Q1 2021 Chorus Aviation Inc Earnings Call
Yeah.
Good day, and thank you for standing by.
On to the chorus Aviation, Inc. First quarter 2021 earnings call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
So ask a question during the session you will need to press star one on your telephone.
Please be advised that this conference is being weak or debt.
If you require any further assistance please press star zero.
I would now like to hand, the conference overdue speaker today.
Ms Natalie <unk> <unk>.
<unk> President of Investor Relations. Please go ahead.
Thank you operator, Hello, and thank you for joining US. This morning for our first quarter 2021 conference call and webcast with me today from course are Joe Randell, President and Chief Executive Officer, and Gary Osborne, Chief Financial Officer, who will start by giving a brief overview of the results and then go on to questions from the analyst community.
Because some of the discussion on this call may be forward looking I direct your attention to the caution regarding forward.
Looking information and statements, which are subject to various risks uncertainties and assumptions that are included or referenced in our management's discussion and analysis of the results and operations of course Aviation Inc. For the period ended March 31, 2021, the outlook section and other sections of our MD&A reset.
Statements appear in.
In addition, some of the following discussion involves certain non-GAAP financial measures, including references to EBITDA adjusted EBITDA adjusted EBT and adjusted net income please refer to our MD&A for a discussion relating to the use of such non-GAAP measures I'll now turn the call over to Joe Randall.
Thank you Natalie and good morning, everyone.
In such a difficult environment.
I'm pleased and encouraged with our accomplishments so far this year.
They really demonstrate the strength and resiliency of our employees and business model and the tremendous expertise of our team.
Safety of our employees is our top priority and the success of our company is in part due to safety being part of our DNA.
With a third wave of the pandemic now on us I'm amazed and grateful for the tenacity and professionalism of our team and especially our frontline employees.
We are continually working to address concerns in an ever changing operational environment.
Together with our unions, we are being as proactive as possible to better support our people.
At some point this crisis will abate.
We've been managing well through the challenges and are collectively focused on ensuring we emerge on the other side as strong as possible.
In March we amended our CPA with air Canada to address the dramatic and sustained reduction in air travel demand.
By the pandemic by optimizing the jazz fleet.
As such Air Canada is transferring the fleet of 25, Embraer 170, fives, making jazz their current sole air Canada Express partner and the exclusive Air Canada Express operator of 70% to 78 seat capacity regional aircraft until 2025.
The transitions of these aircraft and the new output pilots are going well and we're pleased to welcome these new employees.
Earlier this month, we operated our first the 175 flight.
On plan to induct four aircraft per month and have them all flying by the end of the third quarter of this year.
I commend the jazz team for their dedication and hard work, bringing the E 175 fleet online so quickly.
We've begun to retire the dash eight 300 fleet from jazz and we are actively pursuing a range of options for these aircraft.
The revision of the CPA also included the implementation of a cap on the controllable cost guardrail receivable at $20 million annually.
This reduces our potential exposure and minimize as draws on our working capital.
As our work with Air Canada on recovery plans continues these revisions further strengthen our relationship and provides network efficiencies and planning flexibility elements that are vital service resumption are implemented.
We continue to focus on our costs and remain prepared to respond to increased flying demand when the recovery starts.
On the heels of finalizing the revised CPA, we launched a capital raise which was oversubscribed and delivered gross proceeds of $145 million.
Preserving and building liquidity remains a priority.
And we believe the timing of this raise was good given the positive momentum we have been building. Despite the onset of the third wave.
We were delighted to have two new institutional investors, such as Northstar capital and the Alberta Investment Management Corporation come on board through the concurrent private placement and support of our growth strategy.
The net proceeds will be used primarily to support our leasing business pay down debt pursue opportunities and for other general corporate purposes.
While there remains uncertainty our industry is being positive trends as air travel demand returns.
Most particularly in regional in short haul markets.
We are well positioned to prudently pursue growth opportunities.
This was evidenced by our recent long term lease agreements with two new customers Sky Alps of Italy, and Cobham Aviation services of Australia.
Aircraft three dash eight four hundreds were repossessed in 2020 and underwent reconfiguration and returned to service work at Voyager and jazz technical services.
This is what differentiates us from our competition, we offer a broad range of solutions to remarket aircraft. During one of the most challenging periods in aviation history.
We continue to work with our lessees as they manage through this time.
Lease revenue collections have plateaued, given the third wave of the pandemic and we expect this to improve with passenger travel traffic recovery and the reintroduction to service a grounded aircraft around the world.
The current environment has been difficult to re market off lease aircraft the.
The sector itself is very competitive and dynamic.
We are actively remarketing, our off lease aircraft and watching developments in the industry closely we haven't changed our cautious approach to growth.
