CHC announces first quarter results

VANCOUVER, Sept. 13  /PRNewswire-FirstCall/ -- CHC Helicopter Corporation (the "Company") (TSX: FLY.SV.A and FLY.MV.B; NYSE: FLI) today announced unaudited financial results for the three months ended July 31, 2005.

                          Financial Highlights
                 (in millions, except per share amounts)

                                                     Three Months Ended
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                                                     July 31,      July 31,
                                                        2005          2004
  -------------------------------------------------------------------------
  Revenue                                        $     231.3   $     225.5
  Operating income                                      33.4          36.8
  Net earnings from continuing operations               18.7          23.3
  Net loss from discontinued operations                 (0.4)         (0.9)
  Net earnings                                          18.3          22.3

  Per share information(1)
  Basic
  Weighted average number of shares                     42.0          41.9
  Net earnings from continuing operations        $      0.45   $      0.56
  Net loss from discontinued operations                (0.01)        (0.03)
  Net earnings                                          0.44          0.53

  Diluted
  Weighted average number of shares                     46.1          45.8
  Net earnings from continuing operations        $      0.41   $      0.51
  Net loss from discontinued operations                (0.01)        (0.02)
  Net earnings                                          0.40          0.49
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  (1) Comparative share information has been adjusted to reflect the
      April 2005 2-for-1 stock split.

  Highlights

  -  Revenue increased $25.3 million or 11.2% compared to the first quarter
     of last year, offset by a negative foreign exchange impact ("FX") of
     approximately $19.4 million. Excluding FX, revenue in both the Global
     Operations and Heli-One segments increased by more than 20% from the
     first quarter of last year.

  -  Excluding FX, segment EBITDAR increased in all segments and most
     significantly in Global Operations where segment EBITDAR increased
     25.2% from the first quarter of last year.

  -  Operating income for the first quarter was $33.4 million, a decrease
     of $3.4 from the same period last year. This decrease was primarily
     the result of increased restructuring costs of $2.9 million and
     negative FX of approximately $2.8 million, which was partially offset
     by increases in segment EBITDAR in each of the Company's segments.

  -  Net earnings from continuing operations for the first quarter were
     $18.7 million ($0.41 per share, diluted), a decrease of $4.6 million
     from the first quarter of last year. A comparison of first quarter
     earnings from continuing operations should consider the following
     significant variances:

     a) Direct cost increases of approximately $2.0 million (after-tax
        $1.5 million) or $0.03 per share, diluted, expensed primarily in
        the Global Operations segment to support short-term future growth.

     b) Restructuring costs and debt settlement cost increases of
        $1.5 million (after-tax $1.2 million) or $0.03 per share, diluted.
        Restructuring and debt settlement costs were $3.7 million (after-
        tax $2.6 million) or $0.06 per share, diluted, in the first quarter
        and $2.2 million (after-tax $1.4 million) or $0.03 per share,
        diluted, for the same period last year.

     c) An unfavourable foreign exchange impact of $2.8 million (after-tax
        $2.1 million) or $0.05 per share, diluted, on operating income
        largely due to the translation of our foreign subsidiaries results
        to Canadian dollars.

     d) Interest expense increases of approximately $2.6 million (after-tax
        $2.0 million) or $0.04 per share, diluted, primarily as a result of
        higher debt levels related to investments in aircraft deposits,
        aircraft purchases and other capital assets to support future
        growth.

     e) Effective average income tax rate increase of 2.7%, which equates
        to additional income tax expense of $0.6 million or $0.01 per
        share, diluted.

     f) Direct and general and administration cost reductions in the first
        quarter of approximately $1.5 million (after-tax $1.1 million) or
        $0.02 per share, diluted.

  -  Subsequent to quarter end, the Company has agreed to terms for an
     operating lease facility with a major European bank to finance
     U.S.$ 90 million over the next 18 months. The Company has identified
     aircraft that it owned at the end of the first quarter that will be
     financed via this facility, which will result in significant cash
     inflows for the Company in the second and third quarters.

  Investor Conference Call



The Company's first quarter conference call and webcast will take place Wednesday, September 14, 2005 at 10:30 a.m. EDT. To listen to the conference call, dial 416-640-4127 for local and overseas calls, or toll-free 1-800-814-4857 for calls from within North America. To hear a replay of the conference call, dial 416-640-1917, or 877-289-8525 and enter passcode "21150479 followed by the number sign".

The financial results and a live webcast of the conference call will be available at http://www.chc.ca/. The webcast is also available through Canada Newswire at http://www.cnxmarketlink.com/.

CHC Helicopter Corporation is the world's largest provider of helicopter services to the global offshore oil and gas industry with aircraft operating in more than 30 countries.

If you wish to be removed or included on the Company's distribution list, please contact .

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  This document may contain projections and other forward-looking
  statements within the meaning of the "safe harbour" provision of the
  United States Private Securities Litigation Reform Act of 1995. While
  these projections and other statements represent our best current
  judgment, they are subject to risks and uncertainties including, but not
  limited to, factors detailed in the Annual Report on Form 20-F and in
  other filings of the Company with the United States Securities and
  Exchange Commission and in the Company's Annual Information Form filed
  with Canadian security regulatory authorities. Should one or more of
  these risks or uncertainties materialize, or should underlying
  assumptions prove incorrect, actual outcomes may vary materially from
  those indicated.
  -------------------------------------------------------------------------



  Management's Discussion and Analysis of Financial Condition and Results
  of Operations - Three Months Ended July 31, 2005



This management's discussion and analysis ("MD&A") may contain projections and other forward-looking statements within the meaning of the "safe harbour" provision of the United States Private Securities Litigation Reform Act of 1995. While these projections and other statements represent our best current judgment, they are subject to risks and uncertainties including but not limited to, factors detailed in the Annual Report on Form 20-F and in other filings of CHC Helicopter Corporation (the "Company") with the United States Securities and Exchange Commission and in the Company's Annual Information Form filed with Canadian security regulatory authorities. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

This MD&A and the accompanying unaudited consolidated interim financial statements and notes thereto should be read in conjunction with the Company's Audited Consolidated Financial Statements, related notes thereto, and MD&A for the year ended April 30, 2005 as set forth in the Company's Annual Report (the "2005 Annual Filings").

