Category Archives: Jazz Aviation

Four injured in an Air Canada Express (Jazz Aviation) Q400 accident at Edmonton

Jazz Aviation (Halifax) (Air Canada Express) flight AC 8481 from Calgary to Grande Prairie with 71 passengers and four crew members suffered a right landing gear collapse when it attempted an emergency landing on runway 02 at Edmonton International Airport. Four passengers sustained injuries while landing and were transported to local hospitals. The aircraft came to a rest on its right wing. The aircraft involved was Bombardier DHC-8-402 (Q400) C-GGBF (msn 4433). The turboprop reportedly suffered a blown tire on takeoff at Calgary and the flight crew decided to divert to and attempt the emergency landing at Edmonton due to strong cross winds at Calgary. The propeller sliced through the fuselage narrowly missing a passenger on landing.

Jazz Aviation issued this statement:

A Jazz Aviation LP Q400 aircraft, operating as Air Canada Express, was involved in an incident at Edmonton International Airport at 8:30 p.m. Central Mountain Time.

Jazz flight AC 8481 was en route to Grande Prairie from Calgary. The passenger list indicates the aircraft was carrying 71 passengers and four crew members.

Four passengers have been transported to Edmonton-area hospitals and the extent of their injuries cannot be confirmed at this time. All other passengers and crew members have been evaluated by medical responders on the scene and released.

Passengers are being taken care of by Air Canada and a Jazz team is on its way to the scene.

Jazz Aviation’s parent, Chorus Aviation, posts a higher 2Q net profit of $36.5 million

Chorus Aviation (Halifax), the parent of Jazz Aviation (Air Canada Express) (Halifax), reported a second quarter net profit of C$36.5 million ($33.5 million). This basically quadruples its second quarter 2013 net income of C$7.9 million (&.2 million) of the previous year.

Here is the full report:

For the second quarter 2014, Chorus reported EBITDA of $50.7 million compared to $48.0 million in the same quarter 2013, an increase of $2.7 million. Operating income was $34.3 million, $2.6 million higher than the same period 2013. Adjusted net income of $22.2 million or $0.18 per basic share was up by $0.8 million or $0.01 per basic share over the second quarter 2013. Chorus incurred $4.5 million in employee separation program costs in the second quarter versus $2.2 million in the same period in 2013. Chorus has invested $17.2 million in employee separation since the inception of this cost savings program in the first quarter of 2013.

For reporting purposes, at each quarter end, Chorus converts its US denominated aircraft debt into equivalent Canadian dollars based on the prevailing exchange rate. Chorus manages its exposure to currency risk on such long-term debt by billing related lease payments within the Capacity Purchase Agreement (‘CPA’) with Air Canada in the underlying currency (US dollars) related to the aircraft debt. In the second quarter of 2014, Chorus had an unrealized foreign exchange gain of $14.3 million versus an unrealized foreign exchange loss of $13.5 million in the same period of 2013.

Financial Performance –Second Quarter 2014 Compared to Second Quarter 2013

Operating revenue increased from $410.3 million to $417.8 million, representing an increase of $7.5 million or 1.8%. Controllable revenue increased by $9.0 million or 3.5%. This increase occurred primarily as a result of rate increases made pursuant to the CPA of $5.8 million, a favourable US dollar exchange rate of $5.2 million, and a $0.3 million increase in incentives earned under the CPA with Air Canada. These increases were offset by decreased CPA Billable Block Hours of $2.3 million.

Pass-through revenue decreased by $2.1 million or 1.4% from $148.7 million to $146.6 million, which included a decrease of $8.7 million related to airport and navigation fees and terminal handling services. (Effective January 1, 2014, Air Canada entered into a commercial agreement with the Greater Toronto Airport Authority (‘GTAA’) that encompasses Chorus’ Air Canada Express operations. GTAA costs related to landing, terminal and other airport user fees, which are treated as pass-through costs under the CPA, are now paid directly by Air Canada pursuant to this agreement.) This decrease was offset by an increase of $7.3 million related to fuel costs driven primarily by an increase in jet fuel prices. The sale of consignment inventory was the primary factor in other revenue increasing by $0.6 million.

Operating expenses increased from $378.6 million to $383.6 million, an increase of $5.0 million. Controllable costs increased from $229.9 million to $237.0 million, an increase of $7.0 million or 3.1%. Pass-through costs decreased from $148.7 million to $146.6 million, a decrease of $2.1 million or 1.4%.

Salaries, wages and benefits increased by $2.7 million from $100.7 million to $103.4 million. Adjusted salaries, wages and benefits (adjusted by removing employee separation program costs and capitalized major maintenance overhaul labour costs), which includes pension, incentive compensation and other employee benefits, decreased by $0.9 million after incurring an increase in stock based compensation of $0.8 million due to a change in accounting policy. Employee separation program costs incurred during the three months ended June 30, 2014 were $4.5 million, an increase of $2.3 million over the same period of 2013. These costs include employee separation program costs of $2.1 million in 2014 related to the commencement of outsourcing of passenger handling services under applicable collective agreements. Salaries and wages were also affected by fewer labour costs being capitalized as a result of reduced major maintenance overhauls on owned aircraft of $1.4 million.

