Chorus Aviation announces first quarter earnings

HALIFAX, May 14, 2015 /CNW/ – Chorus Aviation Inc. (‘Chorus’) (TSX: CHR.B CHR.A) today announced its first quarter 2015 earnings.

“The first quarter of 2015 was the most transformative in our history,” said Joseph Randell, President and Chief Executive Officer, Chorus.  “Our accomplishments in the quarter have significantly strengthened our organization, preserved the value we have created for our shareholders, and provide a clear, long-term roadmap to build additional, positive returns.  Excluding an unrealized foreign exchange loss and one-time cost items, first quarter earnings were relatively consistent with past results and as expected. We are progressing as planned through this year of change, and I’m pleased with our transition so far.  I sincerely thank the team for our incredible achievements in the quarter, and look forward to executing further on our strategies to transform Chorus into a more formidable competitor in the regional sector.”


  • Adjusted EBITDA1 of $28.0 million.
  • Adjusted EBITDA1 of $40.0 million, excluding one-time items.
  • Adjusted net income1 of $21.0 million, excluding one-time items.
  • Adjusted net income1 per share of $0.17 per basic share, excluding one-time items.
  • Reached 11-year collective agreement with Jazz pilots.
  • Established 11-year Capacity Purchase Agreement (‘CPA’) with Air Canada.
  • Signed purchase agreement with Bombardier for up to 23 NextGen Q400 aircraft.
  • Announced Extended Service Program with Bombardier for Dash 8-300 aircraft.
  • Executed on diversification strategy by entering an agreement to acquire Voyageur Airways.

In the first quarter of 2015, Chorus generated adjusted EBITDA1 of $28.0 million excluding foreign exchange loss of $33.9 million on US denominated debt. Chorus also incurred one-time expenses that included a $10.0 million signing bonus for Jazz pilots under the terms of their new collective agreement, and $2.1 million for advisory fees related to the recent amendment to the CPA.   Chorus’ stock based compensation also increased by $5.1 million as a result of a change in accounting policy and increased Chorus share price.

Our financial performance under the recently amended CPA is in line with our expectations,” said Mr. Randell. “Our employees delivered tremendous operational performance in the first quarter and captured $5.6 million of performance incentive payment under the CPA, or 96.7% of the maximum available.”

“In the quarter we experienced a $1.8 million increase in leasing revenue under the CPA and anticipate this revenue stream to increase as six new Q400 aircraft are planned to be incorporated into the Jazz fleet later this year,” continued Mr. Randell. “Earlier this month we completed the acquisition of Voyageur Airways – a transaction that will be immediately accretive to Chorus’ consolidated earnings and free cash flow.”

For reporting purposes, at each quarter, Chorus converts its US denominated aircraft debt into equivalent Canadian dollars based on the prevailing exchange rate.  Chorus manages its exposure to currency risk on such long-term debt by billing related lease payments under the CPA with Air Canada in the underlying currency (US dollars) related to the aircraft debt.

Financial Performance – First Quarter 2015 Compared to First Quarter 2014

Operating revenue decreased from $414.6 million to $375.1 million, representing a decrease of $39.5 million, or 9.5%.

Flight revenue, including charter revenue, decreased by $14.2 million or 6.7%.  Under the amended CPA, certain items provided to Chorus by Air Canada, such as ground handling at the major hubs which were historically charged back to Air Canada with a 12.5%  mark-up, have been removed from flight revenue.  Other items, such as third party ground handling, have been re-classified as pass-through costs and removed from flight revenue.  The flight revenue reduction related to these changes was $23.2 million.  Further, decreased billable block hours accounted for an additional reduction of $5.3 million. These decreases were offset by a favourable US dollar exchange rate that resulted in a $6.8 million increase in the quarter, and rate increases pursuant to the CPA accounted for an increase of approximately $7.5 million.

Aircraft leasing revenue under the CPA increased by $1.8 million.  The increase was related to a favourable US dollar exchange rate.  Aircraft leasing revenue under the CPA is generated from the 21 Q400 aircraft and four Q400 engines owned by Chorus. 

