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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Chorus Aviation Inc | TSX:CHR | Toronto | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.02 | -0.92% | 2.15 | 2.15 | 2.16 | 2.17 | 2.14 | 2.16 | 117,089 | 20:04:44 |
Q3 2021 Key Metrics
Recent Accomplishments
HALIFAX, NS, Nov. 10, 2021 /CNW/ - Chorus Aviation Inc. ('Chorus') (TSX: CHR) today announced third quarter 2021 financial results.
"I am encouraged by our accomplishments as the regional aviation sector leads the recovery of domestic air transportation in many parts of the world. As vaccination rates increase and travel restrictions are lifted, we expect progress to continue," stated Joe Randell, President and Chief Executive Officer, Chorus Aviation Inc. "Improving market conditions are evidenced this quarter by the significant increases in fleet utilization in both our Air Canada Express operation and our leasing segment's portfolio of aircraft."
This quarter, we carried more than double the number of passengers under the CPA than we did in the first half of the year. For the balance of this year, we are projected to operate approximately 75% to 80% of our fourth quarter 2019 flying activity. We're very pleased to have welcomed back substantially all our frontline and administrative employees and are currently recruiting additional team members."
"Positive signs of recovery were also evident in our regional aircraft leasing division whereby leasing revenue collections increased by 10 percentage points over the previous quarter to 77%, and agreements were executed to lease eight off-lease aircraft with two new customers. Excluding off-lease aircraft, our portfolio of leased aircraft operated at approximately 75% of their pre-pandemic average flying hours in the third quarter 2021 over 2019 – a remarkable improvement given the industry was essentially grounded at the height of the pandemic."
"Later this month we will be fully operating under the new Purolator agreement with two aircraft as announced last May. The team is executing well on our recently announced new contracts and we see additional opportunity."
"We're cautiously optimistic these positive developments indicate the worst of the pandemic is behind us and that we're at an important inflection point. The good work we've done throughout this crisis provides a solid foundation that will deliver value to our stakeholders. I'm very grateful to our employees for their steadfast commitment to safety, the well-being of our customers, company and one another," concluded Mr. Randell.
Liquidity
As of September 30, 2021, Chorus' liquidity was $258.1 million including cash of $223.2 million and $34.9 million of available room on its operating credit facility. Liquidity increased from the second quarter of 2021 by $80.2 million primarily due to the issuance of the Series C Debentures for net proceeds of $80.9 million ($29.8 million of which is currently held in a restricted cash account established in exchange for a conditional waiver of the 35% repayment obligation under the Unsecured Revolving Credit Facility). The net proceeds from the issuance will be used primarily to partially redeem or repay existing indebtedness, including the 6.00% Debentures which may be redeemed by Chorus on or after December 31, 2021.
Excluding the net proceeds from the Series C Debentures and the related restricted cash, liquidity increased by $29.1 million over the second quarter of 2021 primarily due to:
In October 2021, Chorus repaid $30.0 million under its operating credit facility and subsequently entered into a new three-year committed operating credit facility on October 14, 2021. The facility provides Chorus with a committed limit of $75.0 million plus a $25.0 million uncommitted accordion.
Third Quarter Summary
In the third quarter of 2021, Chorus reported adjusted EBITDA of $78.1 million, a decrease of $7.8 million relative to the third quarter of 2020.
The Regional Aircraft Leasing ('RAL') segment's adjusted EBITDA was essentially unchanged from the prior quarter due to additional aircraft earning lease revenue offset by lower lease revenue attributable to negotiated amendments to certain lease agreements including extensions and lower earnings due to a lower US dollar exchange rate.
The Regional Aviation Services ('RAS') segment's adjusted EBITDA decreased by $7.7 million. The third quarter results were impacted by:
Adjusted net income was $15.3 million for the quarter, an increase of $4.4 million due to:
Net income decreased $34.5 million over the prior period due to:
Year-to-date Summary
Chorus reported adjusted EBITDA of $239.0 million for 2021, a decrease of $26.5 million relative to the same prior year period.
The RAL segment's adjusted EBITDA decreased by $18.9 million primarily due to lower lease revenue attributable to off-lease aircraft, negotiated amendments to certain lease agreements including extensions, and lower earnings due to a lower US dollar exchange rate partially offset by additional aircraft earning lease revenue.