Aircraft maintenance expense increased by $4.0 million from $37.9 million to $41.9 million partially as a result of an unfavourable US dollar exchange rate on certain maintenance material purchases of $2.7 million and increased other maintenance costs of $2.6 million. These increases were offset by decreased Block Hours of $1.3 million.

Other expenses decreased by $0.8 million from $32.0 million to $31.2 million. The decrease was the result of reduced general overhead expenses.

Non-operating income increased by $27.8 million from a non-operating expense of $19.2 million to a non-operating income of $8.6 million. The strengthening of the Canadian dollar during the quarter contributed to a foreign exchange gain of $11.8 million compared to a foreign exchange loss of $13.0 million in the same period last year. During the quarter, Chorus redeemed the remaining balance of the convertible debentures, which accounted for a decrease in interest accretion of $0.3 million and a decrease in interest expense of $1.5 million. Interest expense related to long-term debt decreased by $0.8 million due to planned principal repayments. Chorus met employment conditions required in order to obtain the maximum annual forgiveness of a portion of the forgivable loan from the province of Nova Scotia, and as such $0.5 million was recorded in other income.

EBITDA was $50.7 million compared to $48.0 million in 2013, an increase of $2.7 million or 5.7%, producing an EBITDA margin of 12.1%.

Operating income of $34.3 million was up $2.6 million or 8.1% over second quarter 2013 from $31.7 million.

Net income for the second quarter of 2014 was $36.5 million or $0.30 per basic share, an increase of $28.6 million from $7.9 million. On an adjusted basis, net income was $22.2 million or $0.18 per basic share, an increase of $0.8 million from $21.4 million. A reconciliation of these non-GAAP measures to their nearest GAAP measure is provided in Chorus’ Management’s Discussion and Analysis dated August 13, 2014.

Copyright Photo: TMK Photography/AirlinersGallery.com. Bombardier CRJ705 (CL-600-2D15) C-GLJZ (msn 15051) approaches the runway at Toronto’s Lester B. Pearson International Airport (YYZ).

Air Canada Express-Jazz Aviation:

Chorus Aviation reports on its profitable first quarter

Chorus Aviation (Halifax), the parent of Jazz Aviation (Air Canada Express) (Halifax), reported the following for the first quarter:

For the first quarter 2014, Chorus Aviation reported EBITDA of $47.3 million compared to $34.2 million in the same quarter 2013, an increase of $13.1 million. Operating income was $31.2 million, $10.4 million higher than the same period 2013. Adjusted net income of $20.3 million or $0.17 per basic share, was up by $5.6 million or $0.05 per basic share over first quarter 2013. Chorus incurred $2.8 million in voluntary employee severance in the first quarter versus $5.7 million in the same period in 2013. Chorus has invested $12.7 million since the inception of this cost savings program in the first quarter of 2013.

Net income for the first quarter of 2014 was $5.6 million or $0.05 per basic share, a decrease of $3.6 million from $9.2 million. On an adjusted basis, net income was $20.3 million or $0.17 per basic share, an increase of $5.6 million from $14.7 million. A reconciliation of these non-GAAP measures to their nearest GAAP measure is provided in Chorus’ Management’s Discussion and Analysis dated May 14, 2014.

Chorus Aviation is a dividend-paying holding company which owns Jazz Aviation LP and a number of other companies involved in aviation related businesses.

Read the full report: CLICK HERE

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Bombardier DHC-8-311 (Q300) C-GABP (msn 257) of Jazz Aviation (Air Canada Express) touches down at Seattle-Tacoma International Airport (SEA).

Jazz Aviation:

Jazz Aviation DHC-8-300 lands safely after an engine fire

Jazz Aviation (Air Canada Express) (formerly Air Canada Jazz) (Halifax) Bombardier DHC-8-300 operating a passenger flight from Nanaimo on Vancouver Island to Vancouver experienced an engine fire yesterday (December 12). According to Reuters, “Shortly after the Jazz DHC 8-300 aircraft took off from Nanaimo, on Vancouver Island, the crew was notified of an engine oil issue and flames were seen near one of the engines, Air Canada Jazz said in an emailed statement.

The crew released fire retardant into the engine housing and were able to extinguish the flames. The aircraft, which had 35 passengers and three crew members on board, then returned to Nanaimo, where it was met by emergency vehicles.”

Read the full report: CLICK HERE

Copyright Photo: Ton Jochems/AirlinersGallery.com. Jazz Aviation’s Bombardier DHC-8-301 (Q300) C-GKTA (msn 124) is seen at the Vancouver hub.

