Mr. Colin Copp reports

CHORUS AVIATION INC. ANNOUNCES FOURTH QUARTER AND YEAR-END 2023 FINANCIAL RESULTS

Chorus Aviation Inc. has released its fourth quarter and year-end 2023 financial results.

Annual highlights:

• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $458.7-million, compared with $441.0-million for 2022;
• Strong free cash flow of $331.4-million, primarily derived from operating cash flows;
• Achieved leverage ratio target for 2023, improving from 4.4 at Dec. 31, 2022, to 3.6 at Dec. 31, 2023;
• Net income of $106.1-million, compared with $51.9-million for 2022;
• Adjusted earnings available to common shareholders of $57.9-million, compared with $92.9-million for 2022;
• Jazz entered into a new agreement with its pilots to address the changing wage environment and enhance pilot capacity;
• Falko concluded 57 aircraft transactions in 2023, including new leases, lease extensions, sale and leasebacks, and purchase of aircraft with leases attached, utilizing third party capital;
• Falko executed a sales agreement for two aircraft in support of the asset light strategy for net proceeds of $21.9-million (U.S.);
• Voyageur had its best year ever with strong growth in parts sales and specialty MRO and defence, while securing long-term contracts for defence and air ambulance services.

Q4 financial highlights:

• Net income of $36.6-million, compared with $45.9-million for Q4 2022;
• Adjusted earnings available to common shareholders of $8.8-million, compared with $22.3-million for Q4 2022;
• Adjusted earnings available to common shareholders of five cents per common share, basic, compared with 11 cents for Q4 2022;
• Adjusted EBITDA of $116.7-million, compared with $129.5-million for Q4 2022.

"We executed and made steady progress on key aspects of our strategy, delivering on the 2023 financial guidance. That led to strong adjusted EBITDA and free cash flows, allowing for the repayment of over $340-million in debt and a reduction in our leverage ratio from 4.4 times to 3.6 times," said Colin Copp, president and chief executive officer, Chorus. "Looking forward, we are forecasting strong free cash flows in 2024, which will further contribute to our deleveraging goals. We recognize that robust cash generation and a strengthened balance sheet are essential to our future growth and value creation for our shareholders.

"Jazz continued to generate predictable earnings and cash flows under its long-term contract with Air Canada, while Voyageur made meaningful strides with two consecutive years of record growth in parts sales, defence and specialty MRO segments," commented Mr. Copp. "With the recovery in regional aircraft leasing markets and related improvements in airline credits, Falko successfully completed 27 aircraft transactions in 2023 and additionally signed letters of intent for a further 30 aircraft transactions. Additionally, the execution of a sales agreement for two aircraft for net proceeds of $21.9-million (U.S.) helped advance our asset-light strategy. Going forward, we continue to look for optimal opportunities to sell aircraft assets as valuations strengthen.

"Throughout 2023, Chorus's businesses demonstrated progress, contributing to our overall strategy," said Mr. Copp. "Looking ahead, with our significant skills and deep experience across all aspects of aviation, Chorus is well positioned for growth as an industry leader."

Fourth quarter summary

In the fourth quarter of 2023, Chorus reported adjusted EBITDA of $116.7-million, a decrease of $12.8-million compared with the fourth quarter of 2022.

The RAL segment's adjusted EBITDA was $62.1-million, a decrease of $5.4-million compared with the fourth quarter of 2022, primarily due to:

• A decrease in the net gain on sale of assets of $8.2-million related to the sale of wholly owned aircraft in 2022;
• A decrease in lease revenue of $7.0-million due to the sale of wholly owned aircraft in 2022 and lower market lease rates on re-leased aircraft;
• Increased general administrative expense;
• Partially offset by a decrease in ECL provisions of $11.9-million related to improved credit ratings on certain lessees.

The RAS segment's adjusted EBITDA was $61.3-million, a decrease of $6.2-million compared with the fourth quarter of 2022, primarily due to:

• A decrease in aircraft leasing revenue under the CPA of $3.3-million, primarily due to a change in lease rates on certain aircraft offset by a higher U.S.-dollar exchange rate;
• A decrease in other revenue of $2.0-million, primarily due to Voyageur's decrease in parts sales and contract flying, offset by an increase in MRO activity;
• A decrease in capitalization of major maintenance overhauls on owned aircraft of $1.7-million;
• Partially offset by a decrease in general administrative expenses.