We are in a good position to take advantage of new opportunities such as sale and leaseback transactions with high quality customers seeking additional balance sheet flexibility.
We have cash on hand, good liquidity and continue to work well with our customers.
Now turning to our Voyager operation where momentum is debt.
Lee building.
The team in North Bay is having an exceptional start through the year. The recent contract announcements with pure later tranche.
For Canada, and ambulance, New Brunswick are a testament to the incredible skill and ingenuity of the team and clearly position us as a leading special mission service provider.
We see good potential to grow into the cargo business, which is a new area of focus for us we've been active in air cargo through the conversion of several batch eight aircrafts through package freighters.
And developing a new relationship with a market leader like pure later is a meaningful step in the expansion of our contract line capabilities in the cargo market.
The pure later contract is for three years and follows the successful completion of an initial six month trial.
We will be using two former dashy one hundreds from jazz that were converted in house to package freighters to operate between Indianapolis Hamilton and Montreal.
One of the aircraft is completing a contract with another customer and the second aircraft is currently undergoing freighter conversion in North Bay.
This is another demonstration of our ability to leverage to leverage the value in our assets at any point in their lifecycle.
We're very excited about this opportunity and we'll work hard to grow this relationship over time.
Another exciting development is our new three year agreement to upgrade and modify transport Canada's national aerial surveillance program fleet of three dash eight one hundreds and one day seven aircrafts with new surveillance equipment.
This contract demonstrates blazers unique engineering capabilities and expertise.
And of course, we were thrilled to extend our 25 year relationship with ambulance New Brunswick for an additional five years.
Our accomplishments to date this year really show the strength of our employees our expertise in a wide range of integrated products, we offer in the regional aviation space.
We are making meaningful progress in broadening our footprint on the regional aviation sector and diversifying our business. We are proud of the way we are managing through this pandemic and centered our attention on the future.
I am very grateful to our employees, who are delivering terrific accomplishments. Despite all of the challenges associated with the global pandemic.
We are well positioned to take advantage of future opportunities.
I would be remiss, if I didn't acknowledge jazz being named one of Canada's best vs. The employee or employers for the 10th consecutive period by Media Corp, Canada, Inc.
Diversity is core to our culture, we value individual uniqueness and foster safe spaces that empowers employees to be their authentic selves.
By encouraging inclusive work environment that build on the diverse perspectives experiences and abilities of the employees we.
We are fostering innovation and positive change congratulations again for another great accomplishment.
Before I turn the call over to Gary I would like to recognize the federal government's recent announcement confirming the importance of regional services in Canada.
I would like to thank the many government representatives across Canada, I've spoken with over the last several months for listening to our concerns with respect to the importance of regional services being a critical lifeline to Canada's regional communities.
As the vaccine rollout continues.
Governments are turning their attention to safe reopening.
Longer term solutions for the sector.
We look forward to learning the details of this plan and hope it is shared very soon as we know air travel is essential to our economy.
I will continue to advocate for regional service. So that it remains top of mind when decision makers with decision makers as they chart a course for the country out of this pandemic.
Thank you very much for your time and I'll now pass the line over to Gary.
Thank you Joe and good morning.
Here's how the first quarter of this year compares to the first quarter of 2020, our first quarter adjusted EBITDA was $84 million, a $4 $5 million decrease over first quarter 2020, adjusted net income was $15 7 million and $8 $1 million decrease over last year, which led to a decrease in adjusted EPS.
At 10 cents versus <unk> 15 in the first quarter of 2020.
Yes.
The regional aircraft leasing segment's adjusted EBITDA decreased by $9 5 million, primarily due to lower lease margins attributable attributable to off lease aircraft or.
$2 $5 million expected credit loss provision and a lower U S. Dollar exchange rate, partially offset by additional aircraft, earning leasing revenue.
Adjusted EBITDA for the regional Aviation services segment increased by $4 9 million.
The first quarter results were impacted by a decrease in stock based compensation an increase in aircraft leasing revenue under the CPA.
An increase in other revenue and a decrease in general administrative expenses.
Net by a decrease in fixed margin in line with the CPA contract and a decrease in capitalization of major maintenance overhauls on owned aircraft operated under the CPA.
Adjusted net income was $15 7 million for the quarter decrease of $8 1 million due to the previously mentioned $4 $5 million decrease in adjusted EBITDA.
An increase in net interest costs of $4 6 million primarily related to the new credit facilities added in April 2020, and additional aircraft debt and an increase of $1 2 million in realized and unrealized foreign exchange on working capital offset by a $2 million decrease in adjusted income tax expense.
