Chorus/Jazz income down 20% in quarter


Chorus Aviation posted net income of CAD16.9 million in the second quarter, down 20.3% from 2Q2010. The drop was on a 12% increase in operating revenues to CAD402 million and a 13.5% increase in expenses to CAD378 million. Still, it managed a highly respectable EBITDA margin at 8.4%, despite the fact it was down 10% year on year. EBITDA was CAD33.9 million, down 6%.

  • Chorus Aviation's net income in the second quarter decreased by 20.3% compared to the same period last year.
  • Operating revenues increased by 12%, reaching CAD402 million, while expenses increased by 13.5% to CAD378 million.
  • The company achieved a respectable EBITDA margin of 8.4%, although it was down 10% compared to the previous year.
  • Chorus Aviation plans to expand its services with Thomas Cook in the upcoming year, along with regional flying for Air Canada.
  • The company expects to bill between 385,000 and 395,000 block hours for the year ending December 31, 2011.
  • Chorus Aviation is actively seeking diversification opportunities and intends to pursue a liquidity event for its investment in Pluna.

After successfully completing its first year of Thomas Cook flying, it is planning for more service in the 2011/12 period. Coupled with the guidance of regional flying for Air Canada, the airline anticipates billing between 385,000 and 395,000 block hours for the year ending December 31, 2011.

On the call

Analysts were clearly concerned about a double-dip recession, querying executives with what-would-happen-if scenarios. CEO Joe Randell indicated that there are kickers in the Air Canada CPA contract that call for a rate reset below 375,000 block hours and such kickers are also within the Thomas Cook contract. The floor for the Air Canada partnership is around 340,000 hours.

However, Mr Randell and CFO Rick Flynn said they see nothing from either Thomas Cook or Air Canada to indicate that its block-hour projection will not come to pass.

Mr Randell indicated that the company sees "hundreds" of diversification opportunities out there and they would be added as they would add value to stakeholders. Having always intended for the Pluna investment to be short term, he also noted the company is looking for a liquidity event. The Uruguayan carrier was affected by the prolonged Chilean volcanic event but Jazz executives cited the strong growth in South America.

The company cited increased pass-through costs of 27.6% to CAD161.1 million. It also benefitted from a foreign exchange gain on the weaker US dollar. Fuel took up CAD31.5 million of the CAD34.6 million increase. Meanwhile, passenger revenue, ex pass-through costs increase 3.6% or CAD8.4 million on an increase in capacity purchase billable block hours and departures in addition to its charter flying for Thomas Cook. It also earned CAD400,000 in incentives from Air Canada.

Controllable costs increased only 5% to CAD10.4 million during the quarter on capacity purchase growth with the introduction of the Q400 aircraft.

Chorus ended the quarter with CAD73.2 million in cash and cash equivalents on hand, down CAD3.4 million year on year owing to aircraft deposits and purchases. The aircraft are part of the second phase re-fleeting plan begun last year when it got rid of 10 CRJ 100/200s. The 15 Q400s will include more aircraft of the 15-aircraft order with seven scheduled to enter service this year. Additional CRJs will be removed as each Q400 is delivered. It also ended the quarter with CAD23.9 million in free cash flow, down 17.8%.

Want More Analysis Like This?

CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More