Mr. Joe Randell reports

CHORUS AVIATION ANNOUNCES FOURTH QUARTER AND YEAR-END EARNINGS

Chorus Aviation Inc. has provided its fourth quarter and year-end financial results for fiscal year ended Dec. 31, 2018.

"I'm very pleased with our start to 2019 as we build upon the positive momentum of 2018. Our growth and diversification strategy took further hold in 2018 generating $342.7-million in adjusted EBITDA and adjusted net earnings per basic share of 25 cents, increases over 2017 of 11.7 per cent and 19.4 per cent respectively.

"Our group of companies performed well and reached important milestones that strengthened our company. These successes helped advance our vision to transform into a worldwide provider of regional aviation services. To date, we've grown our fleet to 40 aircraft, inclusive of nine transactions pending completion, valued at approximately $1.1-billion. The pipeline of opportunities for additional transactions is strong. With the establishment of our new $300-million (U.S.) credit facility and the capital we have on hand, we're maturing and building scale as a worldwide lessor.

"Our strategic partnership with Air Canada and the value we've created through the amended and extended CPA will benefit our shareholders, employees and other stakeholders for the long term. We are well positioned to take advantage of new opportunities for growth and to effectively compete in an ever-changing industry. I extend my sincere thanks and gratitude to the Chorus team for these significant accomplishments," said Joe Randell, president and chief executive officer, Chorus.

Fourth quarter 2018 summary

Financial performance -- fourth quarter 2018 compared with fourth quarter 2017

In the fourth quarter of 2018, Chorus reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $92.6-million versus $82.9-million in 2017, an increase of $9.7-million or 11.7 per cent due primarily to:

• A $10.4-million increase due to growth in the regional aircraft leasing segment; offset by:
  • A net decrease in the regional aviation services segment of $700,000 resulting from declines in incentive and other revenue and an increase in certain operating costs; offset by increased aircraft leasing under the CPA of $2.4-million.

Adjusted net income was $35.1-million for the period, an increase from 2017 of $11.5-million, or 48.6 per cent due to:

• The $9.7-million increase in adjusted EBITDA previously described;
• Lower foreign exchange losses on working capital which amounted to $4.7-million;
• A decrease of $400,000 in depreciation; offset by:
  • An increase in interest costs of $1.2-million related to additional aircraft debt;
  • An increase in income tax expense of $2.1-million.

Net income was $2.0-million for the period, a decrease of $18.0-million or 89.9 per cent from the same period of 2017. The decrease was primarily due to a quarter-over-quarter change in unrealized foreign exchange losses on long-term debt of $30.5-million; offset by the previously noted $11.5-million increase in the adjusted net income and decreased employee separation program costs of $1.0-million.

Year-end 2018 summary

Financial performance -- year-end 2018 compared with year-end 2017

For the year ended Dec. 31, 2018, Chorus reported adjusted EBITDA of $342.7-million versus $286.9-million in 2017, an increase of $55.8-million or 19.4 per cent due to:

• A $47.3-million increase in the regional aircraft leasing segment;
• Increased earnings in the regional aviation services segment of $8.5-million due primarily to increased aircraft leasing income under the CPA.

Adjusted net income was $121.8-million for the year, an increase from 2017 of $6.4-million, or 5.5 per cent due to:

• The $55.8-million increase in adjusted EBITDA previously described;
• Lower foreign exchange losses on working capital which amounted to $1.6-million; offset by:
  • Increased income taxes of $20.5-million. In 2017 adjusted net income was impacted by changes in tax rates which were recorded in the third quarter of 2017. This change had the impact of lowering income taxes, and therefore increased adjusted net income for the 12 months ended Dec. 31, 2017;
  • An additional $17.4-million in depreciation primarily related to new aircraft;
  • An increase in interest costs of $12.8-million related to additional aircraft debt and convertible units;
  • An increase in other expenses of $300,000.

Net income was $67.0-million for the year, a decrease of $100.3-million from the same period of 2017. The decrease was primarily due to a year-over-year change in unrealized foreign exchange losses on long-term debt of $110.4-million and foreign exchange gain on cash held for deposit of $1.6-million; offset by decreased employee separation program costs of $5.3-million and the previously noted $6.4-million increase in the adjusted net income.

2019 outlook

On Feb. 4, 2019, the amendments to the CPA first announced on Jan. 14, 2019, became effective on a retroactive basis to Jan. 1, 2019.

