Chorus Aviation is a leading global provider of integrated regional aviation solutions. It offers contract flight operations, aircraft leasing and maintenance, repair and overhaul, aircraft parts and components, charter, and custom design and engineering. Chorus comprises the companies Chorus Aviation Capital, Jazz and Voyageur Aviation.

Chorus operates a fleet of 209 aircraft, of which 168 are owned by the company as of March 2021. It has a current fleet of 48 aircraft and five replacement engines with a weighted average age of 4.8 years under the CPA and a dedicated fleet of 62 aircraft.

By segment, regional flight services account for more than 80% of Chorus’ operating income, while regional aircraft leasing accounts for the remaining 20%. Chorus provides contract airline services through its two wholly owned subsidiaries, Jazz and Voyageur.

Jazz is Canada’s largest regional airline and operates almost all of its capacity on behalf of Air Canada. Voyageur offers specialized contract flights such as medical, logistical and humanitarian flights for both Canadian and international customers.

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Plant data

Sales growth & market presence

Chorus Aviation is known for providing regional air services around the world. It generates its revenue through its CPA and aircraft leasing to airline customers worldwide. Chorus offers a wide range of regional aviation support services that span every stage of an aircraft’s life cycle.

The company is well positioned to benefit from synergies between its businesses and strong demand for regional aircraft due to increasing global passenger growth. Chorus subsidiaries have a long history of safe operations and excellent customer service. The company leases aircraft to third party airlines under an agreement with Air Canada. It also handles contract flights and special missions for Air Canada and other parties.

According to the January 2021 CPA changes, Jazz will be the exclusive Air Canada Express operator with a regional capacity of 70-78 seats by the end of 2025 and is currently the only provider of Air Canada Express services. The terms of the CPA require Air Canada to assume all commercial risks.

As a result, fixed margins are expected to increase by $ 46 million while aircraft lease revenue is expected to decrease by $ 56 million. Chorus had more than $ 1 billion in future rental income. Although the company received approximately 62% of the lease revenue billed in the first quarter of 2021 from its lessees, many of its partners have either terminated leases or ceased operations due to the financial hardship caused by the COVID-19 pandemic.

In April 2021, Chorus leased three of the 13 off-lease aircraft on a long-term basis. In the first quarter of 2021, Jazz operated at ~ 15% of the pre-COVID-19 altitude in the first quarter of 2019. In the second quarter of 2021, Jazz expects to operate at ~ 20% to 25% of the level of the second quarter of 2019.

Consolidated operating income continued to decline more than 40% due to the decline in controllable cost revenue and pass-through revenue due to the economic impact of COVID-19 and the loss of revenue from off-lease aircraft.

Dividends

Chorus has suspended its dividend payment and has also temporarily restricted previously planned growth investments in 2020. The nature of Chorus Aviation’s business does not directly expose it to the challenges faced by other passenger aviation companies around the world.

However, all source revenue comes from airline customers through their CPA and global aircraft leasing. The long-term cooperation with Air Canada (until December 2035) makes Air Canada a leading aviation partner. The company is well positioned to leverage synergies and technical know-how across all business areas to drive further diversification.

Jazz is the only provider of Air Canada Express services and costs such as fuel, navigation fees, airport landing and terminal fees are fully borne by Air Canada. The minimum obligations for fleet and aircraft leasing until 2035 offer stability and future growth opportunities.

In addition, a diversified aircraft leasing portfolio as well as special MRO and contract flight capabilities are its strong competitive advantages. The company has a predictable revenue stream, with more than 90% of annual sales backed by long-term contracts and strong relationships.

Chorus expects investments of $ 61 million to $ 80 million in 2021. The airlines are currently operating with a historically low passenger volume. Rising fees and taxes imposed by airlines and governments have also had a negative impact on regional traffic.

Chorus Aviation (CHR) historic return
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competition

Chorus competes with Exchange Income Corporation, a diversified, acquisition-driven company focused on opportunities in the aerospace, aerospace, and manufacturing industries. Other dominant domestic and international airlines are Westjet Airlines, Canada Jetlines, Ace Aviation, etc.

However, the leasing sector for regional aircraft is currently less busy as the low level of competition offers a significant growth opportunity for Chorus. Chorus offers an integrated model that offers a full range of flight operations that sets it apart from the competition.

Bottom line

An ongoing pandemic will continue to challenge the passenger aviation industry and demand for air services will only pick up if people are convinced they are safe from the virus.

However, regional aviation is a resilient sector that will recover quickly once conditions normalize. The operation of Chorus has been affected by border closings and travel bans.

The company’s overall flight operations, minimal fleet and aircraft lease commitments by Air Canada, and an experienced management team are the strong differentiators of the company.

Chorus Aviation (CHR) Historic Pe
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