Net loss increased $28 million, primarily due to the previously noted decrease in adjusted net income of $8 $1 million. The one time restructuring costs related to the 2021 CPE amendments of $81 8 million a change in the in the net.
Lease repossession costs of $7 million offset by the change in net unrealized foreign exchange on long term debt of $45 4 million.
Tax recovery on adjusted items of $21 3 million and a decrease in decreased impairment of $5 9 million in the rail segment.
The 2021, CPA Amendment became effective on a retroactive basis to January one 2021, resulting in one time restructuring costs of $81 8 million with a noncash impairment and inventory provisions on the dash eight three hundreds of $42 8 million.
Early retirement program costs of $26 3 million to incentivize early departure of jazz pilots enrolled in the defined benefit pension plan.
Non cash DB.
Pension plan curtailment provision of 10 million <unk>.
Integration and E 175 aircraft related transition costs of $2 million in signing bonuses of zero point $7 million for jazz pilots.
Of course also agreed to pay air Canada $20 million in connection with the transfer and integration of the <unk> hundred 70 fives into the covered aircraft fleet.
These one time restructuring costs and provisions are added back to adjusted EBITDA adjusted EBT and adjusted net income accordingly.
Now turning to liquidity.
We ended the first quarter with $171 3 million in liquidity a decrease from the fourth quarter of approximately $29 7 million, primarily due to certain payments related to the 2021, CPA amendments of approximately $17 million and debt repayments of $56 million on.
All set by the collection of the 2020 controllable.
Cost guardrail receivable of $44.2 million.
On April six 2021 course completed a concurrent public offering and private placement of equity units and convertible senior unsecured debentures for gross proceeds of $145 $1 million. The net proceeds after transaction costs was approximately $138 million.
<unk> used a portion of these proceeds to repay loan deferrals of $33 9 million.
Of course also plans to pay down additional.
Pay down secured indebtedness by approximately $75 million repayment of the secured debt facilities, we reduce our debt and interest payments by approximately $700000 U S per month, while also bringing the carrying value of <unk> unencumbered fleet to approximately $140 million.
And reducing courses restricted cash requirements by approximately $10 million.
With the capital raise of course has bolstered its liquidity to fund ongoing operations planned capital expenditures and to fund prudent growth opportunities.
We did see Acs gross lease receivable increased by $9 $6 million U S to $53 8 billion U S. In the quarter with the potential to increase to $60 million U S. By the end of 2021.
The increase is due to the additional rent relief requests from certain customers, resulting from the continued travel restrictions and as the number of COVID-19 variance in cases continues to decline.
In addition, we collected 62% of lease revenue build in the first quarter from our lessees, excluding repossessed aircrafts, which is consistent with the fourth quarter 2020 collections.
Planned capital expenditures in 2021, including capitalized major maintenance overhauls are estimated to be between $26 million and $35 million. This estimate includes between 8% and $12 million that will be included in the controllable costs.
Planned Eric planned aircraft related acquisitions are expected to be between 35 and $45 million in 2021.
Before opening the call to questions from the analyst community I would like to acknowledge the outstanding efforts of our team. So far this year. Thank you to all of our employees stay safe and take care.
That includes my commentary. Thank you for listening operator, you can open the call to questions.
Thank you Sir.
<unk> to ask a question you will need to press star one on your telephone.
We have our first question from the line of Tim James from TD Securities. Your line is now open.
Thank you and good morning, everyone.
Good morning.
My first question I'm, just wondering if how we should think about lease rates.
In the short term here.
Should we think that the new leasing contracts.
And I guess im thinking in particular would be off lease aircraft, but potentially any new opportunities as well.
That lease rates will be lower than they were kind of.
<unk> to the pandemic and is it possible if that is the case to kind of quantify what too.
To what degree there is pressure on those rates.
Yes.
Tim I think it's fair to say given the pandemic and the number of aircrafts that.
Have been repossessed and return that there will be downward pressure on lease rates.
As these aircrafts or repositioned with new operators.
But of course, it does give you an opportunity to reset leases for a longer period of time et cetera.
So there is I think the industry is experiencing downward pressure on assets that are on the ground.
I think new assets, new financings, though.
Not experiencing the same magnitude of downward pressure.
In terms of lease rates et cetera.
And.
The amount the reduction as a function of the individual.
Individual carrier and I think it's a little early to say exactly where it's all going to settle out.
I think we were really fortunate.
Unlike a lot of less doors.
Been able to.
<unk>.
Put aircraft out there with new operators.
We've been fortunate to do these were working on some others right now.
<unk>.
I think.
We're optimistic that we will be able to do more here.
But I can't I can't tell you exactly how much.
Though the rates are decreasing and that sort of thing, but there is.