The 2019 CPA amendments result in a near-term reduction in fixed fees starting in 2019, as Chorus accelerates its transition to market-based rates. The reduction was implemented by eliminating the infrastructure fee per covered aircraft and the fixed margin per covered aircraft (each as defined in the CPA) and replacing them with a single fixed margin. As a result, fixed fee revenue in each of 2019 and 2020 is anticipated to be $75.5-million per year as compared with $111.3-million in 2018. In addition, the maximum future available performance incentives reduce from $23.4-million in 2019 and 2020, to an annual average maximum available amount of $3.4-million for the full term of the CPA. The near-term reductions are more than offset over the term of the CPA by incremental contracted revenue secured with the extension of the agreement including fixed fees and aircraft leasing.

In 2017, Chorus launched Chorus Aviation Capital, with the support of a $200.0-million investment in the corporation from Fairfax. In 2018, Chorus raised further gross proceeds of $112.0-million, primarily for investment in its leasing business, through a public offering of shares.* On Feb. 4, 2019, the Air Canada investment was completed, providing further gross proceeds of $97.26-million, approximately 40 per cent of which is to be invested in the leasing business carried on by Chorus Aviation Capital.

Since the start of 2017 Chorus has raised net proceeds of $401.0-million in capital from both the issuance of convertible debt units and share capital, which if levered at 3:1, provides approximately $1.6-billion of investment capital. As at Feb. 21, 2019, approximately three-quarters of this capital has been committed including deposits on future commitments. Chorus anticipates committing the remaining balance by early 2020 in new to mid-life aircraft with long-term leases to a diverse group of high-quality customers around the world.

Capital expenditures for 2019, excluding those for the acquisition of aircraft and the ESP, and including capitalized major maintenance overhauls, are expected to be between $36.0-million and $42.0-million. Aircraft related acquisitions and the extended service program capital expenditures in 2019 are expected to be between $299.0-million and $302.0-million.

* Shares refers to Chorus's Class A variable voting shares and Class B voting shares.

Investor conference call/audio webcast

Chorus will hold an analyst call at 9:30 a.m. ET on Friday, Feb. 22, 2019, to discuss the fourth quarter and year-end financial results. The call may be accessed by dialling 1-888-231-8191. The call will be simultaneously audio webcast via the On24 website.

This is a listen-in only audio webcast. Media Player or Real Player is required to listen to the broadcast; please download well in advance of the call.

The conference call webcast will be archived on Chorus's website under reports, executive management presentations. A playback of the call can also be accessed until midnight ET, Feb. 28, 2019, by dialling toll-free 1-855-859-2056 and passcode 1093749 (pound sign).

  
                            CONSOLIDATED FINANCIAL ANALYSIS
                              (in thousands of dollars)

                                 Three months ended Dec. 31,     Year ended Dec. 31,      
                                           2018        2017        2018        2017    

Operating revenue                      $358,663    $356,033  $1,451,194  $1,352,200
Operating expenses                      297,402     305,872   1,234,553   1,179,154
Operating income                         61,261      50,161     216,641     173,046
Net interest expense                    (14,447)    (13,341)    (56,285)    (43,511)
Other                                   (33,784)     (7,899)    (56,194)     54,448
Earnings before income tax               13,030      28,921     104,162     183,983
Income tax expense                      (11,011)     (8,918)    (37,174)    (16,660)
Net income                                2,019      20,003      66,988     167,323
Adjusted EBITDA                          92,608      82,915     342,692     286,912
Adjusted EBT                             46,116      32,536     159,008     132,091
Adjusted net income                      35,105      23,618     121,834     115,431

About Chorus Aviation Inc.

Headquartered in Halifax, N.S., Chorus was incorporated on Sept. 27, 2010. Chorus's vision is to deliver regional aviation to the world. Chorus has been leasing its owned regional aircraft into Jazz's Air Canada Express operation since 2011 and has established Chorus Aviation Capital Corp. to become a leading, global provider of regional aircraft leases. Chorus also owns Jazz Aviation and Voyageur Aviation -- companies that have long histories of safe and solid operations that deliver excellent customer service in the areas of contract flying operations, engineering, fleet management, and maintenance, repair and overhaul. Together, the Chorus group of companies can provide a full suite of regional aviation support services.

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