chorus aviation overview · chorus has a predictable revenue stream, with 90%+ of annual revenues...
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TSX: CHR
D e l i v e r i n g r e g i o n a l a v i a t i o nt o t h e w o r l d
February 14 , 2020
Chorus Aviation Overview
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This presentation contains “forward-looking information” as defined under applicableCanadian securities laws. Forward-looking information is identified by the use of terms andphrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”,“predict”, “project”, “will”, “would”, and similar terms and phrases, including references toassumptions. Such information may involve but is not limited to comments with respect tostrategies, expectations, planned operations or future actions.
Forward-looking information relates to analyses and other information that are based onforecasts of future results, estimates of amounts not yet determinable and other uncertainevents. Forward-looking information, by its nature, is based on assumptions and is subject toimportant risks and uncertainties. Any forecasts or forward-looking predictions or statementscannot be relied upon due to, among other things, external events, changing marketconditions and general uncertainties of the business. Such statements involve known andunknown risks, uncertainties and other factors that may cause actual results, performance orachievements to differ materially from those expressed in forward-looking information.Factors that could cause results to differ materially from those expressed in this presentationinclude those identified in Chorus’ public disclosure record available at www.sedar.com andthe risk factors identified in Chorus’ Annual Information Form dated February 12, 2020.Statements containing forward-looking information in this presentation represent Chorus'expectations as of the date of this presentation (or as of the date they are otherwise stated tobe made) and are subject to change after such date. Chorus disclaims any intention orobligation to update or revise such statements to reflect new information, subsequent eventsor otherwise, unless required by applicable securities laws.
Caution regarding forward-looking information
Chorus Aviation Overview 2
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Chorus is a fast-growingglobal provider of integrated regional aviation solutions
Chorus Aviation Overview
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1
2
3
Regional aviation is a resilient sector of the aviation industry showing strong stability during economicdownturn
Chorus has a predictable revenue stream, with 90%+ of annual revenues secured through long-term contracts and strong relationships
Chorus has strong growth prospects in aircraft leasing and is differentiated from pure play competitors with an integrated model
4
Investment Highlights
Chorus Aviation Overview
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Regional aviation is based on aircraft carrying Up to 130 passengers
Regional Jets
Up to 130 passengers
Bombardier/ Mitsubishi
CRJ-200 to CRJ-1000
Embraer E135 to E190
Airbus A220-300
83%
37%
17%
Turboprops
RegionalJets
NarrowBody
2 main types of regional aircraft
Fly shorter distances than Narrow Body jets
5Chorus Aviation Overview
3,600
2,300
5,900
15,800
4,500
Regional NarrowBody
WideBody
Account for ~22% of the world’s commercial fleet
Regional aircraft are fundamental to efficient air transport networks and link 60% of the world’s communities 1
Jets
TP
1 Official Aviation Guide (2012). 2 FlightGlobal (2019), includes in-service aircraft with more than 20 seats
50% of world passengers fly
<500 miles
Turbo props
Up to 90 passengers
De Havilland Dash 8 – 100 to 400
ATR ATR 42 to ATR 72
% of all flights below 500 miles 1 Worldwide aircraft fleet 2
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Regional aviation shows strong stability through economic cycles
Chorus Aviation Overview 6
Regional aviation is a resilient sector in an economic downturn
Indexed aircraft value volatility for narrow-body, turboprop and regional jet aircraft
80
85
90
95
100
105
110
115
120
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
● Mainline operators look to contract out more flying to regional partners
● Smaller aircraft are best suited to serve reduced market demand
Turbopropaircraft
Narrow-bodyaircraft
Regional jetaircraft
Source: AVITAS
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The Chorus Story: An Integrated Model
Chorus Aviation is a global provider of integrated regional aircraft solutions
Dry LeasingWet Leasing MRO Opportunities
Leasing Opportunities
Part Sales & Component Repair
Older Assets for Part Out
Wet to Dry Lease Opportunities
Maintenance Data Technical Support
Customer Leads - Wet Leasing & Part Sales
End of Life Assets
Aircraft Repossessions
Aircraft Inspections
Aircraft Transitions
Core Segments
Strategic Enabler
RelationshipsCommon Customers, Suppliers and OEMS
7Chorus Aviation Overview
Technical Expertise
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Appendix 2Supplemental information
6Appendix 1Financial Statements
5
Conclusion4Regional Aircraft Leasing
3
Regional Aviation Services
2Chorus Overview
Contents
Chorus Aviation Overview 8
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Consistently profitable since 2006 IPO
135 Aircraft Leased: 64 third-party71 inside CPA3,2
$0.04 Monthly dividend per share (DRIP)
5,200 Employees TSX:CHR Trading symbol
Chorus has become a significant global player in regional aviation
Chorus Aviation Overview 9
~$1.25B market capitalization as of January 31, 2020
179 Aircraft owned2 $342M 2019 Adjusted1
EBITDA
$1.37B 2019 Revenues1
Note: Market capitalization value based on 160,678,919 shares outstanding and TSX closing stock price of $7.81 as of January 31, 2020.
1 On January 1, 2019, Chorus adopted IFRS 16 using the retrospective transition approach with restatement to comparative periods.2 Includes 4 future committed leased transactions outside North America, 9 future CRJ900s and 5 future aircraft (type TBD) acquisitions/leased transactions inside the CPA.3Includes 5 future ESPs, 9 future CRJ900s and 5 future aircraft (type TBD) that will generate revenue under the CPA.
