Chorus Aviation Inc. exercises options to acquire additional Bombardier Q400 NextGen aircraft

HALIFAX, July 12, 2012 /CNW/ – Chorus Aviation Inc. ('Chorus') (TSX: CHR.B CHR.A CHR.DB) today announced it has exercised six of 15 options it holds to acquire additional Bombardier Q400 NextGen ('Q400') aircraft to be operated by its subsidiary, Jazz Aviation LP ('Jazz') under the Air Canada Express brand.

"The ongoing rejuvenation of the Jazz fleet will deliver value to all of our stakeholders," stated Joe Randell, President and Chief Executive Officer, Chorus.  "The replacement of the older regional jets by these efficient, state-of-the-art aircraft will translate into better operating economics and passenger comfort with less environmental impact. While our total current seat capacity is relatively unchanged, these larger, fuel-efficient turboprops will reduce our Cost per Available Seat Mile."

"As the Canadian aviation landscape continues to change, increased Q400 service in Air Canada's regional network will improve customer experience in these markets." said Calin Rovinescu, President and Chief Executive Officer, Air Canada. "Jazz has been a valued partner and longstanding brand ambassador for Air Canada in many communities across Canada. As the world's largest operator of Dash 8 aircraft, they've proven to be an expert in regional operations as evidenced by their consistently high standards of safety and operational performance.  The introduction of their Q400s in our network has been seamless and has been met with high customer satisfaction."

Jazz will operate 16 Q400s this month under the Air Canada Express brand, which includes one Q400 on short term lease for the peak summer season only.  The Q400 aircraft accommodate 74 passengers, and are configured in a single cabin.  The six optioned Q400s are contracted to be delivered at a rate of two per month in February, March and April, 2013, and will be placed into operation the subsequent month.  A total of nine 50-seat CRJ 100 aircraft will be removed from the Jazz fleet between December, 2012 and May, 2013. As a result, the covered fleet under the Capacity Purchase Agreement with Air Canada ('CPA') will be reduced from 125 to 122 aircraft, with the overall seating capacity, operated under the CPA with Air Canada, being held relatively constant.

"Jazz flies more daily flights in Canada than any other airline with an exclusive fleet of Canadian-made aircraft," continued Mr. Randell. "Jazz has been an integral part of regional communities across our nation since the 1930s, and we're pleased to make this reinvestment and greater commitment to the 56 Canadian regional markets we currently serve as part of Air Canada's network."

The new aircraft will be leased via a Chorus leasing company to Jazz.  The purchase is supported by a third party lender under terms similar to the original order of 15 Q400 aircraft. The transaction is anticipated to be accretive to Chorus' consolidated operating results. As required under the purchase agreement, Chorus has made pre-delivery payments of approximately $13 million USD which have been funded from current cash balances and will not impact Chorus' current dividend policy.

In support of the continued fleet renewal program at Jazz, Air Canada and Jazz have agreed to amend their CPA to reflect the following:

  • Covered Aircraft reduced from 125 to 122 aircraft, resulting in a net reduction of six seats in the entire Jazz CPA fleet effective May, 2013 once all Q400 aircraft have been introduced into service.
  • In February 2013 when the number of Covered Aircraft reaches 122 aircraft, the annual minimum guaranteed Block Hours of 339,000 will be reduced to approximately 331,000 Block Hours to reflect the new number of Covered Aircraft.
  • The agreement between the parties does not change the mark-up on controllable costs structure and mark-up rates but establishes new metrics resulting from the new annual minimum guaranteed Block Hours as follows:
    • The Compensating Mark-up will now be applied based on the range between the new annual minimum Targeted Block Hours of approximately 367,000 and the revised annual minimum guaranteed Block Hours of approximately 331,000. The difference between the annual minimum guaranteed Block Hours and the annual minimum Targeted Block Hours remains at 36,000 Block Hours. This agreement also resolves one of the issues raised in the 2009 Benchmark Arbitration with reference to how the Compensating Mark-up formula will be applied.
    • Mark-up on variable controllable costs for annual Block Hours over 375,000 will remain at 5.0%.


The exercise of the six options and the amendments to the CPA do not result in any change to Chorus' current annual Block Hour guidance for the year 2012 of between 385,000 and 400,000 hours.

Caution regarding forward-looking information

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, risks relating to the airline industry, energy prices, general industry, market, credit, and economic conditions, competition, insurance issues and costs, supply issues, war, terrorist attacks, epidemic diseases, acts of God, changes in demand due to the seasonal nature of the business, the ability to reduce operating costs and employee counts, 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 July 12, 2012 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 Aviation Inc.

Chorus Aviation Inc. ("Chorus") was incorporated on September 27, 2010 and is a dividend-paying holding company which owns Jazz Aviation LP, Chorus Leasing I Inc., Chorus Leasing II Inc., and Chorus Leasing III Inc. (the leasing companies own the Q400 aircraft) and 7503695 Canada Inc.

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

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About Jazz Aviation LP

Jazz Aviation LP has a strong history in Canadian aviation with its roots going back to the 1930s. Jazz is wholly owned by Chorus Aviation Inc. and continues to generate some of the strongest operational and financial results in the North American aviation industry.

There are two airline divisions operated by Jazz Aviation LP:  Air Canada Express and Jazz.

Air Canada Express:  Under a capacity purchase agreement with Air Canada, Jazz provides service to and from lower-density markets as well as higher-density markets at off-peak times throughout Canada and to and from certain destinations in the United States. Jazz currently operates scheduled passenger service on behalf of Air Canada with over 790 departures per weekday to 83 destinations in Canada and in the United States with a fleet of Canadian-made Bombardier aircraft.

Jazz:  Under the Jazz brand, the airline offers charters throughout North America with a dedicated fleet of five Bombardier aircraft for corporate clients, governments, special interest groups and individuals seeking more convenience.  Jazz also has the ability to offer airline operators services such as ground handling, dispatching, flight load planning, training and consulting.

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