Air Canada Express-Jazz Aviation:

Air Canada to launch daily, year-round flights between Sydney, Nova Scotia and Toronto Pearson on December 18

Air Canada (Montreal) today announced that in response to growing customer demand it will launch daily, year-round service between Sydney, Nova Scotia and Toronto (Pearson) beginning on December 18, 2013 .

Air Canada and TCA has been serving Sydney and Cape Breton for 71 years.

Air Canada’s year-round, daily service between Sydney and Toronto will be operated by Jazz Aviation (Halifax) under the Air Canada Express brand using 50-seat CRJ200 regional jets. It will be the only year-round, nonstop flights operated between Sydney, Nova Scotia and Toronto .

Sydney-Toronto year-round service:

Flight	Depart	Arrival
AC 8795	Sydney at 05:55	Toronto at 07:33
AC 8794	Toronto at 20:50	Sydney at 00:10

Copyright Photo: TMK Photography/AirlinersGallery.com. Jazz Aviation’s Bombardier CRJ200 (CL-600-2B19) C-FZJA (msn 7988) rests between assignments at the Toronto (Pearson) hub.

Air Canada:

Air Canada Regional-Jazz:

Chorus Aviation’s 1Q net income drops almost 65% to $9.2 million

Chorus Aviation Inc. (Jazz Aviation) (Air Canada Express) (formerly Air Canada Jazz) (Halifax) has issued its first quarter 2013 earnings, and is revising its quarterly dividend to $0.075 per share from $0.15 per share. The company reported first quarter net income of C$9.2 million ($9 million), down almost 65 percent from the $26.2 million profit in the first quarter a year ago.

First Quarter 2013 Highlights:

Operating revenue of $416.3 million.
EBITDA¹ of $34.2 million.
Operating income of $20.8 million.
Net income of $9.2 million, or $0.07 per basic share.
Adjusted net income¹ of $14.7 million, or $0.12 per basic share.
Billable Block Hours of 97, 202.

“The first quarter delivered solid results; however, two items negatively impacted the bottom line,” said Joseph Randell, President and Chief Executive Officer, Chorus. “In our continued efforts to improve operational efficiency and to reduce costs, we enacted a voluntary separation program for our more senior pilots and maintenance employees. The severance cost of $5.7 million will provide a return within the next two years as ongoing operational costs are reduced. This expense, when factored with the unrealized foreign exchange loss of $5.6 million into the adjusted net income for the quarter, increases earnings per share to the current market consensus of $0.17 per basic share.”

DIVIDEND

Chorus and Air Canada are involved in an ongoing complex arbitration process regarding the 2009 Benchmark. Chorus remains confident in its position that the Controllable Mark-up of 12.5% in the Capacity Purchase Agreement (‘CPA’) should not change as a result of the arbitration. Accordingly, no amounts have been recorded in the accounts of Chorus in 2010, 2011, 2012 or 2013 related to the Air Canada claim. Management has determined that it is not probable that the Air Canada claim will be successful, and it is not practicable to determine an estimate of the possible financial effect, if any, with sufficient reliability.

However, in any litigation process there is always some risk of an adverse outcome. This risk combined with the extended duration of the arbitration has created the risk of a material retroactive amount owing to Air Canada for the period commencing January 1, 2010 should Air Canada succeed in its claim for a material fleet age adjustment in its favour. The longer this process continues without resolution, the larger the amount of any potential retroactive payment.

In addition, Chorus’ $80.2 million convertible debentures come due in December 2014. Chorus anticipates that an increase in liquidity will provide increased flexibility in addressing the maturity of those debentures, in the context of challenging conditions for the airline industry and global economic uncertainty. Those debentures, issued in November 2009, were used to pay part of the term debt of $115.0 million which was established at the time of the Chorus initial public offering in 2006 and matured in February 2010. As a result, Chorus believes that strengthening its cash position during this period is prudent.

Chorus will continue to manage its financial leverage ratios, such as its adjusted net debt to equity ratio which has increased as a result of the financing of its new Bombardier DHC-8-402 (Q400) aircraft fleet. Such continued accretive investment in fleet renewal may occur either through refurbishment of the classic Bombardier DHC-8-100 and DHC-8-300 series aircraft or further investment in new generation aircraft.

In consideration of these factors, Chorus has reduced its quarterly dividend from $0.15 per share to $0.075 per share going forward. This will enable Chorus to retain additional cash of $9.3 million per quarter.

While Chorus has current cash available to pay the dividend at the previous rate, the Board of Directors has determined that, given the factors discussed above, it is prudent and advisable to conserve Chorus’ financial resources.

“We have, and continue to prudently manage our financial resources,” continued Mr. Randell. “The regional airline industry is changing dramatically both here and south of the border. Competition is increasing significantly. We must continue in our efforts to reduce costs, strengthen the fundamentals of our business, and improve our financial position to ensure we have the flexibility required to effectively respond and compete in our ever-changing markets.”

The Board of Directors will continue to assess the dividend payment on an ongoing basis.

