Chorus Aviation Inc. · TSX:CHR
Chorus Aviation — Investor Presentation (September 2019)
41 slides from Chorus Aviation's investor presentation, Sep 4, 2019
Slide 1: Chorus Aviation Overview
Chorus Aviation Overview September 4, 2019 Delivering regional aviation to the world TSX: CHR
Slide 2: 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 3: Chorus is a fast-growing global provider of integrated regional aviation solutions
Chorus is a fast-growing global provider of integrated regional aviation solutions Chorus Aviation Overview 3
Slide 4: Investment Highlights
Investment Highlights Regional aviation is a resilient sector of the aviation 1 industry showing strong stability during economic downturn Chorus is well-positioned for significant growth opportunities as an international 2 aircraft lessor, through leasing opportunities with Air Canada, and expansio
Slide 5: Regional aviation is based on aircraft carrying up to 130 passengers
Regional aviation is based on aircraft carrying Up to 130 passengers 2 main types of Fly shorter distances than Account for ~22% of the regional aircraft Narrow Body jets world’s commercial fleet % of all flights below 500 miles 1 Worldwide aircraft fleet 2 Regional Up to 130 Jets passengers 15,800
Slide 6: Regional aviation shows strong stability through economic cycles
Regional aviation shows strong stability through economic cycles Indexed aircraft value volatility for narrow-body, turboprop and regional jet aircraft 120 Turboprop 115 aircraft 110 105 100 95 90 Narrow-body Regional jet 85 aircraft aircraft 80 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Slide 7: Contents
Contents 1 Chorus Overview 2 Regional Aviation Services 3 Regional Aircraft 4 Conclusion Leasing 5 Appendix 1 6 Appendix 2 Financial Statements Supplemental information Chorus Aviation Overview 7
Slide 8: Chorus has become a significant global player in regional aviation
Chorus has become a significant global player in regional aviation $1.45B 2018 Revenues Consistently profitable since 2006 IPO 154 Aircraft owned1 $343M 2018 Adjusted EBITDA 5,200 Employees TSX:CHR Trading symbol Aircraft Leased: Monthly 122 56 outside N-A $0.04 dividend per 66 inside CPA share (DRI
Slide 9: A highly experienced and stable management team
A highly experienced and stable management team with significant aviation experience Joseph Randell Colin Copp Jolene Mahody President and COO and President, Executive VP and Chief Executive Officer Chorus Aviation Services Chief Strategy Officer 40 years 30 years 26 years Dennis Lopes Steve Ridolfi
Slide 10: Delivering revenue and net earnings growth
Delivering revenue and net earnings growth 12%+ ROIC $M Operating CAGR Revenues 1,666 1,545 2016 to 2018 1,277 1,352 1,451 ▲6.6% 2014* 2015 2016 2017 2018 $M Adjusted CAGR EBITDA 286.9 342.7 2014 to 2018 215.9 228.3 248.1 ▲13.8% 2014 2015 2016 2017 2018 $M Adjusted Net CAGR Income 121.8 2014 to 2018
Slide 11: Chorus operates facilities across Canada plus international offices
Chorus operates 13 facilities across Canada plus 3 international offices for its leasing business Headquarters (2) ● Admin offices / crew bases (8) ▲ Line maintenance facilities (4) Heavy maintenance facilities (2) ● ▲Calgary Chorus Aviation Capital Ireland ● ▲ Vancouver International office
Slide 12: Our strategic agenda
Our strategic agenda Grow our regional aircraft leasing business through aircraft acquisitions, portfolio acquisitions and potential skyline transactions Grow our regional aviation services of contracted flying, MRO and technical services Leverage the synergies and expertise across our lines of busi
Slide 13: Profit growth synergies across our lines of business
Profit growth synergies across our 3 lines of business Contracted Flying MRO Services Aircraft Maintenance, Leasing & Repair & Trading New Customers Overhaul Chorus generates value at every stage of an aircraft’s lifecycle Chorus Aviation Overview 13
Slide 14: Contents
Contents 1 Chorus Overview 2 Regional Aviation Services 3 Regional Aircraft 4 Conclusion Leasing 5 Appendix 1 6 Appendix 2 Financial Statements Supplemental information Chorus Aviation Overview 14
Slide 15: Contracted flying generates largest revenue stream
Contracted flying generates largest revenue stream Air Canada Operates scheduled service through a CPA with Express flying Air Canada under the Air Canada Express brand Specialized Provides medical, logistical and contracted humanitarian flight operations to blue chip flying customers globally Chart
