Chorus Aviation Inc. · TSX:CHR
Chorus Aviation — Investor Presentation (January 2019)
40 slides from Chorus Aviation's investor presentation, Jan 23, 2019
Slide 1: Executing on Growth and Diversification Strategy
EXECUTING ON GROWTH January 2019 AND DIVERSIFICATION STRATEGY
Slide 2: Content
CONTENT ▪ CHORUS OVERVIEW ▪ REGIONAL AVIATION SERVICES • 2019 CPA amendments ▪ REGIONAL AIRCRAFT LEASING ▪ APPENDICES • Financial statements • Contracted flying • MRO • Awards • Regional aircraft leasing growth opportunities Delivering regional aviation to the world 2
Slide 3: Notice to Reader
NOTICE TO READER This document contains information with respect to: ▪ amendments to, including an extension of, the amended and restated capacity purchase agreement effective January 1, 2015, between Air Canada and Jazz Aviation LP (the “CPA Amendments”), and ▪ an investment by Air Canada in Class
Slide 4: Caution Regarding Forward-Looking Information
CAUTION REGARDING FORWARD-LOOKING INFORMATION This presentation contains “forward-looking information” as defined under applicable Canadian securities laws. Forward-looking information is identified by the use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “inte
Slide 5: About Chorus
About Chorus Deliveringregional Delivering regionalaviation aviationtotothe theworld world 5
Slide 6: Chorus at a Glance
CHORUS AT A GLANCE TSX: CHR ~ $1.4 billion Consistently profitable Ticker symbol Operating revenue - 2017 since becoming publicly traded in 2006 ~ 140 million ~ $286 million Focused on enhancing long- Outstanding shares (1) Adjusted EBITDA - 2017 term shareholder value ~ $1 Billion Current monthly d
Slide 7: Chorus Business Segments
CHORUS BUSINESS SEGMENTS Regional Aviation Services Regional Aircraft Leasing Delivering regional aviation to the world 7
Slide 8: Chorus Business Segments: Regional Aviation Services
CHORUS BUSINESS SEGMENTS REGIONAL AVIATION SERVICES Regional Aircraft Leasing Airline Operations Aircraft Leasing Under the CPA Operations conducted through Jazz and Jazz currently earns leasing revenue Chorus Aviation Capital (CAC) is a Voyageur subsidiaries: under the CPA: regional aircraft le
Slide 9: Regional Aviation Services
Regional Aviation Services Contracted Flying CPA Leasing MRO ▪ Jazz is Air Canada’s primary regional ▪ Chorus owns the majority of the aircraft ▪ Jazz Technical Services provides traditional supplier, ~ 70% of total regional operated by Jazz under the CPA – unique in heavy maintenance activities on
Slide 10: 2019 CPA amendments
2019 CPA amendments* Stability, predictability and strong economics * See Notice to Reader on slide 3. Deliveringregional Delivering regionalaviation aviationtotothe theworld world 10
Slide 11: Highlights of 2019 CPA Amendments
HIGHLIGHTS OF 2019 CPA AMENDMENTS Seizing a unique opportunity to strengthen Chorus ▪ 10-year term extension to December 31, 2035 ▪ ~$2.5 billion in contracted revenue over 17-year term • $1.6 billion from aircraft leasing • $858 million from fixed fees ▪ $97.26 million equity investment in Chorus b
Slide 12: 2019 CPA Amendments Provide Long-Term Certainty
2019 CPA AMENDMENTS PROVIDE LONG-TERM CERTAINTY Stability Predictability Strong Economics1 17-Year contractual term Minimum fleet count defined to Up to $2.5 billion in contracted commitment from Air Canada 2035 creates floor for fixed fee fixed fees and aircraft leasing over extending to Dece
Slide 13: Total Contracted Revenue to Increase by ~$940 Million
TOTAL CONTRACTED REVENUE TO INCREASE BY ~$940 MILLION Combined Value ~$2.5 Billion in Minimum Aircraft Leasing and Fixed Fee Revenue Contracted Revenue (Millions CAD$) ▪ Total aircraft leasing and fixed fee revenue under the amended CPA Fixed Fee $2,468 increases by ~$940 million versus the current
Slide 14: Contracted Lease Revenue Grows to ~$1.6 Billion
CONTRACTED LEASE REVENUE GROWS TO ~$1.6 BILLION By 2022, Chorus will have 671 aircraft on lease to Air Canada under the amended CPA Amended CPA Amended CPA CPA Amended CPA Future Future Commitments Commitments Commitments Opportunities Current 9 new CRJ900s Opportunity to lease 5 aircraft wi
Slide 15: Incremental Contracted Lease Revenue of Up to ~$630 Million