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40 years
Joseph RandellPresident and Chief Executive Officer
30 years
Colin CoppCOO and President,Chorus Aviation Services
37 years
Steve RidolfiPresident, Chorus Aviation Capital
26 years
Jolene MahodyExecutive VP and Chief Strategy Officer
5 years
Dennis LopesSenior VP, Chief Legal Officer and Corp. Secretary
A highly experienced and stable management team with significant aviation experience
Chorus Aviation Overview 10
Gary OsborneChief Financial Officer
27 years
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Chorus operates 13 facilities across Canada plus 3 international offices for its leasing business
11Chorus Aviation Overview
Headquarters (2)
● Admin offices / crew bases (8)
▲ Line maintenance facilities (4)
Heavy maintenance facilities (2)
Vancouver
TorontoMontreal
Calgary
North Bay
●▲
●▲
●▲●▲
●Singapore
Chorus Aviation Capital International offices
Halifax●
Ireland
●England
Note: Chorus’ presence in Singapore and England consists of business development representatives
●
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Grow our regional aircraft leasing business through aircraft acquisitions, portfolio acquisitions and potential skyline transactions
Grow our regional aviation services of contracted flying (wet leasing and leasing under the CPA)
Leverage the synergies and technicalexpertise across our lines of business tofurther drive diversification and profit
12Chorus Aviation Overview
Our strategic agenda
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Appendix 2Supplemental information
6Appendix 1Financial Statements
5
Conclusion4Regional Aircraft Leasing
3
Regional Aviation Services
2Chorus Overview
Contents
Chorus Aviation Overview 13
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Contracted flying/wet leasing generates largest revenue stream
Operates scheduled service through a CPA with Air Canada under the Air Canada Express brand
Offers charters throughout North America for corporate clients, governments, special interest groups and individuals
14Chorus Aviation Overview
Provides medical, logistical and humanitarian flight operations to blue chip customers globally
Air Canada Express flying
Charter flights
Specialized contracted flying
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Chorus is Air Canada’s primary regional partner
Responsibilities under the Capacity Purchase Agreement
Air Canada Jazz
● Purchases capacity
● Manages routes
● Sets flight schedules
● Sets ticket prices
● Conducts marketing
● Assumes commercial risk
● Retains revenues for passenger & cargo transport
● Supply of flying crews
● Airframe maintenance
● Flight operations
● Some airport operations
● General administration
15Chorus Aviation Overview
● Flexibility to respond quickly and efficiently to market changes and opportunities
● Jazz manages Air Canada Express operations at 38 airports across Canada● Source of qualified pilots through Pilot Mobility Program
Benefits for Air Canada
~80%of Air Canada’s regional seat capacity
116 Aircraft currently operated by Jazz
52 Currently leased under the CPA
~690daily flights
90N.A. destinations
Largest Chorus
customer
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● Guarantees ~$2.5B in contracted revenue over 17 years1
● $1.6B from aircraft leasing● $0.86B 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 proceeds to acquire aircraft
for the leasing business
● Modernization of Air Canada Express fleet● Acquisition of 9 new CRJ-900s will generate
lease revenue under CPA● Acquisition of 5 aircraft (type TBD) in 2025
● Margin risk on controllable costs reduced to a maximum of $2M/year
Amended/extended CPA with Air Canada to 2035
16
Provides long-term certainty and stability1 Over the 17-year term of the CPA (January 2019 to December 2035), the revenue estimates are based on agreed aircraft lease rates in the CPA and certain assumptions and estimates for future market lease rates related to new and extended leases under the CPA. A foreign exchange rate of 1.30 (based on the long-term historical average rate which is reviewed and adjusted annually) was used in the calculation of the estimates. See cautionary statement regarding forward-looking information on slide 2
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253 266593 748
134
577
980
1,610
223 151
325308
399
548
858
OriginalCPA
AmendedCPA
OriginalCPA
AmendedCPA
OriginalCPA
AmendedCPA
OriginalCPA
AmendedCPA
Fixed fee
Aircraft leasing
476 417
9181,056
1341
976
1,528
2,468
CPA extension increases total minimum contracted revenue by ~$940M
● Near-term fixed fee reductions more than offset by term extension and aircraft leasing
● Aircraft leasing driving ~65% of the contracted revenue for the term of the amended agreement
● Potential for additional lease extensions/renewals beyond 2025
● Maximum available performance incentives will average ~$3.4M annually over the term ● These are variable in nature
and are not included in the contracted revenue figures
17Chorus Aviation Overview
1 Certain current aircraft leases under the current CPA extend past December 31, 20252 Over the 17-year term of the CPA (January 2019 to December 2035) 3 ’Total Amended CPA’ column includes contracted aircraft leasing for 2026 and beyond estimated at $19 millionSee cautionary statement regarding forward-looking information on slide 2
2019-2020Significant
fleet transition
2021-2025Min. 105 aircraft
2026-2035Min. 80 aircraft TOTAL
($59M) +$138M +$842M +$940M
Minimum contracted revenue in CPA ($M)
3
Change vsOriginal CPA
2
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Aircraft type Seat Cap.
