Chorus Aviation Inc. · TSX:CHR
Chorus Aviation — Investor Presentation (September 2017)
38 slides from Chorus Aviation's investor presentation, September 2017
Slide 1: Investor Presentation September 2017
Investor Presentation September 2017
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
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 ~ 123 million ~ $248 million Focused on building Outstanding shares (1) Adjusted EBITDA, excluding additional shareholder other items - 2016 value ~ $1.1 b
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
Slide 5: Contracted Flying Operations
Contracted Flying Operations Delivering regional aviation to the world 5
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
Slide 7: Revenue Generation Under the CPA
REVENUE GENERATION UNDER THE CPA Fixed Performance Aircraft Fees Incentives Leasing ▪ Minimum fleet established Achieving established Chorus-owned Q400, 5 for term of CPA targets: CRJ900 aircraft leased into – Controllable on-time Jazz’s Air Canada Express ▪ Fixed margin per covered operation pe
Slide 8: 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
Slide 9: Cost Management Under the CPA
COST MANAGEMENT UNDER THE CPA Controllable revenue (costs) and pass-through costs Controllable costs Pass-through costs Type of costs ▪ General overhead, salaries, wages and benefits ▪ 100% reimbursed ~25% ▪ Depreciation and amortization on aircraft and parts ▪ Incurred by Chorus under the CPA Pass-
Slide 10: 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
Slide 11: Voyageur Airways
VOYAGEUR AIRWAYS ▪ 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 • Other commercial contracts in Canada, Africa and Europe ▪ Flight operations • Vo
Slide 12: Maintenance, Repair and Overhaul (MRO) and Parts
Maintenance, Repair and Overhaul (MRO) and Parts Delivering regional aviation to the world 12
Slide 13: Maintenance Repair and Overhaul (MRO) and Parts
MAINTENANCE REPAIR AND OVERHAUL (MRO) AND PARTS ▪ Separate division under Jazz ▪ Stand alone 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 and engineering, design for dom
Slide 14: Regional Aircraft Leasing
Regional Aircraft Leasing Delivering regional aviation to the world 14
Slide 15: 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) ― ~20% to 25% regional aircraft manufactured are leased vs. ~40% to 50% narrow-body aircraft – solid grow
Slide 16: Chorus Aviation Capital Corp
CHORUS AVIATION CAPTIAL CORP ▪ Established in January 2017 ▪ Fairfax Financial invested $200 million in Chorus through a private placement of convertible debt units ▪ New subsidiary is building a global, regional aircraft leasing platform - further advancing Chorus’ growth and diversification strate
Slide 17: Sources of Supply for CACC Transactions
SOURCES OF SUPPLY FOR CACC TRANSACTIONS Portfolio ▪ Purchase of existing assets and leases from existing Lessors. Acquisition Airline Sale Leaseback ▪ Sale and leaseback of existing or future aircraft deliveries. Skyline Leases ▪ Direct purchase from OEM for subsequent lease to airlines. There are a
Slide 18: Current Transactions
CURRENT TRANSACTIONS Air Nostrum 4x CRJ1000s Flybe 3x ATR72-600s Virgin Australia 3x ATR72-600s Falcon 3x Q400s KLM 1x E190s Aeromexico 1x E190s Aeromexico 2x E190s Delivering regional aviation to the world 18
Slide 19: Key Strategies
KEY STRATEGIES Young Modern Aircraft ▪ New technology, high demand, fuel efficient, liquid aircraft ▪ New sale leasebacks to cement airline relationships ▪ New skyline purchases, to achieve excellent pricing Diversified High Quality Customers ▪ Build geographical and product diversity ▪ High credit
Slide 20: Leasing Synergistic with Chorus Companies – Competitive Differentiator
Leasing Synergistic with Chorus companies – competitive differentiator New Opportunities MRO Services Delivering regional aviation to the world 20
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
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
Slide 23: Appendices
APPENDICES ▪ Regional aircraft leasing growth opportunity ▪ Private placement with Fairfax Financial ▪ Q2 2017 Income Statement ▪ Q2 2017 Balance Sheet ▪ CPA fleet modernization plan by type and year ▪ Jazz fact sheet ▪ 2016 Jazz industry recognition ▪ Voyageur fleet Delivering regional aviation to
Slide 24: Regional Aircraft Leasing Growth Opportunity
Regional Aircraft Leasing Growth Opportunity
Slide 25: 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
Slide 26: 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
Slide 27: 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
Slide 28: 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
Slide 29: 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, ~70% of their regional capacity ▪ Minimum of 96 aircraft under the CPA in 2025 with the objective to gro
Slide 30: Maintenance Repair and Overhaul (MRO) and Parts – Summary
MAINTENANCE 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 on Bombardier regional aircraft ▪ 24/7 operation enabling quic
Slide 31: 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
Slide 32: Jazz Fact Sheet
JAZZ FACT SHEET Corporate Fact Sheet Aircraft type Number Capacity Head office: Halifax 44 74 Regional offices: Vancouver Bombardier Q400 NextGen Calgary Toronto 21 75 Montreal Bombardier CRJ-705 Halifax (Operations Centre) Destinations served 73 destinations across Canada and the U.S. 10 50 Bombard
Slide 33: Jazz Industry Recognition
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 Americ
Slide 34: Voyageur Fleet
VOYAGEUR FLEET Aircraft Number Aircraft Type 8 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 34
Slide 35: Income Statement – Q2 2017
INCOME STATEMENT – Q2 2017 Three months ended June 30, Six months ended June 30, (expressed in thousands of Canadian dollars, except earnings per share) 2017 2016 2017 2016 $ $ $ $ Operating revenue Passenger 318,235 303,976 626,186 618,005 Other 15,127 6,128 27,766 12,649 333,362 310,104 653,952 63
Slide 36: Income Statement – Q2 2017 (cont'd)
INCOME STATEMENT – Q2 2017 (cont’d) Three months ended June 30, Six months ended June 30, 2017 2016 2017 2016 (expressed in thousands of Canadian dollars, except earnings per share) $ $ $ $ Non-operating income (expenses) Interest revenue 517 115 692 241 Interest expense (11,041) (5,378) (19,230) (1
Slide 37: Balance Sheet – Q2 2017
BALANCE SHEET – Q2 2017 As at 30-June-17 31-Dec-16 $ $ Assets Current assets Cash 132,157 23,491 Restricted cash 5,826 5,671 Accounts receivable – trade and other 75,205 75,058 Inventories 52,137 49,657 Prepaid expenses and deposits 51,302 10,591 Income tax receivable 5,332 4,602 Total current asset
Slide 38: Balance Sheet – Q2 2017 (cont'd)
BALANCE SHEET – Q2 2017 (cont’d) As at 30-June-17 31-Dec-16 $ $ Liabilities Current liabilities Accounts payable and accrued liabilities 181,161 173,656 Current portion of obligations under finance leases 3,725 5,099 Current portion of long-term incentive plan 4,402 6,567 Current portion of long-ter
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