Michael Pyle - CEO David White - VP of Aviation Operations, Safety and Integration Tamara Schock - CFO

Trevor Johnson - National Bank Steven Hansen - Raymond James Mona Nazir - Laurentian Bank David Tyerman - Cormark Securities Raveel Afzaal - Canaccord Genuity Konark Gupta - Macquarie Capital Markets Kevin Chiang - CIBC Derek Spronck - RBC Capital Markets

Thank you, operator. Good morning everyone.

Also with me are Carmele Peter, EIC’s President, David White our Vice President of Aviation Operations, Safety and Integration and Tammy Schock, our CFO, who will review our financial results in greater detail in a few moments. We are pleased with our Q2 performance setting new all-time highs in a number of financial metrics.

For those familiar with our story the growth will not come as a surprise as we have a 13 year track record of the increasing profitability of our company through investment in accretive acquisitions and in capital assets to grow our existing subsidiaries. I will discuss the results in more detail shortly, but before I do I want to speak briefly on the timing of this report.

We typically report approximately six weeks after the quarter end, but have chosen to report earlier for this period. The reason to report earlier was driven by the uncertainty in the marketplace and we felt the best way to relieve this uncertainty was with facts.

We’re pleased to bring some clarity to those who invest or who are considering investing in EIC by releasing our results sooner than we typically do. I want to take a moment to thank Tammy and Carmele and their teams, together with those from our subsidiaries for their tremendous efforts that were necessary to meet this timeline.

I also want to take a moment to thank the team of Price Waterhouse Coopers who altered their schedule to complete the review of the quarterly results in time for this release. I want to be clear that we made the choice to report this early based on a unique set of circumstances in the marketplace and that the timing of this report is not the new normal.

We would consider advancing reporting in the future should the situation want. But we envision a return to our normal reporting schedule in future periods.

As Tammy will detail later in this teleconference with the acceleration of the release of these financial statements we completed all of our processes and our external auditors Price Waterhouse Coopers completed their normal quarterly review of the statements. Returning to our second quarter results, we saw significant growth in a number of our subsidiaries, but most notably at Regional One where we have invested significant capital in the last 30 months.

These investments serve not only to increase our revenue, but more importantly our EBITDA and our earnings on a per share basis. The following consolidated metrics were all quarterly records for continuing operations.

Revenue grew by 20% to $273.1 million. EBITDA grew by 23% to $70.1 million.

Net earnings were up 50% to $25.8 million and earnings per share on a basic basis grew by 34% to $0.83 per share. Even though we increased the number of shares outstanding by 12% as a result of the $98 million bought deal financing we closed at the start of this year.

These financial results should leave no doubt that our strategy of disciplined acquisition and investing in our subsidiaries for future growth not only works, it works extremely well. We have also executed on our plan to advance as much of our aircraft maintenance program as possible into the slower first half of the year.

We completed a significant portion of the year’s overhauls in the first half of the year, completing six in each of the first and second quarters for a total of 12, which compares with only three in the first half of 2016. This increase was the result of two separate factors.

Firstly, overhauls and heavy maintenance of aircraft did not fall on the straight line basis quarter-to-quarter or even year-to-year. They are done based on a well-defined prescriptive requirement for how long an aircraft can fly before inspections and overhauls are required.

While these timelines can be shortened and worked out early they are highly regulated and cannot generally be extended. 2017 is a year with an abnormally large number of overhauls for our larger ATR and Dash 8 aircraft.

We anticipate completing an additional three or four more overhauls in the second half of 2017 for a total for the year of 15 or 16. Comparatively we did six overhauls in the last half of last year for an annual total of nine.

In a typical year we would expect to complete 11 or 12 such overhauls. Secondly, we’ve chosen to take advantage of the synergies made possible by the acquisition of Provincial Aerospace.

Historically, the overhauls of these larger aircraft would have been completed by a third party MRO facility. By internalizing this function we not only reduced the cost of the overhaul by eliminating the margin we would pay to someone else, we gained control over the scheduling for this work.

When you use a third party we need to hit the windows they have available to do the work for us even if that window is not convenient from an operating point of view by utilizing internal capabilities we are able to complete most of this work during the seasonally slower period of the year. Maintaining aircraft is clearly much more complicated than scheduled heavy overhauls and includes work on engines and other components.

But the overhauls are a significant portion of what drives the variability of investment in the aircraft. This is evident in the levels of maintenance capital investment we have made in the first two quarters of this year.

The higher maintenance investment has increased our payout ratio to 75% in spite of our record operating performance. It is very important to realize however that this level of maintenance is unusually high.

We expect aggregate maintenance capital expenditures to fall by 25% to 35% in the last two quarters of the year. We have consistently stated in our public disclosure that these investments tend to be lumpy and will vary significantly period-to-period.

And using an average of 12 to 24 months to calculate indicative levels of maintenance investments provides a more accurate picture of typical required levels of investment. These averages need to be adjusted for the growth and the size of the fleet of course both at the airlines and at Regional One’s lease fleet.

I have explained our past approach to growth investments in the past, but I think a couple of key points bear revisiting. Our business model is predicated on making disciplined acquisitions and providing access to growth capital of the companies we acquire.

Over the past two years the environment for acquisitions has been particularly challenging in the United States given elevated multiples. It has been perhaps the greatest hallmark of our success that we have disciplined in terms of what we are prepared to pay for acquisitions.

We are fully prepared to walk away from an acquisition opportunity if the pricing exceeds our return requirements. In a period of minimal acquisition our model has still enabled us to grow successfully.

We have used capital for internal investments deploying more than $310 million over the past two and half years on growth capital expenditures. In essence growth capital investment is a way that we will generate new cash flow in future periods.

By way of example we are currently building surveillance demonstrator aircraft within Provincial that will generate new cash flow in the future when it is completed and goes into service. All of the funding for this demonstrator aircraft is growth capital expenditures.

Similarly we acquired new planes in support of our expansion into Northwestern Ontario as this expansion will generate new cash flow it too is classified as a growth capital expenditure. The bulk of our growth capital investments however over the past two and half years have gone into Regional One.