Existing Fleet Comment Amended
CPA
De Havilland Dash 8-400 NextGen
74 44 ● 3 will be removed in 2023● 12 currently leased under the CPA will
extend lease to 2030● 19 leases expiring between the end of
2025 and 2028
36
Bombardier CRJ-900
75 21 ● 9 CRJ900s will be purchased and leased under the CPA
● 5 CRJ900s will be sourced by Air Canada and leased to Jazz in the first half of 2019
35
Bombardier CRJ-200
50 10 ● Transferred to Jazz from Air Georgian● 15 to operate until 2025
15
De Havilland Dash 8-300
50 26 ● 18 aircraft will undergo an Extended Service Program and generate leasing revenue under the CPA
● 13 of the 18 completed to date
19
De Havilland Dash 8-100
37 15 ● Removed from the fleet and replaced with larger aircraft
0
The amended CPA brings significant modernizationto the Air Canada Express fleet
18Chorus Aviation Overview
● 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 extensions /
renewal on current aircraft and possibility of new aircraft
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Maintenance Repair & Overhaul (MRO) and Parts
● 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
● 200 000 sq. ft. facility
● Performs heavy maintenance, repair and overhaul activities, customized designs and engineering and aircraft modifications
● Transport Canada, U.S. Federal Aviation Administration and European Aviation Safety Agency approved
● Transport Canada certified Canadian Design Approval Organization
● Supplemental Type Certificates for Dash 8 100/200/300/ Q400s and Dash 7s
● Parts provisioning, sales and service for regional aircraft -complements MRO activities
● Established regional aircraft parts depot in Dubai, UAE in partnership with Segers Aviation SA
19Chorus Aviation Overview
Halifax, NS
North Bay, ON
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Appendix 2Supplemental information
6Appendix 1Financial Statements
5
Conclusion4Regional Aircraft Leasing
3
Regional Aviation Services
2Chorus Overview
Contents
Chorus Aviation Overview 20
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Regional aircraft leasing/dry leasing is an attractive business with strong growth potential
● 50% of global passengers fly on trips shorter than 500 miles● Regional aircraft allow airlines to optimize aircraft size
and reduce per-seat-cost
● 70-130 seat fleet expected to grow at ~3.7% per year overthe next 20 years1
● Penetration rate of operating leases is still relatively low for regional aircraft (~29%) compared to narrow-body jets (~50%)
21Chorus Aviation Overview
● Economic growth in emerging markets is expected to significantly outpace growth in advanced economies
● Fast growth of the urban middle class in emerging marketswill create opportunities for regional air travel
● Stable technology of regional aircraft reduces volatility in residual value compared to narrow-body aircraft
● Steady historical deliveries
Essential component of commercial aviation
Very resilient demand from a broad user base
Geographically diverse demand
Stable technologyand supply
1 Bombardier Market Forecast 2017-2036
1
2
3
4
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5 pillars of our aircraft leasing growth strategy
● Industry veterans based on 3 continents
● Strong relationships with over 100 airlines
● Seek airline customers with good credit quality and/or strong prospects
● Employ collaborative approach to working with airlines
● Build a diversified customer base
22Chorus Aviation Overview
● Acquire modern technology, high demand, marketable aircraft
● Use sale leasebacks to build airline relationships
● Use skyline purchases to reduce aircraft acquisition costs
● Target 5 to 10 years to provide significant visibility into future
● Aim to recover cost of the aircraft over first lease
● Maintain adequate liquidity and flexibility while obtaining the lowest cost of capital available
● Seek debt financing from a variety of markets, channels and sources● Reserve capital for select deals to allow for opportunistic purchasing
Highly Experienced Team
Customers
New to Mid-Life Aircraft
Long-Term Leases
EfficientCapital
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Committed fleet of 64 aircraft worth US$ 1.3 billion
23
1 Includes all aircraft which have been delivered as well as pending acquisitions and future deliveries for which CAC has received lease commitments. Assumes lessees fulfill payment and other lease obligations for the entire lease term.
2 Fleet age and remaining lease term are calculated based on the weighted-average of aircraft net book value of 60 aircraft as of December 31, 2019.
3 Debt and contract terms of 97.3% fixed rate debt (inclusive of floating rate debt that is fixed through the use of swaps) and 2.7% floating rate debt (with leases that float on the same basis as the debt).
4 Reflects actual borrowings as at December 31, 2019 only.
N. America3 Aircraft
S. America5 Aircraft
Europe22 Aircraft
Africa9 Aircraft
Australia3 Aircraft
Asia22 Aircraft
Chorus Aviation Overview
See cautionary statement regarding forward-looking information on slide 2
● Approximately ~US$ 960M in future contracted lease revenue1
● Weighted average fleet age of 3.2 years2
● Weighted average remaining lease term of 6.7 years2
● ~97.3% debt is fixed rate3
● Weighted average cost of borrowing of 4.11%4
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24Chorus Aviation Overview
Chorus has become the world’s 2nd largestregional aircraft lessor (portfolio value)
5,970
2,2001,841
1,565
1,235
735
515
500
485
360
340
NAC
Chorus
Chorus
GECAS
Falko
DAE
Elix
TrueNoord
Avation
Avmax
HEH
Chorus is theonly large regional
aircraft lessor which is also an operator
Portfolio value (US$ M)
See cautionary statement regarding forward-looking information on slide 2
Source: FlightGlobal (June 2019); portfolio values based on half-life CMVs1Chorus’ value, including commitments, consists of 71 aircraft leased under the capacity purchase agreement, including 9 future CRJ900 acquisitions, 5 future ESPs and 5 aircraft (type TBD). Non-CPA aircraft leasing includes all aircraft which have been delivered as well as 4 pending acquisitions and future deliveries for which CAC has lease commitments.2Chorus’ current value includes 52 aircraft leased under the capacity purchase agreement and 60 non-CPA aircraft leased to customers outside of North America.
