Jazz is sole operator of Air Canada Express
flights
- 25 Embraer 175 aircraft to be added to the Covered Aircraft
fleet, increasing the fixed fee margin.
- Jazz to provide 100% of Air Canada Express 70+ seat regional
capacity until 2025.
- Dash 8-300 aircraft to exit the Covered Aircraft
fleet.
- Controllable cost guardrail receivable capped at
$20 million per year, improving
working capital; +/- $2.0 million
exposure is unchanged.
- All other material components of the CPA are
unchanged.
HALIFAX, NS, March 15, 2021 /CNW/ - Chorus Aviation Inc.
(TSX: CHR) ('Chorus'), parent company of Jazz Aviation LP ('Jazz'),
today confirmed the condition precedent to the revisions of the
capacity purchase agreement ('CPA') between Jazz and Air Canada
announced on March 1, 2021 has been
met. As a result, the amended CPA is effective on a retroactive
basis to January 1, 2021. The newly ratified agreement with
Jazz pilots, as represented by the Air line Pilots Association
International, will run until December 31,
2035.
"I extend my gratitude to our Jazz pilots and the leadership
team of the Air Line Pilots Association International for securing
Jazz's place within the Air Canada Express network. This is very
good news for our employees and our stakeholders," stated
Joe Randell, President and Chief
Executive Officer, Chorus. "As the sole operator of Air Canada
Express services, we look forward to integrating the Embraer 175s
into our fleet and further expanding our wide portfolio of regional
aviation capabilities and services."
Revisions to the CPA include the following:
Consolidation of 25 Embraer 175s into Jazz's Covered Aircraft
fleet
- Jazz will operate the 25 E175s under the CPA.
- Jazz is the exclusive Air Canada Express operator of 70+ seat
aircraft until the end of 2025.
- Fixed fees increase by $46.0
million over the term of the CPA with annual minimum fixed
fees increasing by $1.2 million per
year from 2021 to 2025, and by approximately $4.0 million per year from 2026 to 2035.
Removal of 19 Dash 8-300s from Jazz's Covered Aircraft
fleet
- 19 Dash 8-300s will be removed from the fleet in 2021. Removal
of the Dash 8-300s will reduce future aircraft leasing revenue
under the CPA by approximately $56.0
million over the remaining term of the contract.
- Chorus owns these Dash 8-300s, 15 of which have undergone the
Extended Service Program ('ESP') which prolongs their useful life
by approximately 15 years. Chorus estimates the carrying value of
these aircraft to be approximately $65.0
million, and can sell, lease, or convert them for cargo
operations.
Controllable Cost Guardrail Receivable
- The controllable cost guardrail receivable is capped to a
maximum of $20.0 million annually and
is reconciled on a quarterly basis and paid in the following
quarter. This will avoid the accumulation of a receivable in excess
of the agreed maximum. The +/-$2.0
million controllable cost guardrail exposure is
unchanged.
As a result of these revisions to the CPA, Chorus anticipates
one-time costs, charges, and other fees to range between
$100.0 million and $110.0 million, with approximately half of this
range being non-cash in nature, and the cash portion paid over
several years. The non-cash component includes an estimated
$45.0 million impairment provision on
the Dash 8-300s and supporting inventory, and a non-cash defined
benefit pension curtailment expense related to the number and
demographics of pilots opting for early retirement estimated to be
between $10.0 and $15.0 million. Approximately $49.0 million in one-time cash costs are
anticipated on account of cash payments to incentivize the early
departure of Jazz senior pilots enrolled in the defined benefit
pension plan, as well as a contract fee payable to Air Canada
related to the transfer and integration of the E175 fleet.
Forward-Looking Information
This news release contains 'forward-looking information'.
Forward-looking information is identified by the use of terms and
phrases such as "anticipate", "believe", "could", "estimate",
"expect", "intend", "may", "plan", "predict", "potential",
"project", "will", "would", "should" and similar terms and phrases,
including references to assumptions. Forward-looking information,
by its nature, is based on assumptions regarding future events and
circumstances, and is therefore subject to important risks and
uncertainties that may cause actual results to differ materially
from those expressed in forward-looking information. Actual results
may differ materially from those expressed in this news release for
a number of reasons, including the impact of the COVID-19 pandemic
on Air Canada's financial condition and prospects, the risk of
disputes or defaults under the CPA, as well as the risk factors
identified in Chorus' most recent Management's Discussion &
Analysis and Annual Information Form and in Chorus' public
disclosure record available at www.sedar.com. The forward-looking
information contained in this news release represents Chorus'
expectations as of the date of this news release (or as of the date
otherwise stated) and is subject to change after such date. Chorus
disclaims any intention or obligation to update or revise any
forward-looking information except as required under applicable
securities laws.
About Chorus Aviation Inc.
Chorus is a global provider of integrated regional aviation
solutions. Chorus' vision is to deliver regional aviation to the
world. Headquartered in Halifax, Nova
Scotia, Chorus is comprised of Chorus Aviation Capital a
leading, global lessor of regional aircraft, and Jazz and Voyageur
Aviation – companies that have long histories of safe operations
with excellent customer service. Chorus provides a full suite of
regional aviation support services that encompasses every stage of
an aircraft's lifecycle, including aircraft acquisitions and
leasing; aircraft refurbishment, engineering, modification,
repurposing and preparation; contract flying; aircraft and
component maintenance, disassembly, and parts provisioning.
Chorus Class A Variable Voting Shares and Class B Voting Shares
trade on the Toronto Stock Exchange under the trading symbol 'CHR'.
www.chorusaviation.com
SOURCE Chorus Aviation Inc.