Chorus Aviation Inc. exercises options to acquire additional Bombardier Q400 NextGen aircraft
HALIFAX, July 12, 2012 /CNW/ – Chorus Aviation Inc. (‘Chorus‘) (TSX: CHR.B CHR.A CHR.DB) today announced it has exercised six of 15 options it holds to acquire
additional Bombardier Q400 NextGen (‘Q400‘) aircraft to be operated by its subsidiary, Jazz Aviation LP (‘Jazz’) under the Air Canada Express brand.
“The ongoing rejuvenation of the Jazz fleet will deliver value to all of
our stakeholders,” stated Joe Randell, President and Chief Executive
Officer, Chorus. “The replacement of the older regional jets by these
efficient, state-of-the-art aircraft will translate into better
operating economics and passenger comfort with less environmental
impact. While our total current seat capacity is relatively unchanged,
these larger, fuel-efficient turboprops will reduce our Cost per
Available Seat Mile.”
“As the Canadian aviation landscape continues to change, increased Q400
service in Air Canada’s regional network will improve customer
experience in these markets.” said Calin Rovinescu, President and Chief
Executive Officer, Air Canada. “Jazz has been a valued partner and
longstanding brand ambassador for Air Canada in many communities across
Canada. As the world’s largest operator of Dash 8 aircraft, they’ve
proven to be an expert in regional operations as evidenced by their
consistently high standards of safety and operational performance. The
introduction of their Q400s in our network has been seamless and has
been met with high customer satisfaction.”
Jazz will operate 16 Q400s this month under the Air Canada Express
brand, which includes one Q400 on short term lease for the peak summer
season only. The Q400 aircraft accommodate 74 passengers, and are
configured in a single cabin. The six optioned Q400s are contracted to
be delivered at a rate of two per month in February, March and April,
2013, and will be placed into operation the subsequent month. A total
of nine 50-seat CRJ 100 aircraft will be removed from the Jazz fleet
between December, 2012 and May, 2013. As a result, the covered fleet
under the Capacity Purchase Agreement with Air Canada (‘CPA‘) will be reduced from 125 to 122 aircraft, with the overall seating
capacity, operated under the CPA with Air Canada, being held relatively
“Jazz flies more daily flights in Canada than any other airline with an
exclusive fleet of Canadian-made aircraft,” continued Mr. Randell.
“Jazz has been an integral part of regional communities across our
nation since the 1930s, and we’re pleased to make this reinvestment and
greater commitment to the 56 Canadian regional markets we currently
serve as part of Air Canada’s network.”
The new aircraft will be leased via a Chorus leasing company to Jazz.
The purchase is supported by a third party lender under terms similar
to the original order of 15 Q400 aircraft. The transaction is
anticipated to be accretive to Chorus’ consolidated operating results.
As required under the purchase agreement, Chorus has made pre-delivery
payments of approximately $13 million USD which have been funded from
current cash balances and will not impact Chorus’ current dividend
In support of the continued fleet renewal program at Jazz, Air Canada
and Jazz have agreed to amend their CPA to reflect the following:
-- Covered Aircraft reduced from 125 to 122 aircraft, resulting in a net reduction of six seats in the entire Jazz CPA fleet effective May, 2013 once all Q400 aircraft have been introduced into service. -- In February 2013 when the number of Covered Aircraft reaches 122 aircraft, the annual minimum guaranteed Block Hours of 339,000 will be reduced to approximately 331,000 Block Hours to reflect the new number of Covered Aircraft. -- The agreement between the parties does not change the mark-up on controllable costs structure and mark-up rates but establishes new metrics resulting from the new annual minimum guaranteed Block Hours as follows: o The Compensating Mark-up will now be applied based on the range between the new annual minimum Targeted Block Hours of approximately 367,000 and the revised annual minimum guaranteed Block Hours of approximately 331,000. The difference between the annual minimum guaranteed Block Hours and the annual minimum Targeted Block Hours remains at 36,000 Block Hours. This agreement also resolves one of the issues raised in the 2009 Benchmark Arbitration with reference to how the Compensating Mark-up formula will be applied. o Mark-up on variable controllable costs for annual Block Hours over 375,000 will remain at 5.0%.