During this two and half year period we have grown the size of Regional One’s asset base, the parts portfolio and our lease portfolio have grown by a total of approximately $270 million. The results EBITDA has grown by over $65 million on a trailing 12 month basis when compared to 2014 our first full year of operation of Regional One.

Regional One has experienced this remarkable growth by doing more of the same things as it always done. The only difference is the access to growth capital at Exchange has afforded their management team and enabled them to take advantage of more opportunities to grow their portfolio of cash producing assets.

The difference between maintaining our existing cash flow and growing our cash flow is very significant. It’s why we calculate our payout ratio based on free cash flow plus maintenance capital expectations.

The calculation takes into account the necessary replacement of assets to maintain our revenue streams at existing levels. Since growth CapEx will generate future returns similar to an acquisition, these investments are not included in our payout ratio.

We have used this investment approach and classifications since going public in 2004. The proof is in the putting as some say.

Since our IPO we’ve increased our dividend 12 times, made more than $300 million in distributions to our shareholders, acquired 15 companies and maintained our aggregate debt at similar levels to what it was in 2004 when we began. At the same time we’ve growing our earnings on a per share basis dramatically.

We have in fact in the model for sustainable growth for the last 13 years. In spite of dramatic changes in resource prices and exchange rates, which can severely impact our Canadian businesses, we have regularly and sustainably grown our dividend.

Approximately two years ago, during the preparation for our November 2015 strategic planning meeting of the Board of Directors, we established an initiative to set our aircraft operation and safety standards not simply at regulatory compliance levels, but at the highest possible level. Compliance with regulations is of course required to operate an airline, but we chose to set the bar higher in that.

We fly in very challenging conditions in the North, with short travel straps, with no instrument landing equipment available at the airports. Quite simply we need to be the best we can be.

In order to execute on this program, we wanted to hire an industry leader who would join us at the EIC level. Our airlines are separately licensed and each has its own core of experts and professionals within its operations.

Our new executive would look into implementing best practices across the aviation segments and look for ways to raise the bar higher. After a search of the industry we were very happy to hire Mr.

David White, whose long aviation carrier included 15 years at Canada’s aviation regulator transport Canada. Immediately prior to joining us in July of 2016, he was the Associate Director of Operations Civil Aviation.

And his roles at transport he had the opportunity and the obligation to examine a wide range of airline operations across Canada. I have asked him to speak with you today about his experience in the industry in general and EIC specifically.

David?

Thanks, Mike and good morning, everyone. I’m the Vice President of Aviation Operations Safety and Integration here as Exchange Income.

I have 30 plus years of aviation experience including 15 years with Transport Canada Civil Aviation prior to joining EIC a year ago. I’m a licensed aircraft maintenance engineer, and worked for several Canadian aviation organizations.

Including airlines that service the North such as First Air and Air Inuit, prior to joining Transport Canada. I spent the first half of my Transport Canada career as a Frontline Inspector.

The core part of my job was auditing and inspecting aviation companies of multiple sizes and scope of operations both regional and nationally. I had the opportunity to visit multiple aviation organizations over the years including some of the companies that are now part of EIC.

Later on in my Transport Canada career, I was the Regional Project Manager for Safety Management Systems in Prairie Northern region, which included national program input in additional regional delivery of the new SMS program. I then joined the Executive branch the Public Service, as a Regional Associates Director of Operations Transport Canada civil aviation.

As a Transport Canada executive as well as for filling my own regional role, I took on the Simon’s Acting Regional Director, Civil Aviation, Acting Director of Standards and Acting Lead Regulatory Program Modernization with Headquarters. With at this stage of my career, the opportunity to Join EIC arose.

Joining Exchange Income Corporation through for the later part of my career was a relatively easy decision. Even though I really enjoyed my 15 years with the aviation regulator, the diversity and the independence of EIC's aviation companies coupled with the parent’s company ability to support and positively influence the safety objectives was significant in my decision making process.

With EIC, I'm able to enhance the same goal that I was dedicated to during my time as a federal regulator. EIC’s group of companies represented diverse group of Canadian air operators with a solid history of serving the Canadian public largely in northern remote communities for the past 50 years.

This opportunity to support our different aviation management teams coupled with the benefits that these air operators could readily access the backing of a dynamic and well-funded parent company solidified my decision. I'm not aware of another consortium or group of aviation companies that created a role at the parent company like the one I have here at EIC.

That allowed someone with my aviation background to apply safety and quality lessons individually and collectively throughout the subsidiaries. I will speak brief to the regulatory background of Canadian aviation to add some color to the safety environment that EIC's companies operate in.

Canada has one of the safest aviation industries in the world, overseen by well recognized regulatory organization. Transport Canada is a member state as well as host of the International Civil Aviation Organization known as ICAO.

Transport Canada also continuously interacts with the Federal Aviation Administration FAA of United States to harmonize North American rules. The day-to-day safety of this aviation industry is dependent on the professionalism of aviation individuals, the proficiency of Canadian operators and the safety culture nurtured here in Canada over the past 100 years.

This is particularly true in a challenging northern environment that many of our operators serve. This high level of safety is enhanced through strict regulation and monitor to diligent oversight by the regulator.

On a side note, while maintaining safe operations is a definitive regulatory requirement, the economic impact of incidents where aircraft are grounded in remote communities is worth noting. The cost associated with unserviceable aircraft at remote airports are much higher than in a major hub where there are multiple options to access the maintenance other than sending a rescue mission.

This is an example where operational planning through investment and preventative maintenance meets multiple objectives of safety, regulatory compliance and profitability. Back to the subject of regulatory interaction in Canada, in addition to communications with Transport Canada for certification and service issues on an ongoing basis, all Canadian operators including EIC companies are subject to routine and unscheduled inspections by Transport Canada, as well as interactive follow-up on safety or compliance related happenings.

