Chorus Aviation announces solid first quarter 2017 earnings

Delivering regional aviation to the world  

  • Q1 adjusted EBITDA1 of $54.1 million.
  • Q1 adjusted net income1 of $15.9 million, or $0.13 per basic share.
  • Q1 net income of $26.7 million, or $0.22 per basic share, including an unrealized foreign exchange gain of $10.4 million.
  • Established Chorus Aviation Capital to become a leading regional aircraft leasing company worldwide.
  • Received gross proceeds of $200.0 million in financing from Fairfax Financial in support of regional aircraft leasing growth strategy.
  • Announced intention to diversify leasing portfolio through the acquisition of ATR 72-600s on lease with Flybe and Virgin Australia.

HALIFAX, May 12, 2017 /CNW/ – Chorus Aviation Inc. (‘Chorus’) (TSX: CHR) today announced solid financial results for the first quarter of 2017.  

"I’m pleased with our financial performance in the first quarter which delivered an increase in adjusted EBITDA of 6.2% over the same period in 2016," said Joe Randell, President and Chief Executive Officer, Chorus. "Our growth and diversification strategies are taking hold as evidenced by our recent announcement of a pending acquisition of six ATR 72-600s of which three are currently leased to Flybe, a U.K. carrier, and three are leased to Virgin Australia. This will not only add two well established customers to our growing pool of airline lessees, it also will diversify our fleet portfolio to include ATR aircraft. We’re transforming our organization into a global leader in the field of regional aviation, offering customers a complete suite of regional aviation services including contracted flying, aircraft engineering, maintenance, repair and overhaul, and aircraft leasing solutions." 

Q1 2017 Overview

Chorus remains focused on its vision of delivering regional aviation to the world. Our financial results were in line with our expectations. The capacity purchase agreement (‘CPA’) with Air Canada continues to deliver strong and stable financial results, as we modernize our fleet and improve our cost competitiveness. Jazz Technical Services was highly productive in the quarter completing heavy maintenance checks on third party customer aircraft in addition to the CPA aircraft. Voyageur secured two new flying contracts in Africa and Europe, purchased two CRJ-200s for disassembly and part sales, and completed modifications to a Dash 8-100 to convert it to a new first-of-its-kind package freighter.

Financial Performance – first quarter 2017 compared to first quarter 2016

In the first quarter of 2017, Chorus reported revenue and adjusted EBITDA of $320.6 million, and $54.1 million, respectively, versus 2016 comparative figures of $320.6 million and $50.9 million, respectively. Revenue was consistent with the prior year while adjusted EBITDA increased by $3.2 million or 6.2%.

The increase in adjusted EBITDA was primarily driven by:

  • increased aircraft leasing under the CPA of $4.3 million; and
  • a $3.4 million increase related to higher margin attributed primarily to non-CPA third party aircraft leasing and maintenance, repair and overhaul operations.

These increases were partially offset by:

    • decreased incentive revenue of $0.9 million;
    • decreased margin of $1.5 million related to incremental transition costs associated with pilot recruitment, flow and training;
    • increased expenses related to a $0.9 million reduction in capitalized labour and maintenance costs on owned aircraft for major maintenance overhauls; and
    • an increase in other expenses of $1.2 million.

Adjusted net income was $15.9 million, a decrease from the first quarter of 2016 of $4.4 million, or 21.7%. The change was a result of the $3.2 million increase in adjusted EBITDA previously described, offset by:

  • $1.1 million increase in income taxes;
  • $3.4 million of additional depreciation related to new aircraft; and
  • $2.9 million of added interest costs on higher average term loans during the quarter.

Net income was $26.7 million, a reduction of $28.7 million, or 51.7% from the first quarter of 2016. The decrease was due to the previously noted $4.4 million decline in adjusted net income and:

  • a decrease of $30.2 million in unrealized foreign exchange gains on long-term debt;
  • $4.7 million of realized foreign exchange gains on U.S. dollar denominated cash held on deposit for investment in the aircraft leasing business; and
  • $4.3 million in employee separation program costs versus a $5.5 million in signing bonuses incurred in the first quarter of 2016.