Financial Performance -First Quarter 2013 Compared to First Quarter 2012

Operating revenue decreased from $437.1 million to $416.3 million, representing a decrease of $20.8 million or 4.8%. Passenger revenue, excluding pass-through costs, decreased by $6.4 million or 2.5% primarily as a result of no activity in the quarter for Thomas Cook; offset by rate increases made pursuant to the CPA with Air Canada, an increase in Billable Block Hours of 0.8%, a $0.2 million increase in incentives earned under the CPA, and a higher US dollar exchange rate. Pass-through costs decreased from $176.7 million to $162.0 million; a decrease of $14.7 million or 8.3%, which included a decrease of $1.8 million related to fuel costs. Other revenue increased by $0.2 million.

Operating expenses decreased from $407.4 million to $395.5 million, a decrease of $12.0 million or 2.9%. Controllable Costs increased by $2.7 million, or 1.2%; offset by a decrease in pass-through costs of $14.7 million.

Salaries, wages and benefits increased by $3.1 million primarily as a result of voluntary employee severance costs related to flight crew and maintenance employees, wage and scale increases under new collective agreements, and increased pension expense resulting from a revised actuarial valuation; offset by a reduction in the number of full time equivalent employees and higher capitalized salaries and wages related to major maintenance overhauls.

Depreciation and amortization expense increased by $0.5 million, primarily related to the purchase of Q400 aircraft, increased capital expenditures on aircraft rotable parts and other equipment, and increased major maintenance overhauls; offset by certain assets having reached full amortization and a change in estimate related to the residual value of the Dash 8-100 and 300 aircraft.

Aircraft maintenance expense decreased by $2.4 million as a result of a $4.6 million reduction related to no activity for Thomas Cook; offset by an increase in engine maintenance activity due to engine charges for the CRJ705 and Dash 8 – 300 aircraft of $1.2 million, increased other maintenance costs of $0.5 million and an increase in the US-dollar exchange rate on certain material purchases of $0.5 million.

Aircraft rent decreased by $5.4 million primarily as a result of no expense in the quarter for Thomas Cook aircraft and the return of CRJ aircraft.

Other expenses increased by $1.3 million primarily due to increased professional fees, increased travel and training costs associated with the Q400 aircraft and increased general overhead expenses.

Non-operating expenses increased by $9.0 million. This change was mainly attributable to an increase in foreign exchange of $8.8 million (of which $8.9 million was related to an increase in unrealized foreign exchange loss on long-term debt and finance leases) and increased interest expense related to Q400 aircraft financing of $1.0 million; offset by $0.8 million in other income related to a government grant.

EBITDA¹ was $34.2 million compared to $42.6 million in 2012, a decrease of $8.4 million or 19.6%, producing an EBITDA margin of 8.2%. Standardized Free Cash Flow was negative $110.9 million, impacted primarily by the continuing growth capital expenditures related to the purchase of Q400 aircraft.

Operating income of $20.8 million was down $8.8 million or 29.7% over first quarter 2012 from $29.6 million.

Net income for the first quarter of 2013 was $9.2 million or $0.07 per basic share, a decrease of $17.0 million or 64.9% from $26.2 million or $0.21 per basic share. On an adjusted basis, net income was $14.7 million or $0.12 per basic share, a decrease of 35.4% or $0.06 per basic share from $22.8 million or $0.18 per basic share.

¹Non-GAAP Financial Measures

EBITDA

EBITDA (earnings before interest, taxes, depreciation, amortization and obsolescence) is a non-GAAP financial measure commonly used throughout all industries to view operating results before interest expense, interest income, depreciation and amortization, gains and losses on property and equipment and other non-operating income and expenses. Management believes EBITDA assists investors in comparing Chorus’ performance on a consistent basis without regard to depreciation and amortization, which are non-cash in nature and can vary significantly depending on accounting methods and non-operating factors such as historical cost. EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact on working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statement of cash flows which form part of the financial statements.

STANDARDIZED FREE CASH FLOW

Standardized Free Cash Flow is defined as cash flows from operating activities, as reported in accordance with GAAP, less total capital expenditures and dividends.

ADJUSTED NET INCOME

Adjusted net income and adjusted earnings per share are calculated by adjusting net income by the amount of any unrealized foreign exchange gains and losses on long-term debt and finance leases. During the first quarter of 2013, Chorus recorded an $5.6 million loss in unrealized foreign exchange on long-term debt and finance leases. These adjustments more clearly reflect earnings from an operating perspective.

Jazz Aviation:

Jazz’s current route map:

Air Canada and Jazz Aviation introduce the Bombardier Q400 to western Canada

Air Canada (Montreal) and Jazz Aviation (Air Canada Express) (Halifax) on February 1 introduced the Bombardier DHC-8-402 (Q400) to western Canada. The type was introduced on Air Canada Express flights AC 8371 from Calgary to Fort McMurray, AC 8430 from Calgary to Regina and AC 8586 from Calgary to Saskatoon. Concurrent with rolling out new, state-of-the-art Bombardier Q400 Next Generation aircraft in these markets, Air Canada announced it is boosting capacity on key regional routes this spring and summer in response to demand.