Corporate adjusted EBITDA was negative $6.7-million, compared with negative $5.4-million in the fourth quarter of 2022, primarily due to an increase in stock-based compensation of $1.2-million due to an increase in the common share price, offset by the change in fair value of the total return swap.

Adjusted net income was $20.2-million for the quarter, a decrease of $11.6-million compared with the fourth quarter of 2022, primarily due to:

• A $12.8-million decrease in adjusted EBITDA as previously described;
• An increase in depreciation expense of $3.0-million, primarily attributable to capital expenditures incurred in 2022 on re-leased aircraft as well as a change in depreciation estimates on certain aircraft;
• Partially offset by a decrease in net interest costs of $4.5-million.

Net income decreased $9.2-million compared with the fourth quarter of 2022, primarily due to:

• The previously noted decrease in adjusted net income of $11.6-million;
• A change in net unrealized foreign exchange of $21.3-million;
• An increase in impairment provisions of $4.9-million primarily related to the planned repossession of two aircraft from one lessee;
• Partially offset by:
  • A change in realized foreign exchange on the settlement of intercompany loans of $26.4-million;
  • A decrease in lease repossession costs of $2.1-million.

Annual summary

Chorus reported adjusted EBITDA of $458.7-million for 2023, an increase of $17.6-million compared with the same prior-year period.

The RAL segment's adjusted EBITDA was $237.1-million, an increase of $17.6-million compared with the same prior-year period, primarily due to:

• An increase in lease revenue of $26.5-million due to four additional months of lease revenue versus the same period in 2022 for Falko, the release of end of lease (EOL) compensation and maintenance reserves of $13.9-million, and a higher U.S.-dollar exchange rate, offset by a decrease in lease revenue due to the sale of wholly owned aircraft in 2022, and recovered claims in the Virgin Australia and Aeromexico bankruptcies recorded in 2022 of $10.9-million;
• Partially offset by a decrease in net gain on sale of assets of $10.9-million related to the sale of wholly owned aircraft in 2022.

The RAS segment's adjusted EBITDA was $249.3-million, an increase of $0.5-million compared with the same prior-year period, primarily due to:

• An increase in other revenue of $5.0-million, primarily due to Voyageur's increase in parts sales and MRO activity offset by a decrease in contract flying;
• A decrease in general administrative expenses;
• Partially offset by:
  • A contracted decrease in fixed margin of $3.0-million;
  • A decrease in capitalization of major maintenance overhauls on owned aircraft of $4.0-million.

Corporate adjusted EBITDA was negative $27.7-million, compared with negative $27.2-million in 2022, primarily due to:

• An increase in stock-based compensation of $1.7-million due to an increase in the common share price, offset by the change in fair value of the total return swap;
• Partially offset by a decrease in general administrative expenses related to salaries, wages and benefits, professional fees, and travel expenses.

Adjusted net income was $98.0-million, a decrease of $20.8-million compared with the same prior-year period, primarily due to:

• An increase in depreciation expense of $25.3-million, primarily attributable to capital expenditures incurred in 2022 on re-leased aircraft, as well as a change in depreciation estimate on certain aircraft and four additional months of depreciation for Falko;
• An increase of $13.5-million in income tax expense, primarily due to derecognition of deferred tax assets on repossessed aircraft and certain non-deductible expenses;
• A change in net foreign exchange of $2.9-million;
• Partially offset by:
  • A $17.6-million increase in adjusted EBITDA as previously described;
  • A decrease in net interest costs of $2.3-million;
  • An increase of $1.0-million on the fair value of investments.

Net income was $106.1-million, an increase of $54.2-million compared with the same prior-year period, primarily due to:

• The defined benefit pension revenue of $29.9-million;
• A change in realized foreign exchange on the settlement of intercompany loans of $26.4-million;
• A decrease in lease repossession costs of $14.3-million;
• A change in net foreign exchange of $13.1-million;
• A decrease in restructuring ECL of $10.4-million;
• A decrease in strategic advisory fees of $8.5-million;
• Partially offset by:
  • The previously noted decrease in adjusted net income of $20.8-million;
  • An increase in income tax expenses on adjusted items of $18.4-million;
  • An increase in impairment provisions of $10.1-million.

consolidated financial analysis

This section provides detailed information and analysis about Chorus's performance for the three months and year ended Dec. 31, 2023, compared with the three months and year ended Dec. 31, 2022. It focuses on Chorus's consolidated operating results and provides financial information for Chorus's operating segments.

