Mr. Colin Copp reports

CHORUS AVIATION INC. ANNOUNCES FIRST QUARTER 2023 FINANCIAL RESULTS

Chorus Aviation Inc. has released its first quarter 2023 financial results.

"I am pleased to report strong first quarter results in line with expectations, with free cash flow of $73.1-million and adjusted earnings available to common shareholders of 11 cents per common share representing increases of 51 per cent and 10 per cent, respectively. During the quarter, we continued the deleveraging of our balance sheet, improving our leverage ratio to 4.0 times, a 9-per-cent decrease since year-end, bringing us closer to our targeted range of 2.5 times to 3.5 times," said Colin Copp, president and chief executive officer, Chorus.

Mr. Copp continued: "We are laser focused on transitioning our aircraft leasing business to an asset-light model and launching Falko's new investment fund. With our strong core services cash flow and the anticipated proceeds from asset sales, we are progressing towards our targeted leverage level, which will offer considerable flexibility to execute on accretive capital allocation opportunities.

"Last month, we officially launched Cygnet Aviation Academy, introducing a first-of-its-kind pilot academy to the Canadian market, with leading-edge flight training that provides students direct access to career opportunities. We are proud of this initiative, which will provide flight ready pilots to our operating companies and the wider industry," concluded Mr. Copp.

First quarter summary

In the first quarter of 2023, Chorus reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $118.1-million, an increase of $34.8-million over the first quarter of 2022.

The RAL segment's adjusted EBITDA was $61.6-million, a quarter-over-quarter increase of $29.9-million primarily due to Falko's earnings inclusive of $6.7-million due to the recognition of non-reimbursable end-of-lease maintenance reserves.

The RAS segment's adjusted EBITDA was $63.9-million, an increase of $6.5-million over the first quarter of 2022. First quarter results were impacted by:

• An increase in other revenue of $6.7-million due to an increase in parts sales, third party MRO activity and contract flying;
• An increase in aircraft leasing revenue under the CPA of $2.4-million primarily due to a higher U.S.-dollar exchange rate;
• Offset by an increase in general administrative expenses attributable to increased operations;
• And a decrease in capitalization of major maintenance overhauls on owned aircraft of $900,000;
• And a decrease in contracted fixed margin of $800,000.

Corporate adjusted EBITDA or net expenses of $7.4-million were higher than the first quarter of 2022 by $1.6-million due to:

• An increase in general administrative expenses related to higher professional fees, salaries, wages and benefits and travel expenses.

Adjusted net income was $30.8-million for the quarter, an increase of $13.1-million over the first quarter of 2022 due to:

• A $34.8-million increase in adjusted EBITDA as previously described; and
• A change in net foreign exchange of $2.1-million;
• Partially offset by an increase in depreciation expense of $13.0-million primarily attributable to Falko and capital expenditures in 2022;
• And an increase of $5.4-million in income tax expense;
• And an increase in net interest costs of $5.4-million primarily related to interest on long-term debt assumed as part of the Falko acquisition and the draw on the operating credit facility, partially offset by the redemption of the 6.00 per cent debentures in December, 2022.

Net income increased $9.1-million over the first quarter of 2022 primarily due to:

• The previously noted increase in adjusted net income of $13.1-million;
• A decrease in strategic advisory fees of $2.7-million;
• Partially offset by an increase in lease repossession costs of $3.7-million;
• And a decrease in net unrealized foreign exchange gains of $2.5-million;
• And a decrease in income tax recoveries on adjusted items of $200,000.

Consolidated financial analysis

The attached table provides detailed information and analysis about Chorus's performance for the three months ended March 31, 2023, compared with the three months ended March 31, 2022. It focuses on Chorus's consolidated operating results and provides financial information for Chorus's operating segments.

Outlook

Chorus has the key elements to successfully execute on its strategy to transition to an asset-light leasing model while growing its contractual fund management business and its RAS segment. The key elements include:

• Strong and predictable core earnings from the RAS segment, with the potential to expand into adjacent and complementary business lines;
• Significant wholly owned or majority-owned aviation assets that can be monetized to reduce debt and return capital to common shareholders while also providing financing to improve the growth and return profile of the business over time through accretive investments;
• Growth potential in the Falko series of funds from which Chorus can generate attractive returns via asset management fees, co-investment returns and incentive payments.

