Chorus reports a $29 million profit in the second quarter as regional aviation begins a slow recovery
Halifax-based Chorus Aviation has turned a profit despite the pandemic hammering the world’s airlines. The company reported Thursday it earned $29 million between May and July, down 25% from the previous year.
That profit doesn’t mean the crisis is over. Chorus expects to only fly between 20 and 30% of last year’s capacity through the rest of the year.
“Our Air Canada Express operation is a fraction of what it was this time last year,” said Joe Randell, Chorus’ President and Chief Executive Officer. “In the second quarter of 2019, we operated over 56,000 flights and carried 2.7 million passengers under the [Air Canada Capacity Purchase Agreement]. Compared to just 5,000 flights and 92,000 people this past quarter.”
Chorus earns operates the bulk of Air Canada’s regional flights under its Jazz brand. That contract guarantees some revenue, no matter how many flights are actually dispatched. At the end of June, eight Jazz-operated Air Canada bases were closed and 21 routes dropped as part of a pandemic-induced rationalization at Canada’s largest airline.
Chorus has cut 65% of its staff, reduced capital expenditures, and delayed the delivery of six Bombardier CRJ900 aircraft until December. “I sincerely hope more employee reductions won’t be necessary,” said Randell.
Chorus also earns a profit by leasing regional aircraft to airlines around the world. That gives it a unique perspective on the state of aviation.
“In Canada, we have one of the highest levels of government-imposed costs in the world,” said the CEO. “And in the current COVID-19 environment, one of the lowest levels of government support.”
Randell said regional aviation is recovering earlier and more quickly as the industry begins to emerge from the depths of the pandemic. That matches a prediction he made in May.
“With the improving traffic trends, we are seeing greater increase in the utilization of regional aircraft compared to narrow and wide-body aircraft,” he said.
He even sees the trend to regional aircraft growing in the short term, particularly as Chorus adds more CRJ900s. “Air Canada desires to fly larger aircraft on some of these regional routes,” said Randell. “They are larger airplanes, but compared to narrow bodies, they’re not.”
Air Canada’s CRJ900s are configured with 76 seats, while an Airbus A320 – the airline’s most common narrow-body aircraft – has 146 seats.
“They are certainly more economical on routes where you do not need the capacity,” he said. “Of course, that exists on a number of markets in Canada right now.”
A smaller profit in challenging times
Chorus revenues fell almost 45% in the second quarter, while expenses dropped almost 47%. The company has taken advantage of federal wage subsidies and plans to continue until the end of the year. The subsidies pay up to 75% of an employees’ salary up to weekly maximums.
However, among airlines, Chorus is one of the few to report a profit. For a comparison, Air Canada reported a loss of $1.7 billion in its most recent quarter. Chorus said Air Canada is currently paid-up in its contractural obligations.
“We recognize the revitalization of the regional sector will be protracted, sporadic, and will extend well into 2021 and beyond,” said Randell. “We are doing everything in our power to secure our future for when this crisis passes.”
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