The thousands of scheduled and unscheduled flights by our companies every year, frequent engagement with the regulator is required and encouraged as we are both stakeholders in providing safe transportation for Canadians. For example, all Canadian operators have events reported through the Civil Aviation Daily Occurrence Reports known as CADORs.

In comparison to industry EIC's group of companies number of reports is within the norm. With that in mind, it is more important to stress that regardless of the number of reports, each individual event is addressed and followed up by our operators.

Safety information are shared through multiple avenues including regulator to address areas of aircraft operator or industry concerns. Over the past year, our companies have received their regularly scheduled inspection as part of Transport Canada's Surveillance program.

All EIC's aviation companies hold by their operator certificates and continue to provide commercial air services under their respective approvals. In addition to meeting regulatory requirements, operational specific training and procedures as well as suitable technology further enhance safety operations.

Here is an example of an avionics modification designed for safer flights in our operational environment. To serve our First Nation’s communities our aviation companies must fly into small approved airports that have gravel runways and no instrument landing systems, much unlike major centers.

To enhance safety EIC’s supportive parameter to modify the avionic suit and our fleet of metros serving these communities by adding state-of-the-art navigation and glass cockpits. This modification program costing $6 million to $8 million was designed specifically for parameter and is nearing completion this year.

This was a significant investment in the metro fleet and it’s another instance where investment increases the level of safety, significantly increases the aircraft value and furthermore enhances reliability for our operations in our challenging environment. There are multiple other examples of where our operators modify or upgrade their fleet to better serve their customers with the limited aircraft type selection available to us the best match our customers’ needs.

The high level of safety, compliance and quality are fundamental to successful aviation entities. My rule at EIC is to assist all of our current and new companies to continually strive for robust safety standards that consistently exceed regulatory requirements.

These objectives form a crucial part of our daily goals at the individual operators, as well as here at Exchange Income Corporation. Thank you for the opportunity to be on the call today.

Thank you, David. I would now like to turn the call over to Tammy who will review our financial results in greater detail.

I will discuss our outlook in my closing comments.

Thanks, Mike. Good morning, everyone.

I’d like to start by briefly commenting on the process that we undertook to enable us to report our Q2 2017 results earlier than is typical for us. Even though we have compressed our reporting timelines we did not reduce, diminish or eliminate any of our normal regulatory financial reporting control, diligence or reviews in order to hit this timeline.

All normal processes were maintained throughout the piece and our independent external auditors completed their normal review processes on our financial statements. Now I’ll get to my commentary on the quarter two results.

In the interest of time I will restrict my remarks to the three months period only. Consolidated revenue was up was $273.1 million up 20% from the last year, the increase was due to a number of factors among them was the return on growth capital investments that we previously made in our subsidiary particularly at Regional One.

Regional One’s revenue for the quarter was $79.2 million this is an increase of 128% over Q2 2016. Regional One sales and service revenue accounts for over 75% of its year-over-year increase.

Lease revenue also increased significantly over the prior year. Revenue also grew as a result of the improved performance by our Legacy airlines.

Its revenue grew by 7% over Q2 2016. This was driven by the growth across all revenue streams in the Kivalliq markets and increased passenger volumes in our Manitoba market.

Improving economic conditions in the United States resulted in strong contributions from Stainless. Our revenue growth was partially offset by the declines experienced by WesTower, which is impacted by the cyclical reduction in capital spending by Sailer with carriers on WesTower’s traditional services.

This is occurring due to the focus on the transition to new technology. On a segmented basis our aerospace and aviation segment which consist of Legacy airlines Regional One and Provincial Aerospace generated revenue of $227 million up 28%.

This growth was largely driven by the performance of Regional One as noted earlier however improvements in revenue also occurred at Provincial and the Legacy airlines. The manufacturing segment generated revenue of $46.2 million, down 7% from last year.

This decline was driven by the current demand for WesTower’s traditional services as discussed earlier. This decline was partially offset however by higher revenue contributions from all of our other manufacturing entities compared to last year.

Consolidated EBITDA was $70.1 million up 23%. The increase in EBITDA was also driven by previous growth capital investments that we have made.

I’ll cover this a bit further on a segmented basis. The aerospace and aviation segment generated EBITDA of $70.3 million up 29%.

The aerospace and aviation segments EBITDA margin was 31% compared to 30.8% for last year. Regional One contributed EBITDA of $32.2 million, which is an increase of 86% over the prior year.

Provincial’s EBITDA was also up 16% as a result of softening competitive conditions within its airlines operations. The manufacturing segment generated EBITDA of $4.8 million, which is down $6.7 million from last year.

It’s down from $6.7 million.

From, sorry yes. The decrease was largely due to the market conditions facing WesTower that I covered earlier.

The manufacturing segment’s EBITDA margin was 10.4%, which is down from 13.4% for the last year and for the same reasons cited earlier. Consolidated net earnings were $25.8 million or $0.83 basis per share, these compared to $17.2 million and $0.62 respectively for last year.

The growth largely driven by improved EBITDA performance stemming from previous growth capital investments. Net earnings were also positively impacted by a $3.9 million after tax gain on the disposal of our partnership and interest in Innu Mikun and return for our interest in its partnership, we received a 33% interest in a new aviation partnership branded as Air Borealis.

Our per share results improves by 34% or $0.21 even with the 12% year-over-year increase in the average number of shares outstanding, as a result of the $98 million bought deal financing that we closed at the start of 2017. Also influencing our outstanding shares was the conversion of debentures by unitholders at the end of the second quarter in 2016.

Turning now to other key financial metrics, free cash flow totaled $51.7 million, which is up 21%, free cash flow on a per share basis was $1.66 up 8%. Maintenance CapEx was $29.9 million up 74% from $17.2 million for the comparative period.

The increase of $12.7 million is primarily attributable to the aerospace and aviation segment where the airlines Legacy and Provincial have increased its inspected expenditures of $9.6 million and Regional One had increased depreciation of $3.6 million. I will address our airlines and Regional One separately.

