Chorus Aviation issues first quarter 2013 earnings and revises its dividend

HALIFAX, May 9, 2013 /CNW/ – Chorus Aviation Inc. ("Chorus") (TSX: CHR.B CHR.A CHR.DB) today issued its first quarter 2013 earnings, and is revising its quarterly dividend to $0.075 per share from $0.15 per share.


  • Operating revenue of $416.3 million.
  • EBITDA1 of $34.2 million.
  • Operating income of $20.8 million.
  • Net income of $9.2 million, or $0.07 per basic share.
  • Adjusted net income1 of $14.7 million, or $0.12 per basic share.
  • Billable Block Hours of 97, 202.


"The first quarter delivered solid results; however, two items negatively impacted the bottom line," said Joseph Randell, President and Chief Executive Officer, Chorus. "In our continued efforts to improve operational efficiency and to reduce costs, we enacted a voluntary separation program for our more senior pilots and maintenance employees.  The severance cost of $5.7 million will provide a return within the next two years as ongoing operational costs are reduced.  This expense, when factored with the unrealized foreign exchange loss of $5.6 million into the adjusted net income for the quarter, increases earnings per share to the current market consensus of $0.17 per basic share."


Chorus and Air Canada are involved in an ongoing complex arbitration process regarding the 2009 Benchmark.  Chorus remains confident in its position that the Controllable Mark-up of 12.5% in the Capacity Purchase Agreement ('CPA') should not change as a result of the arbitration.  Accordingly, no amounts have been recorded in the accounts of Chorus in 2010, 2011, 2012 or 2013 related to the Air Canada claim.  Management has determined that it is not probable that the Air Canada claim will be successful, and it is not practicable to determine an estimate of the possible financial effect, if any, with sufficient reliability.

However, in any litigation process there is always some risk of an adverse outcome. This risk combined with the extended duration of the arbitration has created the risk of a material retroactive amount owing to Air Canada for the period commencing January 1, 2010 should Air Canada succeed in its claim for a material fleet age adjustment in its favour.  The longer this process continues without resolution, the larger the amount of any potential retroactive payment.

In addition, Chorus' $80.2 million convertible debentures come due in December 2014. Chorus anticipates that an increase in liquidity will provide increased flexibility in addressing the maturity of those debentures, in the context of challenging conditions for the airline industry and global economic uncertainty. Those debentures, issued in November 2009, were used to pay part of the term debt of $115.0 million which was established at the time of the Chorus initial public offering in 2006 and matured in February 2010.  As a result, Chorus believes that strengthening its cash position during this period is prudent.

Chorus will continue to manage its financial leverage ratios, such as its adjusted net debt to equity ratio which has increased as a result of the financing of its new Q400 aircraft fleet. Such continued accretive investment in fleet renewal may occur either through refurbishment of the classic Dash 8-100 and Dash 8-300 series aircraft or further investment in new generation aircraft.

In consideration of these factors, Chorus has reduced its quarterly dividend from $0.15 per share to $0.075 per share going forward. This will enable Chorus to retain additional cash of $9.3 million per quarter.

While Chorus has current cash available to pay the dividend at the previous rate, the Board of Directors has determined that, given the factors discussed above, it is prudent and advisable to conserve Chorus' financial resources.

"We have, and continue to prudently manage our financial resources," continued Mr. Randell.  "The regional airline industry is changing dramatically both here and south of the border. Competition is increasing significantly. We must continue in our efforts to reduce costs, strengthen the fundamentals of our business, and improve our financial position to ensure we have the flexibility required to effectively respond and compete in our ever-changing markets."

The Board of Directors will continue to assess the dividend payment on an ongoing basis. 

Financial Performance -First Quarter 2013 Compared to First Quarter 2012

Operating revenue decreased from $437.1 million to $416.3 million, representing a decrease of $20.8 million or 4.8%.  Passenger revenue, excluding pass-through costs, decreased by $6.4 million or 2.5% primarily as a result of no activity in the quarter for Thomas Cook; offset by rate increases made pursuant to the CPA with Air Canada, an increase in Billable Block Hours of 0.8%, a $0.2 million increase in incentives earned under the CPA, and a higher US dollar exchange rate. Pass-through costs decreased from $176.7 million to $162.0 million; a decrease of $14.7 million or 8.3%, which included a decrease of $1.8 million related to fuel costs. Other revenue increased by $0.2 million.

Operating expenses decreased from $407.4 million to $395.5 million, a decrease of $12.0 million or 2.9%.  Controllable Costs increased by $2.7 million, or 1.2%; offset by a decrease in pass-through costs of $14.7 million.