The RAS segment's adjusted EBITDA decreased by $7.6 million. The period-over-period results were impacted by:
Adjusted net income was $42.4 million year-to-date, a decrease over 2020 of $13.9 million due to:
Net income decreased by $63.0 million over the prior period due to:
Consolidated Financial Analysis
(unaudited) (expressed in thousands of Canadian dollars) | Three months ended September 30, | Nine months ended September 30, | ||||||
2021 | 2020 | Change | Change | 2021 | 2020 | Change | Change | |
$ | $ | $ | % | $ | $ | $ | % | |
Operating revenue | 274,399 | 196,618 | 77,781 | 39.6 | 676,759 | 730,555 | (53,796) | (7.4) |
Operating expenses | 242,501 | 161,229 | 81,272 | 50.4 | 642,344 | 614,791 | 27,553 | 4.5 |
Operating income | 31,898 | 35,389 | (3,491) | (9.9) | 34,415 | 115,764 | (81,349) | (70.3) |
Net interest expense | (22,895) | (25,706) | 2,811 | 10.9 | (71,768) | (67,281) | (4,487) | (6.7) |
Foreign exchange (loss) gain | (20,266) | 14,824 | (35,090) | (236.7) | (5,494) | (6,141) | 647 | 10.5 |
Gain (loss) on property and equipment | 2 | (202) | 204 | 101.0 | 1,718 | (576) | 2,294 | 398.3 |
(Loss) income before income tax | (11,261) | 24,305 | (35,566) | (146.3) | (41,129) | 41,766 | (82,895) | (198.5) |
Income tax (expense) recovery | (2,821) | (3,847) | 1,026 | 26.7 | 10,485 | (9,437) | 19,922 | 211.1 |
Net (loss) income | (14,082) | 20,458 | (34,540) | (168.8) | (30,644) | 32,329 | (62,973) | (194.8) |
Adjusted EBITDA(1) | 78,081 | 85,859 | (7,778) | (9.1) | 238,977 | 265,482 | (26,505) | (10.0) |
Adjusted EBT(1) | 19,361 | 16,264 | 3,097 | 19.0 | 55,533 | 71,417 | (15,884) | (22.2) |
Adjusted net income(1) | 15,310 | 10,908 | 4,402 | 40.4 | 42,434 | 56,374 | (13,940) | (24.7) |
(1) These are non-GAAP financial measures. |
Outlook
(See cautionary statement regarding forward-looking information below)
Chorus' business model does not directly expose it to the market risks ordinarily faced by airlines; however, substantially all its source revenue is derived from airline customers, through its CPA and its leasing of aircraft to airline customers globally. Although the COVID-19 pandemic continues to impact airlines, demand for passenger air travel is starting to show signs of recovery.
Regional Aviation Services:
Jazz earns a Fixed Margin under the CPA based on the number of Covered Aircraft, subject to a minimum of $65.6 million for 2021. The Fixed Margin does not vary based on flight activity.
In the third quarter of 2021, Jazz operated at approximately 55% of its third quarter 2019 (pre-COVID-19) flying levels. Provided the spread of COVID-19 continues to subside, Jazz's flying is expected to increase in the fourth quarter of 2021 to operate between approximately 75% to 80% of its fourth quarter 2019 (pre-COVID-19) flying levels. Jazz has recalled substantially all its front-line and administrative employees as operations increased.
Voyageur continues to perform overseas humanitarian flights and cargo services, and the air ambulance operation in New Brunswick. Voyageur's contract flying, charter sales and MRO services revenues in the second and third quarters of 2021 improved over the first quarter of 2021. The momentum is expected to be sustained with the impact of the four new long-term contracts which will begin to positively impact Voyageur's earnings throughout the fourth quarter of 2021 and beyond. Voyageur represents less than 10% of Chorus' consolidated revenue and net income.