3Falko includes Avolon
1
2
Includingcommitments
Current
3
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25Chorus Aviation Overview
Diversification across airlines, geography and aircraft types
Turboprops Regional Jets
Customer Aircraft committed1
Dash 8 ATR CRJ Embraer A220 TBD
Aeromexico 3
airBaltic 5
Air Nostrum 4
Azul 5
Cityjet 2
Croatia Airlines 2
Ethiopian 5
Flybe 8
IndiGo 8
Jambojet 4
KLM 1
Malindo Air2 4
Philippine Airlines 3
SpiceJet 5
Virgin Australia 3
Wings Air2 2
Total third-party 64 24 23 6 6 5
Air Canada 71 52 14 5
Grand total 135 76 23 20 6 5 5
1Chorus value includes 71 aircraft leased under the capacity purchase agreement which include 9 future CRJ900 acquisitions, 5 future ESPs on Dash 8-300 aircraft and 5 future aircraft (type TBD) that will generate revenue under the CPA. Non-CPA aircraft leasing includes all aircraft which have been delivered as well as pending acquisitions and future deliveries for which CAC has received lease commitments.2A member of the Lion Air Group.
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Description Sample Chorus Transaction
1 From lessors Purchase of assets with attached leases from lessor’s non-core portfolio
Purchase of 2 E190s with Aeromexico leases attached from another lessor
2 From airlines Sale and leaseback of existing or future aircraft deliveries
Purchase of 6 new ATR72-600s under IndiGo’s purchase agreement with concurrent long-term leaseback agreement
3 From aircraft manufacturers
Direct purchase from manufacturers for subsequent lease to airlines
Purchase of 2 Dash 8-400 turboprops directly fromDe Havilland with subsequent lease agreement to JamboJet
Three ways to acquire leasing assets
Chorus Aviation Overview 26
Global regional aircraft leasing market estimated at~275 new aircraft deliveries per year1
1 Bombardier Market Forecast 2017-2036Source: FlightGlobal (2019), Chorus Aviation estimates
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30+ Years Experience in Lease Management
Our team has experience with all aspects of lease event management
Lease Event
Natural Expiry
Workout Required
New Customer Marketing
Lease Extension
Sale or Part-Out of Asset
Consensual Return
Non-Consensual
Return
Lease Restructure
Although our leasing entity is recently formed, our team has significant lease management experience with strong competencies in all aspects of the aircraft leasing cycle; the core based in Ireland.
Strong leasing experience at the Irish board and Chorus public board levels.
Chorus Aviation Overview 27
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Chorus’ leasing business is fully built-out and highly scalable
Our leasing business is strongly supported by the entire Chorus Aviation organization
Legal Services• Aircraft Acquisitions/Sales• Lease Negotiations• Aircraft Financings
Financial Services• Treasury Support• Tax Management• Insurance
Technical Expertise• Engine & Component
Costs• Technical Advisory• Records Reviews
Lease Term Support• Pre-Purchase Inspections• Aircraft and Records
Audits• Reserve Projections
End-of-Lease Support• Reconfiguration &
Redelivery• Ferry & Positioning Flights• Re-Possession Capabilities
End- of- Life Services• Aircraft Conversions• Aircraft Storage• Aircraft Part-out
Chorus Aviation Overview 28
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Aircraft Lease Transition Technical Expertise
Chorus Aviation subsidiaries have 40+ years of experience with aircraft acquisitions and lease transactions with over 300 aircraftsince 2000. Our technical expertise is a competitive advantage.
1. Pre-purchase and Re-deliveryInspection
2. Custody and Control
3. Technical Support Services
4. Heavy Maintenance Service &Checks
5. Engine Services &Changes
6. Interior Configuration Changesand Refurbishing
7. Aircraft RecordsAudits
8. Aircraft Storage
9. Airworthiness Management
10. Ferry Flights & AircraftPositioning
11. Aircraft re-possession
Technical Aircraft Leasing Services
Since 2000, Jazz has completed aircraft lease returns/inductions and recently completed lease return work for other airlines, and managed aircraft transitions for other leasing companies. Additionally, Jazz has extensivetechnical knowledge and capability with regards to aircraft acceptance from theOEM.
Voyageur provides a full suite of aircraft leasing support services and has completed multiple lease returns for aircraft leasing companies.
Chorus Aviation Overview 29
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Chorus holds defensive position in economic downturn
● Over 90% of revenues embedded in flight operations and aircraft leasing long-term contracts
● US $2.7B in future contracted revenues1
● Air Canada assumes risks related to commercial aspects● +/- C$2M guardrail on controllable costs● Minimum fleet and aircraft leasing commitments
30Chorus Aviation Overview
● Lower costs and smaller aircraft than mainline carriers● Aircraft leasing provides operational flexibility, reduces
financing requirements and eliminates risk on aircraft residual value
● Rigorous evaluation process● Diversification of aircraft type and geography● Diversification of customer base with good prospects
● Mature and efficient regional aircraft● Ability to fly, lease, sell, modify, disassemble and part-out
aircraft
Visibility on future revenues and costs
Protected profit margin under CPA
Better suited to serve reduced market demand
Conservative approach to leasing business
Valuable aircraft lifecycle
1 The estimates are based on agreed lease rates in the CPA and certain assumptions and estimates for future market lease rates related to new and extended leases under the CPA as at January 1, 2019. A foreign exchange rate of $1.26 (based on the long-term average historical rate) was used in the calculation of the estimates. The Regional Aircraft Leasing segment's estimates are based on agreed lease rates and assumes no default by lessees.
