Capacity Purchase Agreement (“CPA”) to be amended and extended by an additional 10 years ending December 31, 2035, securing Jazz’s place in Air Canada’s regional network for the next 17 years.

$940 million in incremental contracted CPA revenue with overall contracted revenue growing to $2.5 billion over the term of the amended agreement net of near-term fixed fee reductions.

Reinforcement of strategic partnership through a $97.26 million equity investment in Chorus by Air Canada.

Proceeds from the Air Canada investment will enable Chorus to invest in its leasing business, including the purchase of new larger-gauge aircraft that will generate additional lease revenue under the CPA.

Amended CPA to significantly reduce margin risk for Jazz by limiting exposure on controllable costs to a maximum of $2 million annually.

Chorus expects to continue to generate cash flow to support its current dividend.

Enhanced pilot mobility agreement to provide Jazz pilots with access to pilot careers at Air Canada.

Transactions are subject to certain material conditions precedent to closing.

HALIFAX, January 14, 2019 – Chorus Aviation Inc. (TSX: CHR) (“Chorus”), parent company of Jazz Aviation LP (“Jazz”), today announced the parties’ agreement to amend and extend the capacity purchase agreement (“CPA”) between Jazz and Air Canada and complete a $97.26 million equity investment by Air Canada in Chorus. This agreement will extend the CPA to 2035, creating the longest term strategic partnership between Jazz and Air Canada thus far.

Four years after the last highly-successful amendment to the CPA, the two parties are again taking steps to ensure the long-term competitiveness and strength of their alliance. With this amendment, the parties will effectively address increased domestic and international competition, changing market demand, and fluctuating fuel prices, through significant changes that will modernize and up-gauge the fleet. Chorus and Air Canada have today seized this opportunity to reinforce their strategic partnership.

“This mutually beneficial agreement, proactively and collaboratively, addresses the need to adapt to a challenging, competitive and ever-changing environment,” said Joe Randell, President and Chief Executive Officer, Chorus. “Our solid track record of finding solutions for the long-term benefit of Chorus stakeholders has once again delivered an even stronger relationship with Air Canada for the next 17 years. We seized this opportunity to secure an industry-leading time horizon in support of our valued customer; a clear demonstration that the strategic partnership between Chorus and Air Canada is strong. This amended arrangement will provide certainty and predictability for our shareholders, employees and other stakeholders. Chorus expects to continue to generate cash flow to support the current dividend and remains committed to building additional value with continued growth in our leasing business, which is further enabled with this deal.”

“Air Canada is deepening its partnership with Chorus through an improved CPA agreement for Jazz flying and our equity investment in Chorus. These will strengthen our respective companies to the benefit of employees, investors and, most importantly, our customers, by enabling us to modernize our regional fleet and respond more nimbly to evolving market conditions and to remain ahead of our competitors,” said Calin Rovinescu, President and Chief Executive of Air Canada.

The agreement upholds a history of successfully responding to an ever-changing industry and is extended to December 31, 2035 securing Jazz’s place in Air Canada’s regional network under the following key terms:

Chorus and Air Canada become true allies in the aviation industry and reinforce their strategic partnership through a $97.26 million equity investment in Chorus by Air Canada. Air Canada will subscribe for 15,561,600 Class B Voting Shares in the capital of Chorus by way of a private placement for $6.25 per share, which represents a 5.0% premium to the five-day volume weighted average price as of the close of trading on Thursday, January 10, 2019. On closing, it is anticipated that Air Canada will hold approximately 9.99% of Chorus’ issued and outstanding Class A Variable Voting Share and Class B Voting Shares on a combined basis. The Toronto Stock Exchange (“TSX”) has conditionally approved the issue of the Class B Voting Shares pursuant to the private placement subject to customary conditions.

Chorus will use approximately 60% of the investment proceeds to purchase nine additional new larger-gauge CRJ900 (76-seat) aircraft to modernize Jazz’s fleet and generate additional lease revenue under the CPA. Chorus has conditionally secured the ability to purchase the CRJ900s.The remaining balance will be deployed by Chorus to acquire and lease aircraft outside of the CPA.

Chorus and Air Canada will enter into an investor rights agreement governing the terms of Air Canada’s investment in Chorus. Air Canada will have a seat on Chorus’ board and will nominate Michael Rousseau, Air Canada’s Deputy Chief Executive Officer and Chief Financial Officer to the position. Air Canada will, subject to certain limited exceptions, hold its investment for at least 60 months and support Chorus’ growth strategy through participation in the dividend reinvestment plan and adherence to customary standstill provisions. Air Canada will also have pro rata pre-emptive rights to maintain its ownership percentage in Chorus.

In total, the 17-year contract will provide $2.5 billion in minimum contracted revenues of which $1.6 billion, or 65%, will be generated from aircraft leasing revenue, supporting the continued transformation of Chorus’ business through the migration of CPA earnings to aircraft leasing.

The amended CPA will provide for total incremental contracted revenue of $940 million; $310 million in fixed fees and $630 million in aircraft leasing under the CPA.

Incremental fleet acquisitions will provide Chorus significant tax shield and cash tax deferrals through increased tax depreciation deductions.

Air Canada will achieve cost savings related to fixed fee reductions, predominantly occurring in 2019 and 2020 with a $36 million decrease in each year, as Chorus reduces its above-market fixed fee rates, carried over from its legacy agreement. Maximum available performance incentives will reduce to levels more consistent with market norms and, assuming attainment consistent with historical performance, performance incentive revenue will decrease by an estimated $12 to $14 million in each of 2019 and 2020.

The near-term fixed fee and performance incentive revenue reductions are significantly more than offset by incremental aircraft leasing revenue under the CPA, starting in 2020, and the extended term to 2035.

The amended CPA will significantly reduce margin risk for Jazz by limiting exposure on controllable costs to a maximum of $2 million annually.

Air Canada will consolidate more of its overall regional capacity into Jazz’s footprint, thereby further securing Jazz’s place in Air Canada’s regional network.

The minimum Covered Fleet of 105 aircraft to 2025 and a minimum of 80 75-seat aircraft between 2026 and 2035 will provide a predictable minimum contracted revenue stream for 17 years.

Five CRJ900s sourced by Air Canada will initiate the fleet changes with deliveries expected to begin in the first half of 2019.

Chorus will secure preferred partner status on the operation of aircraft with up to 50 seats through a right to match third-party offers, thus enhancing growth opportunities.

Enhanced pilot mobility agreement that will provide Jazz pilots with access to pilot careers at Air Canada.

Chorus expects to continue to generate cash flow to support the current dividend.

Given the 10-year extension in the amended CPA, Jazz and its employees will benefit from greater certainty of operations.

The amendments to the CPA and the investment by Air Canada are conditional on each other and remain subject to a number of terms and conditions precedent to closing, including the ratification of amendments to the collective agreement tentatively agreed between Jazz and its pilots, as represented by the Air Line Pilots Association International (“ALPA"), and satisfaction of the conditions contained in the TSX’s conditional listing approval. The Jazz Master Executive Council of ALPA has started the ratification process which is expected to be completed by February 1, 2019. If all conditions are satisfied, the CPA amendments will become effective January 1, 2019.