Chorus Posts Q1 Financial Loses But Boasts Some Bright Spots
HALIFAX — Halifax-based Chorus Aviation lost $38.1-million in the first quarter of 2021 as the airline industry continued to struggle with the effects of the Covid-19 pandemic.
The company brought in more than $202-million over the first three months of the year, which was a 42 percent drop compared to the same period in 2020 when it earned nearly $350-million.
Chorus is known primarily as the parent company of Jazz Aviation, which operates regional flights on behalf of Air Canada. The company also owns North Bay’s Voyager Aviation.
In a call with financial analysts on May 13, Chorus’s president and CEO Joe Randall said the company’s losses were due in part to a new deal it struck with Air Canada, as well as decreased lease revenue.
“Twenty-twenty was a difficult year: we were severely hit, as everybody else was. There was a lot of uncertainty [but] we really used the year to our advantage,” Randall said.
In March Chorus and Air Canada revised their capacity purchase agreement (CPA) so that Jazz Aviation took over as the sole operator of Air Canada’s regional flight network.
As part of the new CPA, Air Canada transferred the operation of 25 Embraer E175 airplanes to Jazz.
Randall said the deal “re-established” Chorus’ relationship with Air Canada and removed some uncertainty from the contract. However, it came with a one-time cost of more than $80-million, which contributed to the company’s Q1 losses.
Part of Chorus’s financial hit also came from decreased lease revenue: many of the company’s planes aren’t running right now so they’re not making Chorus any money.
Chorus collected only about 62 percent of lease revenue billed in the first quarter, which was consistent with the fourth quarter of 2020.
Some analysts expressed concern that downward pressure on lease rates will continue to bite into Chorus’s bottom line.
Randall hedged on their concern, saying it’s “a little early to say exactly where it’s all going to settle out.”
He argued that even though it’s possible to get stuck in below-market lease rates right now, locking aircraft into longer-term contracts decreases the risk they will be grounded in a year or two.
He also said Chorus sees “growing interest” in companies looking to lease planes.
“But it isn’t going to happen overnight. It’s going to be a process [and it’s] going to take some time for the industry to recover from this, especially with the assets that are on the ground,” he said.
To help offset some of its lost revenue, Chorus raised capital to the tune of $145-million, including investment from the likes of Northstar Capital and the Alberta Investment Management Foundation
“Preserving and building liquidity remains a priority and we believe the timing of this raise is good given the positive momentum we have been budling despite the onset of the third wave,” Randall said.
He said the proceeds will support the company’s leasing business, help it pay down debt, as well as “pursue opportunities and for other general corporate purposes.”
One bright spot for Chorus this year has been Voyager, which secured several new contracts.
The company recently signed a three-year agreement to upgrade and modify Transport Canada’s National Aerial Surveillance Fleet and extended its relationship with Ambulance New Brunswick for another five years.
The biggest news for Voyager is a new contract with Purolator that will see the company transport cargo between Indianapolis, Hamilton, and Montreal.
The Purolator contract lasts for three years but begins with a six-month trial period.
Cargo is a new area for Chorus and Randall told investors that the company sees “good potentiation to grow in the cargo business.”
“Momentum is definitely building [at Voyager],” Randall said.