All information reflected herein is expressed in Canadian dollars and is prepared by management in accordance with Canadian generally accepted accounting principles and in accordance with generally accepted accounting principles in the United States except as described in Note 13 to the Company's unaudited consolidated interim financial statements to which this MD&A relates.

Additional information regarding the Company, including copies of the Company's continuous disclosure material such as the Company's Annual Information Form, is available on the Company's website at http://www.chc.ca/ or through the SEDAR website at http://www.sedar.com/.

  This MD&A has been prepared as at September 13, 2005.

  Overview of Results



Revenue for the first quarter was $231.3 million, an increase of $5.8 million from the same period last year. This increase was primarily due to a $25.3 million or 11.2% increase in revenues offset by a negative foreign exchange impact ("FX") of approximately $16.0 million on the translation of our self sustaining foreign operations to Canadian dollars and approximately $3.4 million on the conversion of revenues transacted in currencies other than the reporting currencies of foreign operations (see Foreign Currency).

Operating income for the first quarter was $33.4 million, a decrease of $3.4 million from the same period last year. This decrease was primarily the result of an increase in restructuring costs of $2.9 million and a negative foreign exchange impact of $2.8 million, which was partially offset by increases in segment EBITDAR in each of the Company's segments.

Net earnings from continuing operations for the first quarter was $18.7 million ($0.41 per share, diluted) on revenue of $231.3 million as compared to $23.3 million ($0.51 per share, diluted) on revenue of $225.5 million for the same period last year. The decrease of $4.6 million was due primarily to the decrease in operating income as noted above and an increase in interest expense of $2.6 million, primarily as a result of higher debt levels related to investments in aircraft deposits, aircraft purchases and other capital assets to support future growth.

The net loss from discontinued operations for the first quarter was $0.4 million ($0.01 per share, diluted) as compared to a net loss from discontinued operations of $0.9 million ($0.02 per share, diluted) for the same period last year. Net losses from discontinued operations in the current quarter are for the results of CHC Composites Inc. ("Composites"), which has not yet been sold. Net losses from discontinued operations in the first quarter of last year include the results of Schreiner Canada Ltd. ("Schreiner Canada") and Schreiner Aircraft Maintenance B.V. ("SAMCO") that were disposed of in the third quarter of the prior year.

Net earnings during the first quarter were $18.3 million ($0.40 per share, diluted) compared to net earnings of $22.3 million ($0.49 per share, diluted) for the same period last year.

  Significant Events

  New Organizational Structure



Effective May 1, 2005 the Company is organized under a new operational and management structure. This new organizational structure will provide the Company with opportunities for external growth and operational efficiencies that were not realizable prior to the restructuring. Consistent with this new structure the Company has revised its segmented reporting and will report its results under four segments, as follows:

Global Operations

Global Operations, headquartered in Vancouver, Canada, combines the helicopter flying operations of Africa, the Middle East, Asia, Australia and the Americas. Global Operations services oil and gas, emergency medical services ("EMS") and search and rescue ("SAR") customers in all jurisdictions outside of Europe.

European Operations

European Operations, headquartered in Aberdeen, Scotland, combines the oil and gas flying operations of North Sea bases in Scotland, Norway, the Netherlands, Denmark and Ireland as well as EMS/SAR and training operations throughout Europe.

Heli-One

Heli-One, headquartered in Vancouver, Canada, combines the Company's helicopter services support capabilities including repair and overhaul, maintenance, integrated logistics support and aircraft leasing to both internal and external customers. Heli-One operates repair and overhaul facilities in Norway, Canada, Australia and Africa. Heli-One also provides survival suit manufacturing and supply services.

Corporate and Other

Corporate and Other consists of the Company's corporate offices located in various jurisdictions.

Inter-segment Transactions and Measurement of Segment Results

Heli-One owns or leases substantially all of the Company's aircraft fleet and provides tip-to-tail maintenance and logistics support to both Global Operations and European Operations in addition to a growing base of external customers. As a result, all aircraft used by the Company's flying segments are leased from and serviced by Heli-One. Lease, maintenance (power by the hour or "PBH") and associated transactions between Heli-One and the Company's flying divisions are at rates benchmarked to industry standards.

As the owner or lessor of the Company's fleet and as the provider of substantially all maintenance services, Heli-One will recognize a substantial portion of the Company's segment EBITDAR and operating income and will be responsible for the majority of the Company's capital assets. All transactions between Heli-One, Global Operations and European Operations are eliminated on consolidation.

The Company has provided segment revenues, segment EBITDAR and operating income because these are the financial measures used by the Company's key decision makers in making operating decisions and assessing performance.

Comparative Figures for Segmented Reporting

Comparative figures for the first quarter of the prior fiscal year have been restated to reflect the new operational structure as if certain lease, PBH and associated transactions between the Company's operating segments, as detailed above, had occurred for that period as well. The restatement is based on management's best estimate of how these transactions would have been recorded if the operational and management restructuring had been effective on May 1, 2004. The Company's comparative consolidated results remain unchanged from those previously reported as the restatement relates only to internal and eliminated transactions.

Current Restructuring and Related Activities

The Company continued with its global restructuring initiative in the first quarter and expensed $3.7 million (after-tax $2.6 million) of costs primarily consisting of voluntary retirement and involuntary severance costs, professional and consulting fees, and costs associated with the relocation of a Heli-One repair and overhaul shop from Port Alberni to Vancouver, British Columbia. Restructuring costs of $0.8 million (after-tax $0.5 million) were expensed in the same period of last year.

The Company expects to expense further costs of approximately $15 million in the remainder of the year on the current restructuring initiative. These remaining costs will consist primarily of similar items to those expensed in the first quarter of the current fiscal year and planning for the implementation of a new European ownership structure. As well, the Company expects increased costs in relation to the development of standard IT applications, reporting and control processes. In addition, the Company may incur additional expenses in relation to foreign exchange losses and derivative cancellation costs as a result of transaction, cashflow and legal entity changes made in relation to the restructuring.

