Chorus Aviation Inc.

Thank you, operator. Hello and thank you for joining us today for our first quarter 2020 conference call and audio webcast.

With me today from Chorus are Joe Randell, President and Chief Executive Officer; and Gary Osborne, Chief Financial Officer. We'll start by giving a brief overview of the results, and then discuss the impact of COVID-19 to our business and what we're doing about it, and then go on to questions from the analyst community.

Because some of the discussion in this call may be forward-looking, I direct your attention to the caution regarding forward-looking information and statement, which are subject to various risks and uncertainties and assumptions that are included or referenced on page 45 of our Management's Discussion and Analysis of the results and operations of Chorus Aviation for the period ended March 31, 2020, the Outlook section and other sections of our MD&A where such statements appear. In addition, some of the following discussions involve certain non-GAAP measures, including references to EBITDA, adjusted EBT, and adjusted net income.

Please refer to Section 18 of our MD&A for a discussion relating to these such non-GAAP measures. I'll now turn the call over to Joe Randell.

Thank you, Natalie, and good morning everyone. It’s difficult to know where to begin.

We are in unchartered territory. We entered this pandemic from the strongest position on our history having a solid balance sheet, customer base and growth prospects.

Are growth trajectory generated increases in adjusted net income and adjusted EBITDA of approximately 31% and 18% respectively quarter-over-quarter. We won't spend much time discussing the first quarter as most interest in the near future.

Our efforts remain focused on ensuring the well-being of our employees and passengers, reducing costs and bolstering our liquidity as we prepare for the lifting of travel restrictions. We've been prudently and responsibly managing our financial resources and had eliminated all discretionary cash flows including our dividend as announced last month.

We have reduced our workforce to manage our operational demand, reduced compensation for management, administrative employees and our Board of Directors and deferred capital spending. Gary will take you through this specifics of these measures in a few minutes.

No one can predict how long this crisis will last or what the ultimate impact will be on the aviation industry. Most airlines are downsizing the number and size of aircraft in their fleet and accelerating the retirement of older aircraft.

There is also been deferrals of new aircraft acquisitions causing an associated decline in production rates by aircraft manufacturers, however airlines will still need to improve operating efficiencies and replace existing aged aircraft over time. As the recovery unfolds, we believe there will be new opportunities for aircraft leasing at several carriers off to lease versus purchase aircraft.

We are seeing promising airline activity in Asia and in some parts of Europe, where capacity is starting to ramp up as travel restrictions start to ease. As such and as history has shown in times of economic downturn, its regional capacity that comes back first since most carriers are starting with building domestic operations, utilizing smaller gauged aircraft.

There are a few examples of this with some of our airline leasing customers. We understand Croatia airlines resume some domestic service utilizing Dash 8-400s, KLM has started to gradually restore its European network by flying Jazz and Lion Air has started to resume limited domestic operations.

This crisis has affected our business in various ways. We've been working closely with Air Canada and have reduced our Air Canada Express capacity by 90% for April and May, resulting in over 70 aircraft being parked and approximately 65% of the Jazz workforce being placed on inactive status.

We have temporarily shut down our Jazz technical services operation and the associated employee reductions are included in the 65%. Our focus has been on ensuring the health and safety of our active employees and implementing the necessary policies and processes to ensure business continuity.

In conjunction with Air Canada, we are implementing the customer clean plus program and working on flying resumption plans. At this point, we believe the CRJ900 aircraft will be an important part of the recovery schedule given its size and economics.

With Bombardier restarting its production line, we now anticipate commencing the delivery of new CRJ900 later this year. In April, Jazz became the launch customer for the Dash-8-400 simplified package freighter developed by De Havilland Canada.

Jazz ordered the service bulletins and conversion kits for up to 13 aircraft to commence cargo flying under the CPA. This simplified packaged freighter allows us to redeploy aircraft while contributing to the collective fight against COVID-19 by supporting our customer Air Canada and the delivery of essential cargo.

On the leasing front, except for UK-based Flybe, our portfolio of leasing customers remains intact. CityJet and Virgin Australia have voluntarily entered a restructuring process.

We have a total of five aircraft with these two carriers. Both carriers continue to operate and we hold security deposits in respect of the aircraft we have under lease.

