Chorus Aviation Inc. (‘Chorus’ or the ‘Company’) is providing a statement on the impact of the coronavirus (COVID-19) outbreak on its business.
The outbreak combined with the measures taken to contain the spread of COVID-19 have resulted in significant reductions in airline passenger volumes, requiring airlines around the world to take immediate measures to reduce costs. Although the Company’s business model does not directly expose it to the market risks ordinarily faced by airlines, substantially all of its source revenue is derived from airline customers.
Chorus is party to a Capacity Purchase Agreement (‘CPA’) with Air Canada pursuant to which Jazz performs regional flying operations across Canada and into the United States and earns a fee for this service, in addition to aircraft leasing revenue. The Company also leases aircraft to airline customers globally. Chorus expects the current disruption to the airline industry to be temporary, however, its duration and the full extent of its impact are unknown.
Joe Randell, President and CEO, stated, “The disruption to the global airline industry caused by COVID-19 is unprecedented; however, Chorus has entered this crisis stronger than ever. These are very uncertain and difficult times for everyone, including our employees who have contributed significantly to our current strength. We have a collaborative long-term partnership with Air Canada, a well-diversified aircraft leasing portfolio holding high-quality assets, and specialty MRO and contract flying capabilities that give us unique capabilities to transition aircraft for ourselves and third parties. We are certainly not immune to the challenges facing the airline industry; however, the work we have done in the last few years to solidify the CPA and diversify our business has positioned us well to manage through this challenging period.”
Chorus is working with its main customer and partner, Air Canada, as it adjusts to the significant demand reductions seen in its business.
The CPA contains provisions which allow Air Canada to reduce its utilization of the Jazz fleet, and the parties are currently in discussions regarding schedule changes and cost mitigation measures for the Jazz operation. In accordance with the CPA, all resulting savings from such measures will accrue to Air Canada’s benefit with any cost exposure to Jazz being limited to the $2 million guardrail under the contract. Furthermore, the compensation paid to Jazz under the CPA does not vary with the amount of flying and is fixed based on agreed annual amounts.
Chorus currently has a strong liquidity position with a current cash balance of C$132 million.