In the first quarter, the Company realized direct and general and administration cost reductions of approximately $1.5 million in relation to restructuring changes in all operating segments. To date, the Company has reduced the workforce by approximately 100 primarily in the U.K and in the Netherlands, which includes substantial reductions from Schreiner, which is now consolidated into the Company's new operating segments. When the current restructuring initiative is complete the Company expects substantial cost savings from these reductions and the following additional items:

  -  Further headcount reductions to be realized primarily in Europe,
     impacting the European Operations and the Heli-One segments. It is
     important to note that the Company has temporarily increased the
     number of employees in some jurisdictions to manage the restructuring
     initiatives in progress and has increased the number of support and
     line personnel to support newly acquired and developing businesses and
     future growth. Global Operations, for example, has recently hired over
     80 new pilots and engineers to support future contracts.

  -  Reduced infrastructure support costs including carrying and lease
     costs for facilities no longer required (St. John's, Canada and
     Hoofddorp, the Netherlands).

  -  Improvements in fleet management, procurement, logistics and other
     operating efficiencies.

  -  European ownership restructuring which will provide the Company with
     increased flexibility in meeting its licensing requirements and
     reduce average effective tax rates and/or cash tax outflows.



These savings will positively impact operating margins and net income progressively throughout fiscal 2006.

In addition to the restructuring costs incurred in the first quarter, approximately $2.0 million was expensed for costs to prepare for new activities and contracts for which revenue and EBITDAR will start to be realized in the second half of the current fiscal year. These costs were primarily incurred in the Global Operations segment to mobilize new and reposition existing aircraft, recruitment and training of pilots and engineers, and other costs in the Heli-One segment where North American repair and overhaul capabilities and new services including aircraft leasing are being developed.

Divestiture Activities

On September 9, 2005, the Company sold its remaining interest in Canadian Helicopters Limited ("CHL") and realized net proceeds of approximately $48 million. The Company will record a combined pre-tax gain and dividend income of approximately $20 million on this divestiture in the second quarter. The final gain on sale is subject to adjustments of closing costs and expenses and equity accruals from July 31, 2005 to the date of the sale. Equity earnings of CHL were $1.7 million for the first quarter (2005 - $1.8 million).

During the quarter, the Company signed a Letter of Intent for the sale of its 38% shareholdings in Inversiones Aereas S.L. ("Inaer"), which operates light and medium aircraft primarily in the Spanish helicopter market. The transaction is subject to several conditions including satisfactory due diligence and regulatory approval and is expected to close in October 2005. Proceeds are estimated at $45 million. The book value of the investment in Inaer is approximately $22 million at July 31, 2005. Professional fees and other direct costs associated with realizing this potential sale are not yet determinable and will reduce the potential gain on sale arising from this transaction. Equity earnings of Inaer was $1.3 million for the first quarter and approximately the same in the first quarter of last year.

The Company continues to discuss the potential sale of Composites with a number of interested parties. To date no agreement has been reached and any potential agreement is subject to approval by the Government of Newfoundland and Labrador.

Potential Future Acquisition

Subsequent to the quarter end, the Company announced it was granted an irrevocable option to acquire an equity position in Brazilian Helicopter Services ("BHS") and provide, on an exclusive basis, operational expertise including: safety management systems, maintenance procedures, technical support and flight standards. Heli-One will provide helicopter leasing services and access to its worldwide fleet of aircraft and PBH maintenance support.

BHS is one of the largest helicopter operators in the Brazilian offshore sector, employing a team of more than 200 professionals and operating a fleet of 11 aircraft, including AS332 Super Puma Mk2 and Sikorsky S76 helicopters. BHS operates out of Sao Paulo, Macae and Farol de Sao Tome, transporting an average of 14,000 passengers per month and has been providing passenger air transport services to Petrobras since 1992.

There are currently 50 aircraft operating in the Brazilian offshore market primarily for Petrobras. Petrobras, the state-owned oil company, said it plans to invest US$22 billion in exploration and production in order to expand output and build another 10 platforms. In addition, Petrobras has announced its intention to replace a portion of its existing helicopter fleet with new aircraft in the coming year. This may translate into a significant opportunity for both BHS and the Company. In signing the agreement, BHS and the Company are establishing a mutually beneficial, long-term relationship in the rapidly expanding Brazilian offshore sector.

Flying Revenue and Hours

The Company derives its flying revenue from two primary types of contracts. Approximately 50% (2005 - 54%) of the Company's first quarter flying revenue was derived from hourly charges (including hourly charges on contracts that also have fixed charges), and the remaining 50% (2005 - 46%) was generated by fixed monthly charges. Because of the significant fixed component, a change in flying hours may not result in a proportionate change in revenue. While flying hours may not correlate directly with revenue, they remain a good measure of activity levels.

The following table provides a quarterly summary of the Company's flying hours and number of aircraft utilized for the past eight quarters.

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                         Flying Hours by Quarter
  -------------------------------------------------------------------------
                      Flying Hours                Number of Aircraft
            ------------------------------   ------------------------------
              Global    European               Global    European
  Period    Operations Operations   Total    Operations Operations Heli-One
  ----------------------------------------   ------------------------------
  Q2-2004     11,926     21,951     33,877        90        66         8
  Q3-2004     12,066     19,806     31,872        90        68         9
  Q4-2004     15,405     22,451     37,856       110        83        13
  Q1-2005     16,481     24,468     40,949       112        82        13
  Q2-2005     16,364     24,028     40,392       114        80        13
  Q3-2005     17,070     22,927     39,997       122        79        13
  Q4-2005     16,778     22,183     38,961       121        81        13
  Q1-2006     17,355     23,713     41,068       127        77        14
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The following table provides year-to-date information on flying revenue mix by segment and in total by aircraft type for fiscal 2006 and 2005. The mix of aircraft types has changed over the same period in the prior year, with heavy aircraft flying revenue as a percentage of total flying revenue decreasing by 3% and the percentage of medium revenue and fixed wing aircraft flying revenue increasing by 3%. This flying revenue mix change is due primarily to the growth of medium aircraft in the Global Operations segment.

