Chorus Aviation sees Pick up in Regional Travel
This is a narrow body regional jet and it is very economical for short haul regional travel.The CRJ-1000 shown above is the most advanced and fuel efficient of the regional jets.But the pandemic caused an almost complete shut down in regional travel in the spring.Chorius Aviation says that regional aviation is picking up quicker than commercial long haul travel.Furthermore it says that 50% of it's leased fleet is now flying and that flight hours are up from the spring.Still not all of their regional Jazz stations are functioning.And 21 of their regional routes have been discontinued.But in summary Chorus sees the third quarter as better than the past quarter.
Second Quarter Performance
First it should be stated that Chorus Aviation (CHR) has had a tremenduous drop in market capitalization.In January it had a market capitalization of close to $1 billion and now it approaches $400 million in value. This has caused substantial adjustments.But as already mentioned Chorus has started to see a pick up in regional travel.For example, in the spring many regional routes were temporarily abandoned and many Jazz stations were closed in regional airports.Now there is a discontinuation of only 21 regional routes and only 8 Jazz stations remain closed.However CHR is waiting for Air Canada to return to it's former status.That will give a big rebound to the Chorus Aviation operation.
Chorus only reports a decrease in revenues of $10 million over Q2 2019 which is very good considering the shut down of routes in April and May.But June saw a pretty good pick up in demand.Some of the slack was covered by third party leasing revenue to foreign carriers.In addition, adjusted EBITDA at $91 million actually showed an increase of $5 million over Q2 in 2019.And net income was $29 million or $.18 per share for a decrease of only$10 million compared to 2019.So CHR is still on track to hit $.72 per share for 2020.And using the industry P/E ratio this should send the price back towards $5 per share in late fall.
If Trends Continue
The third quarter will tell how well Chorus has bounced back. Like in the picture above CHR will need to get more domestic revenues as well as revenues from their international leasing.Not one but two sources of revenue.However if revenues are equal to that of Q3 in 2019 this will be a very positive sign.As Chorus has reduced it's workforce by a substantial percentage in Q2 and must rehire.CHR expects to double it's Air Canada Express (regional airline) block hours in Q3.Chorus says that adjustable EBITDA in Q2 is up from Q1 2020.If this trend continues adjustable EBITDA should be $375-$400 million on an annual basis. Chorus also says that net income was $.18 per share in Q2 and this blog estimates that net income was about$.15 per share in Q1.If this trend continues then this blog expects annual e.p.s. to be in a range of $.70-$.80.With an industry average P/E/ ratio the price of Chorus' shares could be around $5.00 per share.
This blog believes that Chorus Aviation shares have bottomed out.And if trends continue as expected in Q3 and Q4 the price could be $5 or higher and this would be a 75% increase. from today's share price.
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