Under the amended CPA, Chorus’ margin compensation changed from a mark-up on controllable costs to the more industry standard approach of fixed fees.  Based on the current fleet plan and the terms of the amended CPA, margin compensation for the period of 2015 to 2020 is contractually set at $109.7 million annually or $27.4 million quarterly.

In the first quarter, Chorus earned $5.6 million in performance incentives, or 96.7% of the maximum incentive payment available. 

Pass-through revenue decreased by $26.5 million or 17.7% from $149.9 million to $123.4 million, which included a decrease of $32.0 million primarily related to decreased fuel costs.  Under the amended CPA, compensation for deicing and other certain costs provided to Chorus by Air Canada will no longer be billed.  This change resulted in a decrease of $6.1 million. Further, other costs, such as third party ground handling services, have been reclassified as a pass-through cost and therefore increased pass-through revenue in the quarter by $10.5 million.  A favourable US dollar exchange rate resulted in a $1.7 million increase.

Operating expenses decreased from $383.3 million to $359.2 million, a decrease of $24.1 million. An unfavourable US dollar exchange rate compared to the same period in 2014 increased operating expenses by $8.5 million. Controllable costs increased from $233.5 million to $235.9 million, an increase of $2.4 million. $6.8 million of this controllable cost increase is attributable to an unfavourable US dollar exchange rate.

Salaries, wages and benefits increased by $13.9 million from $104.1 million to $118.1 million. Adjusted salaries, wages and benefits (adjusted by removing employee separation program costs and capitalized major maintenance overhaul labour costs) increased $1.3 million as a result of increased pension, incentive compensation and other employee benefits.  In the first quarter, Chorus incurred a $10.0 million one-time pilot signing bonus in accordance with the ratified new collective agreement.  Stock based compensation of $6.6 million increased by $5.1 million as a result of a change in accounting policy and an increased share price. Employee separation program costs incurred during the three months ended March 31, 2015 were $nil.  Salaries and wages were also affected by fewer labour costs being capitalized on owned aircraft for major maintenance overhauls of $0.3 million.

Aircraft maintenance expense increased by $10.5 million from $39.6 million to $50.0 million. An unfavourable US dollar exchange rate on certain maintenance material purchases accounted for a $4.3 million increase, increased CRJ-200 aircraft engine overhauls accounted for $5.0 million, other maintenance costs accounted for $2.5 million, and fewer maintenance costs being capitalized on owned aircraft for major maintenance overhauls accounted for a $0.3 million increase.  These increases were offset by a decrease in block hours which accounted for $1.6 million.

Non-operating expenses increased by $17.8 million from $19.4 million to $37.2 million. Interest expense related to long-term debt increased by $0.1 million as a result of an unfavourable US dollar exchange rate.

General overhead and professional fees in the first quarter increased by $2.8 million, of which $2.1 million related to advisory fees for the amended CPA.

Operating income of $15.9 million decreased by $15.4 million from $31.2 million.  The overall decrease is attributed to $12.1 million in one-time costs associated with the amended CPA and was comprised of a $10.0 million one-time pilot signing bonus, and $2.1 million related to advisory fees for the amended CPA.  Chorus also incurred a $5.1 million increase in stock based compensation expense as a result of a change in accounting policy in February 2014 and an increase in share price.

Adjusted EBITDA was $28.0 million compared to $47.3 million in 2014, a decrease of $19.3 million which resulted from a $15.4 million decrease in operating income and a $3.9 million decrease in depreciation and amortization expense.

The weakening of the Canadian dollar during the quarter contributed to a foreign exchange loss of $33.9 million compared to a foreign exchange loss of $13.6 million in the same period last year. This foreign exchange loss contributed significantly to a net loss of $24.8 million, or $0.21 per basic share. On an adjusted basis, net income was $8.9 million or $0.07 per basic share. Adjusted net income, excluding one-time items ($10.0 million pilot signing bonus, and $2.1 million in CPA advisory fees), was $21.0 million or $0.17 per basic share.

