HALIFAX, April 6, 2020 – Chorus Aviation Inc. (‘Chorus’ or the ‘Company’) provides the following update on the impact of the coronavirus (COVID-19) outbreak on its business and its initiatives to preserve liquidity.

The COVID-19 outbreak has led to worldwide economic uncertainty with companies around the globe taking painful steps to manage through this unprecedented, ever changing event. For the aviation industry, it has led to strict travel restrictions and global cancellations impacting all airlines around the world. The International Air Transport Association is currently estimating a US$252 billion year-on-year loss in passenger revenue worldwide. Even if the Company’s business model does not directly expose it to the market risks ordinarily faced by airlines, substantially all its source revenue is derived from airline customers, through its Capacity Purchase Agreement (‘CPA’) with Air Canada and its leasing of aircraft to airline customers globally. The full extent of the duration and therefore impact of this pandemic are unknown.

Joe Randell, President and CEO, stated, “Our industry is facing its worst crisis in history.  The world situation is unstable and there are no signs of a near-term recovery. We entered this predicament from our strongest position ever, and it’s devastating to be sending approximately 3,000 employees home, given the successes we’ve achieved together. Our employees are amongst the most talented in the industry, and I’m deeply troubled by the uncertainty and anxiety this is causing our employees and their families. The rapid and dramatic impact of this pandemic is astounding, and we’re taking all measures to ensure the safety of our employees, mitigate costs, bolster our liquidity and strengthen our relationships with customers. We’re prudently and responsibly managing our financial resources to secure our future and eliminating all discretionary cash outflows thus requiring a suspension of our dividend. These are very difficult decisions, impacting all of our stakeholders, but necessary to ensure we’re ready to emerge from this worldwide crisis as resiliently and quickly as possible.”

Further information regarding the suspension of the Company’s dividend is provided below.

Operations Impact

Chorus is working with its main customer and partner, Air Canada, which has implemented a second quarter network-wide capacity reduction of approximately 85%-90%.  Chorus’ Air Canada Express flying has been reduced by approximately 90% for April and May, resulting in significant temporary employee reductions.  Chorus is reviewing the Canada Emergency Wage Subsidy program and is awaiting further details to assess any impact to these planned reductions.

With the shutdown of its production line, Bombardier has notified Chorus of a temporary delay in the production of its order of nine Bombardier CRJ900 aircraft that were originally scheduled for delivery in 2020.  As such, Chorus expects a corresponding delay in anticipated leasing revenue under the CPA for these aircraft. No timeline has been provided for the future delivery of the aircraft. The deposits on these aircraft were previously paid, and the Company has a financing commitment for them.

In accordance with the CPA, the fixed fee does not vary with the amount of flying and is fixed based on agreed annual amounts.

As with many leasing companies, Chorus has received requests from substantially all of its Regional Aircraft Leasing segment customers for some form of temporary rent relief.  The period of relief most commonly spans three months, and where monthly rentals are deferred in full or in part, the customer provides a commitment to repay the amounts deferred following the end of the agreed deferral period. While we expect the industry, and especially the regional aviation sector, to recover in time, these deferrals will increase Chorus’ trade receivable balance in the near term. Consistent with market norms, our leases are generally for a fixed term, contain an absolute payment obligation on the part of the lessee, and cannot be terminated early for convenience. Chorus also had pending transactions involving the delivery of three ATR 72-600 aircraft and three Airbus A220-300 aircraft in 2020.  Chorus expects all these deliveries will be deferred.

The Company’s Voyageur subsidiary, which represents less than 10% of Chorus’ consolidated revenue and net income, is engaged in specialty contract flying, primarily for international organizations engaged in humanitarian missions, and specialty maintenance, repair, overhaul (‘MRO’) and parts sales. Voyageur is experiencing continued demand overseas to support humanitarian efforts, contracted flying for cargo services, and there has been no interruption to the air ambulance operation in New Brunswick. Voyageur’s MRO operation continues in servicing essential aviation customer requirements.

Initiatives to Preserve Liquidity

Given the uncertainty related to the duration and impact of the COVID-19 pandemic, Chorus is suspending its dividend following payment of the previously declared dividend payable on April 17, 2020 to shareholders of record on March 31, 2020 (the ‘March 2020 Dividend’). After payment of the March 2020 Dividend, no further dividends will be paid until further notice and the dividend reinvestment program (‘DRIP’) will also be suspended. Based on current shares outstanding, the company’s $0.48 cent dividend results in approximately C$77 million in annual dividends declared and based on a 29% DRIP participation rate, approximately C$55 million in annual dividends paid in cash. The suspension of the dividend will preserve significant cash to strengthen the Company’s balance sheet through this crisis.

In addition, Chorus has executed a letter of offer with Export Development Canada to provide an unsecured US$100 million revolving credit facility to be used for general corporate purposes, which further bolsters Chorus’ liquidity position. The facility will be unsecured, repayable in two years, and contain customary covenants and events of default, including an event of default that would be triggered upon a change in control of Chorus. The facility offered under this letter of offer remains subject to the satisfaction of customary conditions precedent to closing, including the negotiation and execution of a definitive loan agreement and the consent of the lenders under Chorus’ operating line of credit. There can be no assurance that these conditions will be satisfied.

As reported previously, the Company has an existing C$100 million revolving operating facility, of which C$75 million is committed and C$25 million is uncommitted. This facility can be used to fund working capital at the Company and its Jazz and Voyageur subsidiaries. The Company currently has a drawn balance (including letters of credit) of approximately C$40 million.

The Company is also in the process of raising approximately US$30 to US$50 million in financing to be secured by up to four unencumbered aircraft.  These financings were first mentioned in Chorus’ news release dated March 18, 2020, and the range of anticipated proceeds has widened as the Company explores approaches to refinancing these unencumbered aircraft that could yield to lower proceeds but provide increased flexibility under certain existing loan agreements. These financings are currently anticipated to close in the Company’s second fiscal quarter, subject to the negotiation and execution of definitive agreements and the satisfaction of conditions precedent to closing. There can be no assurance that these conditions will be satisfied.

In addition to the temporary layoffs noted earlier, Joe Randell, President and CEO will forgo 70% of his salary, and members of the executive team will forgo up to 50% of their salary. Further the Board of Directors has taken a 25% reduction in fees.

All areas of the Company are under review with the objective of reducing costs to ensure a strong organization that is ready to resume normal operations as soon as this pandemic abates.

The duration and impact of this crisis are unknown.  With these measures, the Company anticipates having sufficient liquidity to fund ongoing operations, planned capital expenditures, and principal and interest payments related to long-term borrowings.