“We are delighted to introduce the newest, ultra-quiet regional aircraft for customers in Alberta and Saskatchewan,” said Marcel Forget, Air Canada’s Vice President, Network Planning. “This spring, Air Canada will strategically increase capacity by either scheduling larger aircraft or adding flights to meet strong demand in Western Canada and we will continue to roll out the Q400 aircraft on additional routes in BC, Alberta and the Northwest Territories in the coming months. Air Canada Express flights are scheduled to enable convenient, point-to-point, same-day business travel, as well as convenient and easy connections to Air Canada’s extensive domestic, US and international network at Calgary, Edmonton and Vancouver.”

Increased capacity this spring and summer compared to last year include the following routes:

Route	Effective	2012 daily seat capacity	2013 daily seat capacity	% seat increase
Calgary-Fort McMurray	now	375	444	18%
Calgary-Regina	now	200	272	36%
Calgary-Grande Prairie	March 2013	200	248	24%
Calgary-Victoria	March 2013	200	222	11%
Calgary-Yellowknife	April 2013	100	124	24%
Calgary-Edmonton	March 2013	837	870	4%
Calgary-Portland, OR	July 2013	50	100	100%
Edmonton-Yellowknife	April 2013	50	74	48%
Edmonton-Regina	now	50	100	100%
Edmonton-Saskatoon	now	50	100	100%
Edmonton-Fort McMurray	March 2013	300	370	23%
Edmonton-Grande Prairie	May 2013	250	274	10%
Vancouver-Fort McMurray	May 2013	50	100	100%
Vancouver-Fort St. John	May 2013	250	298	19%
Vancouver-Prince George	May 2013	300	370	23%
Vancouver-Smithers	May 2013	100	150	50%
Vancouver-Terrace	July 2013	200	250	25%
Vancouver-Penticton	May 2013	150	200	33%
Toronto-Fort McMurray	May 2013	292	363	24%

Following to the launch of the Q400 aircraft in Calgary, Fort McMurray, Regina and Saskatoon, the aircraft, featuring all-leather seats, spacious overhead bins and comfortable 31-inch legroom, is scheduled to be deployed in the coming months on the following routes:

Calgary-Grande-Prairie	March 2013
Calgary-Victoria	March 2013
Calgary-Edmonton	March 2013
Calgary-Yellowknife	April 2013
Edmonton-Fort McMurray	March 2013
Edmonton-Grande Prairie	May 2013
Edmonton-Yellowknife	April 2013
Vancouver-Prince George	May 2013
Vancouver-Fort St. John	May 2013

The Bombardier DHC-8-402 (Q400) NextGen aircraft with 74 seats replaces 50-seat CRJ100/200ER aircraft, and are operated by Jazz Aviation LP under the Air Canada Express brand.

Copyright Photo: Keith Burton. Jazz Aviation’s Bombardier DHC-8-402 (Q400) C-GGMZ (msn 4399) prepares to land at the Toronto (Pearson) hub.

Air Canada Express-Jazz Aviation:

Routes flown by Jazz Aviation for Air Canada as an Air Canada Express carrier:

Please click on the map for the full-size view.

Chorus Aviation reports third quarter net income of C$37.2 million

Chorus Aviation Inc. (Jazz Aviation) (Air Canada Regional) (Halifax) has announced its third quarter 2012 earnings, with net income of $37.2 million , or $0.30 per basic share, and adjusted net income of $27.1 million or $0.22 per basic share. The company issued the following statement:

Operating revenue increased from $411.7 million to $435.6 million , representing an increase of $24.0 million or 5.8%. Passenger revenue, excluding pass-through costs, increased by $19.0 million or 7.6% primarily as a result of a 1.9% increase in Billable Block Hours, rate increases made pursuant to the Capacity Purchase Agreement (‘CPA’) with Air Canada , a higher US dollar exchange rate, and a $1.1 million increase in incentives earned under the CPA. Pass-through costs increased from $160.8 million to $166.1 million , or $5.3 million or 3.3% which included $1.5 million related to fuel. Other revenue decreased by $0.3 million .

Operating expenses increased from $380.6 million to $399.0 million , an increase of $18.4 million or 4.8%. Controllable Costs increased by $13.1 million , or 6.0%. Controllable operating expenses were impacted by the changes in the fleet ownership structure for the Q400 aircraft. CRJ100 aircraft, previously reported under operating leases, are being replaced by owned Q400 aircraft. Related ownership costs are comprised of depreciation (an operating expense), and interest (a non-operating expense). The Q400 aircraft lease revenue under the CPA is reflected in operating revenue, and is designed to provide compensation to Chorus for both depreciation and interest expense. As interest expense is shown below the operating margin, operating income increased by a similar amount on a quarter over quarter basis.