It certainly down on the aircraft debt.
That are being remarketed.
And for sure within the industry.
So with that in mind I'm wondering if these remarketed aircraft I guess in particular and then maybe it's newer aircrafts given these unprecedented.
Unprecedented times are you approaching sort of the terms on leases any differently is there any way to kind of leave some some flexibility so that.
Yes.
You can avoid.
Locking into leases that may be below market rates.
123 years from now.
Or are you approaching sort of zone.
The.
The terms on the leases in the same way as kind of pre pandemic.
I think it depends it depends on the operator it depends on the lease.
It's good.
It is actually beneficial to put some of these aircrafts out there on longer term leases.
Because you know you certainly don't face the prospect of having the airplane returned in the near term and having to re market once again.
So again.
Barry.
And.
There's no particular.
Sort of.
Through a thumb per se other than.
Getting to cash flow backup on these assets that are otherwise sitting.
Sitting idle.
And doing it with good credit and people who have good business plans as the market starts to recover and I think that's what we're seeing is people are now thinking about the recovery.
And Thats why were seeing some growing interest.
In terms of people picking up airplanes, but it isn't going to happen overnight, it's going to be a process that's going to take some time for the industry I think to recover from this especially on the with the assets that are on the ground and we look at the number of assets that we repossessed.
During this process as total of 13 airplanes, and we look at our competitors and other with others in the business and 13 is actually not a not a bad number at all as you look at it as a percentage of the fleet that we had under leased.
Okay. That's really helpful. Thanks, Joe just my last question really kind of.
Nothing back Big picture I'm, just wondering how youre thinking about the companies the equity valuation these days.
On a where the market's understanding of the business is given.
Where we are in terms of the recovery from the pandemic.
And I guess it is important to come back to kind of the market's understanding of the risk profile of <unk>.
Of course in general just wondering if you can comment on kind of your thoughts on.
Sure on the valuation.
Well clearly I think 2020 was a difficult year and it was we were severely hit as everybody else was.
A lot of uncertainty in terms of how long and how deep et cetera.
We really I think you use the year to our advantage.
Doing this new contract with Air, Canada, and we sort of really really reestablish the relationship on the basis of.
This recovery, that's coming up in the future. So we remove the uncertainty with respect to that.
That contract and its longevity and debt.
And the recent announcements with air Canada, and the Federal government I think gives everybody a lot of comfort in terms of air Canada.
Ability to get through this as well so we look at that side of the business now is being very very solid.
Very predictable.
For sure and a lot of people still don't understand that how we're compensated under the CPA and under a CPA with Air Canada were paid for the aircraft were paid for the operation but.
It's generally fixed with very limited exposure in terms of any downside. The guardrail, we put a cap on that et cetera. So I think still the market is grappling a little bit with understanding some of that and I.
I think on the leasing business itself.
Obviously, we've been through a rough time with this.
We're not fully through it yet, but we're seeing these.
This recovery starting to happen et cetera.
So I really do believe that debt.
Theres a turnaround coming soon in the leasing business as carriers start to get back up I think the third wave and some of these countries was.
We didnt really predict it.
But it is happening for sure but again these countries will come out of it et cetera.
And then.
Well not really huge part of our business, we have noise Irwin and Voyager has been out there.
We were diversifying the business.
Unfortunately, though but the bulk of our business was dependent on passenger travel, but you can see now with some of the things that we're doing organically for azure with respect to the.
The conversion of freighters the operation of.
Freighter aircraft.
Special missions.
We continued to do very well.
With the U N et cetera, and actually the laser has been doing better than it has on a long long time through the pandemic and it's because it's not exposed to the passenger business.
We're moving in that direction as well so.
I think we're definitely in a rebuilding mode.
I think we've done.
Very good job on managing our liquidity through this process to ensure that.
There was no top over here or or anything of that nature of that was going to happen.
And I think we've really solidified our relationships with our customers, including Air Canada, and we grow new customers through this process.
<unk>.
But its tough because people look at the.
At the air business, and we all get sort of thrown in the same bucket and.
Sometimes people don't really look under the covers to understand the different nature of our business and what we have done so.
That makes us feel very optimistic about the future.
So.
The worst is behind we believe.
We're in that rebuilding mode.
Okay. Thank you very much for your thoughts.
Thanks, Tim.
Thank you. Our next question is from the line of Kevin Chiang from CIBC.
Right.
Hi, good morning, everybody. Thanks for taking my question.
Maybe just on that last point, Joe on the optimism.
Have around the recovery and we've obviously seen some submarkets where vaccination rates are higher.
Big Spike.
And air traffic just as you think about side are there any bottlenecks you think you need to work through either from a labor front door.