In our airlines the increase was due to variability in the timing of overhaul event, there were more events than average in 2017 and due to our decision to concentrate the timing of heavy overhauls for our airlines in the first half of the year when winter conditions lessen the demand for transportation services due to the availability of winter roads. By way of context we completed six heavy overhauls during the second quarter as compared to two in Q2 2016.

At Regional One the increase in depreciation is directly related to the growth capital expenditures made in the previous quarters, and as a reminder maintenance capital expenditures at Regional One are equal to depreciation. The rational for this is that as least aircraft are flown by the lessees their dream time is been consumed and must be replaced in order to maintain cash flows at current levels.

To ensure that our payout ratio is appropriately reflect of necessary replacement of assets, we classify an amount equally depreciation as maintenance CapEx. I’d also like to note that when a decision is made to part out or to sell an aircraft that is in our lease portfolio, the net book value of that aircraft is transferred to inventory.

When this transfer occurs the entire net book value associated with transferred asset is reclassified with no residual being left in capital assets. This is necessary to ensure that capital assets recorded at any given time are fully recoverable from a valuation perspective.

The amount reclassified is reflected as a negative growth capital expenditure in the quarter. Free cash flow less maintenance CapEx was $21.8 million or $0.70 on a per share basis, these compared to $25.5 million and $0.92 respectively for last year.

Our payout ratio based on free cash flow less maintenance CapEx was 75%. This compares to 54% for the comparative period.

Despite the increase, which was due to the accelerated timing of maintenance activity and the growth in the number of shares, our payout ratio in Q2 is well within the range we used to determine the sustainability of our dividend and to make decisions around changes to our dividend rates. As Mike indicated with the bulk of 2017 scheduled heavy maintenance and overhauls behind us, we expect to reduce our maintenance CapEx in the second half of the year.

Accordingly we also expect our payout ratio to decline. We invested $33 million in growth capital expenditures.

The investments were largely made within the aerospace and aviation segments within Provincial we invested $17.5 million towards the completion of the demonstrator surveillance aircraft and the purchase of new aircraft to support additional routes and customer volumes. Within our Legacy airlines, we purchased new aircraft to support our expansion of service into Northwestern Ontario.

The remainder of our growth capital investments in Q2 was for the purchase of aircraft by Regional One, including the final CRJ900 from our remarketing agreement with Bombardier. We expect the correlation between growth capital invested at Regional One and subsequent return to remain consistent with our historical experience.

Now I’ll turn to our balance sheet, we ended the quarter with cash position of $14.1 million and net working capital of $203.2 million. These compared to net cash position of $26.5 million and net working capital of $178.5 million at December 31, 2016.

The changes in our working capital position are primarily related to increased business volumes in the second quarter within our airline and at up Regional One. Regional One also had significant sales volumes in the latter part of the quarter and increased inventory at Regional One compared to December 31st.

I would know note that Regional One’s inventory has decreased compared to March 31st. Overall, our balance sheet remained strong, our leverage as well within our target range of 2.08:1 as calculated under the terms of our credit facility and is well under the maximum allowed.

We have maintained our aggregate debt at consistent levels since our inception and have at the same time grown our per share measures. This demonstrates our success with making accretive investments in growth opportunities, while at the same time maintaining the strength of our balance sheet.

That concludes my review of our financial results, and I’ll turn the call back to Mike for some closing remarks.

Thank you, Tammy. We are excited about our expansion of services in Northwestern Ontario, Labrador and Quebec.

The formation of the Air Borealis partnership is particularly positive. We’ve historically partnered with the Innu through the Innu Development Corporation to service parts of Labrador.

The Innu it through the Nunatsiavut Group of Companies and I apologies for my pronunciation of that word, partnered with a company was a competitor of Provincial in other markets. We are to partner with both of these First Nation and extend our reach across Labrador and Northern Quebec.

We’ve already added an additional aircraft in the second quarter and we’ll add one more in the third to give us the necessary capacity to cover these additional communities. We have enjoyed the long relationship with Innu and are looking forward to the new relationship with the Innu.

While this relationship is tied to our Provincial operation, the underline concept is not unique to that airline. We are proud of similar partnership relationships across our airline operations in Manitoba and Northwestern Ontario and Nunavut, many of which state back for a decade.

Through these relationships and partnership agreements we put millions of dollars back into the communities we services on an annual basis. We realized that in many communities we are the predominant means of transportation in and out of the community other than winter roads for a short period of the year.

We take that responsibility seriously and view the communities as more than customers they are in fact our partners. We are particularly proud of our most recent initiative in Manitoba and Northwestern Ontario.

We have partnered with the Winnipeg Blue Bombers of the Canadian Football League and the Victoria Inn hotel chain. Under this program for every home game this season, we will bring 40 to 50 children from various communities together with their shop [ph] ones to Winnipeg.

In most communities we will do this through a dedicated charter where the participations will fly to Winnipeg and receive the full Bomber game day treatment including Bomber gear, food, drinks and perhaps most excitingly at the end of the game culminating a trip to field level to meet the players after the game. We’ve continued to grow our medevac business with Keewatin’s Kitikmeot contract, which will begin service in the fourth quarter of this year.

The contract will also firmly establish Keewatin as the preeminent northern medevac provider. This will extend our service across all of the territory of Nunavut.

We also recently announced Provincial Aerospace contract to provide maritime surveillances to the Netherlands Government in Curacao has now been extended into 2020. We also continue to advance the development of our surveillance demonstrator aircraft at Provincial.

The plane which will be used to -- as a demonstrator to show Provincial’s capabilities will also be available as a quick response aircraft to provide services when required by governments around the globe. It will attend air shows beginning in late 2017 and will be available for use next year.

We anticipate that the deployment of growth capital expenditures will slow materially in the second half of 2017. We’ve now completed the CRJ900 acquisition program announced in the fourth quarter of 2016 these aircraft are more expensive than most of the aircraft in our fleet and as such the purchase made up a significant portion of the fund’s investment in capital assets at Regional One.

While Regional One is an opportunist buyer by its nature and things could change too quickly should the right opportunity present itself, we would expect growth investments to be limited in the balance of the year. Growth capital and the balance of the company is also expected to moderate in the second half of the year.