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                                  Year-to-date Flying Revenue Mix
                                 (in thousands of Canadian dollars)
                         --------------------------------------------------
                                          Three Months Ended
                                            July 31, 2005
                         --------------------------------------------------
                                                         Fixed
                            Heavy    Medium     Light     wing      Total
                         --------------------------------------------------
  Global Ops              $ 16,994  $ 48,723  $    963  $  6,395  $ 73,075
  European Ops              86,500    29,051         -         -   115,551
                         --------------------------------------------------
  Total Flying Revenue    $103,494  $ 77,774  $    963  $  6,395  $188,626
                         --------------------------------------------------
  Total %                      55%       41%        1%        3%      100%
  -------------------------------------------------------------------------


  -------------------------------------------------------------------------
                                  Year-to-date Flying Revenue Mix
                                 (in thousands of Canadian dollars)
                          -------------------------------------------------
                                          Three Months Ended
                                            July 31, 2004
                          -------------------------------------------------
                                                         Fixed
                            Heavy    Medium     Light     wing      Total
                          -------------------------------------------------
  Global Ops              $ 14,321  $ 38,867  $    847  $  8,429  $ 62,464
  European Ops              90,882    28,605       527         -   120,014
                          -------------------------------------------------
  Total Flying Revenue    $105,203  $ 67,472  $  1,374  $  8,429  $182,478
                          -------------------------------------------------
  Total %                      58%       37%        1%        4%      100%
  -------------------------------------------------------------------------



The following table provides year-to-date information on the hourly and fixed flying revenue by segment (without adjusting for the impact of foreign exchange) for fiscal 2006 and 2005. Fixed flying revenue as a percentage of total flying revenue has increased from 46% last year to 50% this year primarily due to growth in the Company's Global Operations segment, which includes a higher percentage of fixed charge contracts.

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                             Flying Revenue - Hourly vs. Fixed
                                 Three Months Ended July 31
                             (in thousands of Canadian dollars)
                -----------------------------------------------------------
                      Hourly               Fixed               Total
                -----------------------------------------------------------
                  2005      2004      2005      2004      2005      2004
                ------------------- ------------------- -------------------
  Global
   Operations   $ 23,050  $ 20,803  $ 50,025  $ 41,661  $ 73,075  $ 62,464
  European
   Operations     71,698    76,877    43,853    43,137   115,551   120,014
                ------------------- ------------------- -------------------
    Total       $ 94,748  $ 97,680  $ 93,878  $ 84,798  $188,626  $182,478

    % of Total       50%       54%       50%       46%      100%      100%
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The following table provides year-to-date information on segment flying revenue by industry sector for fiscal 2006 and 2005. During the quarter the Company derived approximately 86% of its flying revenue from the oil and gas industry, compared to 85% in the first quarter of last year. Revenue from this industry is primarily derived from oil and gas production support.

  -------------------------------------------------------------------------
                            Flying Revenue - By Industry Sector
                                 Three Months Ended July 31
                             (in thousands of Canadian dollars)
                -----------------------------------------------------------
                Global Operations   European Operations       Total
                -----------------------------------------------------------
                  2005      2004      2005      2004      2005      2004
                ------------------- ------------------- -------------------
  Oil & Gas     $ 56,901  $ 46,572  $106,094  $109,254  $162,995  $155,826
  EMS/SAR(1)      11,566    10,134     5,316     6,440    16,882    16,574
  Other            4,608     5,758     4,141     4,320     8,749    10,078
  -------------------------------------------------------------------------
    Total       $ 73,075  $ 62,464  $115,551  $120,014  $188,626  $182,478
  -------------------------------------------------------------------------
  (1) Emergency medical services and search and rescue services.



The Company regularly compares its activity levels against available industry data. Aberdeen Airport Ltd. in the U.K. reports monthly helicopter passenger traffic for all helicopter operations in Aberdeen, Scotland, which is the Company's largest base (accounting for approximately 28% of total European Operations revenue) as measured by the number of aircraft and revenue. The following table provides a quarterly summary of all helicopter passenger traffic at Aberdeen Airport from fiscal 2002 to fiscal 2006.

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                Aberdeen Airport - Helicopter Passengers
                           Year Ended April 30
  -------------------------------------------------------------------------
                              2006      2005      2004      2003      2002
  -------------------------------------------------------------------------
  Q1                       115,696   102,228   101,757   116,102   121,868
  Q2                                 104,715    95,227   112,449   123,012
  Q3                                  95,896    87,588    92,918   114,606
  Q4                                 101,132    89,975    92,686   108,247
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                           115,696   403,971   374,547   414,155   467,733
  -------------------------------------------------------------------------
  Source: Aberdeen Airport Ltd.



The data in the above table shows that helicopter passenger activity this quarter has increased 13.2% from the same period in fiscal 2005. This 13.2% increase is greater than the increase experienced by the European Operations segment in the first quarter primarily due to the loss of the bp and Talisman contracts in the prior fiscal year. However, it is in part because of the general activity increases that the European Operations segment has substantially replaced this lost revenue with new contracts and ad hoc work. It also demonstrates the seasonality in activity levels from quarter to quarter.

Review of Segment Revenue, EBITDAR and Operating Income

The Company includes four reporting segments in its financial statements: Global Operations, European Operations, Heli-One and Corporate and Other. The primary factors considered in identifying segments are: consistency with the Company's internal operational and management structure, geographic coverage, type of contracts that are entered into, type of aircraft that are utilized and information used by the Company's key decision makers to evaluate results of operations.

The following table provides first quarter external revenue, segment EBITDAR and operating income variance analysis between fiscal 2006 and 2005. The numbers in this analysis are referred to in the review of each operating segment that follows the table.