Regional Aircraft Leasing:
In August 2021, Chorus Aviation Capital ('CAC') executed long-term leases for six ATR72-600s to Emerald Airlines of Dublin, Ireland. The first aircraft was delivered in the third quarter of 2021 and a second aircraft was delivered in October 2021, with the remaining deliveries expected over the next 12 months. CAC also executed long-term leases for two Dash 8-400s to Waltzing Matilda Aviation of Boston, Massachusetts, doing business as Connect Airlines. The first aircraft was delivered to Waltzing Matilda Aviation in October 2021, and the second aircraft is scheduled to be delivered before the end of 2021.
Since the onset of the COVID-19 pandemic, CAC has received requests from substantially all its customers for some form of temporary rent relief, as they cope with an unprecedented reduction in demand for passenger air travel. In connection with the rent relief arrangements, that include lease term extensions, the repayment terms vary but typically coincide with the lease term extensions. As of September 30, 2021, CAC's gross lease receivable was $79.4 million (US $62.3 million) (December 31, 2020 - $56.3 million (US $44.2 million)). The gross lease receivable may increase to approximately $85.0 million (US $65.0 million) by the end of 2021 due to potential delays in payments.
As of September 30, 2021, the net lease receivable, after an expected credit loss provision, was $72.2 million (US $56.7 million) (December 31, 2020 - $48.3 million (US $38.0 million)). CAC's lease deferral receivable exposure is also partially mitigated by security packages held of approximately $27.0 million (US $21.0 million).
Chorus collected approximately 77% of its lease revenue recognized in the third quarter from its lessees. Consistent with market norms, these leases are generally for a fixed term, contain an absolute payment obligation on the part of the lessee, and cannot be terminated early for convenience.
The following table provides the number of aircraft that earn leasing revenue for completed transactions:
(unaudited) | Completed Transactions | |||
Customer | Aircraft type | Q2 2021 | Q3 2021 | Total |
Aeromexico(1) | E190 | 3 | 3 | |
Air Nostrum | CRJ1000 | 4 | 4 | |
airBaltic | A220-300 | 5 | 5 | |
Azul Airlines(2) | ATR72-600/E195 | 5 | 5 | |
Cobham | Dash 8-400 | 1 | 1 | |
Croatia Airlines | Dash 8-400 | 2 | 2 | |
Emerald Airlines | ATR72-600 | — | 1 | 1 |
Ethiopian Airlines | Dash 8-400 | 5 | 5 | |
Indigo | ATR72-600 | 8 | 8 | |
Jambojet | Dash 8-400 | 3 | 3 | |
KLM Cityhopper | E190 | 1 | 1 | |
Malindo Air | ATR72-600 | 4 | 4 | |
Philippine Airlines(3) | Dash 8-400 | 3 | 3 | |
Sky Alps | Dash 8-400 | 2 | 2 | |
SpiceJet | Dash 8-400 | 5 | 5 | |
Waltzing Matilda | Dash 8-400 | — | — | |
Wings Air | ATR72-600 | 1 | 1 | |
Total Regional Aircraft Leasing | 52 | 1 | 53 | |
Total Regional Aviation Services(4) | Dash 8-400/CRJ900 | 48 | — | 48 |
Chorus Total Aircraft | 100 | 1 | 101 | |
(1) | On November 4, 2021, Aeromexico and CAC executed amended and restated lease agreements in respect of all three E190s currently leased by CAC to Aeromexico. These agreements, which remain subject to the satisfaction of certain conditions precedent to effectiveness, reflect revised commercial terms negotiated by the parties following Aeromexico's voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on June 30, 2020. |
(2) | Consists of three ATR72-600s and two E195s. |
(3) | On September 3, 2021, Philippine Airlines filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a pre-arranged restructuring plan. Two aircraft are expected to be retained under lease on revised negotiated terms and one is expected to be returned by the end of January 2022. |
(4) | RAS segment aircraft breakdown: 34 Dash 8-400s and 14 CRJ900s. |
Capital expenditures in 2021, including capitalized major maintenance overhauls but excluding expenditures for the acquisition of aircraft and the ESP, are expected to be between $19.0 million and $29.0 million. Aircraft related acquisitions and ESP capital expenditures in 2021 are expected to be between $42.0 million and $50.0 million.(1)
(unaudited) | Actual | ||
Nine months ended | Year ended | ||
Planned 2021(1) | September 30, 2021 | December 31, 2020 | |
$ | $ | $ | |
Capital expenditures, excluding aircraft acquisitions and ESP | 7,000 to 11,000 | 3,679 | 11,727 |
Capitalized major maintenance overhauls(2) | 12,000 to 18,000 | 9,835 | 7,529 |
Aircraft related acquisitions and ESP | 42,000 to 50,000 | 42,746 | 386,881 |
61,000 to 79,000 | 56,260 | 406,137 |
(1) | The 2021 plan includes one CRJ900 in the RAS segment and reconfiguration costs on off-lease and re-leased aircraft in the RAL segment which have been converted using a foreign exchange rate of 1.2741, the September 30, 2021 closing day rate from the Bank of Canada. |
(2) | The 2021 plan includes between $7.0 million to $9.0 million of costs that are expected to be included in Controllable Costs. Actual 2021 and 2020 costs include $2.9 million and $6.1 million, respectively which were included in Controllable Costs. |
With the current recovery in passenger demand for air travel and further improvement expected in 2022, Chorus plans to invest between $300.0 million and $400.0 million in aircraft acquisitions in 2022 financed through existing cash resources, capital raises, secured debt financing or a combination thereof.