One aircraft that we purchased in provincial in the third quarter, which will bring to a completion the fleet expansion plan for the airlines for the foreseeable future. With the exception of medevac aircraft for Keewatin’s new contract which starts in the fourth quarter of this year.

We will complete Provincial search and surveillance aircraft and we will also have a small initiative to increase production in our U.S. tank business, which is currently running very near capacity.

The outlook for acquisitions in the United States remains challenging. Companies are selling at prices that are beyond what we are prepared to pay.

As such it is unlikely we will conclude a material transaction in the U.S. in the future.

The situation in Canada is quite different. While competition for strong target companies remains, high prices are not as inflated as they are in the United States.

Our pipeline is within historical norms in terms of the number of potential transactions. The opportunities we see however are of higher quality that in recent periods and we are cautiously optimistic about our opportunity to grow the group of subsidiary companies.

Our balance sheet is strong with approximately $290 million in available capital to enable us to move swiftly should the right opportunity be uncovered. In the event we are unable to find the target that meets our well defined criteria at a price thus is accretive to our shareholders we will simply wait.

Growth for the sake of growth does not add value, it needs to be accretive to our shareholders or we will pass on the transaction. We look forward to the second half of the year and continuing to deliver strong financial performance and sustainable dividends to our shareholders.

We have a long track record of delivering disciplined, accretive growth to our shareholders. By no means however does that mean we’re without challenges, rather as we have demonstrated over more than a decade the strength and the resiliency of our model allows us to deliver on our promises to our shareholders without every business performing at its peak.

We’re currently facing a cyclical decline in the wireless business, which is having a material impact on WesTower. While this will improve when the telecommunication companies rollout the next wireless technology in the next few quarters, we will face weaker demand until that occurs.

Similarly the ongoing softness of the mining sector combined with the wet summer on the Far East, which has resulted in reduced demand for fire suppression work has resulted in a challenging environment for our rotary wing business. Ongoing strength in the balance of our portfolio will enable us to meet the expectations of our shareholders in the balance of the year.

We’re entering the busiest summer season for our airlines with our fleet in great shape to take advantage of available opportunities and to look after the needs of our customers. Regional One will continue to deploy the assets bought in recent periods and the balance of our manufacturing entities will benefit from a strengthening economy and improved demand.

I want to take this opportunity to thank our shareholders for their support during what has been a very challenging period in the capital markets. We are proud of the most recent quarter, but more importantly we are pleased that it’s been delivered without changing our business model that has served the company and our stakeholders so well for the last 13 years.

It has worked in the past, it is working now, and we have every reason to expect it will continue to work in the future. We look forward to speaking to you again in the fall with our Q3 results.

Thank you very much for listening. And we'd now like to open the call to questions, operator?

Good morning, Trevor.

Hey, morning folks. Yes just firstly, there has been some information circulating the market that the flight volumes from the Legacy regional airlines specifically Perimeter and Calm are collapsing.

When we look at Q2 results for this segment it doesn't suggest that this is the case. I just wondering if you might be able to speak to this apparent disconnect.

The company has never commented on the statements about flight declines, because they're quite frankly and simply untrue. For Perimeter itself the best revenues it's had in its history in May and June which will simply impossible if the number of flights decline by 80%.

The flights are consistent with historical norms with some growth because of the increased number of passengers.

Great. Just turning to Regional One, can you provide a bit more color just on sustainability of the EBITDA in Q2, specifically with respect to the leasing and part sales component of the business that are a bit more recurring and sticky.

Yes, I think it's really important to look at Regional One as a group of things that we do. We buy aircraft, which we either sell as parts, resale as full aircraft or lease out.

And if we buy it to part it out it goes into inventory. If we buy it to lease it out, it goes into fixed assets.

And if it ever changes categories, we move the entire aircraft from one category to the other. The only exception to that would be in the event that we purchased an aircraft as a capital asset decide to lease it out or I'm sorry to part it out, we may decide to lease the engines and leave them in our engine portfolio.

But there is never any parts left behind or fragments left as part of a fixed assets when the plane is moved the plane is moved. From a sustainability point of view, the makeup of the revenue changes slightly quarter-to-quarter.

Two thirds of our business is very predictable, parts revenue and lease revenue. And they've grown in walk step with the investments we've made.

Plane sales do tend to vary a little bit quarter-to-quarter, but it's really important to understand that makes up a very small portion of the earnings of that business. The margins on the sale of aircraft are far lower than they are on the sale of parts.

And while so when you look at the results, you could see a variability in revenue quarter-to-quarter if we were to sell a CRJ700 for $8 million in one quarter and then not the following quarter, but the margin impact of that sale is very small. And as such, the growth rate assuming we continue to invest in maintenance capital investment and I want to make sure that's clear, in maintenance capital investments to replace the hours we're using up in our lease fleet.

The results of Regional One are sustainable and we in fact believe will grow overtime as we fully deploy the assets we've already bought.

Alright. And then just lastly and then I can hop back in the queue.

There has been some severe flooding in Churchill that we speculate could be of some benefits here, Manitoba Airline, any commentary on this opportunity or potential?

Yeah, I think it's highly political in our province right now about how that railway line will be repaired or in fact if it will be. In the short-term, the single biggest impact is in our freight business.

And so we have increased our number of freight flights. I don't have the numbers in front of me, but it's probably added a few flights a week into the community.

One thing I would like to point out though is because of the in quotation marks emergency nature of this, no one in Churchill could have prepared for the fact that they didn’t have rail service. We have actually reduced the price of our freight significantly to do what we can to help limit the impact on the community.

We don’t want to be seen as taking advantage of what’s a very difficult situation for the people living there.

Got you. Great, thank you.

Thanks, Trevor.

Yes, good morning guys, a solid quarter.

Good morning, Steve.

Good to see. My first question Mike relates to the demonstrator aircraft and you suggested it would be available for next year, if I get a sense for what kind of pipeline you think you’re going to have for that aircraft and what the opportunity is over the longer term?