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       Segment Revenue from External Customers - Variance Analysis
                   (in thousands of Canadian dollars)

                -----------------------------------------------------------
                                                          Inter-
                 Global   European                       segment
                 Opera-    Opera-             Corporate   Elimi-
                 tions     tions    Heli-One   & other   nations    Total
                -----------------------------------------------------------
  Three months
   ended July
   31, 2004     $ 71,161  $125,029  $ 29,213  $     68       N/A  $225,471
  Foreign
   exchange
   impact(2)      (8,892)   (8,075)   (2,474)       (3)      N/A   (19,444)
  Revenue
   increase
   (decrease)     14,555     3,961     6,813       (11)      N/A    25,318
                -----------------------------------------------------------
  Three months
   ended July
   31, 2005     $ 76,824  $120,915  $ 33,552  $     54       N/A  $231,345
                -----------------------------------------------------------
                -----------------------------------------------------------

  Total revenue
   increase
   (decrease)   $  5,663  $ (4,114) $  4,339       N/A       N/A  $  5,874
  % increase
   (decrease)       8.0%     (3.3%)    14.9%       N/A       N/A      2.6%
  % increase
   (decrease)
   excluding FX    20.5%      3.2%     23.3%       N/A       N/A     11.2%


                    Segment EBITDAR Variance Analysis
                   (in thousands of Canadian dollars)

                -----------------------------------------------------------
                                                          Inter-
                 Global   European                       segment
                 Opera-    Opera-             Corporate   Elimi-
                 tions     tions    Heli-One   & other   nations    Total
                -----------------------------------------------------------
  Three months
   ended July
   31, 2004     $ 19,553  $ 28,836  $ 55,453  $ (8,053) $(36,818) $ 58,971
  Foreign
   exchange
   impact(2)      (2,692)   (2,531)     (137)       28         -    (5,332)
  Segment EBITDAR
   increase
   (decrease)      4,924       607        55     1,994      (260)    7,320
                -----------------------------------------------------------
  Three months
   ended July
   31, 2005     $ 21,785  $ 26,912  $ 55,371  $ (6,031) $(37,078) $ 60,959
                -----------------------------------------------------------
                -----------------------------------------------------------

  Segment
   EBITDAR
   margin(1)
  - Last year      27.5%     23.1%     46.5%       N/A       N/A     26.2%
  - This year      28.4%     22.3%     44.7%       N/A       N/A     26.3%
  Total Segment
   EBITDAR
   increase
   (decrease)   $  2,232  $ (1,924) $    (82) $  2,022  $   (260) $  1,988
  % increase
   (decrease)      11.4%     (6.7%)    (0.1%)   (25.1%)      N/A      3.4%
  % increase
   (decrease)
   excluding FX    25.2%      2.1%      0.1%    (24.8%)      N/A     12.4%


                   Operating Income Variance Analysis
                   (in thousands of Canadian dollars)

                -----------------------------------------------------------
                                                          Inter-
                 Global   European                       segment
                 Opera-    Opera-             Corporate   Elimi-
                 tions     tions    Heli-One   & other   nations    Total
                -----------------------------------------------------------
  Three months
   ended July
   31, 2004     $  1,506  $  5,806  $ 38,700  $ (9,167)      N/A  $ 36,845
  Foreign
   exchange
   impact(2)      (2,096)   (2,194)    1,379       125       N/A    (2,786)
  Operating
   income
   increase
   (decrease)      1,147     3,050    (5,508)      629       N/A      (682)
                -----------------------------------------------------------
  Three months
   ended July
   31, 2005     $    557  $  6,662  $ 34,571  $ (8,413)      N/A  $ 33,377
                -----------------------------------------------------------
                -----------------------------------------------------------

  Total operating
   income
   increase
   (decrease)   $   (949) $    856  $ (4,129) $    754       N/A  $ (3,468)
  % increase
   (decrease)     (63.0%)    14.7%    (10.7%)    (8.2%)      N/A     (9.4%)
  % increase
   (decrease)
   excluding FX    76.2%     52.5%    (14.2%)    (6.9%)      N/A     (1.9%)
  -------------------------------------------------------------------------
  (1) Segment EBITDAR as a percent of revenue from external customers,
      except for the Heli-One segment, which is a percent of total revenue.
  (2) Includes both translation and transaction foreign exchange impact.
      See discussion under Foreign Currency.


  Divisional Review

  Global Operations



Revenue from the Company's Global Operations segment for the first quarter was $76.8 million, an increase of $5.7 million from the same period last year. This increase was primarily the result of increased flying revenue of $14.6 million (excluding FX) from new and expanded contracts in Turkey, Sudan, Nigeria, Venezuela, Australia and Azerbaijan which was partially offset by a negative foreign exchange impact of $8.9 million. Flying hours increased by 874 hours in the first quarter compared to the first quarter last year, and by 577 hours compared to the fourth quarter of last year.

Segment EBITDAR for the first quarter was $21.8 million, an increase of $2.2 million from the same period last year. This increase was primarily attributable to a segment EBITDAR increase of $4.9 million earned on increased revenue offset by an unfavourable foreign exchange impact of $2.7 million. Global Operations segment EBITDAR has increased 25.2% from the same quarter last year. Because Global Operations continues to expand at a rapid rate incremental costs of approximately $1.8 million were expensed in the first quarter primarily in relation to the repositioning and mobilization of aircraft and the hiring in recent months of approximately 80 new pilots and engineers to crew these aircraft in various jurisdictions.

Operating income for the first quarter was $0.6 million, a decrease of $0.9 million from the same period last year, primarily due to a $4.9 million increase in segment EBITDAR, offset by increased lease costs of $2.8 million charged by Heli-One, restructuring costs of $0.4 million and a negative foreign exchange impact of $2.1 million. Lease costs have increased primarily due to the increase in the number of aircraft in the Global Operations segment from the first quarter last year.

Growth in the Global Operations segment is expected to continue as contracts already awarded generate additional revenue and segment EBITDAR and as new opportunities develop in Brazil in relation to the Company's potential acquisition of an equity position in BHS and in West Africa where additional fixed-wing aircraft will be deployed by the fourth quarter of fiscal 2006.

Subsequent to the quarter end, Global Operations, through BHS, has submitted a tender to Petrobras for a total of 22 new medium helicopters. The contract award is expected to be announced in October for a potential start next spring.

At July 31, 2005 there were 127 aircraft operating in this segment consisting of 20 heavy, 85 medium, 8 light and 14 fixed-wing.

European Operations

Revenue from the Company's European Operations segment for the first quarter was $120.9 million, a decrease of $4.1 million from the same period last year. This decrease was attributable to an unfavourable foreign exchange impact of $8.1 million partially offset by an increase in flying revenue of $4.0 million (excluding the impact of foreign exchange). The increase in flying revenue relates primarily to increased revenue from Norsk Hydro, Total and increases from other long-term and ad hoc customers throughout the North Sea. Flying revenue increases were realized despite lower revenue from bp and Talisman as these contracts have expired. Flying hours of 23,713 decreased by 755 hours in the first quarter versus the first quarter last year primarily due to the loss of the low margin bp contract and Talisman contract together representing 2,724 flying hours in the first quarter of last year. European Operations flying hours have increased 1,530 hours from the recent fourth quarter of last year and will continue to increase in the second quarter with the start-up of the recently announced Nexen Petroleum U.K. Limited and Marathon Oil U.K. Ltd contracts.