Salaries, wages and benefits increased by $3.1 million primarily as a result of voluntary employee severance costs related to flight crew and maintenance employees, wage and scale increases under new collective agreements, and increased pension expense resulting from a revised actuarial valuation; offset by a reduction in the number of full time equivalent employees and higher capitalized salaries and wages related to major maintenance overhauls.

Depreciation and amortization expense increased by $0.5 million, primarily related to the purchase of Q400 aircraft, increased capital expenditures on aircraft rotable parts and other equipment, and increased major maintenance overhauls; offset by certain assets having reached full amortization and a change in estimate related to the residual value of the Dash 8-100 and 300 aircraft.

Aircraft maintenance expense decreased by $2.4 million as a result of a $4.6 million reduction related to no activity for Thomas Cook; offset by an increase in engine maintenance activity due to engine charges for the CRJ705 and Dash 8 – 300 aircraft of $1.2 million, increased other maintenance costs of $0.5 million and an increase in the US-dollar exchange rate on certain material purchases of $0.5 million.

Aircraft rent decreased by $5.4 million primarily as a result of no expense in the quarter for Thomas Cook aircraft and the return of CRJ aircraft.

Other expenses increased by $1.3 million primarily due to increased professional fees, increased travel and training costs associated with the Q400 aircraft and increased general overhead expenses.

Non-operating expenses increased by $9.0 million.  This change was mainly attributable to an increase in foreign exchange of $8.8 million (of which $8.9 million was related to an increase in unrealized foreign exchange loss on long-term debt and finance leases) and increased interest expense related to Q400 aircraft financing of $1.0 million; offset by $0.8 million in other income related to a government grant.

EBITDA1 was $34.2 million compared to $42.6 million in 2012, a decrease of $8.4 million or 19.6%, producing an EBITDA margin of 8.2%. Standardized Free Cash Flow was negative $110.9 million, impacted primarily by the continuing growth capital expenditures related to the purchase of Q400 aircraft.

Operating income of $20.8 million was down $8.8 million or 29.7% over first quarter 2012 from $29.6 million.

Net income for the first quarter of 2013 was $9.2 million or $0.07 per basic share, a decrease of $17.0 million or 64.9% from $26.2 million or $0.21 per basic share. On an adjusted basis, net income was $14.7 million or $0.12 per basic share, a decrease of 35.4% or $0.06 per basic share from $22.8 million or $0.18 per basic share.

Chorus Aviation Inc.'s unaudited interim condensed consolidated financial statements for the period ended March 31, 2013 and accompanying Management's Discussion and Analysis (MD&A) are available at and at  A copy may also be obtained on request by contacting Investor Relations at: or (902) 873-5094.

Investor Conference Call / Audio Webcast

Chorus will hold an analyst call at 11:00 a.m. ET on Friday, May 10, 2013 to discuss the first quarter 2013 results.  The call may be accessed by dialing 1-888-231-8191.  The call will be simultaneously audio webcast via: or in the Investor Relations section at 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' Investor Relations website at  A playback of the call can also be accessed until midnight ET, May 17, 2013, by dialing (416) 849-0833 or toll-free 1- 855-859-2056, and passcode 34548114# (pound key).

1 Non-GAAP Financial Measures

EBITDA (earnings before interest, taxes, depreciation, amortization and obsolescence) is a non-GAAP financial measure commonly used throughout all industries to view operating results before interest expense, interest income, depreciation and amortization, gains and losses on property and equipment and other non-operating income and expenses.  Management believes 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 non-operating factors such as historical cost.  EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact on working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statement of cash flows which form part of the financial statements.

Standardized Free Cash Flow is defined as cash flows from operating activities, as reported in accordance with GAAP, less total capital expenditures and dividends.

Adjusted net income and adjusted earnings per share are calculated by adjusting net income by the amount of any unrealized foreign exchange gains and losses on long-term debt and finance leases.  During the first quarter of 2013, Chorus recorded an $5.6 million loss in unrealized foreign exchange on long-term debt and finance leases.  These adjustments more clearly reflect earnings from an operating perspective.

Caution regarding forward-looking information

This news release should be read in conjunction with Chorus' unaudited interim condensed consolidated financial statements for the period ended March 31, 2013 and MD&A dated May 9, 2013 filed with Canadian Securities regulatory authorities (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, 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 May 9, 2013, 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, and Chorus Leasing III Inc.

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

For more information, visit

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. In the first quarter of 2013, Jazz operated scheduled passenger service on behalf of Air Canada with approximately 789 departures per weekday to 82 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.

For more information, visit