INCREMENTAL CONTRACTED LEASE REVENUE OF UP TO ~$630 MILLION Contracted Lease Revenue of ~$1.6 Billion Minimum Contracted Aircraft Leasing Revenue (Millions CAD$) Up to ~$1.6 billion in future contracted $1,610 lease revenue Includes ~$630 million in incremental Increased Total Value of ~$630 M c
Slide 16: Opportunities for Incremental Revenue at End of Leases
OPPORTUNITIES FOR INCREMENTAL REVENUE AT END OF LEASES Significant Leasing Opportunity as each Aircraft Lease under the CPA Expires ▪ Current lease commitments beyond 2025 leave substantial room for additional lease extensions/renewals on current and possibly new aircraft to Air Canada in amended CP
Slide 17: Minimum Covered Fleet Commitment Provides Certainty
MINIMUM COVERED FLEET COMMITMENT PROVIDES CERTAINTY Significant Footprint within Amended CPA 2026 Air Canada Regional Network 2019 2020 2021 2022 2023 2024 2025 ONWARD under Amended CPA DASH 8-100 - - - - - - - - ▪ Enhanced relevance to Air Canada with DASH 8-300 19 19 19 19 19 19 19 - CRJ200 region
Slide 18: Incremental $310 Million in Contracted Fixed Fee Revenue
INCREMENTAL $310 MILLION IN CONTRACTED FIXED FEE REVENUE Significant Contracted Minimum Contracted Fixed Fee Revenue Fixed Fee Revenue under (Millions CAD$) Amended CPA $858 ▪ $858 million of total contracted fixed fee revenue under amended CPA Incremental Value of $310 M based on minimum fleet comm
Slide 19: Regional Aircraft Leasing
Regional Aircraft Leasing Serving global demand for regional aircraft Deliveringregional Delivering regionalaviation aviationtotothe theworld world 19
Slide 20: Key Strategies to Drive Growth
KEY STRATEGIES TO DRIVE GROWTH New to Mid-Life Aircraft ▪ Acquire modern technology, high demand, marketable aircraft ▪ Use sale leasebacks to build airline relationships ▪ Use skyline purchases to reduce aircraft acquisition costs Customers ▪ Build geographic, customer and product diversity ▪ Seek
Slide 21: Sources of Supply for CAC Transactions
SOURCES OF SUPPLY FOR CAC TRANSACTIONS Portfolio ▪ Purchase of existing assets and leases from existing Lessors Acquisition Airline Sale ▪ Sale and leaseback of existing or future aircraft deliveries Leaseback Skyline Leases ▪ Direct purchase from manufacturers for subsequent lease to airlines There
Slide 22: Chorus Has Become a Significant Player in Regional Aircraft Leasing
CHORUS HAS BECOME A SIGNIFICANT PLAYER IN REGIONAL AIRCRAFT LEASING Portfolio Value Chorus is now the third largest regional aircraft lessor (US$ mm) 7,000 6,470 6,000 5,000 4,000 3,000 1,880 2,000 1,300 876 735 694 671 1,000 475 381 330 0 NAC GECAS Chorus DAE Elix GTLK Falko TrueNoord Avmax Regiona
Slide 23: Regional Aircraft Leasing – Portfolio
REGIONAL AIRCRAFT LEASING – PORTFOLIO ▪ Committed fleet of 34 aircraft ▪ $760 million USD aircraft acquired1 North Europe: America: 10 Aircraft ▪ Approximately $600 3 Aircraft million USD in future contracted lease Asia: revenue1 10 Aircraft ▪ Weighted average fleet age of 3 years1 ▪ Weighted averag
Slide 24: Regional Aircraft Leasing – Portfolio
REGIONAL AIRCRAFT LEASING – PORTFOLIO By Customer1 Azul By Aircraft Type1 Flybe 3 1 3 2 3 Lion 4 11 4 9% 3% 9% 6% 9% Virgin Australia 12% 32% Q400 11% 4 2 11% Falcon CRJ900 6% 2 3 PAL CRJ1000 6% 3 9% Ethiopian 11 2 3 3 32% ATR72- 600 9% 4 6% 9% 9% Jambo 12% E190 Cityjet E195 Nostrum Aeromex KLM 1Inc
Slide 25: Synergies Create Additional Value and Opportunity
SYNERGIES CREATE ADDITIONAL VALUE AND OPPORTUNITY Our competitive differentiator New Opportunities MRO Services Delivering regional aviation to the world 25
Slide 26: Contact
Contact Nathalie Megann Vice President, Investor Relations and Corporate Affairs [email protected] (902) 873-5094 Deliveringregional Delivering regionalaviation aviationtotothe theworld world 26
Slide 27: Appendices
Appendices Deliveringregional Delivering regionalaviation aviationtotothe theworld world 27
Slide 28: Income Statement | Q3 2018
INCOME STATEMENT | Q3 2018 Three months ended Nine months ended September 30, September 30, 2018 2017 2018 2017 (expressed in thousands of Canadian dollars, except earnings per share) $ $ $ $ Operating revenue Passenger 336,946 324,216 1,003,083 948,932 Other 29,750 19,469 89,448 47,235 366,696 343,
Slide 29: Income Statement | Q3 2018