Segment EBITDAR for the first quarter was $26.9 million, a decrease of $1.9 million from the same period last year. This decrease was primarily attributable to an unfavourable foreign exchange impact of $2.5 million partially offset by an increase in segment EBITDAR of $0.6 million earned on the increase in flying revenue noted above.

Operating income for the first quarter was $6.7 million, an increase of $0.9 million from the same period last year, primarily due to increased segment EBITDAR of $0.6 million and decreased lease costs of $3.1 million, charged by Heli-One, partially offset by an unfavourable foreign exchange impact of $2.2 million. Lease costs have decreased as several aircraft previously deployed in the North Sea have been reassigned to contracts in Global Operations. Segment EBITDAR was also negatively impacted by incremental direct costs as a result of delays in deployment of certain aircraft in the quarter.

During the first quarter the Company successfully negotiated a five-year U.K. pilot union agreement. The agreement provides a 5-year pay deal and a restructuring of the final 5-day pension agreement which will yield lower pension costs.

Subsequent to the quarter, European Operations submitted a bid to the Maritime and Coast Guard Agency, U.K. Department for Transport for search and rescue services for the provision of seven heavy aircraft. The contract award is expected to be announced this fall for a July 2007 start.

At July 31, 2005 there were 77 aircraft operating in this segment, consisting of 51 heavy and 26 medium aircraft.

Heli-One

Revenue from external customers for the Heli-One segment for the first quarter was $33.6 million, an increase of $4.3 million from the first quarter of last year. This increase was primarily attributable to growth from newly acquired businesses which generated revenue of $6.3 million. Revenue from these businesses was slowed somewhat in the first quarter by the relocation of one of the Company's repair and overhaul facilities from Port Alberni, Canada to Vancouver, Canada. Revenue growth was partially offset by an unfavourable foreign exchange impact of $2.5 million. Internal revenues for Heli-One were $90.3 million, an increase of $0.2 million from the first quarter of last year. Internal revenues are expected to grow as Global Operations and European Operations deploy more aircraft and increase flying activity. Heli-One's total revenue in the quarter was $123.8 million compared to $119.3 million in the first quarter of last year.

Segment EBITDAR for the first quarter was $55.4 million, a decrease of $0.1 million from the first quarter of last year. This decrease was primarily attributable to an increase in direct costs in relation to the development of Heli-One and a small unfavourable foreign exchange impact offset by a small increase in segment EBITDAR from increased revenue. Direct costs incurred to build-up Heli-One capabilities included costs to consolidate and develop North American repair and overhaul facilities and develop new services including aircraft leasing for external customers.

Operating income for the first quarter was $34.6 million, a decrease of $4.1 million from the first quarter last year. This decrease was primarily due to restructuring costs of $1.0 million, increased amortization of $0.9 million, reduced gains from the sale of assets of $0.9 million and increased lease costs of approximately $1.3 million due to the introduction of higher cost aircraft, including two S-92 helicopters, and an increase in the interest component of lease costs. These items were partially offset by a favourable foreign exchange impact of $1.4 million.

The Company believes future opportunities for Heli-One are significant. Heli-One has committed to purchase seven heavy and 27 medium aircraft expected to be delivered by the end of fiscal 2007 and has options to purchase up to four heavy and 31 medium aircraft over the next five years. The Company expects that the majority of these aircraft will be used internally to support continued growth. As well, significant opportunities exist from the continued development of Heli-One's North American repair and overhaul facilities.

Corporate and Other

Corporate and Other segment EBITDAR costs of $6.0 million in the first quarter decreased $2.0 million from the same period last year. The primary reasons for the decrease were adjustments in claim reserves for various insured risks and a reduction in the Schreiner corporate office costs as a result of restructuring changes made in that jurisdiction offset by increases in variable compensation costs.

Debt Settlement Costs

No debt settlement costs were incurred in the first quarter, compared to $1.4 million in the first quarter of last year. Debt settlement costs were incurred in the first quarter of last year in relation to the redemption of the Company's remaining 11 3/4% senior subordinated notes and 8% subordinated debentures.

Financing Charges

Financing charges of $12.0 million were expensed in the first quarter, compared to $9.0 million expensed in the first quarter of last year. The increase of $3.0 million relates primarily to a $2.6 million increase in interest on long-term debt relating to the increase in total debt due to investment in aircraft deposits, aircraft purchases and other capital assets made in the last twelve months and an increase of $0.4 million in foreign exchange losses on foreign currency denominated working capital and long-term debt.

Equity Earnings of Associated Companies

Equity earnings of associated companies for the first quarter was $3.2 million compared to $3.1 million in the first quarter of last year. Equity earnings for both Inaer and CHL were the same as the prior year.

Income Taxes

Income tax provision on earnings from continuing operations for the first quarter was $5.8 million compared to $6.3 million in the same period last year. The Company's average effective tax rate, excluding tax associated with discontinued operations restructuring and debt settlement costs, for the first quarter was 24.8% compared to 22.1% for the same period last year. The higher rate was primarily the result of increased earnings in jurisdictions with higher income tax rates as noted below. Corporate restructuring initiatives should have a positive impact on the Company's future average effective tax rate.

Operating activities

The Company generated $46.3 million of operating cash flow (before changes in non-cash working capital) during the first quarter, an increase of $5.8 million from the $40.5 million generated during the first quarter of last year. This increase is due primarily to an $8.4 million decrease in advance rental payments, offset by a $4.6 million reduction in net earnings from continuing operations and various other differences.

Increases in working capital during the first quarter was $56.1 million (2005  - $14.5 million), primarily due to a $28.2 million reduction in accounts payable and a $25.2 million increase in accounts receivable. The $28.2 million decrease in accounts payable included a $10 million semi-annual payment of interest on the Company's senior subordinate notes, and the paying down of some large payable balances that had accrued at April 30, 2005. The $25.2 million increase in accounts receivable included,

  -  An approximate $6 million increase in accounts receivable from a
     customer which is in dispute with the Company for failure to deliver
     aircraft on specified dates. Approximately $3 million of this amount
     has now been collected.