Or just maybe from a pilots on personnel front as you think of getting.
Flight quite activity picks up again across the.
Folio.
Yes.
No in terms of getting back up.
Don't lose any sleep at night over that at all.
We are in constant contact with our unions, we've been recalling some people.
And we see people wanting to get back to work et cetera.
It's been difficult.
<unk> environment operationally.
Where you have to take proactive steps with your crews et cetera.
On aircraft, where you may have pad passengers traveling debt.
Debt.
COVID-19, but we've been doing that well, we are being very proactive with respect to that.
And.
But generally speaking I don't think were going to see a huge overnight ramp up and flying in any event.
But I think it will be fairly steady and we're totally equipped on doing that and we're bringing these 170 fives over.
Operationally the aircraft have to be transitioned to cruise.
Generally coming over as well.
Pilots and that transition has been has been going very well.
So so we're in pretty good.
Good shape. So we don't really see any bottleneck. The issue is the restart and how it's going to happen so that passengers feel comfortable traveling safely.
And what is going to be required events with respect to testing.
Quarantines things of that nature. So we're we're all anxiously awaiting this and as the vaccine level starts to increase.
You can really see people wanting to get back up and we believe.
Debt, there's a pent up demand, especially on the leisure side for people that just want to travel that we're seeing some signs even in terms of Canada and interest in Canadian tourism domestically and things of that nature that you read about that makes us makes us hopeful.
Thank you for the color there and then if I could.
Turn to Voyager that had been on quite a roll here to start to start the year.
And maybe more specifically on your on your recent agreement with pure later, just wondering as you think of the charter opportunities in front of you.
The primary focus on converting regional aircraft and turboprops.
Feel free to conversion would you consider other fleet types.
As you expand that opportunity is there anything in the CPA that we should be aware of that.
That may limit your cargo ambitions here.
No. There are none there are no limitations on the CPA with respect to cargo.
Our focus is on regional airplanes currently for sure and.
And that's because we have a lot of them.
That came back as a result of restructuring the CPA with Air Canada, and we now have to.
Dash eight $300 debt, we believe are going to be very valuable as the world starts to return to some degree of normality.
These are 50 seat airplanes, they had investments on life extension programs on.
The majority of these airplanes and we see them as being valuable going forward because there is only one manufacturer in the year in the world right now of 50 seat aircraft and they are incredibly expensive brand new and.
And we think there will be a worldwide demand for the size of airplanes as the pandemic starts to come around so that's why I mentioned in my comments that we're looking at.
On a variety of different alternative ways of.
Working this fleet and getting it deployed and.
Laser is.
Is really the center for doing that and theyre going to be focused on.
On making the most out of these assets and that's in our DNA. So thats.
And we're feeling very positive about that.
That's that's helpful and maybe just last one for me.
When you look at the pipeline of opportunities I'd be just interested in the.
Conversations youre, having with customers today in terms of how they're looking at.
The regional fleet.
Maybe leasing leasing that today versus maybe what they thought pre pandemic.
And then maybe your own appetite for any type of portfolio transaction now is that something that you'd be looking at or is your preference for kind of the overall aviation market.
A little bit further along before you take a bigger bite on a pull on a portfolio deal.
So with respect to the regional fleet. The good news is the customers that we deal with in general are not saying they don't want the airplanes they are saying.
We just need a little help to get through debt.
And as we're seeing these are the first airplanes back so we're not seeing a big pushback on people just saying I just don't want to operate these airplanes anymore. They all see them.
Folks that we deal with as part of their future and they want to utilize those.
Just a matter of the.
In the interim effect of the pandemic more or less.
With respect to.
Two opportunities, whether it's portfolio sale on leaseback anything of that nature.
We see these things out there in the marketplace, we constantly evaluate them and we look at them though.
In terms of what.
What an investment would do for us in terms of improving our results.
Or what it does to our balance sheet and our debt loads et cetera. So.
We are focused on this so.
I can't really rule anything out.
But.
There are interesting opportunities out there.
Thank you for taking my question.
Thank you.
Our next one ask from David Ocampo from <unk> Securities. Your line is now open.
Good morning, everyone.
Thank you David.
I just wanted to circle back here on the on the leasing opportunity that you guys see in front of you.
When we think about the amount of leverage that you guys typically normally used in a leasing transaction I think it was three three to one or four to one as that change given the current environment or are you are you willing to take on less debt now just given the risk that you see in front of me.
David It's Gary here I mean, typically it's three to one that we've seen in the in the industry with the the leverage ratio. So when you take on an aircraft and certainly that's always our target and as we go through these transactions Thats, what we certainly gravitate back towards but it could be plus or minus depending.
And then Joe you talked about new opportunities.
