Chorus Aviation announces strong first quarter

Adjusted EBITDA1 of $50.9 million, excluding other items

HALIFAX, May 13, 2016 /CNW Telbec/ – Chorus Aviation Inc. (‘Chorus’) (TSX: CHR.B CHR.A) today announced strong first quarter 2016 earnings.

"I am pleased again this quarter to report solid earnings and operational performance by Chorus," said Joe Randell, President and Chief Executive Officer, Chorus. "Quarter-over-quarter we generated increases in operating income and adjusted EBITDA1 of 69% and 62% respectively, and ended the first quarter of 2016 with net income per basic share of $0.45, or $0.12 per basic share on an adjusted basis."

"The Capacity Purchase Agreement (‘CPA’) with Air Canada is delivering the strong cash flow and benefits anticipated as evidenced by our solid financial results for the past five quarters," continued Mr. Randell.  "The agreement not only preserves the value we had previously established for our shareholders and employees; it also provides a foundation to pursue growth and diversification.   We have excellent visibility on our costs and compensation to 2025.  Cash flow from this agreement is anticipated to support the current dividend, as well as future investments to support our corporate objectives.  Recent initiatives such as the planned acquisition of five new CRJ900 regional jets, the anticipated third-party heavy maintenance contract at Jazz, and our intention to consolidate Chorus’ stock ticker symbols are expected to generate positive returns.  I thank the Chorus team for helping realize our vision to be a premiere provider of regional airline services."


  • Adjusted EBITDA1 of $45.4 million.
  • Adjusted net income1 of $14.8 million.
  • Adjusted net income1 per basic share of $0.12.
  • Net income of $55.4 million.
  • Net income per basic share of $0.45.
  • Reached new collective agreement with Jazz maintenance and engineering employees with a term lasting to 2025.

In the first quarter of 2016, Chorus generated operating income of $26.8 million, an increase of $10.9 million over first quarter of 2015.  This increase was driven by a $1.0 million contribution from the Voyageur operation while aircraft leasing operations under the CPA contributed an additional $5.3 million as a result of the addition of new Q400s in the fourth quarter of 2015 and the first quarter of 2016, combined with a change in the US dollar exchange rate.  The remaining net increase of $4.6 million in operating income was primarily attributable to a net decrease in collective agreement signing bonuses of $4.5 million, and other expense reductions.   Adjusted EBITDA in the first quarter of 2016 was $45.4 million, a $17.4 million increase over the first quarter of 2015. This increase resulted primarily from the $10.9 million increase in operating income as well as a net $6.5 million increase in depreciation and amortization expense compared to the first quarter of 2015.

For reporting purposes, at each quarter end, Chorus converts its US dollar 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 Capacity Purchase Agreement (‘CPA’) with Air Canada in the underlying currency (US dollars) related to the aircraft debt. As a result of this conversion, in the first quarter of 2016, Chorus had an unrealized foreign exchange gain of $40.6 million versus an unrealized foreign exchange loss of $33.7 million in the same period of 2015.

Financial Performance – First Quarter 2016 Compared to First Quarter 2015

Operating revenue decreased from $375.1 million to $320.6 million, representing a decrease of $54.6 million, or 14.5%.

Controllable revenue decreased by $8.4 million or 4.2%.  The controllable revenue reduction was primarily driven by rate decreases under the CPA related to aircraft lease returns and other reductions in controllable costs, such as flight and cabin crew, which accounted for $8.7 million of the decrease. A further decrease of approximately $6.5 million resulted from 4,729 fewer billable block hours generated in the first quarter of 2016 compared to the same period in 2015.  These decreases were offset by a change in the US dollar exchange rate that resulted in a $6.8 million increase in the quarter.

Aircraft leasing revenue under the CPA increased by $7.2 million to $23.2 million$5.6 million was generated from the addition of new Q400 aircraft to the CPA covered fleet, and $1.6 million of the increase was related to a change in the US dollar exchange rate. As of March 31, 2016, aircraft leasing revenue under the CPA was generated from 28 Q400 aircraft and four Q400 engines owned by Chorus, compared to 21 Q400 aircraft and four Q400s engines owned by Chorus as of March 31, 2015.  Annually these aircraft and engines currently generate a cash margin of approximately 20% after consideration of debt servicing charges.

Under the amended CPA, Chorus’ compensation is based on fixed fees for the term of the agreement. The fixed fee compensation for the first quarter of 2016 was contractually set at $27.4 million. It is anticipated that when the five incremental Q400 and five incremental CRJ900 aircraft (announced September 28, 2015) are operating in the CPA fleet, the annual fixed fee compensation will increase to $111.7 million, or $27.9 million quarterly until 2020.

In the first quarter, Chorus earned $5.7 million in performance incentives, or 96.7% of the maximum incentive payment available under the CPA, compared to $5.6 million or 96.7% in the first quarter of 2015. 