It should be noted with respect to the $30.2 million change in unrealized foreign exchange gains on long-term debt, that for reporting purposes, Chorus converts its U.S. Dollar denominated aircraft debt into equivalent Canadian Dollars at each quarter end, based on the prevailing exchange rate. As such, this conversion in the first quarter of 2017, resulted in an unrealized foreign exchange gain of $10.4 million versus an unrealized foreign exchange gain of $40.6 million in the same period of 2016. Chorus manages its economic exposure to currency risk on such long-term debt by billing related lease payments under the CPA in the underlying currency (U.S. Dollars) related to the aircraft debt.


(See cautionary statement regarding forward-looking information below)

Chorus’ subsidiaries continue to deliver results within management’s expectations, supporting positive operating income and cash flows from operations. This reporting period marks nine consecutive quarters of solid operational and financial performance under the CPA, and demonstrates the continued long-term value of this strong, stable revenue source.

The progress made in advancing the diversification strategy through growth in aircraft leasing is expected to continue with the addition of five new CRJ900s under the CPA and with the establishment of Chorus Aviation Capital (‘CAC’). Further, Chorus expects to acquire and lease two additional new CRJ1000s to Air Nostrum by the end of September 2017, bringing the total number of CRJ1000s leased under this arrangement to four. Chorus also intends to acquire six ATR 72-600s on lease to U.K. carrier, Flybe and Virgin Australia; the transaction is expected to close by the end of June 2017.

Chorus intends to grow its regional aircraft leasing business through CAC by leveraging the proceeds from the private placement of convertible debt units to acquire aircraft for lease to regional aircraft operators. CAC intends to deploy the capital within the next 12 to 18 months in a manner consistent with prevailing market returns on leases for new and mid-life aircraft, leveraging that capital with further debt financing at a ratio ranging between three and four to one.

Given the breadth of its expertise and capabilities in regional aviation, Chorus believes it has the opportunity to become one of the world’s largest regional aircraft lessors.  

Chorus is determined to create additional long-term shareholder value by strengthening the foundational CPA business, growing and diversifying aircraft leasing revenues, and pursuing additional growth opportunities.

Based on the 2016-2017 winter schedule, the 2017 summer schedule and updated planning assumptions received from Air Canada, Billable Block Hours for 2017 are expected to be between 360,000 and 370,000 hours based on 117 Covered Aircraft as at December 31, 2017. The actual number of Billable Block Hours for 2017 may vary from this anticipated range due to several factors, (see Section 8 – Risk Factors in the first quarter 2017 MD&A).  However, the CPA fleet transition to larger aircraft will generate approximately 10% more available seat miles in fiscal 2017 over the same period in 2016.

Capital expenditures for 2017, excluding those for the acquisition of aircraft and the extended service program, and including capitalized major maintenance overhauls, are expected to be between $45.0 million and $55.0 million.

Investor Conference Call / Audio Webcast

Chorus will hold an analyst call at 11:00 a.m. ET on Friday, May 12, 2017 to discuss the first quarter financial 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 20, 2017 by dialing toll-free 1-855-859-2056, and passcode 81364847#.


This news release makes reference to several non-GAAP measures to supplement the analysis of Chorus’ results.  These measures are provided to enhance the reader’s understanding of our current financial performance.  They are included to provide investors and management with an alternative method for assessing our operating results in a manner that is focused on the performance of our ongoing operations and to provide a consistent basis for comparison between periods.  These non-GAAP measures are not recognized measures under GAAP, and therefore they are unlikely to be comparable to similar measures presented by other companies. A reconciliation of these non-GAAP measures to their nearest GAAP measure is provided in Management’s Discussion and Analysis (‘MD&A’) dated May 11, 2017.

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, signing bonuses, employee separation program costs, strategic advisory fees 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. During the quarter, Chorus revised its definition of adjusted EBITDA to include signing bonuses, employee separation program costs and strategic advisory fees to facilitate transparency and comparability as these items can fluctuate from period to period. 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 statements of cash flows, forming part of Chorus’ 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, signing bonuses, employee separation program costs and strategic advisory fees. 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. During the quarter, Chorus revised its definition of adjusted net income to exclude the signing bonuses, employee separation program costs, and strategic advisory fees to facilitate transparency and comparability as these items can fluctuate from period to period. In addition, Chorus revised its definition of Adjusted Net Income to exclude foreign exchange gains or losses on US dollar denominated cash held on deposit for investment in the leasing business. This item is excluded as it relates to a foreign exchange gain or loss on proceeds from the Convertible Units that were converted to US dollars and will be used to invest in long-term and primarily US dollar denominated assets, whose related income is expected to be earned over time.  