<unk> very similar type results.
Pandemic levels I think previously.
Previously you mentioned that you are targeting a mid teens ROE would that three to one leverage is that still the case or are you looking at higher quality customers now that may push down those those lease rates.
I think there may be a little downward pressure.
On the lease rate.
Out there.
But.
We're still targeting to get back to what we had said before but it's just going to take it's not going to happen quickly.
Okay.
And then just a clarification question for me on the CPA Amendment fee that you guys are paying too.
Some of your pilots is any of that reimbursed by air Canada as part of the capacity purchase agreement or is that completely one off and something that you guys have to bear on your on.
It's Gary here, that's one of the two.
$20 million fee is a one off that's something we bear and same with the early retirement programs and all the items we mentioned there.
Part of our restructuring costs.
Okay. Thank you.
Thank you.
The next one on this from Kamran dark.
National Bank financial.
Please go ahead.
Thanks, Good morning.
I guess a question on the Capex and I guess, the I think it's related.
Third party leased fleet expectations. This year I mean, if I look back to the Q4.
MD&A.
Capex expected for 2021 was quite a bit higher and then there was also $2 <unk> I think for an undisclosed customer that were planned to come in this year at some point I see those have kind of disappeared.
I just wanted to make sure that the reason why the Capex has come down.
A big factor would be the fact that no longer expect those two ATR has to come in.
So.
Cameron as Gerry here, so we've removed those two because theres not a firm commitment on those aircraft, even though we continue to talk to the customer in that transaction. There is no firm commitment at this point and if you look at how we've approached the disclosure here in Q1 as we we put in the Capex table the firm commitments and we've done the same also with the fleet and other tables.
So that way, it's very clear that we have a firm commitment, it's there and if not it.
It is and in this case here, we removed it simply because we're still on discussions, but there is nothing firm anymore.
Okay that explains it.
Can you talk about I guess any change in I guess cash collections.
Not change a whole lot in Q1 relative to Q4, I mean have you seen any material change so far in Q2 or is it still kind of running in that 60% to 65% range.
It's Gary here again.
I think as far as the rent collections on that we are expecting hopefully to be in that 60% range. It's really what you saw on the receivables we had some of the deferral arrangements.
Just get a bit behind given the COVID-19.
But as far as the basic rent numbers were hoping to be in that same range.
Okay.
And maybe just going back to the the pure later.
Contract.
Obviously, that's a nice win.
I would suspect that pure later, maybe it doesn't.
Only one operate one or two aircraft here. So I'm just wondering if you can talk about.
Any specific opportunities to grow with pure later or with any other I guess packaging through your companies in Canada, just just any prospects for growth there.
Yes.
On.
I believe there are good prospects for growth.
<unk>.
Fostered a very good relationship with pure later and.
We believe there could be other opportunities to do more.
This is <unk>.
Beginning.
I think with the growth of E Commerce, certainly and <unk>.
That's really affected a lot of regional communities where.
People are shopping online et cetera, et cetera, and I think a lot of that will continue and that will I think grow demand.
Especially for time sensitive items into these communities.
These dash eight freighters are real workhorses in.
And reliable.
Did the six months trial it worked very well.
So were we.
We're optimistic that it's going to grow that the demand will be there.
And we're going to work hard to do that.
We see it as being one of the better opportunities we have no question about it.
Okay, that's great thanks very much.
Thank you again as a reminder, if you would like to ask a question over the phone.
Press Star then the number one on your telephone keypad.
Our next question is from the line of <unk> Gupta from Scotiabank.
Go ahead.
Thanks, Rob and good morning, everyone.
And kudos to the team on ESG achievements.
If our.
So maybe the first one is follow up on <unk> question on Capex.
From the Capex table.
Obviously, your Capex is coming down.
Thanks.
Foreign exchange rate has improved as well its really.
Bbs still seeing further strength in Canadian dollars since the end of March 2021.
So wondering Gary if you have any sense as to what this capex number $60 million to $80 million would look like under the current FX.
Under the current on its Gary here under the current FX that would come down a little bit.
Because there is some U S funds and there obviously, we used 125, one to $5 75 as conversion rates were down into the one twos now I believe low.
One two so it would certainly bring it down a bit but it wouldn't be materially down given what's what sits in there.
Thanks, Gary.
Then on.
On the on the incremental rent relief commentary that you made just wondering.
Do you have a lot of customers in Asia Pacific Africa.
Different markets.
What is the rent relief largely coming from I guess, because that would be different jurisdiction.
On a different mode right now with respect to Lockdowns and debates on the COVID-19 on stuff right. So where are you seeing more kind of relief requests coming in.
Well I think that depends on the time, where you are in the pandemic and I think youre right <unk> debt.