CPA pass-through revenue decreased by $66.5 million or 53.9%, from $123.4 million to $56.9 million.  Compensation for aircraft fuel (effective November 1, 2015), deicing and certain other costs provided to Chorus by Air Canada are no longer billed. Further, effective January 1, 2016, Air Canada entered into a new commercial agreement with the Vancouver International Airport Authority (‘YVR’) in connection with Jazz’s CPA operations.  YVR costs related to airport fees and certain terminal handling services, which are pass-through costs under the CPA, are now paid directly by Air Canada pursuant to this new agreement.  This change accounted for a $4.8 million decrease in CPA pass-through revenue.

Charter and other contract flying revenue increased by $10.1 million to $11.2 million.  Contract flight revenue from the Voyageur operation accounted for $9.9 million of the increase.

Other revenue increased by $2.9 million to $6.5 million.  Revenue from the Voyageur operation, which includes maintenance repair and overhaul and leasing, accounted for $5.3 million; offset by decreased ancillary revenue and decreased sale of consignment inventory of $2.4 million.

Operating expenses decreased from $359.2 million to $293.8 million, a decrease of $65.5 million or 18.2%.

Salaries, wages and benefits decreased by $2.1 million to $116.0 million. Adjusted salaries, wages and benefits increased by $4.3 million primarily as a result of the Voyageur operation. As part of the newly ratified collective agreement with Jazz maintenance and engineering employees, Chorus incurred a $5.5 million one-time signing bonus in 2016, while in the first quarter of 2015, Chorus incurred a $10.0 million one-time signing bonus with Jazz pilots as part of the newly ratified collective agreement.  This accounted for a net decrease of $4.5 million. Stock-based compensation decreased primarily as a result of fluctuations in Chorus’ share price.

Depreciation and amortization expense increased by $6.5 million to $18.6 million.  Depreciation expense related to Voyageur was $3.5 million, and the purchase of additional aircraft during the second half of 2015 and the first quarter of 2016 accounted for $1.9 million.  Further, depreciation associated with capitalized major maintenance overhauls increased depreciation expense by $0.4 million, and new finance leases accounted for $0.7 million.

Aircraft maintenance expense decreased by $3.1 million to $47.0 million. Compared to first quarter 2015, fewer block hours and fewer engine overhaul events accounted for $1.9 million and $1.2 million decreases respectively.  Other maintenance costs decreased by $3.0 million, and decreased cost of sales of consignment inventory accounted for $0.8 million.  These decreases were offset by a change in the US dollar exchange rate on certain maintenance material purchases which accounted for a $2.2 million increase, and the Voyageur operation accounted for a $1.6 million increase.   

Other expenses increased by $3.9 million to $33.6 million.  This increase was due to increased costs from the Voyageur operation of $3.1 million, and increased crew costs related to training and travel associated with the flow of pilots to Air Canada of $1.0 million. These increases were offset by general overhead decreases of $0.2 million.

Non-operating expenses decreased by $70.9 million from an expense of $37.2 million in the first quarter of 2015 to a non-operating income of $33.8 million. Net interest expense increased by $1.7 million. Interest expense related to long-term debt increased by $1.4 million as a result of a change in the US dollar exchange rate, new Q400 long-term debt, and $0.3 million related to interest on consideration payable. The strengthening of the Canadian dollar in the quarter contributed to a foreign exchange gain of $38.8 million, compared to a foreign exchange loss of $33.9 million in the same period of the previous year.

Operating income of $26.8 million increased by $10.9 million from $15.9 million

Adjusted EBITDA was $45.4 million compared to $28.0 million in 2015, an increase of $17.4 million.

Adjusted net income for the first quarter 2016 was $14.8 million or $0.12 per basic share compared to $8.9 million or $0.07 per basic share for the same period 2015.  Net income in the quarter was $55.4 million or $0.45 per basic share compared to a 2015 net loss of $24.8 million or loss of $0.21 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 12, 2016.

Investor Conference Call / Audio Webcast

Chorus will hold an analyst call at 11:00 a.m. ET on Friday, May 13, 2016 to discuss the first quarter of 2016. 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, 2016 by dialing toll-free 1-855-859-2056, and passcode 87007448#.

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 EBITDA, excluding other items, excludes one-time signing bonuses and CPA advisory fees.

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.  The one-time signing bonuses, and CPA advisory fees have been included within our definition of adjusted net income.

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, 2016 and MD&A dated May 12, 2016 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 including international operation of airlines in developing countries and areas of unrest, 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, aircraft incidents, 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, the ability of Chorus to renew and or replace existing contracts, employee relations, labour negotiations or disputes, pension issues, currency exchange and interest rates, leverage and restructure covenants in future indebtedness, 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 discussion of certain risks, please refer to Section 18 – Risk Factors in the first quarter 2016 MD&A. The forward-looking statements contained in this discussion represent Chorus’ expectations as of May 12, 2016, 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 aviation interests including Jazz Aviation LP and Voyageur Aviation Corp.


SOURCE Chorus Aviation Inc.