  -  Temporary increases of receivables in the U.K. and Africa of
     approximately $18 million. Approximately 50% of these amounts have now
     been collected since July 31, 2005.



In addition to these increases, the Company invested $5.3 million in new inventory to support its expanding fleet of aircraft operated by the Company's flying segments and Heli-One's third party customers.

As a result of this increase in working capital, net operating cash flow for the quarter was ($9.8) million, a decrease of $35.8 million from the first quarter of last year.

Financing activities

The Company's total net debt increased by $72.9 million primarily to support investing activities during the first quarter of fiscal 2006 as follows:

                                                     Change in
                                             Total Net Debt Position(1)
                                                  During Q1 - 2006
                                          (in millions of Canadian dollars)
                                          ---------------------------------
  Opening balance, April 30, 2005                     $575.7
  Increase in net debt                                  94.0
  Foreign exchange                                     (21.1)
                                          ---------------------------------
  Ending balance, July 31, 2005                       $648.6
                                          ---------------------------------

  (1) Net debt is comprised of total debt, less cash and cash equivalents.




Financing activities generated cash of $75.7 million for the first quarter compared to $12.0 million generated for the first quarter last year. Total long-term debt proceeds of $85.4 million were offset by $6.7 million in long-term debt repayments. The net proceeds were used primarily to support investing activities for the first quarter.

Subsequent to quarter end, the Company has agreed to terms for an operating lease facility with a major European bank to lease finance U.S.$90 million of helicopters over the next 18 months. This facility will allow the Company to move aircraft among jurisdictions, as long as pre-negotiated percentages of facility value are maintained in primary and non-primary operating jurisdictions. The Company has identified aircraft that it owned at the end of the first quarter that will be financed via this facility, which will result in significant net cash inflows for the Company in the second and third quarters of fiscal 2006.

During the quarter the Company paid a quarterly dividend of $3.2 million.

At July 31, 2005, the Company had unused capacity under its credit facilities of $157.7 million (April 30, 2005 - $232.7 million) and cash and cash equivalents of $33.8 million, for a total of $191.5 million (April 30, 2005 - $284.1 million).

Investing activities

Cash used for investing activities was $79.3 million for the first quarter compared to $61.6 million for the first quarter last year. Additions to property and equipment during the quarter totalled $24.2 million. This was comprised of (i) $14.4 million for the purchase of two aircraft; (ii) $4.1 million for aircraft modifications; (ii) $1.1 million related to buildings and hangars; and (iv) $4.6 million for other equipment. Aircraft expenditures were comprised of a combined aircraft purchase price of $29.1 million less the application of deposits of $14.7 million, for a net amount of $14.4 million. The Company made additional aircraft deposits of $41.2 million during the first quarter.

Capital expenditures for helicopter major components during the first quarter totalled $12.7 million. The Company also incurred expenditures of $1.0 million for helicopter major inspections.

Risks and Uncertainties

Except for the discussion contained elsewhere in this MD&A, there has been no significant change in the risks and uncertainties to the Company as outlined in the MD&A contained in the Company's 2005 Annual Filings and as detailed in the Company's 2005 Annual Information Form filed with Canadian Securities Administrators and in the Annual Report on Form 20-F filed with the United States Securities and Exchange Commission.

Foreign currency

The Company's reporting currency is the Canadian dollar. However, a significant portion of revenue and operating expenses are denominated in the reporting currencies of the Company's principal foreign operating subsidiaries which consist primarily of pound sterling, Norwegian kroner, U.S. dollars, Australian dollars, South African rand and euros. In addition, certain revenue and operating expenses are transacted in currencies other than the reporting currencies of these subsidiaries. The foreign exchange impact on revenue and segment EBITDAR is comprised of (i) foreign exchange on the translation of the financial results of the foreign subsidiaries into Canadian dollars ("translation impact"); and (ii) foreign exchange on the translation of foreign denominated transactions into the reporting currencies of the subsidiaries ("transaction impact").

The total unfavourable foreign exchange impact on revenue for the three months ended July 31, 2005 was $19.4 million. This consisted of an unfavourable translation impact of $16.0 million and a $3.4 million unfavourable transaction impact.

The total unfavourable foreign exchange impact on operating income for the three months ended July 31, 2005 was $2.8 million. This consisted of an unfavourable translation impact of $2.1 million and an unfavourable transaction impact of $0.7 million

As at July 31, 2005, the Company's total net debt was denominated (before currency swaps) in the following currencies:

  -------------------------------------------------------------------------
                                                        (Thousands)
                                             ------------------------------
                                                   Debt in       Canadian
  Currency                                   Original Currency  Equivalent
  -------------------------------------------------------------------------
  Euro                                        Euro    56,433   $    83,905
  Pound sterling                               GBP     9,583        20,669
  U.S. dollar                                    $   463,000       567,592
  Canadian dollar                            U.S.$    10,224        10,224
  Cash and cash equivalents (various currencies)                   (33,805)
  -------------------------------------------------------------------------

  Total Net Debt                                               $   648,585
  -------------------------------------------------------------------------



Of the U.S. $463 million of US dollar denominated debt at July 31, 2005, U.S. $94 million, U.S. $30 million and U.S. $137 million were converted to pnds stlg 55 million, (euro) 25 million and NOK 856 million respectively through the use of currency swaps.

  -------------------------------------------------------------------------
                                             Year-to-date Average Foreign
                                                     Exchange Rates
                                             ------------------------------
                                                   July 31,     July 31,
                                                     2005         2004
                                             ------------------------------
  USD - CAD                                           1.2398        1.3523
  NOK - CAD                                           0.1914        0.1973
  GBP - CAD                                           2.2430        2.4619
  Euro - CAD                                          1.5247        1.6421
  -------------------------------------------------------------------------
  As the table above indicates, the Canadian dollar has strengthened
  against all currencies listed.