Slide 16: Chorus is Air Canada's primary regional partner
Chorus is Air Canada’s primary regional partner ~74% 116 Aircraft currently operated by Jazz ~700 Largest daily flights of Air Canada’s Chorus regional seat 47 Currently 81 customer capacity leased under N.A. destinations the CPA Responsibilities Air Canada Jazz under the Capacity ● Purchases capaci
Slide 17: Amended/extended CPA with Air Canada to 2035
Amended/extended CPA with Air Canada to 2035 ● Guarantees ~$2.5B in contracted revenue over 17 years1 ● $1.6B from aircraft leasing ● $858M from fixed fees ● $97.26M equity investment by Air Canada in Chorus ● 60% of investment proceeds to purchase larger aircraft for CPA fleet ● 40% of investment p
Slide 18: CPA extension increases total minimum contracted revenue by ~$940M
CPA extension increases total minimum contracted revenue by ~$940M Minimum contracted revenue in CPA ($M) ● Near-term fixed fee 2019-2020 2021-2025 2026-2035 reductions more than offset Significant Min. 105 aircraft Min. 80 aircraft TOTAL fleet transition by term extension and aircraft leasing Chang
Slide 19: The amended CPA brings significant modernization to the Air Canada Express fleet
The amended CPA brings significant modernization to the Air Canada Express fleet ● Fleet known by aircraft type until 2025 ● Post-2025: Commitment to operate a minimum of 80 aircraft in the 75 to 78 seat range ● Current lease commitments beyond 2025 leave substantial room for additional lease extens
Slide 20: Maintenance Repair & Overhaul (MRO) and Parts
Maintenance Repair & Overhaul (MRO) and Parts Halifax, NS ● 6-bay, 80 000 sq. ft. facility ● 24/7 operations provide flexibility to serve carriers exactly when needed ● Certified to perform traditional heavy maintenance activities on De Havilland, Bombardier and Embraer 135/145 regional aircraft Nor
Slide 21: Contents
Contents 1 Chorus Overview 2 Regional Aviation Services 3 Regional Aircraft 4 Conclusion Leasing 5 Appendix 1 6 Appendix 2 Financial Statements Supplemental information Chorus Aviation Overview 21
Slide 22: Regional aircraft leasing is an attractive business with strong growth potential
Regional aircraft leasing is an attractive business with strong growth potential 1 Essential ● 50% of global passengers fly on trips shorter than 500 miles component of ● Regional aircraft allow airlines to optimize aircraft size commercial and reduce per-seat-cost aviation 2 Very resilient ● 70-130
Slide 23: 5 pillars of our aircraft leasing growth strategy
5 pillars of our aircraft leasing growth strategy Highly ● Industry veterans based on 3 continents Experienced ● Strong relationships with over 100 airlines Team Customers ● Seek airline customers with good credit quality and/or strong prospects ● Employ collaborative approach to working with airlin
Slide 24: Launched third-party leasing in January 2017
Launched third-party leasing in January 2017 to seize opportunities in regional aircraft leasing C$ 401 M raised since 2017 Net proceeds C$ M 2017 2018 2019 ● Provides ~C$1.6B of investment capital when levered at 3:1 ● All funds raised have been committed as of June 13, 2019 ● 60% of Air Canada’s i
Slide 25: Committed fleet of 56 aircraft worth US$1.1 billion
Committed fleet of 56 aircraft worth US$ 1.1 billion ● Approximately ~US$ 815M in future contracted lease revenue 1 ● Weighted average fleet age of 3.4 years2 ● Weighted average remaining lease term of 6 years 2 ● ~88% debt is fixed rate3 ● Weighted average cost of borrowing of 4.46%4 1 Includes all
Slide 26: Chorus is on track to become the world's 2nd largest regional aircraft lessor
Chorus is on track to become the world’s 2nd largest regional aircraft lessor (portfolio value) Portfolio value (US$ M) NAC 5,970 Including Chorus1 commitments 2,000 GECAS 1,565 Chorus is the only large regional Chorus2 Current 1,470 aircraft lessor which Falko3 1,235 is also an operator DAE 735 Eli
Slide 27: Diversification across airlines, geography and aircraft types
Diversification across airlines, geography and aircraft types Turboprops Regional Jets Customer Aircraft Dash 8 ATR CRJ Embraer committed1 IndiGo 6 Ethiopian 5 Azul 5 SpiceJet 5 Air Nostrum 4 Lion Air 4 Jambojet 4 Philippine Airlines 3 Falcon 3 AeroMexico 3 Flybe 8 1Chorus
Slide 28: Three ways to acquire leasing assets