We also have a 24-month remarketing period available under our loan agreements should the need arise. We are working cooperatively with our lessees as we try to manage through these difficult circumstances.

We provided temporary rent deferrals to substantially all our lessees for a period of between three and six months, with repayment terms between six and 24 months. Given our lease portfolio is geographically diverse we expect to see a variation in the ramp up speed and financial stability of these airlines.

Our approach with our customers is to work with them to our mutual benefit. Consistent with market norms our leases are for a fixed term contain an absolute payment obligation on the part of the lessee and cannot be terminated for convenience.

While we do expect our industry and especially the regional aviation sector to recover in time. We are pausing our growth plan of adding up to 20 aircraft per year to preserve liquidity.

At Voyageur, we've been fortunate that the impact on our contract line has been mitigated by the essential nature of the humanitarian and peacekeeping operations, as well as our air ambulance operation in New Brunswick. However, our parts sales and our specialty maintenance, repair and overhaul work are showing declines related to reduced airline operations and this is being somewhat positively offset by several government customers and contractors.

Prior to this crisis we were flying over 700 daily flights to 90 North American destinations many of them being the low communities and eight of which we were the sole air operator. Today we're operating fewer than 60 daily flights and have ceased operations at 36 airports.

Billions in government assistance has been announced for airlines around the world in recognition of their role as critical infrastructure. The Government of Canada announced this week the creation of the large employer emergency financing facility which we will review to determine our next steps.

We believe air service to regional communities is a critical component to stimulating the return of the Canadian economy. We'll remain hopeful that the Government of Canada will spearhead a collaborative effort amongst all stakeholders in aviation to address the many additional measures required beyond financial support to ensure the safe and timely reopening of air travel in Canada.

As Gary will explain, we have a strong liquidity position. With combined cash and committed facilities of over $265 million providing us with the ability to navigate through this period and emerge positively on the other side.

In these times of great stress and uncertainty, I'm inspired by and thankful for the energy, resilience and commitment of our employees. Our employees are amongst the most talented in the industry and I'm deeply troubled by the uncertainty and anxiety this is causing them and their families.

Together, our team has overcome significant challenges and unconfident this crisis will be no different. We want to be ready to capitalize on opportunities that will inevitably arise.

Thank you. And now I'll pass the line over to Gary.

Thank you, Joe and good morning. I echo Joe's sentiments on the resiliency and strength of our employees.

We truly have an incredible team. And I am confident we'll get through this period together.

Our financial performance in the first quarter had adjusted EBITDA at $88.7 million, a $14 million increase over first quarter 2019. We also saw an adjusted net income $25 million in the quarter and $6 million increase over last year which led to an increase in adjusted EPS at $0.16 versus $0.13 last year.

Net unrealized foreign exchange losses on long-term debt of $55 billion drove the net loss of $17.3 million over first quarter 2019. As noted in our MD&A, the losses do not materially affect current or future cash flows as we build the revenue in the same currency as the debt payments.

Overall, the growth in our Q1 earnings was driven by our regional aircraft leasing segment which increased by 24 aircraft and resultant adjusted EBITDA by $16.5 million and adjusted EBT by $4.8 million over the same period last year. The regional aviation services segment at a reduction in adjusted EBITDA of $2.6 million, but the small increase in adjusted EBT of $0.3 million.

The CPA financial results were within our expectations, but we had some headwinds in the aircraft part sales and MRO side of the business given slow down with COVID-19 along with an increase in other general and administrative expenses. As we have seen COVID-19 has disrupted our daily lives and with it the economy.

Like most businesses we have taken and continue to take numerous substantial measures to protect our company. These protective measures include initiatives from the physical well-being of her employees, passengers and customers along with significant steps to enhance our liquidity including reducing costs and travel spending as we resize our operations to meet current demand.

As Joe mentioned, we currently have over $265 million in committed liquidity. In addition, we expect to raise financing of between US$30 million and US$50 million on for unencumbered aircraft bringing the total anticipated liquidity to approximately $310 million.