Depreciation and amortization expense increased by $3.3 million , of which $3.1 million is related to the purchase of Q400 aircraft, with the balance due to increased capital expenditures on aircraft rotable parts and other equipment; offset by decreased major maintenance overhauls and certain assets having reached full amortization.

Aircraft maintenance expense increased by $4.0 million , with increased costs of $0.8 million arising as a result of increased Block Hours, the effect of the increase in the US-dollar exchange rate on certain material purchases of $0.3 million , increased other maintenance costs of $1.4 million , and an increase in engine maintenance activity of $1.5 million .

Salaries, wages and benefits increased by $7.4 million as a result of wage and scale increases under new collective agreements, increased Block Hours, increased incentive compensation expense, increased pension expense resulting from a revised actuarial valuation and lower capitalized salaries and wages related to major maintenance overhauls; offset by a 3.7% reduction in the number of full time equivalent employees.

Other expenses decreased by $0.7 million primarily due to decreased professional fees and general overhead expenses; offset by increased crew expenses increased due to increased activity and rates.

Non-operating income increased $19.8 million . This change was mainly attributable to a foreign exchange gain of $10.7 million (of which $10.0 million was related to an unrealized foreign exchange gain on long-term debt and finance leases) arising as a result of the change in value of the Canadian dollar relative to the US dollar; offset by increased interest expense related to the Q400 aircraft financing of $1.8 million .

EBITDA¹ was $51.8 million compared to $43.0 million in 2011, an increase of $8.8 million or 20.7%, producing an EBITDA margin of 11.9%. Free Cash Flow was $37.8 million , an increase of $8.7 million or 30.0% from $29.1 million .

Operating income of $36.7 million for the three months ended September 30, 2012 , was up $5.6 million or 17.9% over third quarter 2011 from $31.1 million .

Net income for the third quarter of 2012 was $37.2 million or $0.30 per basic share, an increase of $23.3 million or 167.1% from $13.9 million or $0.19 per basic share.

As communicated on October 3 and 4, 2012, the arbitration panel (the ‘Panel’) released its award (the ‘Award’) on the 2009 benchmark exercise between Jazz Aviation LP (‘Jazz’) (a wholly owned subsidiary of Chorus) and Air Canada .

In the Award, two of the three member Panel concluded that the component unit cost driver (‘CUCD’) methodology put forward by Air Canada was the appropriate methodology to use in the 2009 Benchmark to compare Jazz’s Unit Costs to the stage length adjusted median controllable unit costs of the Comparable Operators. However, the Panel also agreed with Jazz that a number of the additional adjustments proposed by Jazz were also required to be made (the “Adjustments”).The Panel also agreed with Jazz that fleet age impacts the rate at which maintenance costs increase. The Panel directed Air Canada and Jazz to negotiate a further adjustment that would account for the impact of fleet age, failing which the parties will submit new proposals and analysis to the Panel.

There remain disputes between the parties with respect to the interpretation and application of the Award and its impact on the Controllable Mark-Up. Jazz is of the view that, applying the CUCD methodology, and based on the proper application of the Adjustments that the Panel has found are required to be made, the result of the 2009 Benchmark is that Jazz is not required to repay Air Canada any amounts in respect of payments made since January 1, 2010 , and that its Controllable Mark-Up will remain at 12.50% going forward until at least the 2015 Benchmark.

Air Canada , on the other hand, has asserted to Jazz its view that the impact of the Adjustments that the Panel found were required to be made would reduce the Controllable Mark-Up to 11.41%. However, this does not account for any impact that the fleet age adjustment described above would have on the Controllable Mark-Up. Air Canada took the position at the hearing that there should be no such fleet age adjustment. Jazz is of the view that, given its older fleet relative to those of the relevant comparable operators, any fleet age adjustment would result in a Controllable Mark-Up higher than 11.41%, even if the Panel were to otherwise accept Air Canada’s position concerning the impact of each of the various other Adjustments which the Panel indicated must be made.

The parties have scheduled a further hearing with the Panel to occur in the last week of November 2012 to resolve the outstanding issues in dispute, including the impact of the fleet age adjustment. As a consequence, the impact, if any, to the Controllable Mark-Up on Jazz’s Controllable Costs cannot be stated at this time with reasonable certainty. Chorus anticipates having all matters settled no later than the first quarter of 2013.

No amounts have been recorded in the accounts of Chorus in 2010, 2011 or 2012 related to this claim as management has determined that it is not probable that the Air Canada claim will be successful, and it is not practicable to determine an estimate of the possible financial effect, if any, with sufficient reliability.

¹ Non-GAAP Financial Measures

EBITDA
EBITDA (earnings before interest, taxes, depreciation, amortization and obsolescence) is a non-GAAP financial measure commonly used throughout all industries to view operating results before interest expense, interest income, depreciation and amortization, gains and losses on property and equipment and other non-operating income and expenses. Management believes EBITDA assists investors in comparing Chorus’ performance on a consistent basis without regard to depreciation and amortization, which are non-cash in nature and can vary significantly depending on accounting methods and non-operating factors such as historical cost. EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact on working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statement of cash flows which form part of the financial statements.