  Financial Instruments



The Company periodically enters into interest rate swaps, forward foreign exchange contracts, currency swaps, equity forward pricing agreements and other derivative instruments to hedge the Company's exposure to interest rate risk, foreign currency exchange risk and stock price volatility in connection with its stock appreciation rights plan. The Company does not enter into derivative transactions for speculative or trading purposes.

During the period ended July 31, 2005, the Company continued its designation of its U.S. $400 million 7 3/8% senior subordinated notes and related currency swaps as effective hedges of the Company's net investments in certain self-sustaining operations in Canada, the U.K., the Netherlands and Norway. The Company also has designated other pound sterling, euro and U.S. dollar denominated debt as hedges of its net investments in its self- sustaining operations in the U.K., the Netherlands, and Canada respectively. As a result of these effective hedging relationships, revaluation gains and losses on debt, the net investments and currency swaps are offset in the cumulative translation adjustment account in the equity section of the balance sheet in accordance with Canadian GAAP.

The Company has also entered into foreign currency forward contracts to reduce its exposure to currency fluctuations. These derivatives were designated as effective hedges of anticipated foreign currency revenues or expenses for certain of its operations.

In addition, the Company has hedged its obligations under its stock appreciation rights plans using an equity forward price agreement to reduce volatility in cash flow and earnings due to possible future increases in the Company's share price.

Fleet

At July 31, 2005 the Company's fleet consisted of 154 owned aircraft and 64 aircraft under operating leases. Seventy-seven of these aircraft are deployed in European Operations (primarily in the North Sea) with the other 141 deployed throughout the world. In addition, 236 aircraft were deployed in the Company's 41.75% owned Canadian onshore helicopter operations (Canadian Helicopters Limited), the Company's 40% owned Nigeria helicopter operations (Aero Contractors of Nigeria) and the Company's 38% owned investment in Inaer, the largest onshore and offshore helicopter operator in Spain, for a combined total of 454 aircraft.

The following table outlines the changes in the Company's fleet during the first quarter of fiscal 2006:

  Fleet Summary

  -------------------------------------------------------------------------
                              Fleet Summary
  -------------------------------------------------------------------------
                                                                    Operat-
                                                 Fixed                 ing
                            Heavy  Medium  Light  Wing  Total  Owned  Lease
                            -----  ------  ----- -----  -----  -----  -----
  Fleet at April 30, 2005     76    115     10     14    215    152     63

  Increases (decreases)
   during the period:

  Purchase of AS365N3                 1                    1      1
  Lease of AS365N2                    1                    1             1
  Purchase of S-92             1                           1      1
                            -----------------------------------------------
  Fleet at July 31, 2005      77    117     10     14    218    154     64
                            -----------------------------------------------

  Fleet deployment as at
   July 31, 2005

  Global Operations           20     85      8     14    127    103     24
  European Operations         51     26      -      -     77     40     37
  Heli-One                     6      6      2      -     14     11      3
                            -----------------------------------------------
                              77    117     10     14    218    154     64
  -------------------------------------------------------------------------



During the first quarter, the Company incurred aircraft operating lease costs of $15.4 million compared to $14.6 million in the same period last year. As at July 31, 2005, there were two fewer leased aircraft compared to the same period last year. Lease costs increased due to new leases of higher cost aircraft including two S-92 aircraft compared to the first quarter of the previous year and an increase in the interest component of lease charges.

The Company has entered into operating leases with third-party lessors in respect of 64 aircraft included in the Company's fleet at July 31, 2005. Forty-six of these leases are long-term with expiry dates ranging from 2006 to 2013. The Company has an option to purchase these aircraft at market values or agreed amounts at the end of the majority of these long-term leases.

At July 31, 2005 the Company operated 19 aircraft under operating leases with seven entities that would be considered variable interest entities ("VIEs") under Canadian GAAP. These leases have terms and conditions similar to those of the Company's other operating leases over periods ranging from 2006 to 2012.

Based on appraisals by independent helicopter valuation companies as at April 30, 2005, the estimated fair market value of the aircraft leased from VIEs is $165.4 million as at July 31, 2005. The Company has provided junior loans and loans receivable in connection with operating leases with these VIEs. The Company's maximum exposure to loss related to the junior loans and loans receivable as a result of its involvement with the VIEs is $16.4 million as at July 31, 2005.

The future minimum lease payments required under aircraft operating leases are as follows (based on July 31, 2005 interest rates and foreign exchange rates):

  2006                                                     $  41.1 million
  2007                                                        44.3 million
  2008                                                        38.9 million
  2009                                                        35.7 million
  2010                                                        31.0 million
  And thereafter:                                             35.3 million
                                                           ----------------
  Total                                                    $ 226.3 million
                                                           ----------------
                                                           ----------------



In addition to aircraft leases, the Company has approximately $4 million in annual lease commitments for land, buildings and non-aircraft equipment.

Based on an independent appraisal as at April 30, 2005, and, in the case of aircraft acquired during the current fiscal year, independent appraisals as at the date of acquisition, the fair market value of the Company's owned aircraft fleet at July 31, 2005 was US $523.7 million (CDN $641.9 million), exceeding its recorded net book value by approximately CDN $71.8 million (April 30, 2005 - $53.2 million). The increase in the appraisal surplus from April 30, 2005 is primarily attributable to the strengthening of the U.S. dollar, the currency in which appraisals are performed, against the functional currency of the Company's foreign subsidiaries.

As at July 31, 2005 the Company had ordered and made deposits for a number of aircraft. At July 31, 2005, the Company had committed to purchase seven heavy and 27 medium aircraft. Where possible, the Company intends to obtain the use of these aircraft through operating leases.

Executive and Senior Management Compensation Plans

During the first quarter, the Company revised its Short Term Incentive Plan ("STIP") for executives and senior management employees. The purpose of the revised STIP is to reward plan participants based on controllable factors which contribute to improved performance of the Company. Participants receive a bonus based upon the Company's performance measured against predetermined targets, with bonuses based on a percentage of base salary.

During the quarter, the Company also initiated a Long-Term Incentive Plan for executives and senior management employees. The plan is designed to reward the participants based upon long-term performance of the Company. Under the plan, executives and senior management are granted performance stock units ("LTIP PSUs"), which are a notional Class A subordinate voting share. These LTIP PSUs have a three-year vesting term after which the holder is entitled to a cash award calculated on the basis of the market value of t

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