During the quarter, we saw a restricted cash position increased by $21.3 million given some of our regional aircraft leasing customers were no longer current in their rent payments to Chorus. Once we have completed finalizing rent deferral agreements with our lessees, we expect most of the restricted cash increase we saw in Q1 will be released back into our unrestricted cash balance and remain there provided our lessees were being compliant with the rent deferral agreements.

As previously announced, we suspended future dividend payments and the dividend reinvestment plan until further notice. This is estimated to save approximately $55 million in annual cash dividend payments when taken into account a drip participation rate of 29%.

Our growth plans have been delayed and we're no longer projecting the addition of up to 20 aircraft to our leasing portfolio. Our current aircraft and ESP growth CapEx forecast has been reduced by approximately $ 95 million and only includes the nine committed CRJ900 for the CPA operation, two aircraft to an undisclosed customer and three ESPs of which one was completed in the first quarter with another currently undergoing the program.

Last month, we did collect approximately 25% of our contractual revenue for the regional aircraft leasing segment. The deferral of rents by most of our lessees are estimated to increase trade receivables to an aggregate amount of between $40 million and $60 million at its peak over the next two quarters.

On the regional aviation services side of the business, we have seen a significant reduction in flying at Jazz due to COVID-19 particularly in Q2. With this reduction flying we are estimating the Controllable Cost Guardrail receivable from Air Canada could increase between $20 million and $40 million by the end of the year as compared to 2019.

This is due to the unpredictability in the flying levels and its impact on our rates. Under the CPA contract this amount will be subsequently paid by Air Canada in Q1, 2021.

In addition to the employee reductions we've enacted several cost reduction initiatives including employee salary and board fee reductions. We've also reduced our non growth CapEx and other capital expenditures by approximately $15 million versus Q4 2019 outlook.

Capital expenditures in 2020 including capitalized major maintenance overhauls, but excluding expenditures for the acquisition of aircraft and the ESP are expected to be between $23 million and 29 million. Aircraft related acquisitions and ESP capital expenditures in 2020 are expected to be between $349 million and $355 million.

For additional information supporting our outlook for the balance of this year, I'll refer you to Section 4 of the 2020 outlook section of our MD&A for the period ended March 31, 2020. That concludes my commentary.

Thank you for listening. Operator, we can open the call to questions from the analyst community when you are ready.

Good morning.

Good morning. Just a few question.

Maybe first on the receivables. So you mentioned the MD&A that you have about $300 million in current portion of contracted lease receivables.

Does that include the 53 aircraft that are currently under lease with Air Canada? And then secondly, when you said $40 million to $60 million increase in receivables over the next two quarters, were you referring to the lease payment deferrals for three to six months?

So the lease receivable, the financial statements that you're talking about the 300 and some million, yes, I do believe it includes the Air Canada piece. On the $40 million to $60 million, that relates to the third party non Air Canada related receivables on the rentals.

Okay. So -- and the increase in receivables -- the trade receivables will reflect in that receivable amount.

And apparently, that receivable does not show up in working capital. Is that correct?

No. It does show up in the working capital side of the accounts receivable.

I see. Okay.

Yes. No.

I was actually more referring to -- I think there was a commentary in the MD&A that says that the working capital is not a good measure of liquidity because the current assets do not include the current portion of lease receivables. So I was just kind of making sure what does that mean with respect with this amount?

Yes. No.

That was put in I think in Q4. It just reflects the fact that you put in a current portion of the future, all the payment obligations, but yet we have all those lease amounts coming in.

I see. Okay.

Thanks. And then secondly, with respect to your leases with Air Canada and other customers, even if you agree to collect payments after six to 24 months.

Would you keep recognizing revenue and EBITDA from those leases at rates similar to pre-COVID levels?

If we're into a situation as we are now where the deferral of the rentals payback over a period of time. Yes, we would continue to recognize our revenue at the same rate that we see.

So was it deferral and receivable that's what we would do.

I see. So it’s just the cash that's being delayed and not the revenue.

So hence why we put the disclosure on the receivable side that so you could -- you'd be able to model and understand where that could go.

Okay. That makes sense.

And lastly from me. You still have the nine CRJ900s in the CapEx schedule.