FREE CASH FLOW
Pre-conversion distributable cash was a key performance indicator used by management to evaluate the ongoing performance of Jazz Air Income Fund. Distributable cash is not a measure which is commonly utilized in respect of a public corporation. Management believes, however, that it is a term with which its shareholders are familiar and has provided Free Cash Flow as a proxy for previously reported distributable income. Free Cash Flow is calculated in the same manner as distributable cash. Free Cash Flow is defined as EBITDA less non-operating expenses, Maintenance Capital Expenditures to sustain the operation, and adjusted for any unrealized foreign exchange gain or loss on long-term debt and finance leases and any unusual non-operating one-time items. Other capital expenditures incurred to facilitate growth of the business are excluded from this calculation.

ADJUSTED NET INCOME
Adjusted net income and adjusted earnings per share are calculated by adjusting net income by the amount of any unrealized foreign exchange gains and losses on long-term debt and finance leases. During the third quarter of 2012, Chorus recorded a $10.0 million gain in unrealized foreign exchange on long-term debt and finance leases. This adjustment more clearly reflects earnings from an operating perspective.

Copyright Photo: Keith Burton. Jazz Aviation’s (Air Canada Express) Bombardier DHC-8-402 (Q400) C-GGND (msn 4394) prepares to land at Air Canada’s Toronto (Pearson) hub.

Air Canada Express-Jazz Aviation:

Air Canada to deploy the Bombardier Q400 on the Toronto – New York JFK route and in Western Canada

Air Canada (Montreal) is adding the Bombardier DHC-8-402 (Q400) on the Toronto (Pearson-New York (JFK) route starting on November 1. In addition, the carrier has announced that it is boosting capacity on regional routes across Western Canada this fall and winter to meet demand. The airline will also be gradually introducing Bombardier Q400 aircraft operated by Jazz Aviation (Halifax) under the Air Canada Express brand on key markets from Calgary and Edmonton beginning next year.

Starting next February, Air Canada will be scheduling new Q400 aircraft on regional routes across Western Canada to replace smaller Bombardier CRJ200 aircraft. Air Canada Express flights are scheduled to enable convenient, point-to-point same day business travel, as well as convenient and easy connections to Air Canada’s extensive domestic, US and international network at Calgary, Edmonton and Vancouver. Increased services this fall and winter compared to last year include:

Calgary-Fort McMurray	7 daily (from 6 daily)	350 daily seats (from 300)
Calgary-Grande Prairie	5 daily (from 4 daily)	250 daily seats (from 200)
Calgary-Yellowknife	2 daily (from 1 daily)	100 daily seats (from 50)
Edmonton-Fort McMurray	7 daily (from 6 daily)	350 daily seats (from 300)
Edmonton-Regina	2 daily (from 1 daily)	100 daily seats (from 50)
Edmonton-Saskatoon	2 daily (from 1 daily)	100 daily seats (from 50)
Vancouver-Fort St. John	5 daily (from 4 daily)	250 daily seats (from 200)
Vancouver-Nanaimo	7 daily (from 6 daily)	350 daily seats (from 300)

As mentioned, in February, 2013, Air Canada will begin gradually deploying 74-seat Bombardier Q400 aircraft on routes within Western Canada, replacing 50-seat CRJ200 aircraft. The Q400s will initially be scheduled on the following routes:

Calgary-Fort McMurray	February, 2013
Calgary-Regina	February, 2013
Calgary-Saskatoon	February, 2013
Calgary-Yellowknife	April, 2013
Calgary-Grande Prairie	March, 2013
Calgary-Victoria	March, 2013
Calgary-Edmonton	March, 2013
Edmonton-Fort McMurray	March, 2013
Edmonton-Yellowknife	April, 2013
Edmonton-Winnipeg	May, 2013

Copyright Photo: TMK Photography. Bombardier DHC-8-402 (Q400) C-GGOY (msn 4365) of Jazz Aviation is pictured at the Toronto (YYZ) hub.

Air Canada Express-Jazz Aviation:

Chorus Aviation posts a second quarter net profit of $22.9 million

Chorus Aviation Inc. (Jazz Aviation) (Air Canada Express) (Halifax) has announced its second quarter 2012 earnings, with net income of (all currencies in Canadian dollars) $22.9 million or $0.18 per share, and adjusted net income¹ of $27.4 million or $0.22 per share.

Q2 2012 Highlights:

Operating revenue of $426.3 million.
Free Cash Flow¹ of $38.7 million, or $0.31 per share.
Operating income of $36.6 million.
Net income of $22.9 million, or $0.18 per share.
Adjusted net income¹ of $27.4 million, or $0.22 per share.