Each part of the world seems to be going through things at a little bit of a different time.
And I'll just use it as an example, India, which was doing very very well with very high utilization and that sort of thing until.
Sort of the end of March and then things have deteriorated quite significantly there.
Africa is having some challenges as well.
But then we see rebounds in other areas.
In terms of.
Relative to the areas in South America are coming back.
And even in terms of opening up Europe, a little bit here et cetera, So and of course, the United States.
Is sort of leading I think through the rest of the world. So.
But we really don't know.
And an area, that's growing well EMEA turnaround.
And fall back a bit.
Of course through where even have experienced that here in Nova Scotia.
No.
It's hard to say, but I think it is fair to say that the.
The stress on the carriers is directly proportionate to the to.
The standard the pandemic in any of these jurisdictions.
Another areas of Southeast Asia, we see some improvement.
<unk> it.
It depends.
That makes sense Joe Thank you.
And then on the lease collection can you remind us what's your least collection.
Typically about 100%.
Through the pandemic call was a lower number.
Just thinking there kind of go back through from 60% plus.
It's Gary here again, typically its a 100% prior to the pandemic normally your rent is paid in advance on the.
So we would hope to gravitate towards back closer to that as we come on as the pandemic here.
Great. Thanks.
And then on.
On the gross lease receivable it seems like its obviously going up here and you expect a further increase as you collect less than 100%.
Whats your line of sight Joe.
When and at what level the gross lease receivables peaks.
Sorry.
Sorry go ahead Gary.
I guess, what we're showing there on arc.
Really we expected to peak at most of the $60 million hopefully by the end of the year.
And as far as the.
Collections as I said, we're hoping to stay in and around that where we're at today on them and improve on it but it's really going to be dependent on the COVID-19 variance. So it's hard to give you exact.
<unk> on that.
So I guess that $60 million.
Obviously going up from here, but it may not necessarily come down right away at that point I think it might continue to build up that depending on the collection.
Yes.
I think what we've shown there is $60 million is where we expect the top end or possibly be it will take time to collect the funds as we come out of this year and into next year. So that will take some tylenol to wind its way down.
Great Okay. Thanks.
And then as you look at the growth trajectory from here.
Perhaps leveraging.
The recent equity raise and debt raise.
How do you how do you envision the growth trajectory.
I'm like what historically you guys have.
Pre pandemic looked at 20 odd aircraft a year.
On like where would you see that number be today for the next couple of years. So further out in <unk>.
What would be our assumption for the timing of the remaining 10 off lease aircraft placement.
So conor goods, Gary here I'll talk a little bit of both the growth Capex, we're certainly evaluating leasing transactions out there and we're certainly not.
Putting any guidance out there as far as the number of transactions and timing so.
We're making our way through this COVID-19 piece, we certainly want to.
Study it and make sure that we make the right decisions as we as we come out of that cycle.
Okay.
That's understandable, Gary but more curious as to the timing on the 10 off lease aircraft. If you see an opportunity here.
Here in the near term, but then like calendar 2021 or do you see those 10 aircraft fully being marketed by 2022.
I know we are actively remarketing all those off lease aircraft and we continue to be optimistic that we'll get those working here soon but there's nothing we can report and give you guidance on at this stage other than we're working hard and we're very optimistic but.
It's tough to give an exact answer to that.
I think.
It's certainly a possibility that some of them will fall into 2022.
So.
Like Gary said, we're working hard you never know.
So.
We will see.
Okay. Thanks for the emphasis that's on my question great. Thanks.
Thank you.
Next one on this from Walter.
Spratlin from RBC capital markets.
Good morning, everyone.
So I want to come back on the pure later question understanding that this was being done to a certain degree with another carrier prior to you are having.
That business is that right and what can you gauge if that's true what can you gauge from the trends there where they look where they looked at was purely on looking forward to someone with larger capacity to grow in.
A little bit of detail around your ability to win that contract would be great.
Yes, well I think.
This was a service performed by someone else originally with the different types of aircraft et cetera.
I am sure Purolator looks at a lot of things.
They choose an operator in terms of reliability cost volumes et cetera.
I think it was really a combination of those things and we have a very good track record as an operator.
In terms of our performance.
<unk>.
I think I can't help but think that weighted in terms of the decision as well and reliability in the in the freight business in the carrier business I think is very important.
I think it was a combination of things.
The dash eight freighters are relatively new in the marketplace have a good payload.
And our reliable.
So.
I think I think it was really don't think it was one thing Walter I think it was a combination of things.
I know that when whenever one of those time sensitive carrier customers switch.
Reliability is it's either because they lost significant liability of reliability with their predecessor or.