Outlook

The discussion that follows includes forward-looking information. This outlook is provided for the purpose of providing information about current expectations for 2024. Forecast information has also been provided for 2025 and 2026 for Jazz. This information may not be appropriate for other purposes.

Jazz

The CPA provides a fixed margin to Jazz regardless of flying levels; therefore, any variations in flying are not expected to have any impact on Jazz's earnings. In addition, Jazz receives compensation for aircraft leased under the CPA that generates predictable free cash flows. Jazz aircraft have amortizing debt that will be fully paid off at the end of the original lease term under the CPA. At the end of each lease, Jazz will either extend the lease, sell or part out each aircraft. Subsequent aircraft leases will continue to produce predictable free cash flow at lower rates as the aircraft will be unencumbered.

RAL

RAL continues to execute on its asset-light leasing strategy, which consists of monetizing select on-balance sheet aircraft assets while growing its contractual fund management business. Maximizing cash flow generation from existing assets through lease term extensions is also a key element of RAL's business model.

Fund III is anticipated to close by the end of the 2024 year and is expected to have: (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.

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 the 10th anniversary of the commencement of Fund I (2025). As of Dec. 31, 2023, Ravelin Holdings LP held an interest in 39 aircraft with a net book value of $382.8-million (U.S.) and secured debt of $189.0-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.

RAL receivables

RAL is participating in the Azul S.A. restructuring, which is expected to be finalized before the end of March, 2024. The transaction includes the exchange of certain accounts receivable (existing AR) held by RAL and the granting of certain modifications related to the operating leases with Azul (Azul restructuring).

In exchange for the existing AR, RAL will receive new notes from Azul that are due at various dates beginning in 2024 and ending in 2027. In addition, certain of the new notes may be settled, at Azul's option, in cash or by the issuance of Azul's publicly listed preferred shares. The new notes will be initially recognized at an aggregate estimated fair value. No material gain or loss is anticipated on the exchange of the existing AR for the new notes.

RAL collected approximately 97 per cent of the value of its lease revenue billed in the fourth quarter of 2023 when giving effect to the expected repayment terms of the Azul restructuring agreement.

RAL's gross receivable, primarily related to rent relief arrangements (1), may decrease from the Dec. 31, 2023, balance of $108.2-million (U.S.) to between $90.0-million (U.S.) and $95.0-million (U.S.) by the end of 2024 based on management's current repayment expectations.

RAL's lease deferral receivable exposure is partially mitigated by security packages held of approximately $20.4-million (U.S.) (Dec. 31, 2022 -- $17.1-million (U.S.)).

(1) Following the onset of the COVID-19 pandemic, RAL received requests from many of its customers for some form of temporary rent relief, as they coped with an unprecedented reduction in demand for passenger air travel.

Capital expenditures

The expected capital expenditures in 2024 are detailed in an attached table.

Use of defined terms

Capitalized terms used but not defined in this news release have the meanings given to them in management's discussion and analysis of results of operations and financial condition (MD&A) dated the date hereof, which is available on Chorus's website and under Chorus's profile on SEDAR+.

Investor conference call/audio webcast

Chorus will hold an analyst call at 9 a.m. ET on Feb. 23, 2024, to discuss the fourth quarter and year-end 2023 financial results. The call may be accessed by dialling 1-888-664-6392. The call will be simultaneously audio webcast.

This is a listen-in only audio webcast.

The conference call webcast will be archived on Chorus's website under investors and reports. A playback of the call can also be accessed until midnight ET, March 1, 2024, by dialling toll-free 1-888-390-0541 and using passcode 660924 followed by the pound key.

About Chorus Aviation Inc.

Chorus is a global aviation solutions provider and asset manager, focused on regional aviation. Its 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 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's 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.

We seek Safe Harbor.