INCOME STATEMENT | Q3 2018 Three months ended Nine months ended September 30, September 30, 2018 2017 2018 2017 (expressed in thousands of Canadian dollars, except earnings per share) $ $ $ $ Non-operating (expenses) income Interest revenue 876 651 1,925 1,343 Interest expense (14,863) (12,283 (43,3
Slide 30: Balance Sheet | Q3 2018
BALANCE SHEET | Q3 2018 (cont’d) As at September 30, As at December 31, 2018 2017 $ $ Assets Current assets Cash 178,601 71,249 Accounts receivable – trade and other 75,822 77,397 Inventories 53,540 51,543 Prepaid expenses and deposits 16,931 12,920 Income tax receivable 642 2,268 Total current asse
Slide 31: Balance Sheet | Q3 2018 (cont'd)
BALANCE SHEET| Q3 2018 (cont’d) As at September 30, As at December 31, 2018 2017 $ $ Liabilities Current liabilities Accounts payable and accrued liabilities 200,7889 210,809 Current portion of obligations under finance leases 2,904 2,762 Current portion of long-term incentive plan 5,466 5,844 Curre
Slide 32: Indicative Segment Results
INDICATIVE SEGMENT RESULTS For the nine months ended September 30, 2018 For the nine months ended September 30, 2017 Regional Regional Airline Airline Aircraft Total Aircraft Total Operations Operations (Unaudited) Leasing Leasing (In thousands of Canadian dollars) $ $ $ $ $ $ Operating Revenue 1,03
Slide 33: Contracted Flying Operations | Summary
CONTRACTED FLYING OPERATIONS | Summary Long history in flying operations with strong industry relationships – competitive advantage Jazz Aviation ▪ Jazz is Air Canada’s primary regional supplier, ~74% of their regional capacity ▪ Larger Q400s and CRJ-900s decrease per-seat costs ▪ Air Canada’s Q400
Slide 34: Air Canada Express | Responsibilities
AIR CANADA EXPRESS | Responsibilities Air Canada Air Canada Express – operated by Jazz ▪ Purchases capacity ▪ Provides crews, airframe maintenance, flight operations, some airport operations, and general administration ▪ Manages routes ▪ Scope of operation ▪ Sets flight schedules • ~700 daily flight
Slide 35: Maintenance Repair and Overhaul (MRO) and Parts | Summary
MAINTENACE REPAIR AND OVERHAUL (MRO) AND PARTS | Summary Jazz Technical Services (JTS) ▪ JTS provides opportunity to grow as separate profit centre ▪ New, industry-leading maintenance collective agreement ▪ Traditional heavy maintenance ▪ 24/7 operation enabling quick aircraft turnaround times ▪ Fac
Slide 36: Jazz Industry Recognition
JAZZ INDUSTRY RECOGNITION ▪ Canada’s Safest Employers 2018 – silver in the Transportation and Psychological Safety categories ▪ Canada’s Best Diversity Employers 2018-2012 ▪ Canada’s Top Employers for Young People 2019-2014 ▪ Atlantic Canada’s Top 25 Employers 2019-2012 ▪ Nova Scotia’s Top 15 Employ
Slide 37: Regional Aircraft: A Highly Attractive Leased Asset
REGIONAL AIRCRAFT: A highly attractive leased asset 1 Resilient Demand Expectations with a Broad User Base ― The 70-130 seat fleet is expected to grow ~4-5% per year over the next 20 years(1) ― ~20% to 25% regional aircraft manufactured are leased vs. ~40% to 50% narrow-body aircraft – solid growth
Slide 38: Regional Leasing Is in Demand
REGIONAL LEASING IS IN DEMAND Air Travel to Double in the Next 15 Years(1) Increased Use of Operating Leases(3) World annual traffic (trillion RPK) 16.0 14,000 45% ICAO Airbus ~40% total traffic GMF 2016 40% 14.0 12,000 ~34% 35% 12.0 10,000 ~30% ~9,500 % on Operating Lease Number of Aircraft 30% 10.
Slide 39: Regional Aircraft Create Efficient Transport Networks
REGIONAL AIRCRAFT CREATE EFFICIENT TRANSPORT NETWORKS Worldwide Flight Distribution By Aircraft Type(1) Worldwide Distribution of Aircraft by Type(2) 3.0 Turboprop (TP) 14,900 2.5 Regional Jet (RJ) 61-120 Passengers Narrow Body (NB) Flights 2012 (million) 2.0 1.5 83% of NB flights are beyond 500 km
Slide 40: Regional Leasing Is Not Core for Many Commercial Aircraft Lessors
REGIONAL LEASING IS NOT CORE FOR MANY COMMERCIAL AIRCRAFT LESSORS Commercial Aircraft Leasing Focus Regional Aircraft Leasing Focus ▪ Focus on larger aircraft allows for faster deployment of capital ▪ Smaller ticket size per aircraft ▪ Core OEM relationships with Airbus and Boeing ▪ Core OEM relatio
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