They just needed the capacity and are hopeful that the reliability stays in place and I think they probably have that comfort level with you for the reasons that you mentioned.
Any sense of where the growth was going.
Is this a.
Our rapid growth.
Trend prior to you're picking up that you hope or expect will continue how are you how are you anticipating for <unk>.
Factoring in growth and what is pure later, giving you in terms of what they believe the growth rate will be in that business for cross border activity.
Yes, we started actually looking at the cargo business before even COVID-19.
With the assets that we had coming off lease et cetera, and we've had some of these assets deployed for some time with other carriers in Canada, both on a wet leasing a dry lease basis.
So.
We didn't say a lot about it because it was pretty small and it was sort of an incubation period.
It was I think it started getting more serious when we got in and got into the trial with <unk>.
Pure later and.
This wasn't something that was just brand new like I had mentioned we've been doing this for some time to them and they do have other regional services that they offer in Canada.
They use in Canada for <unk>.
Or are there need.
We see some opportunities there.
We don't have a particular size on that right now or or.
A timeframe other than we're working hard in North Bay on converting airplanes.
And we believe that converting these aircrafts there will be a good market for them, whether it's for us to operate for us to lease.
Et cetera.
They're great assets.
Including in that we have these three hundreds as well.
Its coming at us.
I think as great raw material so.
That's been good.
The other thing I didn't mention is that we launched the used parts business or the U S. M business, some time ago and that business, we do see a recovery in.
As well so in demand around the world. So that's and that's part of what <unk> been doing as well we've parted out a number of airplanes et cetera. So when you look at the number of things that theyre doing and.
And how those fit with us.
I think it's very very promising.
That's fantastic.
Switching gears, a little bit I know, we all have the view that regional is going to open up first.
Friends and family travel domestically will be.
Open quickly and ramp up significantly by two questions there are.
As we see different regions in the world.
Moving at different paces experiencing different levels of opening when you look at the ones where debt are useful as a crystal ball to see where trends are you encouraged by that.
And importantly, if it comes back very significantly.
And we get a kind of a hockey stick.
Knock on wood type of event.
Are you positioned to be able to handle.
At that level.
Would that speed of growth in demand.
We will have a little bit of that.
Look too.
Advanced look of it with your booking curve, but.
You feel comfortable that you are able to handle.
Some erratic surges in and capacity are in demand should that come should that come about.
No I think.
I think we're in good shape.
And when I look at what's happening in the U S right now where the vaccination rates are high.
And people are back in the air and traveling in a lot of it is driven by leisure travel.
People just want to get out of the house.
Go see their relatives or take a break somewhere and.
I think there'll be primarily looking domestically to do that.
And that's exactly what we're seeing in the U S. So.
I can't help but think that what we're seeing there.
Happened with time and the various other jurisdictions, including Europe, it or talking about travel passport now and things of that nature.
So.
But where we are in good shape.
We're ready to go operationally and we do have.
As you know some assets available to lease so.
As the recovery comes round I think we'll be there great.
Alright, I've already booked flights back home. So all set thanks very much Jonathan Okay.
Thank you.
Do you have another question from Mathieu <unk> from Canaccord. Please go ahead.
Hey, good morning, guys.
Good morning.
So just a follow up question on the Capex.
The undisclosed customer ends up for me on the commitment from <unk> will that flow into F. 'twenty, one capex or is that more likely to come in at 22 event at this point.
It would flow into our Capex table, if we end up doing that deal.
Matthew Soda would end up just adding to our capex forecast work into our Capex for 2021.
Right.
On the timing, that's still going to 2031 event.
It's possible again, we're in discussions with the customers or the customer and if you look just given where the world is worldwide.
The thing is worldwide it could be this year it could be next year. It would really depend on how things go.
Okay, Great and then maybe if you were to ballpark on your objective for collection rates going on throughout the year.
What would you say is an attainable right by the end of 2021, if you would.
About it that way.
We haven't put together not certainly come from putting a forecast.
Around that at this stage, given where we are worldwide, but we do want to improve obviously off the 60% on 100% is really the goal and it's going to depend on how the markets open up how the COVID-19 variance shape up and how the jurisdictions goes so it's really hard to give you a firm answer on that just given where the world is so.
Different.
Alright.
Thanks.
Yes.
Thank you.
We don't have any questions at this time presenters. Please continue.
Yes.
Thank you operator, and thank you everyone for being with US. This morning, we wish you a pleasant day, and we will now conclude the call.
Okay.
Thank you. This concludes today's conference call. Thank you for participating.
May now disconnect have a great day.
[music].
Okay.
[music].
Okay.
Net income.
[music] later on.
Perfect.
Gross margin.