Chorus Aviation reports Q2 profit down as regional passenger number plunge 97%

Chorus Aviation Inc. saw profits fall as passenger numbers plummeted during the height of COVID-19-related shutdowns last quarter.

Profits dropped by 25 per cent and revenue tumbled 45 per cent at the regional aviation company, which suffered from a massive drop in demand amid travel restrictions.

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"I sincerely hope more employee reductions won't be necessary," Chorus CEO Joseph Randell said on a conference call with analysts Thursday.

"Our Air Canada Express operation is a fragment of what it was this time last year."

The number of passengers on Air Canada Express, whose flights Chorus operates, dropped to 92,000 in the second quarter, a 97 per cent decline from 2.7 million travellers in the same period a year earlier. The number of flights fell to 5,000 from more than 56,000.

Despite the industry's "fragile" state, Randell sees blips of hope on the radar.

"Regional aviation is generally resuming flying earlier and at a quicker pace than long-haul travel," he noted.

Chorus cut costs, curtailed capital investment and laid off 3,200 of its roughly 5,000 employees in response to the pandemic. Most of them were let go well before Air Canada announced in June it would discontinue 30 regional routes — 21 of them operated by Jazz Aviation, a Chorus subsidiary — and close eight Jazz-managed airport stations.

In the second quarter, Air Canada Express flew roughly nine per cent of the hours it logged a year earlier. While the return of regional routes will be "protracted and sporadic," Randell expects flight time to rise to between 20 and 30 per cent of last year's hours for the balance of 2020.

Meanwhile about half of Chorus's leased fleet — the company's other line of business — is now back in the air, with the number of flight hours up from the nadir of last spring.

The Halifax-based company collected only 28 per cent of lease revenue in the second quarter due to rent deferrals, though the figure climbed to 38 per cent in July, Chorus said.

Randell, like Air Canada's CEO, cast a harsh glance at government for imposing tough restrictions on a battered industry.

"Canada's federal and interprovincial travel restrictions are now one of the most severe in the world. The mandatory two-week quarantine requirement in Nova Scotia, as an example, makes doing business very difficult," he said.

Randell called on officials to look to other G20 countries that have implemented "practical and science-based approaches" to loosening restrictions and supporting airlines.

Carriers have prodded Ottawa and provincial governments to ease the blanket ban on foreign travellers, the Canada-U.S. border shutdown and the two-week quarantine required of anyone entering the country, as well as the travel "bubble" in Atlantic Canada that requires two weeks of self-isolation for those arriving from outside the region.

Chorus reported its liquidity sits at $228 million, "which in our modeling should be sufficient for the company to manage through the crisis," National Bank analyst Cameron Doerksen said in a research note.

However, the collapse of several airlines — FlyBe ceased operations in March and CityJet and Virgin Australia filed for bankruptcy protection in the second quarter — have left the company with 13 planes to re-lease.

"Given the dire health of the global airline industry, there is significant risk of additional failures that could result in more aircraft being returned to Chorus," Doerksen said.

"It could take several years before all aircraft in Chorus's portfolio are back on lease."

Chorus earned $29.2 million or 18 cents per diluted share for the quarter ended June 30, down from $38.9 million or 24 cents per diluted share a year ago.

Operating revenue fell to $184.2 million compared with $332.5 million in the same quarter last year.

On an adjusted basis, Chorus said it earned 13 cents per share for the quarter, down from 15 cents per share a year ago but beating analyst expectations of 11 cents per share, according to financial markets data firm Refinitiv.

Chorus shares gained more than 10 per cent or 26 cents at $2.77 in mid-afternoon trading on the Toronto Stock Exchange.

This report by The Canadian Press was first published Aug. 13, 2020.

Companies in this story: (TSX:CHR, TSX:AC)

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