Various Financial Measures



(expressed in thousands of Canadian dollars, except per share amounts))

Three months ended March 31,









Operating revenue




Operating expenses





Operating income





Non-operating income (expenses)





Income before income taxes





Income tax expense





Net income





Add (Deduct) items to get to Adjusted Net Income(1)

Unrealized foreign exchange gain





Realized foreign exchange gain on Convertible Units




Employee separation program




Signing bonuses








Adjusted net income(2)





Adjusted net income per share





Add (Deduct) items to get to Adjusted EBITDA(1)

Net interest expense





Income tax expense





Depreciation and amortization





Foreign exchange loss





Loss (gain) on disposal of property and equipment









Adjusted EBITDA(2)






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.


This is a non-GAAP measurement.


Forward-Looking Information

This news release should be read in conjunction with Chorus’ unaudited interim condensed and consolidated financial statements for the three months ended March 31, 2017 and MD&A dated May 11, 2017 filed with Canadian Securities Administrators (available at

This news release contains ‘forward-looking information’ as defined under applicable Canadian securities legislation. Forward-looking information is 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 information may involve but is not limited to comments with respect to strategies, expectations, planned operations or future actions. Examples of forward-looking information can be found in this news release under the heading "2017 Outlook".

Forward-looking information relates 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 information, by its nature, is based on assumptions, including those described below, and is subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, external events, changing market conditions and general uncertainties of the business. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from those expressed in the forward-looking information. Results indicated in forward-looking information may differ materially from actual results for a number of reasons, including, without limitation: risks relating to Chorus’ economic dependence on and relationship with Air Canada; risks relating to the airline industry (including the international operation of aircraft in developing countries and areas of unrest); aircraft leasing (including the financial condition of lessees, availability of aircraft, access to capital, fluctuations in aircraft market values, competition and political risks); the failure of Chorus or any other party to satisfy conditions precedent to the closing of anticipated transactions referred to in the MD&A; energy prices, general industry, market, credit, and economic conditions (including a severe and prolonged economic downturn which could result in reduced payments under the CPA); increased competition affecting Chorus and/or Air Canada; insurance issues and costs; supply issues and costs; the risk of war, terrorist attacks, aircraft incidents and accidents; fraud, cybersecurity attacks or other criminal behaviour by internal or external parties; epidemic diseases, environmental factors or acts of God; changes in demand due to the seasonal nature of Chorus’ business or general economic conditions; the ability to reduce operating costs and employee counts; the ability of Chorus to secure financing; the ability of Chorus to attract and retain the talent required for its existing operations and future growth; the ability of Chorus to remain in good standing under and to renew and/or replace the CPA and other important contracts; employee relations, labour negotiations or disputes; pension issues and costs; currency exchange and interest rates; leverage and restrictive covenants contained in debt facilities; uncertainty of dividend payments; managing growth; changes in laws; adverse regulatory developments or proceedings in countries in which Chorus and its subsidiaries operate or will operate; pending and future litigation and actions by third parties. For a further discussion of risks, please refer to 2016 Annual Information Form dated February 15, 2017. The statements containing forward-looking information in this discussion represent Chorus’ expectations as of May 12, 2017, and are subject to change after such date. However, Chorus disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

About Chorus
Headquartered in Halifax, Nova Scotia, Chorus was incorporated on September 27, 2010. Chorus’ vision is to deliver regional aviation to the world. Chorus owns Jazz Aviation and Voyageur Aviation – companies that have long histories of safe and solid operations that deliver excellent customer service in the areas of contract flying operations, engineering, fleet management, and maintenance, repair and overhaul. Chorus has been leasing its owned regional aircraft into Jazz’s Air Canada Express operation since 2009, and recently established Chorus Aviation Capital Corp. to become a leading, global provider of regional aircraft leases and support services. Chorus Class A Variable Voting Shares and Class B Voting Shares trade on the Toronto Stock Exchange under the trading symbol ‘CHR’.


SOURCE Chorus Aviation Inc.