The exercise of the six options and the amendments to the CPA do not
result in any change to Chorus’ current annual Block Hour guidance for
the year 2012 of between 385,000 and 400,000 hours.
Caution regarding forward-looking information
Certain statements in this news release may contain statements which are
forward-looking. These forward-looking statements are identified by the
use of terms and phrases such as “anticipate”, “believe”, “could”,
“estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”,
“will”, “would”, and similar terms and phrases, including references to
assumptions. Such statements may involve but are not limited to
comments with respect to strategies, expectations, planned operations
or future actions.
Forward-looking statements relate to analyses and other information that
are based on forecasts of future results, estimates of amounts not yet
determinable and other uncertain events. Forward-looking statements, by
their nature, are based on assumptions, including those described
below, and are subject to important risks and uncertainties. Any
forecasts or forward-looking predictions or statements cannot be relied
upon due to, amongst other things, changing external events and general
uncertainties of the business. Such statements involve known and
unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements to differ materially from
those expressed in the forward-looking statements. Results indicated in
forward-looking statements may differ materially from actual results
for a number of reasons, including without limitation, risks relating
to Chorus’ relationship with Air Canada, risks relating to the airline
industry, energy prices, general industry, market, credit, and economic
conditions, competition, insurance issues and costs, supply issues,
war, terrorist attacks, epidemic diseases, acts of God, changes in
demand due to the seasonal nature of the business, the ability to
reduce operating costs and employee counts, secure financing, employee
relations, labour negotiations or disputes, restructuring, pension
issues, currency exchange and interest rates, leverage and restructure
covenants in future indebtedness, dilution of Chorus shareholders,
uncertainty of dividend payments, managing growth, changes in laws,
adverse regulatory developments or proceedings, pending and future
litigation and actions by third parties. The forward-looking statements
contained in this discussion represent Chorus’ expectations as of July
12, 2012 and are subject to change after such date. However, Chorus
disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information,
future events or otherwise, except as required under applicable
About Chorus Aviation Inc.
Chorus Aviation Inc. (“Chorus”) was incorporated on September 27, 2010
and is a dividend-paying holding company which owns Jazz Aviation LP,
Chorus Leasing I Inc., Chorus Leasing II Inc., and Chorus Leasing III
Inc. (the leasing companies own the Q400 aircraft) and 7503695 Canada
Chorus is traded on the Toronto Stock Exchange under the trading symbols
of CHR.A, CHR.B and CHR.DB.
For more information, visit www.chorusaviation.ca
About Jazz Aviation LP
Jazz Aviation LP has a strong history in Canadian aviation with its
roots going back to the 1930s. Jazz is wholly owned by Chorus Aviation
Inc. and continues to generate some of the strongest operational and
financial results in the North American aviation industry.
There are two airline divisions operated by Jazz Aviation LP: Air
Canada Express and Jazz.
Air Canada Express: Under a capacity purchase agreement with Air
Canada, Jazz provides service to and from lower-density markets as well
as higher-density markets at off-peak times throughout Canada and to
and from certain destinations in the United States. Jazz currently
operates scheduled passenger service on behalf of Air Canada with over
790 departures per weekday to 83 destinations in Canada and in the
United States with a fleet of Canadian-made Bombardier aircraft.
Jazz: Under the Jazz brand, the airline offers charters throughout
North America with a dedicated fleet of five Bombardier aircraft for
corporate clients, governments, special interest groups and individuals
seeking more convenience. Jazz also has the ability to offer airline
operators services such as ground handling, dispatching, flight load
planning, training and consulting.
For more information, visit www.flyjazz.ca.
SOURCE CHORUS AVIATION INC.