There is good news for Canadians hoping to travel to other places within the country. According to recent reports, Air Canada (TSE:AC) and Chorus Aviation Inc. (TSE:CHR) have extended their purchase agreement by an extra 10-years. This means Chorus’ subsidiary Jazz Aviation LP will continue to provide Canada’s major airline with regional service up until 2035.
This is good news for Chorus as Air Canada announced last February that it will expand its Rogue fleet and operate low-cost airplanes on Canadian regional routes. Doing so meant that Jazz Aviation will have to compete with one of Canada’s largest airlines. With the deal, the future of Chorus is painted with optimism.
Chorus CEO Joe Randell acknowledged the worries of investors regarding the relationship of his company and Air Canada. He goes on saying that the extension of the deal puts those concerns to bed and investors can rest easy. Upon the announcement, Chorus’ stock went up by 15 percent to close the trading session at $7.24.
Aside from securing the future of Jazz Aviation, Chorus also bags another extra $940 million in aircraft leasing income and fixed fees in the next 17 years. In total, the company’s contract with Air Canada has amounted to $2.5 billion already. The deal was extended after an amendment on their 2015 agreement which included lowering the fixed fees and revenue totaling to $50 million annually for Chorus for 2019 and 2020.
Air Canada Chief Executive Calin Rovinescu says that the extension of the contract will provide the airline with long-term stability and cost certainty. It will also give the airline the capacity to improve its regional fleet which can help improve the overall experience of customers.
Chorus leases another aircraft to Ethiopian Airlines Group
The announcement follows a month after Chorus revealed that it will lease an additional Bombardier Q400 aircraft to Ethiopian Airlines Group. The first aircraft was leased in December 2017.
Chorus President Steve Ridolfi said that they are pleased to extend their relationship with Ethiopian Airlines. He adds “recently awarded Company of the Year by All African Business Leaders Award, Ethiopian Airlines is one of the fastest growing and storied airlines in Africa. We look forward to continuing to work with this award-winning airline and their impressive team.”
Since the lease, Chorus has expanded its list to 13 lessees in 13 countries, two of which are airlines from Africa. In total, Chorus has a total of 81 aircraft on lease across the world.
These two updates spell good news for investors as it can help solidify the future of the company. Investors are now hoping that there is more great news this 2019.
In hindsight, the deal between Air Canada and Chorus is a win-win for both companies. Chorus is going to benefit from the relationship long-term as it remains under the wing of Canada’s top airline. Meanwhile, Air Canada is going to maintain a solid hold on all flight routes including regional trips with the help of Chorus.