I was just curious because somebody just announced that they are closing the sale of their CRJ business to Mitsubishi on June 1st. What do you anticipate in terms of timing of those nine CRJ900s?

And will they be coming from Bombardier or from Mitsubishi?

Yes. We're still working through the exact timing of the delivery of those aircraft, but we do anticipate a commencement around mid-year.

Yes. And our CapEx forecast we left them into the full year and attempting to close it by the end of the year, hence why we left the CapEx as it is.

Once we get an update from Bombardier we'll go back at that appropriately.

Yes. We're working to have the delivery schedule updated and there is a possibility that you may have some of that flow into next year.

But we're uncertain on that at the moment until we have firm delivery schedule from Bombardier.

Okay. Thanks.

I'll turn it over. Thank you so much.

Yes. Thanks very much.

Good morning everyone.

Good morning, Walters.

So I'd like to start with a few questions just on the post COVID-19 environment to extent that you can see it. So not asking you when it's going to happen.

But just moving to into the future and it's in our rearview mirror. How would you describe the early ramp-up in airline capacity.

When I asked that to Colin in his call, he indicated that domestic would be the first to come out. And if that's the case, would you see a bit of an over servicing of regional aircraft during that early phase of ramp-up where that you'll ramp-up a lot quicker then call it your overall airline that would have international, leisure, domestic, cross-border and all that included.

Would you expect to see that kind of more rapid ramp-up in your business?

Well, we are seeing that. First of all, when you look at the fleets around the world, the percentage of regional fleet actually grounded as a percentage of total fleet is less than narrow-body and wide-body.

I think if you look at it, the largest percentage of fleet grounded is are wide-body aircraft. So we're just sort of starting from there.

Number two is we are seeing short-haul domestic markets come back first. In Asia, I think I mentioned that.

Now with KLM in Europe. And so we're seeing those markets showing some green shoots I guess earlier on certainly before any of the long haul or international services.

I think domestic markets are the ones that countries will generally feel most comfortable opening first. And there are lot of domestic markets that as they ramp back up will require services in terms of remote communities and et cetera.

And the loads, I think initially will probably be somewhat lighter. So some routes that originally would have had, for instance, 320neo may be better suited to a CRJ900, because the trip costs are lower et cetera.

So I think of the segments of the business we're in the one that I think is showing the earliest sign of return. But again, it depends on the speed of these travel restrictions being lifted.

In Canada right now, we're seeing travel restrictions between provinces. And that's not particularly helpful in terms of getting travel back up in the air.

But they're at least I think is increasing pressure on governments and as the curve starts to flatten an increased interest in getting back up in regional and some of the domestic markets.

Keeping with the post COVID environment I guess, when these airlines, the ones that come through this. When they come out they're going to be in a much more debt laden situation, a lot more focus on liquidity.

Do you expect that leasing therefore as opposed to outright ownership will be more prevalent than would have been the case prior to COVID-19 at least in the maybe early months and years?

Yes. We do believe that.

And I think we're seeing some evidence of that actually. Because some of the airlines that were previously stronger credits and I think most airlines in the world have decreased in terms of their credit ratings.

These airlines are more and more focused on their own liquidity. So we're seeing opportunities in the business, for instance, in terms of sale and leaseback, both of new fleet because we still see aircraft like A220s and aircraft like that actually being in good demand.

So I think that some of the carriers that may have financed those themselves previously will now look at sale leaseback opportunities, sale leaseback of existing fleets because it's all going to be about liquidity. But we're not acting on those, because for us it's about preserving our own liquidity.

But we're keeping a very keen outlook on how the leasing business ultimately comes out of this and we believe that there will be good demand.

So on that, if there is good demand coming out and taking your experience in the current environment into consideration, are there any major changes you would put into the lease terms that you didn't have before? I know, Joe you mentioned security deposits and so on.

Would you require higher security deposits? Would you -- is there anything that you would change with regard to the lease term?

And is your, let's call it, the price of a lease going up as a result of the higher demand and the more -- arguably more risk that is out there that perhaps we didn't consider before?

Well certainly security is so important here in term of lease, but also things like deposits, maintenance reserves, things of that nature, and those are the things that give you comfort as a lessor. So we'll certainly be looking for a lot of those things.