Use of Defined Terms
Capitalized terms used but not defined in this news release have the meanings given to them in the MD&A which is available on Chorus' website (www.chorusaviation.com) and SEDAR (www.sedar.com).
Investor Conference Call / Audio Webcast
Chorus will hold an analyst call at 9:00 a.m. ET on Thursday, November 11, 2021 to discuss the third quarter 2021 financial results. The call may be accessed by dialing 1-888-664-6392. The call will be simultaneously audio webcast via:
https://produceredition.webcasts.com/starthere.jsp?ei=1503034&tp_key=9e8734d005
This is a listen-in only audio webcast.
The conference call webcast will be archived on Chorus' website at www.chorusaviation.com under Investors > Reports > Executive Management Presentations. A playback of the call can also be accessed until midnight ET, November 18, 2021 by dialing toll-free1-888-390-0541, and using passcode 152135#
1NON-GAAP FINANCIAL MEASURES
This news release references several non-GAAP financial measures to supplement the analysis of Chorus' results. Chorus uses certain non-GAAP financial measures, described below, to evaluate and assess performance. These non-GAAP measures are generally numerical measures of a company's financial performance, financial position, or cash flows, that include or exclude amounts from the most comparable GAAP measure. As such, these measures are not recognized for financial statement presentation under GAAP, do not have a standardized meaning, and are therefore not likely to be comparable to similar measures presented by other public entities.
Adjusted Net Income, Adjusted EBT and Adjusted EBITDA
Chorus revised its definition of Adjusted net income in the first quarter of 2021 to include the Dash 8-300 inventory provision, the defined benefit pension curtailment resulting from the pilot early retirement program and integration costs related to the 2021 CPA Amendments to facilitate comparability of its results.
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 lease liability related to aircraft, signing bonuses, employee separation program costs, impairment provisions, lease repossession costs net of security packages realized, Dash 8-300 inventory provision, defined benefit pension curtailment, integration costs, strategic advisory fees and the applicable tax expense (recovery). 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 Chorus' 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.
Chorus revised its definition of Adjusted EBT and Adjusted EBITDA in the first quarter of 2021 to include the Dash 8-300 inventory provision, the defined benefit pension curtailment resulting from the pilot early retirement program and integration costs related to the 2021 CPA Amendments to facilitate comparability of its results. Adjusted EBT and 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 statements of cash flows, forming part of Chorus' financial statements.
EBT is defined as earnings before income tax. Adjusted EBT (EBT before signing bonuses, employee separation program costs, impairment provisions, lease repossession costs net of security packages realized, Dash 8-300 inventory provision, defined benefit pension curtailment, integration costs, strategic advisory fees and other items such as foreign exchange gains and losses) is a non-GAAP financial measure used by Chorus as a supplemental financial measure of operational performance. Management believes Adjusted EBT assists investors in comparing Chorus' performance by excluding items, which it does not believe will re-occur over the longer-term (such as signing bonuses, employee separation program costs, impairment provisions, lease repossession costs net of security packages realized, Dash 8-300 inventory provision, defined benefit pension curtailment, integration costs and strategic advisory fees) as well as items that are non-cash in nature such as foreign exchange gains and losses.
