Chorus Aviation announces strong second quarter earnings

HALIFAX, Aug. 12, 2015 /CNW/ – Chorus Aviation Inc. (‘Chorus’) (TSX: CHR.B CHR.A) today announced its second quarter 2015 earnings.


  • Adjusted EBITDA1 of $52.1 million.
  • Adjusted net income1 of $23.8 million.
  • Adjusted net income1 per basic share of $0.20.
  • Net income of $31.4 million.
  • Net income per basic share of $0.26.
  • Achieved new collective agreement with Jazz Dispatchers that expires December 31, 2025.
  • Completed the acquisition of the Voyageur Airways group of companies (‘Voyageur’).

“I’m pleased with our performance and accomplishments in the second quarter as we continue to deliver solid returns to our shareholders and to strengthen Chorus,” said Joseph Randell, President and Chief Executive Officer, Chorus.  “We experienced increased operating income and adjusted EBITDA over second quarter 2014 that resulted in adjusted net earnings per basic share of $0.20. Our strong operational performance captured 96.7 percent of the maximum available performance incentive payment under our recently amended Capacity Purchase Agreement (‘CPA’) with Air Canada, and we were pleased to reach a new long-term collective agreement with Jazz’s dispatchers. 

“We continue to make significant progress on a number of fronts,” continued Mr. Randell.  “The implementation of our new CPA terms with Air Canada is transitioning as planned and delivering financial results relatively consistent with past performance.  Cash flow remains strong. Our continuing investment in modernizing the Jazz fleet with the addition of six new Q400 NextGen aircraft by the end of this year and the acquisition of Voyageur increases shareholder value.  The acquisition of Voyageur is accretive and is already demonstrating potential for future growth as it was the successful bidder for a new and expanded air ambulance contract with a long term customer. I thank the teams for their contribution to another successful quarter for Chorus.”

In the second quarter of 2015, Chorus generated adjusted EBITDA of $52.1 million excluding a foreign exchange gain of $5.7 million on US denominated debt. The strong performance of a $1.4 million increase in adjusted EBITDA over second quarter 2014 takes into account a $2.4 million reduction in depreciation and amortization in the residual value of certain owned aircraft and flight equipment, which is offset  by the addition of $2.3 million in adjusted EBITDA generated by the Voyageur operation.

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. As a result of this conversion, in the second quarter of 2015, Chorus had an unrealized foreign exchange gain of $7.6 million versus an unrealized foreign exchange gain of $14.3 million in the same period of 2014.

Financial Performance – Second Quarter 2015 Compared to Second Quarter 2014

Operating revenue decreased from $417.8 million to $400.1 million, representing a decrease of $17.8 million, or 4.3%.

Flight revenue, including charter revenue, decreased by $8.8 million or 4.0%.  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 $26.5 million.  Further, decreased billable block hours accounted for an additional reduction of $1.0 million. These decreases were offset by a favourable US dollar exchange rate that resulted in an $8.8 million increase in the quarter, and rate increases pursuant to the CPA accounted for an increase of approximately $1.7 million. New flight revenue from the Voyageur operation accounted for $8.2 million.

Aircraft leasing revenue under the CPA increased by $1.8 million to $15.9 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 second quarter, Chorus earned $5.6 million in performance incentives, or 96.7% of the maximum incentive payment available under the CPA. 

Pass-through revenue decreased by $12.3 million or 8.4% from $146.6 million to $134.3 million, which included a decrease of $24.8 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 $1.9 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 $12.3 million.  A favourable US dollar exchange rate resulted in a $1.9 million increase.

Other revenue increased by $3.5 million primarily related to increased sale of consignment inventory and new revenue from the Voyageur operation which included leasing, and maintenance repair and overhaul.

Operating expenses decreased from $383.6 million to $362.0 million, a decrease of $21.6 million.

Salaries, wages and benefits increased by $3.2 million from $103.4 million to $106.6 million. Adjusted salaries, wages and benefits (adjusted by removing employee separation program costs and capitalized major maintenance overhaul labour costs) increased $6.3 million primarily as a result of the Voyageur operation and increased pension costs. Employee separation program costs incurred during the second quarter were $1.6 million compared to $4.5 million in the same period of 2014.  More labour costs were capitalized on owned aircraft for major maintenance overhauls decreased salaries and wages by $1.3 million quarter-over-quarter.

Aircraft maintenance expense increased by $9.1 million from $41.9 million to $51.0 million. An unfavourable US dollar exchange rate on certain maintenance material purchases accounted for a $4.7 million increase, other maintenance costs accounted for $1.9 million, and the Voyageur operation accounted for $3.3 million.  These increases were offset by decreased block hours which accounted for $0.1 million, and more maintenance costs being capitalized as a result of increased major maintenance overhauls accounted for a $0.7 million decrease.   

Other expenses increased by $2.5 million from $31.2 million to $33.7 million.  The increase was due to increased costs related to the Voyageur operation of $2.3 million, increased professional fees of $0.7 million and increased crew costs related to training and travel of $1.6 million.

Non-operating income decreased by $5.8 million from $8.6 million to $2.8 million. In the first half of 2014 Chorus redeemed all convertible debentures which accounted for a decrease in interest expense of $0.6 million. Interest expense related to long-term debt increased by $0.1 million as a result of an unfavourable US dollar exchange rate.

Operating income of $38.0 million increased by $3.8 million from $34.3 million

Adjusted EBITDA was $52.1 million compared to $50.7 million in 2014, an increase of $1.4 million which resulted from a $3.8 million increase in operating income and the addition of $2.3 million in adjusted EBITDA generated by the Voyageur operation. This was offset by a decrease of $2.4 million in depreciation and amortization expense.  

The strengthening of the Canadian dollar during the quarter contributed to a foreign exchange gain of $5.7 million compared to a foreign exchange gain of $11.8 million in the same period last year.

Adjusted net income for the second quarter 2015 was $23.9 million or $0.20 per basic share compared to $22.2 million or $0.18 per basic share for the same period 2014.  Net income in the quarter was $31.4 million or $0.26 per basic share compared to 2014 net income of $36.5 million or $0.30 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 August 11, 2015.

Investor Conference Call / Audio Webcast

Chorus will hold an analyst call at 10:30 a.m. ET on Wednesday, August 12, 2015 to discuss the second 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, August 20, 2015 by dialing toll-free 1-855-859-2056, and passcode 84245985#.

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 the one-time pilot signing bonus, CPA advisory fees and employee separation program costs have 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 June 30, 2015 and MD&A dated August 11, 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 and in particular the 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 21 – Risk Factors in the second quarter 2015 MD&A. The forward-looking statements contained in this discussion represent Chorus’ expectations as of August 12, 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.