It sounds like it’s a rapid deployment aircraft, but it also sounds like a pretty good marketing vehicle for your broader services. So just the broader sort of strategic plan for the aircraft would be nice.

Well I shot back and got ready for the conference call, I expected someone to ask this, and this is single handedly the most difficult question to answer. Because our guys are so excited about the potential opportunities and the discussions they have had with quite frankly customers around the world, you said if this available we’re going to be interested in it for this or that.

But its first role when it’s first ready later in this year will be to attend a couple of air shows where people can actually going to see it, one in particular I believe is in Dubai towards the end of the year, which is the first place it will be seen publicly. But the key with this thing is do we get the business, we think we’re going to get out of it, and the last thing I want to do is over promise and underperform.

I can tell you we’re really excited about it, I can tell you that we have tentative plans to do more of them in the event there as successful as we think that will be, but the proofs in the pudding this is something no one has done before. So let’s wait and see how well the governments actually follow on in terms of the indications they have given us.

Okay, very good and that’s helpful. It does sound like an attractive program.

Just secondly on the Regional One, if you sort of finished through the pipeline now on the recent set of purchases, and how do you think about sort of like filling the pipeline if you will for future purchases down the road, is there a still a reasonable number of aircraft becoming available. I understand growth CapEx in the back half will be lower, but if you are thinking about future aircraft pipeline, where do you sort of sit and how does it look?

I think there is two things to cover us Steven, perhaps I wasn’t clear a little bit on growth CapEx, we continue to look and we are very active in buying aircraft, but they tend to be one here or two there as oppose to the program with where Bomber J and with some of the airlines in Europe where we bought those aircraft, which was an investment of north of $100 million. Because we don’t see one of those right now, there is nothing that we’re looking at that meets the return requirements we have.

But we quite literally have opportunities to buy planes in the world whether they are in Japan, whether they’re in Europe, whether they’re in the United States and then deploy them around the world. And understand and just to maintain our maintenance CapEx levels, we replace that dream time we are using up I don’t know the exact number Tammy can jump in and help me here.

But I think we’re talking about something in the range of $7 million or $8 million a quarter in terms of aircraft we need to…

Yes, it’s just over $8 million a quarter right now.

So we need to buy just to stay on the same place. And in terms of what we have already bought, we have seen some of the benefit, but not all of our 900s are on leased yet, some of them are -- we’re still working with people, there is LOIs on some of them.

And so we expect a view that you will continue to see growth in the lease portfolio over the next 12 months as we deploy the balances of those aircraft.

And just as a reminder we of course have our Ireland expansion, which gives us additional access to aircraft in our Bombardier relationship, which continues on albeit we finished the purchase of our CRJ-900s that relationship is still ongoing and a good source of information and opportunities for aircraft.

Great, that’s helpful. And just as a derivative question to that, have you started to dip your toe into the water any further on the alternative platforms, the jets or otherwise?

We have actually bought and sold and traded in the ERJ. It would still be a relatively speaking smaller platform for us.

Our initial forays into that have been positive, but again we’ll walk before we run. We want to make sure we have the expertise so that when we do a significant purchase and we think we’re buying at the right price, we’re correct like we have been in our CRJs, ATRs and Dash 8.

Yes and in fact we recently just hired an individual with significant experience in ERJ engine platform, which we think will be very helpful and continuing to delve further into this aircraft platform.

Okay, very good thanks again. I’ll get back in the queue.

Thanks.

Thanks Steve. Operator Your next question comes from Mona Nazir from Laurentian Bank.

Your line is open.

Good morning.

Good morning Mona.

Hi my first question touches on specific balance sheet line items and I think you might have answered this to Trevor, but I just wanted to clarify how you transfer assets between capital investments and inventory particularly within Regional One and touch on or discuss what portion of aircraft if any in placed into fixed assets and when?

Okay, let’s do a quick EIC accounting one-on-one on this. When we buy an aircraft it’s going into our operating airline, so the Calm Air, Parameters, Provincials of the world we take that aircraft and we break it into its component parts on our balance sheet.

And we do that because of the depreciation rates are different, clearly the fuselage of an aircraft has a longer life span than a landing gear, which has a different life span than an engine. So when you look at our operating aircraft they’re broken down into the various component parts of the aircraft.

Conversely when you look at Regional One, we’re leasing the aircraft to a third party and we did not have visibility on what overhauls, what work they’re doing on the various components. So it’s impossible for us to componentize that into the various parts.

As such we take a look at the value of the aircraft when we buy it, the residual value at the end of its life and then depreciate it over that period. That then the entire aircraft is recorded in the section of our financial statements in fixed assets called fuselages.

So fuselages really includes two things, it includes just the fuselages on our operating aircraft and the whole aircraft engines, landing gear, windshield wipers, you name it, they’re all in there for the planes that are available for lease or under lease. Then when we move -- if a plane reaches the end of its useful life and Regional One as a flying plane and we chose to monetize it by parting it out we take the entire plane out of fuselages and move it into parts.

There are occasionally times where the engine may still have life left in which case we would leave the engine in our engine portfolio and but the balance of the aircraft ends up in parts. It is really, really, really important to understand when it goes to parts there’s most of the aircraft in terms of volume, doesn’t have value.

Nobody buys the tail section of a retired aircraft, nobody buys the scratch or a very few people buy the scratch used windows or the chairs or the overhead bins or the drink cart. Do we have one or two of those things in our parts thing sure in case someone needs one, but the vast majority of that stuff has no value and is discarded.

The value is placed on the parts that actually do have value and it ends up in parts. Now that was the explanation from a CEO I'm going to just confirm here with Tammy that what I’ve said is actually correct.

Yes, I can confirm that Mike’s description is accurate. I think like one little bit of color I would also add to it just around the value of Regional One’s inventory is to add on to Mike’s point about a third of Regional One’s parts inventory is carried at zero cost, because it’s more difficult to move that stuff.

And then additionally about 85% of the total cost on our books is approximately two years old or less. So we’re very diligent about making sure that what the inventory we’re carrying on the books is at an amount that will drive future profit, we're not carrying bad inventory there.