EBITDA is defined as earnings before net interest expense, income taxes, depreciation and amortization, and impairment and is a non-GAAP financial measure that is used frequently by companies in the aviation industry as a measure of performance. Adjusted EBITDA (EBITDA before signing bonuses, employee separation program costs, strategic advisory fees, impairment provisions, lease repossession costs net of security packages realized, Dash 8-300 inventory provision, defined benefit pension curtailment and integration costs, and other items such as foreign exchange gains or losses) is a non-GAAP financial measure used by Chorus as a supplemental financial measure of operational performance. Management believes Adjusted EBITDA assists investors in comparing Chorus' performance by excluding items, which it does not believe will re-occur over the longer-term (such as signing bonuses, employee separation program costs, impairment provisions, lease repossession costs net of security packages realized, Dash 8-300 inventory provision, defined benefit pension curtailment, integration costs and strategic advisory fees) as well as items that are non-cash in nature such as foreign exchange gains and losses. 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 statements of cash flows, forming part of Chorus' financial statements.
Forward-Looking Information
This news release includes 'forward-looking information'. Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "potential", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions. Such information may involve but is not limited to comments with respect to strategies, expectations, planned operations or future actions. Forward-looking information relates 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 information, by its nature, is based on assumptions, including those referenced below, and is subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, among other things, external events, changing market conditions and general uncertainties of the business. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from those indicated in the forward-looking information.
Examples of forward-looking information in this news release include the discussion in the Outlook section, as well as statements regarding expectations as to Chorus' future liquidity and financial strength and contracted revenues, the recovery of domestic air traffic in Canada and around the world and Chorus' future growth and the completion of pending or planned transactions (including the delivery of aircraft under lease and the use of the proceeds from the issuance of the Series C Debentures to partially redeem the 6.00% Debentures). Actual results may differ materially from results indicated in forward-looking information for a number of reasons, including a prolonged duration of the COVID-19 outbreak and/or further restrictive measures to contain its spread, the evolving impact of COVID-19 on Chorus' contractual counterparties, changes in aviation industry and general economic conditions, the continued payment (in whole or in part) of amounts due under the CPA and/or aircraft lease agreements with CAC's customers, the risk of disputes under the CPA and/or aircraft lease agreements with CAC's customers, Chorus' ability to pay its indebtedness and otherwise remain in compliance with its debt covenants, the risk of cross defaults under debt agreements and other significant contracts, the risk of asset impairments and provisions for expected credit losses, a failure to conclude transactions (including potential financings) referenced in this news release and in Chorus' public disclosure record available at www.sedar.com. The forward-looking statements contained in this news release represent Chorus' expectations as of the date of this news release (or as of the date they are otherwise stated to be made) and are subject to change after such date. Chorus disclaims any intention or obligation to update or revise such statements to reflect new information, subsequent events or otherwise, except as required by applicable securities laws. Readers are cautioned that the foregoing factors and risks are not exhaustive.
About Chorus Aviation Inc.
Chorus is a global provider of integrated regional aviation solutions. Chorus' vision is to deliver regional aviation to the world. Headquartered in Halifax, Nova Scotia, Chorus is comprised of Chorus Aviation Capital a leading, global lessor of regional aircraft, and Jazz Aviation and Voyageur Aviation - companies that have long histories of safe operations with excellent customer service. Chorus provides a full suite of regional aviation support services that encompasses every stage of an aircraft's lifecycle, including aircraft acquisitions and leasing; aircraft refurbishment, engineering, modification, repurposing and preparation; contract flying; aircraft and component maintenance, disassembly, and parts provisioning.
Chorus Class A Variable Voting Shares and Class B Voting Shares trade on the Toronto Stock Exchange under the trading symbol 'CHR'. Chorus 6.00% Senior Debentures, 5.75% Senior Unsecured Debentures, and 6.00% Convertible Senior Unsecured Debentures trade on the Toronto Stock Exchange under the trading symbols 'CHR.DB', 'CHR.DB.A', 'CHR.DB.B','CHR.DB.C' respectively. www.chorusaviation.com
SOURCE Chorus Aviation Inc.
Copyright 2021 Canada NewsWire
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