So there's that. And also looking more closely on business plans, because how the industry evolves from this and the travel patterns et cetera will influence this.

But as well, we're we are seeing a lot of instances where governments are actually supporting their carriers through both capital injections and loan supports and things of that nature, and that gives us some comfort there. But on the lease rates themselves, I think it'll be a function of the cost of debt and what the cost of debt will be, I think, coming out of this.

And as we've said before, generally the leases and the lease amounts will float with whatever than cost of debt is. So it's early on to tell exactly what it's going to look like.

But those are just a few thoughts right now in terms of the type of credits that we're interested in the types of deals and where some opportunities may lie.

Just two quick questions here to wrap up for me. We had Air Canada conference yesterday and there were a lot of questions being asked about Air Canada's CPA with you.

Do you know or can you shed any light on whether Air Canada has sought to revise their CPA? And if they were to even if they have it, is there accommodations that you could be may -- that could be much like you did, I think it was maybe 10, 15 years ago where Air Canada requested changes.

But in return you were able to achieve a lengthening the program or lengthening the contract and so forth?

Well, we're working very closely with Air Canada probably more closely than we've ever worked in terms of responding to this crisis to the situation. And Air Canada as you know is believing that they will take some time to recover from this in terms of the industry.

The shape of the industry will be somewhat different than. And therefore our communication with Air Canada will be around how this evolves and how things happen.

Up to this point our work with Air Canada though has been more on removing operational costs and perhaps going forward. There may be some opportunities to reduce some fixed costs.

And we always speak with them. We're always willing to work with them as a partner.

I believe the CRJs will play a pretty critical role in the Air Canada network et cetera and we do provide a lot of very unique services. So we're going to work with them.

But as always, we will work to satisfy their requirements, but always on a win-win basis. And that's the way we've done it time and time again.

And the industry keeps changing and evolving. And we always have to be open to change absolutely and something that works for our partner.

But whatever it is it has to work for us as well. So again.

it's in the early stages. How it all comes back, the time frame, the whole network is from our perspective right now to be determined.

Okay. Last question from me.

I noted you had a shareholder rights plan amendment there. Can you -- I get this question a lot.

So anything that prompted that? Any color around that.

I'll leave it there.

Yes. No.

I think in this environment where share prices are very, very volatile and we saw such a dramatic drop in our share price et cetera, we just thought that it would be prudent in this environment to do whatever we can to protect the rights of our existing shareholders to ensure that nothing untoward happens and that we again look to bring back maximum value to our shareholders. So there was no particular action that had caused us to do that.

None that we know of. And we just did it simply as a precautionary measure.

Okay. That's it for me.

Thanks very much and I hope everyone's keeping well and safe.

You too. Thank you.

Hi. Good morning and thanks for taking my question.

Maybe first off just on the trade receivable disclosure of the $40 million to $60 million I guess peak trade receivables over the next two quarters. If I look at -- I guess the question is, is this a right way to look at it.

If I think of the quarterly revenue run rate for Chorus Aviation capital looks like about $40 million a quarter. So over two quarters that's about $80 million.

That suggests I guess a cash conversion rate of anywhere from kind of 25% to 50%. And you're seeing a 25% collection right now I guess.

So I guess does that suggest that April is kind of a low point or you see that kind of being the low point for cash collection or lease deferral request and it can improve from here. Is that the underlying assumption you're making with that trade receivable guidance?

Yes. I guess the way we calculate that I think you're right, it's around $42 million by the end of the quarter.

For revenue you take -- assume you're collecting about 25% of that, you get into the $30 to $60 million range. And that's based on our current agreements that we have with our lessees and we're hoping that's where we're going to end up.

So based on three to six months deferral and payback over six to 24 months that is the peak range somewhere between $40 and $60.

Okay. And maybe just a follow-up on Walters question there on -- and I guess, there's a constant concern around the CPA.

Maybe if you can just highlight the opportunities. I think a lot of people worry about the fixed fee coming in, but maybe what you're doing on the controllable cost side and how that might be a bigger opportunity to pass through cost savings to Air Canada versus I'm just trying to squeeze your fixed fee that they've agreed to?