See cautionary statement regarding forward-looking information on slide 2
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Appendix 2Supplemental information
6Appendix 1Financial Statements
5
Conclusion4Regional Aircraft Leasing
3
Regional Aviation Services
2Chorus Overview
Contents
Chorus Aviation Overview 31
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1
2
3
Chorus is very well positioned to grow significantly in the regional aircraft leasing 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 aviation services, both inside and outside the CPA
Chorus has a predictable revenue stream, with a business model based on long-term contracts, less exposed to downturns than main line carriers and lessors
Chorus Aviation Overview
Conclusion
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Appendix 2Supplemental information
6Appendix 1Financial Statements
5
Conclusion4Regional Aircraft Leasing
3
Regional Aviation Services
2Chorus Overview
Contents
Chorus Aviation Overview 33
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34
Consolidated Income Statement For the years ended December 31, 2019 and 2018(expressed in thousands of Canadian dollars, except earnings per share)
Operating revenue 1,366,447 1,353,287 Operating expenses
Salaries, wages and benefits 471,118 443,332
Depreciation and amortization 136,948 118,487 Aircraft maintenance materials, supplies and services 207,846 240,744
Airport and navigation fees 170,065 170,180 Terminal handling services 20,493 21,720 Other 159,514 142,115
1,165,984 1,136,578
Operating income 200,463 216,709 Non-operating (expenses) income
Interest revenue 3,052 2,924
Interest expense (74,820) (59,209)Loss on disposal of property and equipment (653) (164)Foreign exchange gain (loss) 30,613 (55,986)Other (395) 500
(42,203) (111,935)
Income before income taxes 158,260 104,774
Income tax expense
Current income tax (8,416) (2,133)
Deferred income tax (16,684) (35,211) (25,100) (37,344)
Net income 133,160 67,430
Earnings per share, basic 0.85 0.49
Earnings per share, diluted 0.84 0.48
Earnings per share, diluted 0.15 0.31
$ $2019 2018
(Restated - Note 3)
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35
Unaudited Consolidated Statements of Financial Position(expressed in thousands of Canadian dollars)
AssetsCurrent assetsCash 87,167 92,592 78,007 Accounts receivable – trade and other 68,666 77,097 77,397 Inventories 61,843 55,691 51,543 Prepaid expenses and deposits 11,150 11,486 11,334 Current portion of lease receivables 4,558 5,190 4,511 Income tax receivable 1,323 704 2,268
234,707 242,760 225,060
Restricted cash 26,690 20,081 13,625 Lease receivables 8,637 13,865 17,522 Property and equipment 2,592,327 1,997,552 1,736,927 Intangibles 1,799 2,088 2,392 Goodwill 7,150 7,150 7,150 Deferred income tax asset 2,784 4,295 3,022 Other long-term assets 71,600 37,490 28,362
2,945,694 2,325,281 2,034,060
LiabilitiesCurrent liabilities Accounts payable and accrued liabilities 177,575 189,048 213,910 Current portion of lease liabilities 5,785 6,720 6,179 Current portion of long-term incentive plan 6,549 4,087 5,844 Current portion of long-term debt 164,554 142,652 118,567 Dividends payable 6,487 5,657 5,014 Income tax payable 10,114 930 —
371,064 349,094 349,514
Lease liabilities 10,531 15,910 20,932 Long-term debt 1,658,576 1,297,077 1,188,602 Deferred income tax liability 192,315 172,262 135,577 Other long-term liabilities 108,215 61,131 57,835
2,340,701 1,895,474 1,752,460
Equity 604,993 429,807 281,600
2,945,694 2,325,281 2,034,060
As at As at As atDecember 31, December 31, January 1,
2019 2018 2018$ $ $
(Restated - Note 3) (Restated - Note 3)
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36
Segmented Financial StatementThree Months Ended December 31, 2019(expressed in thousands of Canadian dollars)
Operating revenue 301,949 36,657 338,606 310,701 23,023 333,724
Operating expenses 268,522 18,651 287,173 262,085 10,378 272,463
Operating income 33,427 18,006 51,433 48,616 12,645 61,261
Net interest expense (8,330) (11,400) (19,730) (8,710) (5,737) (14,447)
Foreign exchange gain (loss) 10,757 1,144 11,901 (33,955) 451 (33,504)
Other (loss) gain(2) (1,270) (395) (1,665) 22 — 22
Earnings before income tax 34,584 7,355 41,939 5,973 7,359 13,332
Income tax (expense) recovery (5,802) 440 (5,362) (10,590) (505) (11,095)
Net income (loss) 28,782 7,795 36,577 (4,617) 6,854 2,237
Operating income 33,427 18,006 51,433 48,616 12,645 61,261
Depreciation and amortization(3) 22,090 15,052 37,142 22,496 8,082 30,578
Employee separation(3) 61 — 61 217 — 217
Adjusted EBITDA(4) 55,578 33,058 88,636 71,329 20,727 92,056
Earnings before income tax 34,584 7,355 41,939 5,973 7,359 13,332
Unrealized foreign exchange (gain) loss (13,354) — (13,354) 32,869 — 32,869
Employee separation program(3) 61 — 61 217 — 217
Adjusted EBT(4) 21,291 7,355 28,646 39,059 7,359 46,418
$
Regional Aircraft Leasing
(1) On January 1, 2019, Chorus adopted IFRS 16 using the retrospective transition approach with restatement to comparative periods. Please refer to Section 13 - Changes in Accounting Standards.(2) Other includes gain/loss on disposal of property and equipment and other income.