A reconciliation of these non-GAAP measures to their nearest GAAP measure is provided in Chorus’ Management’s Discussion and Analysis dated May 13, 2015.

Investor Conference Call / Audio Webcast

Chorus will hold an analyst call at 11:00 a.m. ET on Thursday, May 14, 2015 to discuss the first quarter results. The call may be accessed by dialing 1-888-231-8191. The call will be simultaneously audio webcast via: This is a listen-in only audio webcast.  Media Player or Real Player is required to listen to the broadcast; please download well in advance of the call.

The conference call webcast will be archived on Chorus’ website at under Reports > Executive Management Presentations.  A playback of the call can also be accessed until midnight ET, May 21, 2015 by dialing toll-free 1-855-859-2056, and passcode 13827595.

1 Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before net interest expense, income taxes, and depreciation and amortization and is a non-GAAP financial measure.  Adjusted EBITDA (net income before net interest expense, income taxes, depreciation and amortization and other items such as asset impairment and foreign exchange gains or losses) is a non-GAAP financial measure used by Chorus, and commonly by other regional airlines in the industry, as a supplemental financial measure of operational performance. Management believes Adjusted EBITDA assists investors in comparing Chorus’ performance on a consistent basis without regard to depreciation and amortization, which are non-cash in nature and can vary significantly depending on accounting methods and factors such as historical cost. Adjusted EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact of working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statement of cash flows, forming part of the financial statements.  

Adjusted Net Income
Adjusted net income and adjusted net income per share are used by Chorus to assess performance without the effects of unrealized foreign exchange gains or losses on long-term debt and finance leases related to aircraft.  Chorus manages its exposure to currency risk on such long-term debt by billing the lease payments within the CPA in the underlying currency (US dollars) related to the aircraft debt.  These items are excluded because they affect the comparability of our financial results, period over period, and could potentially distort the analysis of trends in business performance.  Excluding these items does not imply they are non-recurring due to ongoing currency fluctuations between the Canadian and US dollar.  While employee separation program costs have not been included within our definition of adjusted net income, it is shown separately to facilitate transparency and comparability.

Forward Looking Statements

This news release should be read in conjunction with Chorus’ unaudited interim condensed consolidated financial statements for the three months ended March 31, 2015 and MD&A dated May 13, 2015 filed with Canadian Securities Administrators (available at

Certain statements in this news release may contain statements which are forward-looking. These forward-looking statements are identified by the use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would”, and similar terms and phrases, including references to assumptions. Such statements may involve but are not limited to comments with respect to strategies, expectations, planned operations or future actions.

Forward-looking statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and other uncertain events. Forward-looking statements, by their nature, are based on assumptions, including those described below, and are subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to differ materially from those expressed in the forward-looking statements. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, risks relating to Chorus’ relationship with Air Canada, the airline industry, airline leasing, energy prices, general industry, market, credit, and economic conditions, (including a severe and prolonged economic downturn which could result in reduced payments under the amended CPA), competition, insurance issues and costs, supply issues, war, terrorist attacks, epidemic diseases, environmental factors, acts of God, changes in demand due to the seasonal nature of the business, the ability of Chorus to reduce operating costs and employee counts, the ability of Chorus to secure financing, employee relations, labour negotiations or disputes, restructuring, pension issues, currency exchange and interest rates, leverage and restructure covenants in future indebtedness, dilution of Chorus shareholders, uncertainty of dividend payments, managing growth, changes in laws, adverse regulatory developments or proceedings, pending and future litigation and actions by third parties. The forward-looking statements contained in this discussion represent Chorus’ expectations as of May 14, 2015, and are subject to change after such date. However, Chorus disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.

About Chorus

Chorus is traded on the Toronto Stock Exchange under the trading symbols of CHR.A and CHR.B.

Headquartered in Halifax, Nova Scotia, Chorus was incorporated on September 27, 2010 and is a dividend-paying holding company with various interests including Jazz Aviation Holdings Inc. and Chorus Aviation Holdings II Inc.

SOURCE Chorus Aviation Inc.