Chorus Aviation closer to consolidation with Express

     Chorus Aviation just released another quarterly report on August11.The title of my last blog on Chorus (CHR) was Chorus needs another Step click here for details.And they just took another step.Chorus says that they have acquired 5 new Bombardier Q400 aircraft and are now moving towards consolidation of Air Canada Express.The operating conditions are not yet clear but it seems like it will be run (almost completely) by Chorus and it's partner Georgian Air Lines.At the present time Chorus and Georgian own 140 out of a total 171 aircraft operated by Air Canada express and they serve 120 locations.There will certainly be a revenue split with Air Canada but CHR has given us no details here.
     Second Quarter Earnings
     Chorus had a big first quarter and showed investors $45 million of EBITDA and $55 million of net income.The latter was buoyed by a large foreign exchange gain but adjusted EBITDA was actual.It amounted to $.29 to $.30 per share and this is a good proxy for earnings per share.This quarter adjusted EBITDA was even bigger at $58 million.So adjusted EBITDA was $.54 to $.56 per share in Q2.This makes earnings per share of $.83 to $.86 per share for six months and on track to hit $1.75 to $1.85 per share for the year.
   Operating revenue (under CPA) was down from 2015; it went from $400 million to $310 million.However aircraft leasing revenue ( under CPA) went up from $16 to $23 million.10 new aircraft were obtained for leasing under the CPA.And 3 more will be acquired in September.This will bring the total to 34 aircraft in this program.Surprisingly there was no information on the newly acquired Voyageur Airways nor on the Chorus maintenance operations.
      Air Canada Express
    The consolidation of Chorus and Air Canada Express is new information for this blog.It is clear that Georgian Air Lines and Chorus almost run this operation now as they own 140 of 171 air craft and Chorus just acquired 5 new aircraft for Air Canada Express.However it is not clear what relationship Georgian Air has with Chorus.This blog expects there is some relationship.It is also not clear what split on revenues Chorus will have with Air Canada here.The next quarter, especially with the new aircraft, should reveal more of what the amended CPA agreement is all about.This blog expects an increase of revenues and income in Q3.
           The rest of 2016          

Chorus had a good first quarter in terms of net income and adjusted EBITDA.And the second quarter was also a strong one but with a smaller foreign exchange gain.Operating revenue was down but leasing revenues were up.This blog expects that EBITDA from Voyageur and their maintenance operations will continue to grow.Now Air Canada Express should start to be a source of income for Chorus. Adjusted EBITDA should be  $.85 per share for the first half and about $1.75 to $1.95 for the year.At $6.00 per share this makes Chorus a cheap purchase at a little more than 3 times earnings.But investors still need to see how the Air Canada Express arrangement will unfurl.                         use Workathon for analysis of small caps; see recent analysis of amended CPA agreement