(3) Included in operating expenses.
(4) These are non-GAAP financial measures – refer to Section 18 for disclosures on non-GAAP financial measures.
(in thousands of Canadian dollars)
Regional Aviation Services
Regional Aircraft Leasing Total Regional Aviation
Services
$ $ $ $
For the three months ended December 31, 2018 (1)For the three months ended December 31, 2019
Total
$
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37
Segmented Financial StatementFor the Year Ended December 31, 2019(expressed in thousands of Canadian dollars)
(in thousands of Canadian dollars)
Operating revenue 1,239,404 127,043 1,366,447 1,273,447 79,840 1,353,287
Operating expenses 1,102,722 63,262 1,165,984 1,096,824 39,754 1,136,578
Operating income 136,682 63,781 200,463 176,623 40,086 216,709
Net interest expense (34,108) (37,660) (71,768) (36,569) (19,716) (56,285)
Foreign exchange gain (loss) 29,703 910 30,613 (56,579) 593 (55,986)
Other (loss) gain(2) (653) (395) (1,048) 336 — 336
Earnings before income tax 131,624 26,636 158,260 83,811 20,963 104,774
Income tax expense (22,881) (2,219) (25,100) (34,481) (2,863) (37,344)
Net income 108,743 24,417 133,160 49,330 18,100 67,430
Operating income 136,682 63,781 200,463 176,623 40,086 216,709
Depreciation and amortization(3) 89,344 47,604 136,948 89,627 28,860 118,487
Employee separation(3) 2,308 — 2,308 5,364 — 5,364
Signing bonus(3) 2,000 — 2,000 — — —
Adjusted EBITDA(4) 230,334 111,385 341,719 271,614 68,946 340,560
Earnings before income tax 131,624 26,636 158,260 83,811 20,963 104,774
Unrealized foreign exchange (gain) loss (41,305) — (41,305) 49,482 — 49,482
Employee separation program(3) 2,308 — 2,308 5,364 — 5,364
Signing bonus(3) 2,000 — 2,000 — — —
Adjusted EBT(4) 94,627 26,636 121,263 138,657 20,963 159,620
(2) Other includes gain/loss on disposal of property and equipment and other income.
(3) Included in operating expenses.
(4) These are non-GAAP financial measures – refer to Section 18 for disclosures on non-GAAP financial measures.
Total
$
(1) On January 1, 2019, Chorus adopted IFRS 16 using the retrospective transition approach with restatement to comparative periods. Please refer to Section 13 - Changes in Accounting Standards.
$ $ $ $ $
Regional Aviation Services
Regional Aircraft Leasing
Total Regional Aviation Services
Regional Aircraft Leasing
For the year ended December 31, 2019 For the year ended December 31, 2018 (1)
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Appendix 2Supplemental information
6Appendix 1Financial Statements
5
Conclusion4Regional Aircraft Leasing
3
Regional Aviation Services
2Chorus Overview
Contents
Chorus Aviation Overview 38
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Chorus Aviation - The Leasing Platform
Chorus’ leasing business is fully built-out and highly scalable
Business CycleAcquire Manage Transition Dispose
• Strategy and Planning
• Worldwide Market Coverage
• Purchase/Lease Contracting
• Aircraft Delivery and Acceptance
• OEM/Fleet Relationship Management
• Lease Management
• Compliance
• Maintenance Monitoring
• Continuous Risk Assessment
• Lease Contracting
• Worldwide Market Coverage
• Aircraft Delivery and Acceptance
• Repossession
• MRO Services
• Asset Trading Management
• Contracting for Sale
• Worldwide Market Coverage
• MRO Services and Part-out
Within our leasing entity, Chorus Aviation Capital, a team of 20 professionals with strong competencies in allaspects of the aircraft leasing cycle; the core based in Ireland.
Legal, financial and administration support provided from parent, Chorus.
Technical operations supported by Jazz and Voyageur (technical advisory and support services).
Ability to leverage the synergistic capabilities of Jazz and Voyageur (e.g. repossessions, transitions, part-outs,etc.).
Strong leasing experience at the Irish board level and Chorus public board level.
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Director of Sales, Bombardier Airline Analyst, Saab Aircraft
AppendixChorus Aviation Capital - Senior Management
VP, Capital Markets, Lease Corporation International Head of Treasury, Vistajet Director, Structured Finance, Bombardier Director, Aircraft Finance, Bank of Scotland
Director, Corporate Development/Aircraft Programs, Chorus
Manager, Business Development, Jazz Aviation LP Vice President, Commercial Operations, Provincial
Airlines Manager, Aircraft Programs, Jazz Aviation LP
SVP, Strategic Investments, Mergers & Acquisitions, Chorus Aviation
SVP, Strategy, Mergers and Acquisitions, Bombardier President, Business Aircraft, Bombardier President, Regional Aircraft, Bombardier
Steven Ridolfi, President
Director of New Aircraft Sales, Bombardier Director of Pre-owned Aircraft Sales, Bombardier
Prashant Mahajan, Vice President, Lease Originations
Director, Finance and Operations, CIT Aerospace International European Treasury Manager, CIT Vendor Finance Financial Controller, Commcorp International Fixed Income Accountant, Credit Suisse First Boston, London, UK
Una Slevin, Vice President, Head of Contracts
VP, Aircraft Leasing and Trading, Chorus Aviation VP, Marketing and Sales, Bombardier Flexjet VP, Commercial, Embraer North America Managing Director, Embraer Asia Pacific.