And that inventory is value tested every quarter by the subsidiary. It's tested by our internal audit department regulatory from head office.

And as part of the year-end audit PWC test the value by utilizing a third-party appraiser to test the values. And make sure that they're appropriate.

So there is no risk or no concern on our part about the value of that inventory.

Okay, thank you. Just secondly from me, wondering if you could run us through your ability to pay dividends if you were to stop investing in growth CapEx.

That's a good question, Mona. The growth CapEx are the things we do to increase our future cash flow.

So the maintenance capital expenditures we have whether they're in the airlines or whether they're in the manufacturing companies, or whether they're Regional One are fully sufficient to maintain the assets in those businesses. And by doing that they're fully sufficient to maintain the dividends at current level.

We do generate cash flow beyond our dividend and our maintenance CapEx, which is always going to be available for growth, which should for some reason we choose to stop using new capital, which I want to be clear it's not our intention as long as there is good opportunities we're going to do what we've done for the last 13 years. But should we choose not to for some reasons, there is no reason that the current dividend levels are impaled [ph].

The only challenges that it would have it would take us longer to grow the dividend in the future because there would be less capital deployed.

Okay. Thank you, I'll step back in queue.

Thanks, Mona.

Good morning.

Good morning, David.

My first question is on the Legacy airlines. So the concern among some investor is that competition is negatively impacting the Legacy airlines or could.

I was wondering if you could just give us a rundown on the state of competition in Legacy and I guess also provincial.

Yes, in Provincial just to start with your last question first, the competitive landscape is eased somewhat with the new deal we've done with Air Borealis and Air Labrador’s exit from a number of other markets. So I would suggest that the competitive landscape there is easier.

In Northwestern Ontario, that's the most competitive markets we're in. It has been competitive and it's still is.

There is really no change there. In Manitoba, we have a very dominant market position in there finding in Nunatsiavut it's exceptionally dominant.

In Manitoba in most of the markets we're in we are the key carrier or the only carrier. We have an airline from Ontario that has started one flight into Manitoba a day, which has had a negligible impact on our company.

And occasionally we have small airlines start and try and fly against us into some of our communities. And that comes and goes and again at this point there has been no material impact.

Let me clear it doesn't mean no one can chill up, someone could try and compete against us at some point in the future, it's entirely possible. It's happened in the past, there are cost structures in our relations such that we're confident were that to occur we'd be able to deal with it.

But at this point in time, as you can see by the Legacy revenues, the thought that we're under massive seize is just factually wrong.

Okay, very good. And then the second question, just on the working capital, sounds like you add a build in the receivables related to aircraft sales.

So should we expect working cap to reverse and be actually generator of cash in the second half or maybe you could just comment on that.

I guess, I would make a couple of comments related to that. Our receivables and do tend to be quite high at the end of the second quarter relative to the rest of the year because our business volumes are growing significantly through that period in a lot of areas.

So in fact in Legacy and then obviously with the growth at Regional One we’re seeing that as well. So yes, we would expect it to decline all other things being equal because that's the way the cyclicality of our business will influence.

One thing that I would also like to point out is that we -- when we have a certain large contracts in our Legacy airlines with governments, the timing of their payment of receivables can really influence that balance that any given time. So, while we would expect it to go down if they pay very shortly after a quarter-end you may see it appear high for that reason and that's not business volume related that’s just timing related, but with large customers that can happen.

And then the one anomaly in the quarter-end quite simply as we saw an aircraft into a difficult part of the world. We sold it with the benefit of a letter of credit to ensure we would be paid, but at quarter-end the check had replaced the letter of credit.

That happens regularly, happened at the end of Q4 as well where we sold an aircraft and then corrected it in Q1 that's normal part of the business, we make sure we’ve got the necessary collateral to let them have the aircraft. But it’s not a change in the business or a ongoing pattern, it’s just tied to a particular transaction.

And one last comment I would make on working capital is asset wise business volumes are starting to really grow. So those have influenced working capital position at quarter-end.

And depending on their continued business growth, we could see it go up or down in the third quarter. But generally we would expect it to come down, yes.

Okay, that's helpful. And then third question I had was on the Canadian dollar, I was wondering if you could comment on how you see that impacting results since it strengthened so much.

The Canadian dollar in the last month or so has risen fairly significantly. And that has the potential, that hurts just a little bit in the short-term and the reason is really quite simple Regional One operates in U.S.

dollar so when we repatriate that profit the decline or the strength of the Canadian dollar reduces the Canadian dollar value in those sales. Typically, that's largely offset by two things, one is the impact on fuel prices which we should see in the future, because ultimately fuel is a U.S.

dollar commodity and the cost of airplane parts. But as we’ve talked a lot first half of this call we chose to do a lot of that in the first half of the year and apparently my ability to time currency transactions isn’t that good because we spent most of that money back when the Canadian dollar was in the $0.73, $0.74 or $0.75 range it’s now in the $0.79 range.

So, the shelter we would normally get from that isn’t there. So, there is a very long answer to say that the strength of the Canadian dollar is likely to cost us a few million dollars in the back half of the year.

Okay, you wouldn’t be the first not that the currencies right Mike. Thanks very much.

Thanks, David.

Hi, Raveel.

Yes, thank you very much. Good morning guys.

So my first question is regarding your acquisition pipeline, could you provide us with a little bit more color about the type of sectors that you guys are looking at and the opportunities there?

Yes, absolutely. I have talked for those of you who followed our story for a while.

I have talked about the desire to find a new vertical for a very long time. And we’re still looking actively, but we’ve not found anything at this point that meets our criteria, and is big enough to warrant going into something new.

So I can tell you that the transactions we’re pretty excited about are in the sectors we’re in now. They may not be exactly what we do.

We are looking it’s a very interesting unique opportunities within the aviation and aerospace sector one in particular and I can’t tell you what it does because it wouldn’t be that hard for you to figure out who they are then. Is an expert in their part of the field and it’s a very exciting opportunity.