The asset-light leasing model will enable Chorus to achieve greater scale in its leasing business by co-investing alongside third party equity investors in Falko-managed funds, while decreasing risk to Chorus by reducing the use of recourse debt financing. As Chorus transitions to an asset-light leasing model, asset sales will generate free cash flow that can be deployed to pursue accretive investment opportunities and/or return capital to common shareholders. As part of this asset-light transformation, Chorus is targeting:

• Aircraft asset sales: Chorus intends to opportunistically trade RAL's wholly owned or majority-owned aircraft, including in connection with the windup of its 67.45-per-cent ownership in Ravelin Holdings LP by its 10th anniversary in 2025. As of March 31, 2023, Ravelin Holdings LP held an interest in 39 aircraft with a net book value of $402.5-million (U.S.) and secured debt of $212.9-million (U.S.). As asset sales occur, the related leasing revenues in RAL will decrease, which will be partially offset by lower depreciation and debt servicing costs and earnings from Falko managed funds.
• Reduced leverage: Chorus anticipates its leverage ratio will be between 2.5 to 3.5 by Dec. 31, 2024, given the contractual nature of Chorus's earnings, amortizing debt repayments and expected asset sales. Deleveraging amounts will vary from quarter to quarter depending on the timing and quantum of asset sales.
• Growth: Chorus intends to expand the number of Falko managed funds and the RAS business into adjacent and complementary specialty aviation business lines.

Chorus's forecast for the year ending Dec. 31, 2023, is provided in the attached table.

2023 key economic assumptions:

• The forecast assumes the launch in the first half of 2023 of a new investment fund managed by Falko with: (i) a minimum of $500.0-million (U.S.) in capital commitments; and (ii) management fees and economic terms commensurate with those in Falko's prior funds.
• The forecast revenue is based on current contracted lease revenue and forecasted revenues for leased aircraft and asset management fees. Aircraft leasing revenue under the CPA and fixed margin revenue is expected to be $110.0-million (U.S.) and $63.0-million, respectively, in 2023 (2022: $114.5-million (U.S.) and $66.3-million, respectively).
• Asset sales of approximately $50.0-million (U.S.) to $100.0-million in 2023 with a loan to value of between 50 per cent and 60 per cent generating net proceeds between $25.0-million (U.S.) and $50.0-million (U.S.). If material asset sales are executed in 2023, this may reduce expected revenue in RAL, depending on the timing of such sales.
• The forecast uses a foreign exchange rate of 1.30 for 2023 to translate U.S.-dollar to Canadian-dollar revenue.

RAL's gross lease receivable may decrease from the March 31, 2023, balance of $109.9-million (U.S.) to between $95.0-million (U.S.) and $100.0-million (U.S.) by the end of 2023 due to rent relief arrangements and repayment expectations.

RAL's lease deferral receivable exposure is partially mitigated by security packages held of approximately $18.2-million (U.S.) (Dec. 31, 2022 -- $17.1-million (U.S.)).

Capital expenditures

Capital expenditures in 2023, are expected as shown in the attached table.

About Chorus Aviation Inc.

Chorus is a leading global aviation solutions provider and asset manager, focused on regional aviation. The company's principal subsidiaries are: Falko Regional Aircraft, the leading pure-play regional aircraft asset manager and lessor, managing investments on behalf of third party fund investors; Jazz Aviation, the largest regional operator in Canada and the sole provider of regional air services under the Air Canada Express brand; Voyageur Aviation, a leading provider of specialty charter, aircraft modifications, parts provisioning and in-service support services; and Cygnet Aviation Academy, an industry-leading accredited training academy preparing pilots for direct entry into airlines. Together, Chorus's subsidiaries provide services that encompass every stage of a regional aircraft's life cycle, including: aircraft acquisition and leasing; aircraft refurbishment, engineering, modification, repurposing and transition; contract flying; aircraft and component maintenance, disassembly, and parts provisioning; and pilot training.

Chorus's Class A variable voting shares and Class B voting shares trade on the Toronto Stock Exchange under the trading symbol CHR. Chorus 5.75 per cent senior unsecured debentures due Dec. 31, 2024, 6.00 per cent convertible senior unsecured debentures due June 30, 2026, and 5.75 per cent senior unsecured debentures due June 30, 2027, trade on the TSX under the trading symbols CHR.DB.A, CHR.DB.B and CHR.DB.C, respectively.

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