J. Bruce Peddle, Chief Operating Officer
Rory McQueen, Vice President Finance & Capital Markets
VP, Structured Finance, Bombardier VP, Finance and Contracts, Bombardier VP, Asset Management & Business Development, Bombardier
Cameron Mountenay, Chief Financial Officer
Jim Murphy, V/P, Transactions and Control
Dave Corri, Vice President, Technical Director, Technical, Chorus Aviation Capital Technical Services Engineer, Part M Aviation Technical Services Engineer, Maintenance Planning, ASL Airlines
Ireland Aircraft Engineer, CityJet
Financial Controller, External Reporting & Control, DAE Financial Controller, External Reporting, AWAS Manager, Statutory Reporting, AWAS Manager, PWC
Ray Gorman, Vice President, Accounting
Fabio Ligi, Vice President, Lease Originations
CAC personnel have experience with all aspects of lease management.
Chorus Aviation Overview 40
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How we mitigate risk● Air Canada manages all commercial aspects and assumes all associated risks
● Air Canada pays for all fuel – CHR does not see a fuel bill
● Jazz operates ~80% of Air Canada’s regional capacity
● Jazz operates over 690 daily flights – complex and cost prohibitive to replace
● Minimum of $2.5B in contracted revenue until the end of 20351
● Fix fee revenue tied to minimum aircraft fleet irrespective of hours flown
● Margin risk on controllable costs reduced to a maximum of $2M/year
● Cliff termination: operations cease at midnight December 31, 2035
● Worldwide reputation for excellence in safety, operational integrity and customer service
● Robust, thorough transaction approval process to evaluate prospective customer● Aircraft leasing expertise on the boards of CAC and CHR● Diversity in customer, aircraft type and geographic location● Target strongest airline in each jurisdiction – preferably in locations that honour Cape
Town Convention● Conduct regular on-site checks of aircraft condition and operations● Collection of reserves, security deposits and maintaining high debt service cover ratio● Target long-term leases, providing more return from the lease itself compared to aircraft
residual value● Maintain industry standards of leverage● In-house ability to re-possess aircraft or to re-lease, operate, modify, refurbish, sell,
disassemble/part out for parts provisioning when lease terms expire● Regional aircraft values exhibit less volatility than narrow and wide body aircraft in market
cycles
41Chorus Aviation Overview
CPA/Wet Leasing
Dry Leasing
1 This estimate is based on agreed lease rates in the CPA and certain assumptions and estimates for future market lease rates related to new and extended leases under the CPA as at January 1, 2019. A foreign rate of $1.26 (based on the long-term average historical rate) was used in the calculation of this estimate.
See cautionary statement regarding forward-looking information on slide 2
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Opportunities for incremental revenue at end of leases under the CPA
● Current lease commitments beyond 2025 leave substantial room for additional lease extensions/renewals on current and possibly new aircraft to Air Canada in amended CPA
● Lease expiry of each aircraft is concurrent with full debt repayment; no exposure for Chorus on debt
● 19 Dash 8-400 aircraft have lease terms expiring from end of 2025 toend of 2028● Put and call rights to Air Canada in 2025 no longer applicable due to CPA extension
to 2035
42Chorus Aviation Overview
Significant leasing opportunity as each aircraft lease under the CPA expires
Year end fleet counts 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Chorus-owned 75-78 seat aircraft earning leasing revenue under CPA
39 481 48 48 45 45 501 44 39 31 26 26 14 5 5 5 5
Chorus-owned Dash 8-300 aircraft2 (50-seat aircraft) earning leasing revenue under CPA
13 16 17 18 18 18 18 - - - - - - - - - -
Chorus-owned aircraft with expired leases 3, 4 - - - - 3 3 3 28 33 41 46 46 58 67 67 67 67
Total 52 64 65 66 66 66 66 72 72 72 72 72 72 72 72 72 72
1 Includes 9 CRJ900s acquired and leased in 2020 and 5 aircraft to be determined acquired and leased in 2025.2 As of December 31, 2019, the Extended Service Program was completed on 13 Dash 8-300s which are earning lease revenue under the CPA. The remaining 5 aircraft will gradually be completed by December 31, 2022 and will earn lease revenue under the amended CPA.3 Owned Chorus aircraft that have their lease expire under the amended CPA. These aircraft have the potential for re-lease with Air Canada or other third parties, sale or part out.4 Aircraft debt is fully paid off with each lease expiry, including the 3 Dash 8-400s removed in 2023.
