Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chorus Aviation Inc (CHRRF, Financial) reported strong financial performance with a combined adjusted EBITDA of $51 million for Q2 2024 and $105 million year to date.
- Voyageur delivered a $4.8 million increase in revenue over Q2 of 2023, showcasing its ability to seize new opportunities.
- The company successfully bought back 1.4 million common shares under its NCIB, reflecting confidence in its financial position.
- The divestiture of the Regional Aviation Leasing Segment (RAL) is expected to significantly deleverage the capital structure and improve financial flexibility.
- Post-transaction, Chorus Aviation Inc (CHRRF) expects to eliminate substantially all corporate debt, enhancing its ability to grow and return capital to shareholders.
Negative Points
- The reclassification of the RAL segment to discontinued operations may create some uncertainty and transitional challenges.
- The fixed fee and leasing revenue under the CPA with Air Canada may face potential risks if not renewed or extended.
- The company’s leverage ratio, although improved, still stands at 3.0, indicating ongoing debt management challenges.
- The pilot shortage situation in Canada remains a concern, although it is less pronounced than in the US.
- The step-down in fleet count post-2026 under the CPA with Air Canada could impact future revenue streams if not adequately managed.
Q & A Highlights
Chorus Aviation Inc (CHRRF) Q2 2024 Earnings Call Highlights
Q: What are the biggest risks to Chorus Aviation's business going forward?
A: Colin Copp, President and CEO, emphasized that both Voyageur and Jazz are very solid and insulated, with diversified operations and long-term contracts. The focus is on shareholder returns, measured growth, and managing corporate costs.
Q: Is there still strong interest in the Cygnet business given the current pilot market?
A: Colin Copp noted that while there is a slight slowdown in the US, Canada still has a strong demand for pilots. Cygnet continues to attract students and new hires, and the relationship with CAE differentiates it in the market.
Q: How does Chorus plan to redeploy aircraft coming off the CPA in 2026?
A: Colin Copp mentioned that the aircraft are unencumbered, providing flexibility. The plan is to renew leases with Air Canada, but they can also redeploy or sell the aircraft if necessary.
Q: What are the growth opportunities for Voyageur, especially in defense and surveillance?
A: Colin Copp highlighted significant opportunities in specialty aviation and defense. Recent contracts, such as air ambulance services and Department of Defense programs, indicate strong growth potential.
Q: How is Chorus planning to deploy capital post-transaction?
A: Colin Copp stated that the focus is on mid-teen returns, whether through organic growth or acquisitions. The strategy involves smaller, manageable acquisitions in aviation or aerospace and continued growth in Voyageur's defense and surveillance sectors.
Q: What is the status of lease renewals with Air Canada?
A: Gary Osborne, CFO, explained that discussions are ongoing, and the timing is natural. The nine aircraft coming off lease at the end of 2025 provide flexibility for renewal or redeployment.
Q: Can leasing revenue from the CPA potentially increase?
A: Gary Osborne confirmed that while the fixed fee is set, there is potential upside in leasing revenue depending on discussions with Air Canada and other opportunities.
Q: What is the growth outlook for Voyageur?
A: Gary Osborne and Colin Copp both expressed confidence in reaching the $150 million revenue target by 2025, driven by new contracts and continued growth in defense and surveillance.
Q: How is Chorus preparing for the post-2026 fleet count with Air Canada?
A: Gary Osborne noted that the current fleet of 80 aircraft with 70+ seats is in place, and discussions with Air Canada will determine any changes or additional opportunities.
Q: What are the immediate plans for capital allocation and growth?
A: Colin Copp reiterated the focus on shareholder returns, measured growth, and managing corporate costs, with a strategic approach to acquisitions and organic growth in key areas like Voyageur.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