The full report:

Financial Performance -Second Quarter 2012 Compared to Second Quarter 2011

Operating revenue increased from $402.0 million to $426.3 million, representing an increase of $24.2 million or 6.0%. Passenger revenue, excluding pass-through costs, increased by $25.7 million or 10.8% primarily as a result of $9.0 million related to the early termination of the Thomas Cook Flight Services Agreement, rate increases made pursuant to the CPA, an adjustment of $1.8 million related to the new rates which were retroactive to January 1, 2012, a higher US dollar exchange rate, and a $1.4 million increase in incentives earned under the CPA with Air Canada; offset by a $1.9 million or 1.2% decrease in pass-through costs from $161.1 million to $159.2 million, which included $5.3 million related to fuel. Other revenue increased by $0.3 million.

Operating expenses increased from $378.1 million to $389.7 million, an increase of $11.6 million or 3.1%. Controllable Costs increased by $13.5 million, or 6.2%; offset by a decrease in pass-through costs of $1.9 million. Controllable operating expenses were impacted by the changes in the fleet ownership structure for the Q400 aircraft. CRJ100 aircraft, previously under operating leases, are being replaced by owned Q400 aircraft, whose ownership costs are comprised of depreciation under operating expenses, and interest under non-operating expenses. The Q400 aircraft lease revenue under the CPA is captured under operating revenue and is designed to provide compensation to Chorus for both depreciation and interest expense. As interest expense is shown below the operating margin, operating income increased by a similar amount on a quarter over quarter basis.

Depreciation and amortization expense increased by $4.0 million, of which $3.0 million is related to the purchase of Q400 aircraft, with the balance due to the increased major maintenance overhauls and increased capital expenditures on aircraft rotable parts and other equipment; offset by certain assets reaching full amortization.

Aircraft maintenance expense increased by $2.3 million as a result of increased Block Hours of $0.4 million, the effect of the increase in the US-dollar exchange rate on certain material purchases of $1.3 million, and increased other maintenance costs of $2.6 million; offset by a decrease in engine maintenance activity due to the return of CRJ aircraft of $2.0 million.

Salaries, wages and benefits increased by $2.8 million as a result of wage and scale increases under new collective agreements, increased Block Hours, and increased pension expense resulting from a revised actuarial valuation; offset by a reduction in the number of full time equivalent employees.

Other expenses increased by $3.4 million primarily due to increased general overhead expenses (crew expenses increased due to increased activity, rates and training expenses) and professional fees.

Non-operating expenses increased $7.8 million. This change was mainly attributable to a foreign exchange loss of $4.8 million (of which $4.5 million was related to an unrealized foreign exchange loss on long-term debt and finance leases) arising as a result of the change in value of the Canadian dollar relative to the US dollar, and increased interest expense related to the Q400 aircraft financing of $2.1 million.

EBITDA¹ was $50.4 million compared to $33.9 million in 2011, an increase of $16.5 million or 48.9%. Free Cash Flow was $38.7 million, an increase of $15.4 million or 66.5% from $23.3 million.

Operating income of $36.6 million for the three months ended June 30, 2012, was up $12.6 million or 52.6% over second quarter 2011 from $24.0 million.

Net income for the second quarter of 2012 was $22.9 million or $0.18 per share, an increase of $6.0 million or 35.3% from $16.9 million or $0.14 per share.

CPA rate setting negotiations

On August 7, 2012, Jazz and Air Canada finalized an agreement on the establishment of new rates for controllable costs that are payable by Air Canada under the CPA in respect of the years 2012 to 2014 inclusive. This rate review and adjustment is required under the terms of the CPA. The new rates are retroactive to January 1, 2012, and the parties have reconciled the amounts previously paid to the amount owing based on the new rates. The reconciliation is conducted so that the parties will be in the same position they would have been had the new rates been in effect as of January 1, 2012.

Update on investment in South American regional carrier Pluna.

On April 30, 2010, Chorus purchased a 33% non-voting interest in Latin American Regional Aviation Holding Corporation (LARAH). LARAH held an indirect 75% equity interest in Pluna Líneas Aéreas Uruguayas S.A. The remaining 25% equity interest in Pluna was held, indirectly, by the Government of Uruguay.

In the second quarter of 2012, it was announced that Pluna was in financial difficulty, and that the Uruguayan government had taken control of the airline, allowing it to continue operating. All of the shares in Pluna held indirectly by LARAH, including the portion indirectly owned by Chorus, were placed in trust with the Montevideo Stock Exchange in return for certain conditions and indemnities from the Uruguayan government. As a result, Chorus recorded a write-down of $16.4 million to the fair value of the investment through other comprehensive loss, as there is no indication that the LARAH shares hold any current value, and there can be no assurances that a successful recapitalization of Pluna will result in Chorus holding an ownership stake in the resulting entity.

Subsequent to June 30, 2012, Pluna announced that it had ceased operations indefinitely. The situation with Pluna has no effect on Jazz operations or current cash flows.

¹ Non-GAAP Financial Measures

Air Canada Express-Jazz: