Chorus Aviation Inc. · TSX:CHR

Chorus Aviation — Investor Presentation (February 2017)

40 slides from Chorus Aviation's investor presentation, February 2017

  1. Slide 1: Investor Presentation February 2017

    Investor Presentation February 2017

  2. Slide 2: Caution Regarding Forward-Looking Information

    CAUTION REGARDING FORWARD-LOOKING INFORMATION CAUTION REGARDING FORWARD-LOOKING INFORMATION Certain information in this presentation may contain ‘forward-looking information’ as defined under applicable Canadian securities legislation. Forward-looking information typically contains words such as “an

  3. Slide 3: Chorus at a Glance

    CHORUS AT A GLANCE TSX: CHR ~ $1.3 billion Consistently profitable Ticker symbol Operating revenue - 2016 since becoming publicly traded in 2006 ~ 122 million ~ $248 million Focused on building Outstanding shares (1) Adjusted EBITDA, excluding additional shareholder other items - 2016 value ~ $914 m

  4. Slide 4: Growth Strategy – Chorus Lines of Business

    GROWTH STRATEGY – CHORUS LINES OF BUSINESS  Focused on providing a full suite of regional airline services to customers around the world Contracted flying Maintenance, repair Regional operations and overhaul (MRO) aircraft leasing Operated by Focus area of growth and revenue diversification Deliver

  5. Slide 5: Contracted Flying Operations

    CONTRACTED FLYING OPERATIONS  CPA – foundation of our business  Operates fleet of 111 regional aircraft on behalf of Air Canada Operated by  CPA in place until 2025  ~ 94% of Chorus’ total revenue1  Ad hoc flying  Various customers • sport teams • corporate clients  Stand alone fleet of three

  6. Slide 6: 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  Manages routes general administration  Sets flight schedules  Scope of operation  Sets ticket prici

  7. Slide 7: Cost Management Under the CPA

    COST MANAGEMENT UNDER THE CPA Controllable Revenue (controllable costs)  General overhead, salaries, wages and benefits  Depreciation and amortization on aircraft and parts Type of costs  Aircraft maintenance  Materials and supplies  Majority of costs, excluding crew rates, set annually, based

  8. Slide 8: Pass-through costs – 100% reimbursed

    COST MANAGEMENT UNDER THE CPA Pass-through costs – 100% reimbursed  Incurred by Chorus under the CPA Pass-through costs  Passed through to Air Canada and 100% reimbursed  Airport fees Type of costs  Navigational fees  Terminal handling fees Services provided by Air Canada at no cost to Chorus i

  9. Slide 9: Revenue Generation Under the CPA

    REVENUE GENERATION UNDER THE CPA Fixed Performance Aircraft Fees Incentives Leasing  Minimum fleet established  Achieving established  Chorus-owned Q400 aircraft for term of CPA targets: leased into Jazz’s Air – Controllable on-time Canada Express operation  Fixed margin per covered (5 CRJ900s i

  10. Slide 10: Revenue Generation Under the CPA - Outlook

    REVENUE GENERATION UNDER THE CPA - OUTLOOK Revenue generation under the CPA (1) CPA revenue for 2016-2020 is not contingent upon fleet size while 2021-2025 has a portion (unaudited) adjusted downward as the remaining Dash 8 100 For the calendar For the twelve Average for Average for aircraft reach t

  11. Slide 11: Jazz's Competitiveness Under the CPA

    JAZZ’S COMPETITIVENESS UNDER THE CPA Focused on increasing market competitiveness and growing services provided to Air Canada through a differentiated fleet and service offering  Industry-leading collective agreements expire end of 2025 • Pilots, Flight Attendants, Maintenance, Dispatchers • Pilots

  12. Slide 12: Voyageur Airways

    VOYAGEUR AIRWAYS  ~ 70% of revenue generated through specialized flight operations  Fleet of 18 owned aircraft (16 Bombardier manufactured)  Contract flying services • Flight and cabin crew • Maintenance personnel • On-site manager  Missions • Medical, logistical and humanitarian • Canada and Af

  13. Slide 13: 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, providing 65% of their regional capacity  Minimum of 96 aircraft under the CPA in 2025 with the objecti

  14. Slide 14: Maintenance Repair and Overhaul (MRO) and Parts

    MAINTENANCE REPAIR AND OVERHAUL (MRO) AND PARTS  New division under Jazz  Separate profit centre  Focused on traditional heavy maintenance on Bombardier aircraft  Operating in North Bay, ON  200,000 square foot facility  Highly specialized and custom MRO  International clients  Newly created

  15. Slide 15: Jazz Technical Services

    JAZZ TECHNICAL SERVICES  Traditional heavy maintenance on Bombardier regional aircraft  Five-year contract with another Air Canada Express partner • Heavy maintenance checks on 14 regional jets  Contract to refurbish cabin interior of Dash 8- 300 aircraft  Two-year contract with CommutAir, a Uni

  16. Slide 16: Voyageur Aerotech

    VOYAGEUR AEROTECH  Transport Canada Design Approved Organization • Dedicated engineering team developing Supplemental Type Certificates  Aircraft modifications  Maintenance, repair and overhaul (MRO) • All models of Bombardier regional aircraft • Worldwide customer base • Highly specialized MRO w

  17. Slide 17: Voyageur Avparts

    VOYAGEUR AVPARTS  Newly created business  Part sales and service in support of future growth  Services • Consignment inventories • Aircraft part-outs • Purchase and sale of bulk/surplus inventories from third parties • Inventory leasing programs  Synergies with services provided by the Chorus gr

  18. Slide 18: MRO and Parts – Summary

    MAINTENANCE REPAIR AND OVERHAUL (MRO) AND PARTS – SUMMARY Jazz Technical Services  Jazz Technical Services provides opportunity to grow as separate profit centre  New, industry-leading maintenance collective agreement  24/7 operation enabling quick aircraft turnaround times  Facility has capacit

  19. Slide 19: Chorus Aviation Capital Corp

    Chorus Aviation Capital Corp  Regional aircraft leasing is an emerging business • ~20% to 25% regional aircraft manufactured are leased vs. ~40% to 50% for narrow-body aircraft • Solid opportunity for growth  Fairfax Financial investing $200 million in Chorus through a private placement of convert

  20. Slide 20: Launch Customer - Air Nostrum

    LAUNCH CUSTOMER - AIR NOSTRUM Chorus to purchase and lease four new CRJ1000 regional jets to Air Nostrum  Secured letter of offer from Export Development Canada (EDC) for debt financing  Two aircraft delivered in November/December 2016; two deliveries expected in June/October 2017  Air Nostrum is

  21. Slide 21: Creating Value Through Growth and Diversification

    CREATING VALUE THROUGH GROWTH AND DIVERSIFICATION Growing aircraft Pursuing growth Advancing business Strengthening leasing revenues opportunities for diversification leveraging Jazz competitiveness inside/outside CPA Voyageur in MRO and parts our regional aviation expertise Delivering regional avia

  22. Slide 22: Contact

    CONTACT Nathalie Megann Vice President, Investor Relations and Corporate Affairs nmegann@chorusaviation.ca (902) 873-5094 Delivering regional aviation to the world 22

  23. Slide 23: Appendices

    APPENDICES  Regional aircraft leasing growth opportunity  Private placement with Fairfax Financial  Q4 2016 Income Statement  Q4 2016 Balance Sheet  CPA fleet modernization plan by type and year  Jazz fact sheet  Jazz’s network  2016 Jazz industry recognition  Voyageur fleet Delivering regi

  24. Slide 24: Regional Aircraft Leasing Growth Opportunity

    Regional Aircraft Leasing Growth Opportunity

  25. Slide 25: Our Regional Aircraft Leasing Strategic Vision

    OUR REGIONAL AIRCRAFT LEASING STRATEGIC VISION Chorus believes there is a significant opportunity to develop a large and profitable leasing platform by capitalizing on its unique expertise in the regional aircraft and airline market. Chorus is targeting the regional segment because: 1 Accelerating

  26. Slide 26: Aviation Leasing Is an Attractive Segment

    AVIATION LEASING IS AN ATTRACTIVE SEGMENT End Market / Airline Profitability has Air Travel to Double in the Next 15 Years(1) Increased Use of Operating Leases(3) Recovered(4) World annual traffic (trillion RPK) Net Profit / Loss ($bn) % Revenues 16.0 ICAO Airbus 14,000 45% $40 8% total traffic GMF

  27. Slide 27: Regional Aircraft Are Fundamental to Efficient Air Transport Networks

    REGIONAL AIRCRAFT ARE FUNDAMENTAL TO EFFICIENT AIR TRANSPORT NETWORKS Worldwide Flight Distribution By Aircraft Type(1) Worldwide Distribution of Aircraft by Type(2) 3.0 14,900 Turboprop (TP) 2.5 Regional Jet (RJ) 61-120 Passengers Narrow Body (NB) Flights 2012 (million) 2.0 1.5 83% of NB flights ar

  28. Slide 28: Regional Aircraft Leasing Is Not Core for Many Commercial Aircraft Lessors

    REGIONAL AIRCRAFT 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 OE

  29. Slide 29: Ability to Source Assets from Multiple Channels

    ABILITY TO SOURCE ASSETS FROM MULTIPLE CHANNELS Chorus is building its funnel through several sourcing channels 3rd Party Leasing Direct OEM Orders Sale-Leaseback Companies  Leveraging OEM  Leveraging trusted  Taking advantage of relationships to peer-operator status regional aircraft’s source cu

  30. Slide 30: Regional Aircraft Are a Highly Attractive Leased Asset

    REGIONAL AIRCRAFT ARE 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) ― Operational efficiencies from regional aircraft play a key role in hub-and-spoke networks 2 Attractive

  31. Slide 31: The Fairfax Investment

    THE FAIRFAX INVESTMENT  $200 million investment in Chorus (200,000 convertible debt units at $1,000/unit) • $1,000 secured debenture • 121.21212121 warrants  Debentures • Interest rate of 6.00% per annum • Secured by Dash 8-100 and Dash 8-300 aircraft, plus real estate; security released if Fairfa

  32. Slide 32: Income Statement – Q4 2016

    INCOME STATEMENT – Q4 2016 As at December 31, (expressed in thousands of Canadian dollars, except earnings per share) 2016 2015 $ $ Operating revenue Passenger 1,251,856 1,517,365 Other 24,998 27,316 1,276,854 1,544,681 Operating expenses Salaries, wages and benefits 432,921 435,521 Aircraft fuel 3,

  33. Slide 33: Income Statement – Q4 2016 (cont'd)

    INCOME STATEMENT – Q4 2016 (cont’d) As at December 31, 2016 2015 (expressed in thousands of Canadian dollars, except earnings per share) $ $ Operating income 151,478 149,497 Non-operating income (expenses) Interest revenue 578 2,443 Interest expense (22,667) (17,457) Gain on disposal of property and

  34. Slide 34: Balance Sheet – Q4 2016

    BALANCE SHEET – Q4 2016 As at 31-Dec-16 31-Dec-15 $ $ Assets Current assets Cash 23,491 32,677 Restricted cash 5,671 1,829 Accounts receivable – trade and other 75,058 81,357 Inventories 49,657 45,942 Prepaid expenses and deposits 10,591 15,718 Income tax receivable 4,602 --- Total current assets 16

  35. Slide 35: Balance Sheet – Q4 2016 (cont'd)

    BALANCE SHEET – Q4 2016 (cont’d) As at 31-Dec-16 31-Dec-15 $ $ Liabilities Current liabilities Accounts payable and accrued liabilities 173,656 177,313 Current portion of obligations under finance leases 5,099 5,432 Current portion of long-term incentive plan 6,567 5,159 Current portion of long-term

  36. Slide 36: Jazz Fleet Modernization Plan

    JAZZ FLEET MODERNIZATION PLAN The Chorus fleet will transition to more efficient, larger aircraft with significant fleet simplification  Jazz will transition to a mix of larger, newer technology regional jets (CRJ900s) and turboprops (Q400s) Aircraft Type 2015 2016 2017 2018 2019 2020 2021 2022 202

  37. Slide 37: Jazz Fact Sheet

    JAZZ FACT SHEET Corporate Fact Sheet Aircraft type Number Capacity Head office: Halifax 40 74 Regional offices: Vancouver Bombardier Q400 NextGen Calgary Toronto 16 75 Montreal Bombardier CRJ-705 Halifax (Operations Centre) Destinations served 72 destinations across Canada and the U.S. 13 50 Bombard

  38. Slide 38: Jazz – Canada's Regional Airline

    JAZZ – CANADA’S REGIONAL AIRLINE Delivering regional aviation to the world 38

  39. Slide 39: 2016 Jazz Industry Recognition

    2016 JAZZ INDUSTRY RECOGNITION  Jazz received top Airline Reliability Performance Awards for dispatch reliability: • Q400 Aircraft Programs for North America • CRJ100/200 Aircraft Programs for North America • CRJ700/900/1000 Aircraft Programs for North America  Recognized in 2016 as one of North A

  40. Slide 40: Voyageur Fleet

    VOYAGEUR FLEET Aircraft Number Aircraft Type 7 Passenger charter Bombardier CRJ-200LR 6 Passenger charter Bombardier Dash 8-300 2 Passenger charter Bombardier Dash 8-100 1 Passenger charter De Havilland Dash 7 2 Air ambulance Beechcraft King Air 200 Delivering regional aviation to the world 40

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