Well, the fixed fee is a small amount of what has been the cost of the CPA. And the greatest cost reductions obviously come from the reduction of the operational costs.

And unfortunately we've had to lay off employees in all the various areas et cetera and reduce discretionary spend. So -- I think that's where the greatest benefit is being delivered to Air Canada.

I think the other thing that you have to remember is that when we reset this agreement it's at market. And we established market rates.

And in the long-term agreement Air Canada came in as you know as a shareholder. So I think that puts us in a very good position.

We will continue to talk about how we can take down costs for Air Canada because in this environment costs are so important. But at the same time, we work for our fixed fee and that's how we're compensated.

And we do have leasing agreement with Air Canada that are of a long term nature on the larger turboprops and some of the older Dash 8-300s. And those obligations remain in place.

So we're going to continue to work with them to find ways of reducing their costs.

And maybe just two more from me. I appreciate it's obviously tough to forecast the future here.

But Joe, I'd be interested in your thoughts on what you think COVID-19 means for pilot scope clause relief maybe -- and maybe especially in the U.S. where I think there was a lot of pushback on that idea given the U.S.

airlines were in a strong financial position, obviously, much has changed over the past month or so. Do you see do potential relief from pilot scope clause and that potentially being an opportunity for more outsourced flying or bigger regional jets?

Well, I think generally scope clauses only happen when there are actual bankruptcies or restructurings. I've not seen a lot of changes in scope clauses outside of that.

I think the environments changed significantly from there being pilot shortage to there being a pilot surplus, especially as you look at I think some of the longer haul and leisure routes being perhaps longer coming back. So I don't really see a big change in that regard right now.

But again, I've been in the business long enough to know that anything can happen. But I don't see anything in the near future in that regard especially if there are surplus pilots at the larger operation.

That's helpful. And just maybe last one for me.

When you look at your portfolio of least aircraft, you did take an impairment on the ATR or from Flybe. You didn't take one on the Dash 8.

Just within that regional aircraft portfolio, is there a change in how you'd like that mix to be coming out of COVID-19 whenever that is just based on how you're seeing residual values hold in here through the crisis? Would you want to be less exposed to turboprops and more exposed to regional jets or certain brands anything that changes from that perspective?

Well, I think we've said before going into this that we were becoming more focused on larger regional jets. And I think that's exactly where we are still right now.

We still think there's a solid base demand for turboprops. Although we are seeing some surpluses in some areas, but we're seeing maybe some opportunities in some of those areas as well.

But in terms of newer equipment, new customers and where we see growth opportunities I would have to say, we'd be in the larger, newer regional jets. And I mentioned earlier the A220 is an example.

And it will be interesting to see what happens with Embraer and the E2s as a result of all this because as you know there's uncertainty there. But I think we're going to see good demand in those hit -- for those types of airplanes, especially when you have lower demand levels anyway, and I think keeping trip cost down is important.

And even I see some of the financial support that's been given in some of these countries also has certain environmental requirements being placed on airlines which I think will help in terms of newer technology and new airplanes.

That super helpful color. Thank you very much.

Thank you. Good morning.

I'm going to build on Kevin's questions about residual value. I mean, I understand that the market for re-leasing or remarketing aircraft is not going to be strong here and unprecedented, but you've had the Flybe aircraft now, I guess on the shelf for a couple months here.

Can you give us any additional color as to what the realistic prospects or range of potential scenarios is for releasing those aircraft?

So we do have prospects for some of those airplanes and we're actively pursuing them right now. It is a tough environment.

There are a lot of aircraft available out there. I don't think anybody knows exactly what's going to happen with residual values as a result of this.

But we are seeing some signs of demand. When people go bankrupt, a lot of the routes and services have to replace.

And you may see some carriers as they entered into some sort of liquidation, I'm talking to the any of ours in particular or anything like that. But generally what happens is there are new entrants that come in and the leases are restructured or they're at a different type of level and the aircraft are utilized.

So we're seeing some, but again, I can't hold out a lot of opportunities right now. It is a very difficult situation.

But it’s not dead. But there's a bit of heart bit, put it that way.

And related question, perhaps you can educate us a little bit on the intricacies of voluntary versus involuntary administration and maybe how you would approach those situations different with respect to how you start thinking about your options with related to -- with respect to those aircraft like Virgin Australia and CityJets seem to be right now?

I think when carriers go through restructuring everything is looked at in terms of their network or fleet et cetera and everything is reviewed. I think as with a lot of lessors we're no different.

It's always desirable to keep your aircraft in your asset placed and in a restructured environment then that's what we look -- I think that would be a first preference as long as it works economically. You have comfort in that regard.

So that becomes the prime focus right now and any of these is to see whether these aircraft can be utilized in a similar environment.

And then with the lease payment deferrals that you guys are -- these agreements that you guys have put in place over the last couple months into the pandemic really hit in earnest. I mean, are you receiving any other either qualitative or quantitative consideration for, I mean, really offering up your balance sheet and your liquidity to these airlines?

I guess in the short term we were going through deferral agreements. In the long run there could -- as we come out of this there could be some other opportunities that come up.

But right now its deferral agreements given the situation has been so volatile so quickly. And also we're hopeful that as a result of this will be in a position to extend leases et cetera and so there may be some opportunities there, but we don't know it.

Perhaps is sports analogy kind of trading for future considerations sort of thing?

For us, we're looking to work cooperatively with these customers. We do believe that this too shall pass and we want to ensure that we have good relationships that we're seeing as being a trusted partner and a solid partner.

And at the same time of course our liquidity is what's most important. But we look to preserve relationships and build on them and to take advantage of opportunities as we come out of this.

Okay. Last one for me just a clarification, because I think I'm going to missed it here, perhaps everyone.

Is Air Canada specifically receiving rent deferral? And can you maybe describe what that particular situation looks like with respect to their rent payments given it is such a meaningful proportion of your cash flow and revenue?

Air Canada is current in all payments and essentially we have not deferred any rental or lease payments with Air Canada.

That's what I understood. Okay, great.

Thank you. I'll pass the line.

Thanks. Good morning.

Good morning.

Just want to follow up on I guess, the Virgin Australia CDS situations. As at this point they have not rejected the leases during their restructuring.

Is that correct?

They have not yet.

Okay.

And working to see whether of course we can keep those leases at Virgin Australia. They are some of the newer assets and the newer ATR-72 600s.

So -- and we're hearing and as many have in the media that Virgin will as it emerges the most likely a purely domestic operation. And I think that's good for regional service.

But again who knows Australia itself has had a tough time with all of this and even Guardrail is suffering I think. So -- but we think we're in a reasonable good position.

Okay. And it seems as though, I mean, maybe the Flybe, I don't the exception that, I guess the repayment terms of the debt associated with the Q400s is September, but most -- seems like most of the other ones you've described here are 24 months in the event of -- that meant a time to remarket the aircraft before you'd have to pay the debt principal.

Is that pretty typical for most of your leases that you would have up to two years to remarket the claims before having to repay the principal?

A lot of our debt does have that currently a two-year remarketing in there and then others are around six to nine months as you noted with those three or sorry, those five Q400s with Flybe. And we're actively looking to push that out further.

And the other thing is, it's an option. It's not a given that it will be paid out at that point in time.

As long as we're paying our debt payments with the bank which we are, they may just leave it sit.

And as noted in our MD&A we -- some of the leases that have been deferred we've been able to achieve for a number of months here deferral on payment on interest in principal on those assets. So that's helped.

Okay. And that actually leads me to my next question which was just on the I guess the totality of principal debt repayments over the next twelve months.

I mean, if I look at the current long-term debt, it's around $180 million or so. Is that a good sort of proxy for what you would expect to have to pay in principal repayment?

And does that include the -- I guess the deferral of some of those through to September?

Yes. That's what we would expect over the next twelve months.

So it's a good proxy, and it would include the September deferrals. So if you're modeling that that's a pretty good number, the current debt number.

Okay. And maybe just final one for me and is just looking at the leasing portfolio or the portfolio of Airlines there.

Obviously the situation is pretty dire for a lot of airlines out there. I'm just wondering if there's -- do you have any other sort of near-term concerns for any of your other leasing customers?

If any sort of highlighted to you. I mean, other than obviously coming to you and asking for rent deferral, but are there any other I guess airlines out there in your portfolio that you're particularly worried about without necessarily mentioning them.

I'm just wondering what the sort of risk is for additional aircraft being returned to you?

Yes. We watch them all very closely.

We've executed a number of these agreements now in terms of the new arrangements et cetera. And we don't get into talking about individual accounts for customer confidentiality purposes unless it's disclosed on the part of customer in terms of where they are.

But we are watching it very closely and so steady as it goes, but you never know.

Okay. Fair enough.

Thanks very much for your time.

Thank you.

Thanks. Good morning.

Just one last question here. The cost of capital across the airline industry will obviously go up as a result of us through certainly the short to medium term at least.

The leasing business is largely dependent on its relative cost of capital versus the airlines. So to the extent that Chorus can improve or limit the upward pressure on its own cost of capital.

And I'm thinking both debt cost and equity cost. It certainly creates a real growth opportunity I would think.

How do you previously think about your cost of capital getting it as low as possible? And how do you think about it going forward if it changes at all as a result of this?

Well, good question. The cost of capital is obviously very important to the leasing side and we continue to try to get that as low as possible as you alluded to.

And I think when we move ahead here, obviously, how we're able to raise the funds on the security side in particular for the assets or the equity portion we put in there will play a big factor along with the risk profile within the industry and within the airline itself from the security packages, as Joe alluded to you. So I think when we -- as we move ahead we'll continue to keep our cost capital low.

I think you're going to see us as we approach each lessee and each deal. Once we come out of this a bit, I think you're going to see a very little bit different anyway.

Shall we say, than what you've seen in the past as far as that goes because of the volatility in that we've seen. So, as far as our capital goes in our situation we got -- what we got at this juncture and we'll continue to monitor going ahead and see if there's opportunities to keep our cost to capital lower than lot of others.

And if I could just kind of build on that and specifically thinking about the equity cost which is still a important component albeit smaller than debt. Longer term, obviously, the quality of the balance sheet liquidity et cetera affects your cost of equity.

What about the dividend? Do you do you view that returning or the size of that as helping reduce your cost of equity?

Or how does that factor into the equation?

Well, we know the dividend is important and it does affect the cost of equity for sure. So like everything it's going to be a consideration for us going forward as things start to emerge.

But at this point we not put out any particular view on it. It's all about hunkering down here, getting through it.

But we do recognize what you're saying and the impact that the dividend can have on the cost of your equity.

Great. Thank you very much.

That's the only question I have.

Thanks. Just a quick follow-up on that dividend question.

So -- like you have the operating credit facility and the EDC facility that's just got. So it looks like you have some restrictions on dividend in that, but you can still pay a dividend that you had before.

So just curious as to any other changes with respect to your lending agreements that restrict the amount of dividend below the previous dividend you paid?

No. There is nothing.

That is the only restriction that you see there.

Thanks.

Good morning, everyone. Two quick question from me.

First on the Air Canada CPA. In you release you noted that the coast guardrail receivable might be $20 million to $40 million fro this year.

So are we behind plan right now? Or is that order of magnitude expected to hit in Q2 and Q3 with a true-up payment in Q4?

Yes. You'll probably see it in Q2 and Q3 and it's really just a legged on the cost.

We're building our cost-out but the rates are really -- they're set right now based on 2019 and it just takes time to get the cost out to kind of match the environment we're in. All that being said under the way things have been moving with the activity in the CPA, we estimate around $20 million to $40 million higher and then it will get paid in Q1 next year.

That's great. And my last one is sort of building on the receivable question as everyone is asking.

Kind of when you put everything together, your leniency on principal payments and maybe even on the interest portion, are you guys burning cash in this environment on a monthly or quarterly basis?

No. I don't feel it at all.

We've been doing quite well, holding our own as far as the cash and liquidity side. It is something we monitor daily, as everybody is in this environment.

And if you look Air Canada, the CPA side of the equation is performing as expected as we noted. And then on the leasing side we still have 25% of the revenues coming in.

So we feel very good about our liquidity and where we're at.

That's great. Thanks guys.

Thank you.

Thank you very much operator, and thank you everyone for joining us today. We hope you all stay well.