Average of 33 Average of 7
Average of 52
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Minimum CPA fleet commitment provides predictability
● Enhanced relevance to Air Canada with CRJ200 regional AC Express capacity reallocated to Jazz
● Further fleet modernization and transition to larger gauge equipment with the Dash 8-100s exiting the fleet earlier
● All owned Dash 8-300 aircraft maintained as covered fleet until 2025
● Minimum fleet of 105 determines fixed fee revenue floor; set at $75.3 million in each of 2019 and 2020, given substantial fleet transitions and averages $61.6 million from 2021 -2025
● Minimum covered fleet of 80 aircraft in the 75-78 seat range provides minimum revenue floor of $399 million over extended term from 2026-35
Significant regional network footprintunder amended CPA
43Chorus Aviation Overview
Amended CPA 2019 2020 2021 2022 2023 2024 2025 2026 Onward
DASH 8-100 - - - - - - - -
DASH 8-300 19 19 19 19 19 19 19 -
CRJ900 35 35 35 35 35 35 35 -
Dash 8-400 36 36 36 36 36 36 36 -
CRJ200 15 15 15 15 15 15 15 -
Type TBD 80
TOTAL 105 105 105 105 105 105 105 80
Previous CPA 2019 2020 2021 2022 2023 2024 2025 2026 Onward
DASH 8-100 15 15 12 12 4 1 - -
DASH 8-300 26 26 26 26 26 26 26 -
CRJ900 21 21 21 21 21 21 21 -
Dash 8-400 44 49 49 49 49 49 49 -
CRJ200 10 - - - - - - -
TOTAL 116 111 108 108 100 97 96 -
Operating aircraft in fleet may be higher than the minimum covered fleet commitment, particularly in the early years as fleet transition occurs
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Jazz is widely recognized for its excellence,both as an employer and operator
● Canada’s Safest Employers 2019 Gold in Transportation cat.
● Canada’s Best Diversity Employers 2019 - 2012
● Mercer Award for Excellence in Diversity and Inclusion 2019
● Employee Recommended Workplace – 2018 - 2019 The Globe and Mail & Morneau Shepell
2019
2017
44Chorus Aviation Overview
2018
● Canada’s Safest Employers 2017 Gold in Transportation cat.
● APEX award for “Excellence in Publication” - Focus on Safety
● Top Airline Reliability Performance Awards 2018-2015
● Canada’s Safest Employers 2018● Silver in Transportation cat.● Silver Psychological Safety cat.
● Canada’s Top Employers for Young People 2020 - 2014
● Atlantic Canada’s Top 25 Employers 2020 - 2012
● Nova Scotia’s Top 15 Employers 2020 - 2012
2020
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Oil
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2x
Regional aviation holds strong growth potential worldwide
45Chorus Aviation Overview
● Resilient passenger air traffic growth has outperformed GDP growth by ~2.0x over the past 10 years 1
● 20-year world annual traffic growth forecast of 4.4% 1
● Growth in leased aircraft fleet drivenby 2 factors:● Increase in global fleet● Increasing use of leased aircraft (vs owned)
● Operating leases provide more operational flexibility, lower financing requirements, and no residual value risk
Air Travel expected to double from 2015 to 2025 1
Airlines increasingly dependent on operating leases 2
0
5
10
15
20
25
1977 1982 1987 1992 1997 2002 2007 2012 2017 2022 2027 2032 2037
2,0003,100
4,7006,100
7,3009,400
17%
24%
32%36%
40%43%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1995 2000 2005 2010 2015 2019
Operating lease market share
Operating lease fleet (est.)
World aircraft fleet on an operating lease
World annual traffic (trillion RPK)
1 Airbus Global Market Forecast (2018-2037), 2 FlightGlobal (2019), includes in-service TPs, RJs, and NBs with more than 20 seats
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Hypothetical leased assets earnings example
Chorus Aviation Overview 46
See cautionary statement regarding forward-looking information on slide 2
InputsInvestment information Rentals Expenses SaleAircraft cost $20.0 Average LRF 0.90% Interest rate 4.50% Holding period 10Loan/value 0.75 $15.00 Monthy rental $0.18 Depreciation rate 4.00% Sales value 0.00%Equity $5.0 Annual rental $2.2 Payment at maturity 25.00% (Gain over NBV)D/E Ratio 3.0x
Year Revenue DepreciationInterest
Expense EBTDeferred
taxesNet
Income Investment RevenueDebt
RepaymentSales
proceeds
Net Cash Flow
NBV Equity
Aircraft Value
Debt Balance Debt/Equity
0 (5.0) (5.0) 5.0 20.0 15.0 3.01 2.2 (0.8) (0.7) 0.7 (0.1) 0.6 2.2 (1 .6) 0.6 5.6 19.2 14.1 2.52 2.2 (0.8) (0.6) 0.7 (0.1) 0.6 2.2 (1 .6) 0.6 6.2 18.4 13.1 2.13 2.2 (0.8) (0.6) 0.8 (0.1) 0.7 2.2 (1 .6) 0.6 6.9 17.6 12.1 1 .84 2.2 (0.8) (0.5) 0.8 (0.1) 0.7 2.2 (1 .6) 0.6 7.6 16.8 11 .1 1 .55 2.2 (0.8) (0.5) 0.9 (0.1) 0.8 2.2 (1 .6) 0.6 8.4 16.0 10.0 1.26 2.2 (0.8) (0.5) 0.9 (0.1) 0.8 2.2 (1 .6) 0.6 9.2 15.2 8.9 1.07 2.2 (0.8) (0.4) 1.0 (0.1) 0.8 2.2 (1 .6) 0.6 10.0 14.4 7.7 0.88 2.2 (0.8) (0.3) 1 .0 (0.1) 0.9 2.2 (1 .6) 0.6 10.9 13.6 6.4 0.69 2.2 (0.8) (0.3) 1 .1 (0.1) 0.9 2.2 (1 .6) 0.6 11.8 12.8 5.1 0.410 2.2 (0.8) (0.2) 1 .1 (0.1) 1 .0 2.2 (5.4) 12.0 8.8 12.8 12.0 0.0 0.0
Total 21.6 (8.0) (4.7) 8.9 (1.1) 7.8 (5.0) 21.6 (19.7) 12.0 8.9 Project IRR 15%
Income Statement Cash Flows Metrics