Chorus Aviation strengthens it's subsidiaries

   Recently Chorus Aviation completed a deal with Air Nostrum,a subsidiary of Iberia Airlines, to lease 4 CRJ 1000 aircraft.Financing was obtained from Export Development Corporation (EDC).This was followed up with a deal with Fairfax Investment that saw Fairfax lend $200 million to a new subsidiary called Chorus Aviation Capital.Chorus Aviation Capital will buy regional aircraft and lease them to third parties at a very competitive price.In the past Chorus has leased only Bombardier  regional aircraft to third parties-either Q400 or the CRJ aircraft.However this is a new venture and this subsidiary is not likely to have substantial earnings in 2016.                                                                                            On January14 it  made another solid move.It announced that it had extended it's Smart Parts agreement with Bombardier to provide longer term support for more than 150 Q400 and C series aircraft to 2025.Chorus had an agreement with Bombardier before only for Dash-8s and Q400s.Likely this agreement  will be done with their Voyageur Avparts subsidiary.Of interest is  that it appears that much of the parts and equipment are being provided by Bombardier. This ,at first blush, seems to be quite profitable for Chorus. The Smart Parts operation will be setup at three airports and Chorus only has a maintenance operation in Halifax.This blog predicts that Voyageur Avparts will have a small but positive EBITDA in 2016.                  

     Voyageur and Air Canada Express 
   These are the two subsidiaries that are hardest to predict in terms of performance.Chorus has just put more regional aircraft into their Air Canada Express operation in the last quarter.Chorus already had (with Georgian Air Lines) 141 of 170 aircraft in the start of 2016.And it has added 5 to 10 new aircraft in the second half of 2016.Chorus has also added aircraft to Voyageur Airways a completely owned subsidiary that does special charters.It does medical and engineering charters to other continents.This blog predicts  Voyageur Airways will have an increase in revenues and earnings and adjusted EBITDA for 2016.It was about $20 million for the first half and may hit $30 to $35 million for the year.This may compensate(at least partly) for the reduction in expected revenues and earnings from the CPA agreement with Air Canada.
       The Bottom Line
  The important question is what impact will this have on Chorus total adjusted EBITDA.This blog predicts adjusted EBITDA of $235 to $250 million or earnings of about $1.95 to $2.05 per share.There will likely be a drop in revenues from their CPA agreement with Air Canada and offset by earnings from Voyageur  and a small increase from Voyageur Avparts.Charter earnings will be up as will earnings from Air Canada Express.The wild card in the earnings prediction will be from Air Canada Express.They are too many variables here but this blog sees an increase from the third quarter results.So $240 million seems likely and this will put the P/E ratio at about 3 to 4 times.If these predictions are close to being accurate then can a dividend increase be faraway?
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