innovation minister declined to comment, according to a representative.

The jet added 63 orders in 2019, with 105 currently in service and a backlog of close to 500 planes. Airbus will begin producing the A220 on a second assembly line this year at its factory in Mobile, Alabama.