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 constant.
"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 policy.
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:
-
- 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.
- 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 securities
regulations.
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
Inc.
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.