Three ways to acquire leasing assets Description Sample Chorus Transaction 1 From lessors Purchase of assets with Purchase of 2 E190s with attached leases from Aeromexico leases attached from lessor’s non-core portfolio another lessor 2 From airlines Sale and leaseback of Purchase of 6 new ATR72-600
Slide 29: Chorus holds defensive position in economic downturn
Chorus holds defensive position in economic downturn Visibility on ● Over 90% of revenues embedded in flight operations and future revenues aircraft leasing long-term contracts and costs ● C$3.5B in future contracted revenues1 Protected profit ● Air Canada assumes risks related to commercial aspects
Slide 30: Contents
Contents 1 Chorus Overview 2 Regional Aviation Services 3 Regional Aircraft 4 Conclusion Leasing 5 Appendix 1 6 Appendix 2 Financial Statements Supplemental information Chorus Aviation Overview 30
Slide 31: Conclusion
Conclusion Chorus is very well positioned to grow significantly in the regional aircraft leasing 1 business, led by a very strong team of industry veterans and supported by internal expertise and capabilities in regional aviation services Chorus is committed to grow its regional 2 aviation services,
Slide 32: Contents
Contents 1 Chorus Overview 2 Regional Aviation Services 3 Regional Aircraft 4 Conclusion Leasing 5 Appendix 1 6 Appendix 2 Financial Statements Supplemental information Chorus Aviation Overview 32
Slide 33: Consolidated Income Statement
Consolidated Income Statement For the three and six-month periods ended June 30, 2019 and 2018 Three months ended June 30, Six months ended June 30, Expressed in thousands of Canadian dollars, 2019 2018 2019 2018 except earnings per share (Restated) (Restated) Operating revenue 332,520 353,907 676,3
Slide 34: Consolidated Statements of Financial Position
Consolidated Statements of Financial Position As at June 30, December 31, January 1, 2019 2018 2018 Expressed in thousands of Canadian dollars (Restated) (Restated) Assets Current assets Cash 127,586 92,592 78,007 Accounts receivable – trade and other 89,388 77,097 77,397 Inventories 58,333 55,691 5
Slide 35: Segmented Financial Statement
Segmented Financial Statement Three Months Ended June 30, 2019 For the three months ended June 30, 2019 For the three months ended June 30, 2019 (Restated) Regional Regional Regional Regional Aviation Aircraft Aviation Aircraft (in thousands of Canadian dollars) Services Leasing Total Services Leasi
Slide 36: Contents
Contents 1 Chorus Overview 2 Regional Aviation Services 3 Regional Aircraft 4 Conclusion Leasing 5 Appendix 1 6 Appendix 2 Financial Statements Supplemental information Chorus Aviation Overview 36
Slide 37: Opportunities for incremental revenue at end of leases under the CPA
Opportunities for incremental revenue at end of leases under the CPA Significant ● Current lease commitments beyond 2025 leave substantial room for additional lease extensions/renewals on current and possibly new aircraft leasing to Air Canada in amended CPA opportunity ● Lease expiry of each aircra
Slide 38: Minimum CPA fleet commitment provides predictability
Minimum CPA fleet commitment provides predictability 2026 Amended CPA 2019 2020 2021 2022 2023 2024 2025 Significant regional Onward network footprint DASH 8-100 - - - - - - - - under amended CPA DASH 8-300 19 19 19 19 19 19 19 - CRJ900 35 35 35 35 35 35 35 - ● Enhanced relevance to Air Canada Q400
Slide 39: Jazz is widely recognized for its excellence as an employer and operator
Jazz is widely recognized for its excellence, both as an employer and operator 2019 2018 ● Canada’s Top Employers for ● Canada’s Safest Employers 2018 Young People 2019 - 2014 ● Silver in Transportation cat. ● Silver Psychological Safety cat. ● Canada’s Best Diversity Employers 2019 - 2012 ● Atlanti
Slide 40: Regional aviation holds strong growth potential worldwide
Regional aviation holds strong growth potential worldwide Air Travel expected to double from 2015 to 2025 1 World annual traffic (trillion RPK) ● Resilient passenger air traffic growth 25 has outperformed GDP growth by ~2.0x Oil crisis Financial Crisis Gulf Crisis Asian Crisis SARS 9/11 2x over the
Slide 41: Hypothetical leased assets earnings example
Hypothetical leased assets earnings example Inputs Investment information Rentals Expenses Sale Aircraft cost $20.0 Average LRF 0.90% Interest rate 4.50% Holding period 10 Loan/value 0.75 $1 5.00 Monthy rental $0.1 8 Depreciation rate 4.00% Sales value 0.00% Equity $5.0 Annual rental $2.2 Payment at
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