Chorus Aviation : Q3 2022 Analyst Call Transcript

FINAL TRANSCRIPT

Chorus Aviation Inc.

Third Quarter 2022 Financial Results Conference Call

November 10, 2022 - 10:00 a.m. A.T.

Length: 29 minutes

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CORPORATE PARTICIPANTS

Tyrone Cotie

Chorus Aviation Inc. - Vice President, Treasury & Investor Relations

Joe Randell

Chorus Aviation Inc. - President & Chief Executive Officer

Colin Copp

Chorus Aviation Inc. - Chief Operating Officer & Chorus Aviation Services - President

Gary Osborne

Chorus Aviation Inc. - Chief Financial Officer

CONFERENCE CALL PARTICIPANTS

Angela

RBC Capital Markets - Analyst

Konark Gupta

Scotiabank - Analyst

Adam McBain

Cormark Securities - Analyst

Renato Monzon

BMO Capital Markets - Analyst

Jessica

CIBC World Markets - Analyst

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PRESENTATION

Operator

Good morning, ladies and gentlemen, and welcome to the Chorus Aviation Inc. Third Quarter 2022 Financial Results Conference Call. At this time, all lines are in listen-only mode and following the presentation we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on November 10, 2022.

I would now like to turn the conference call over to Vice President, Treasury and Investor Relations, Mr. Tyrone Cotie. Please go ahead.

Tyrone Cotie - Vice President, Treasury & Investor Relations, Chorus Aviation Inc.

Thank you, Kelsey. Hello and thank you for joining us today for our third quarter 2022 conference call and audio webcast. With me today from Chorus are Joe Randell, President and Chief Executive Officer; Gary Osborne, Chief Financial Officer; and Colin Copp, Chief Operating Officer, Chorus Aviation

and President, Chorus Aviation Services. We'll start by giving a brief overview of the results and then go on to questions from the analyst community.

Because some of the discussion in this call may be forward looking, I direct your attention to the caution regarding forward-looking statements and information, which are subject to various risks,

uncertainties, and assumptions that are included or referenced in our Management's Discussion and

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Analysis of the results and operations of Chorus Aviation Inc. for the three months ended September 30, 2022, the outlook section, and other sections of our MD&A where such statements appear.

In addition, some of the following discussion involves certain non-GAAP financial measures, including references to EBITDA, adjusted EBITDA, adjusted EBT, and adjusted net income. Please refer to our MD&A for a discussion relating to the use of such non-GAAP measures.

I'll now turn the call over to Joe Randell.

Joe Randell - President & Chief Executive Officer, Chorus Aviation Inc.

Thank you, Tyrone, and good morning, everyone.

This past quarter marked our first full quarter since the Falko acquisition. I'm pleased to report

the continued seamless integration of the Falko business into the Chorus group of companies and that our investment in Falko is delivering the expected financial performance. The Falko team continues to demonstrate its extensive track record of opportunistically selling aircraft, allowing the business to maximize the value of its owned assets and assets under management. In August 2022 we announced the completion of agreements to sell eight fully-owned aircraft that had previously been on lease, enabling a significant reduction in our leverage level. As we continue to transition to an asset-light leasing model, these opportunistic asset sales will continue to reduce our leverage.

The Jazz operation has moved past the wider industry issues experienced in the second quarter

and continues to deliver a world-class service, having recently been named one of Canada's safest

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employers, winning the public transportation category. And our Voyageur operations had a great quarter with increased part sales and the sale of four Dash 8-100s for a gain of $2.2 million.

One topic that is being discussed with greater frequency lately is pilots, so I thought it would be useful to provide some context. The Canadian aviation industry is expected to experience increasing demand for pilots; however, Jazz is well positioned to attract and retain pilots with its pilot flow agreement to Air Canada and with Jazz and Air Canada teams working together to ensure a coordinated and smooth pilot flow process. We believe these agreements and processes will continue to allow us to proactively and effectively manage pilot recruitment.

Looking at the regional aviation industry as a whole, the recovery is showing no signs of slowing down with passenger numbers remaining strong, reflecting the pent-up demand in the market. Domestic operations in North America, Europe, and Latin America are back to pre-pandemic levels, while the Middle East, Africa, and Asia are at 80% to 90%. With roughly 50% of world flights being less than 500 miles and 45% of all world airports serviced by regional aircraft only, the regional sector continues to be an indispensable component of the industry. Recent industry publications report that

there's been a recovery in the domestic market and demand has picked up. As a result, most regional

assets have seen improvements in value and lease rates from mid-2021 and both are trending in the right direction.

We are pleased with our third quarter leasing activity, which supports the demand the sector is seeing overall. During the quarter, Falko has 28 transactions, including additions, sales, and lease extensions broadly across all regional aircraft types with most increased volume with regional jet

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