And we also for the first time in a while have a very exciting opportunity on the manufacturing front. It’s not exactly what we do today, but there are Canadian leader in a certain business and we will see if we are able to close any of those transactions.

We also have a number of smaller transactions again both in those two fields that we will see what we can get to. We are not at a stage where we have any deals or there is anything I can report to you, just the stuff that we’re excited about and I think we are in the ballpark on pricing.

Got it. And I mean given the age of your fleet, can you please comment on how you see the maintenance capital trend changing for your business over the next four to five years?

That’s a really good question, Raveel. Aircraft when they first come out from the manufacturer they are in a warranty and they are coming up to their first overhaul.

So the first segment when a brand new aircraft comes out is very cheap for the company to operate, then it goes in for the overhaul and the expenses start to change. By the time the aircrafts been overhauled a couple of times it’s reached in quotation marks kind of matured level, our aircraft range from kind of 15 to 30 years old and the overhauls of those aircraft, when you overhaul it at 18 years old versus when you overhaul it at 21, there is not a material difference.

Now plane-to-plane, you could have a variation depending on what work you choose to do on a plane in a given time, but there is no discernible trend on the maintenance costs of those aircraft absent where the Canadian dollar to weaken that will drive up the costs of those planes conversely where the Canadian dollar to strengthen it would reduce the costs of those planes or if there was a major inflationary environment it access to the parts for those planes. But the amount and the type of work required on our fleet is essentially the same today as it was five years ago, it is essentially the same as it will be five years from now.

Great, thank you so much for that. And then just finally, if you can please comment on consensus forecast for 2017, do they make sense based on your outlook for the company?

Yes, we stated after Q1, that we thought we could meet analyst consensus, and we still think we can meet that. We have good really strong second quarter, and with that we continue to expect that we will be able to meet the year end numbers, we are not without our challenges, WesTower is having a tough go of it.

If I were to be honest, it’s a tougher go that we anticipated the telcos are even slower than we thought they might be. And as Mr.

Tyerman asked me the exchange rate doesn’t help us any. Having said both of those things we are still comfortable that we are going to meet the analyst consensus.

Great, thank you. That’s all for me.

Thanks for taking my questions. I have three questions, and I wanted to start with the simplest one first.

So Mike what do you think is the total CapEx required to sustain EBITDA at the current run rate without cutting the dividend?

We haven’t really given a forward looking number on that. Konark, I think if you were to take kind of a two year average of this year and last year that’s probably pretty close.

We have grown the fleet 5% or 10% so you might want to add some adjustment factor. And the reason I say to take a couple year look at this, last year was a very light year for us for overhauls, timing wise we only had nine.

This year is the opposite. It’s looking at something like 15 or 16.

Next year while we haven’t done our budgets and I don’t have a final number, I would expect it to fall somewhere right in the middle of that is our current estimate. We will give much better guidance on that in Q3, once we have got the opportunity to do our peer scheduling for that.

But I think something in the average of those two periods, with a slight adjustment for the fact that remember the Regional One fleet has grown. And so that depreciation will grow a little bit more with the fleet and should we grow during the other growth CapEx that we would tell you about that would obviously increase it by the depreciation on the new planes.

So Mike let me be clear on this. So do you sort of imply that if you have just sustainable CapEx to maintain EBITDA, you would be free cash positive after all the CapEx and after all the dividend, is that a fair statement?

Absolutely, completely and equivocally.

Okay, thanks. Second question Mike, I know it’s tough to predict growth CapEx given the dynamics at Regional One, but perhaps you can help us with some numbers here.

So when you say you don’t have major CapEx plans in the near-term how much growth CapEx does that mean in second half and into 2018? And let’s say a big opportunity shows up in the next couple of months where would you set your maximum limit for growth CapEx for that?

Let’s deal with that question first, I don’t know that I have a maximum limit of the stocks trading at a level today that I think is well below its intrinsic value as evidenced by the fact that we’ve been using our share buyback capabilities pretty consistently until we went into the blackout period. So I don’t think you’re going to see us actively pursuing new capital to expand in this environment until our stock prices were appropriately valued.

But for us the size of the growth CapEx is really based on how good the return is. If the deal is good enough within our existing capital we would look at it.

In terms of the rest of the year, I kind of spelled out those projects, it will be down materially from where we are now.

Okay, Mike thanks. And then finally Mike, on the current leverage metrics that you have and given the share price where it is how do you plan to fund future growth CapEx or let’s say a big M&A in case you see a very attractive big opportunity.

Like do you have some headroom in your covenants and could there be a potential divestiture of certain underperforming assets as an option?

We would always consider divesting ourselves in underperforming or even in over performing division if the price was right. At this point I don’t see that as a high degree of likelihood.

In terms of within our existing capital I think we have like $290 million available and if were buying EBITDA with that so if we’re using that money to buy new stuff I can fully deploy all of that at the kind of prices we pay and stay within our covenant strength.

Okay, that’s all my questions Mike, thanks.

Thanks Donald.

Hey, thanks. I’ll -- maybe housekeeping question, I’ll start with a housekeeping question here, thanks for the details around capital assets and inventory.

I’ve noticed though over the past few quarters you’ve seen an uptick in your asset sales I just want to confirm whether that reflects the planes that you’re selling. So you noted you sold three planes does that reflect the $12 million of asset sales.

And if that’s correct, I'm just trying to reconcile when would -- why wouldn’t of that moved up into the inventory and what special case would that just come out of capital assets is something change in I guess some of your estimates to lead to one accounting treatment versus the other?

Kevin I really have no idea what you’re talking about in terms of our accounting treatment, it’s really quite simple. If we have a plane that’s in fixed assets and it’s available for -- and someone wants to purchase it and it’s an accretive sale that’s the business we’re in.

I’ll sell fixed assets if the price is right and we don’t have to move it to inventory to sell it and if we did the accounting treatment would be exactly the same anyway. Because if you move it out of capital expenditures and out of capital assets and into inventory it would be a negative CapEx we talked about that.

And then if I sold it out of inventory it would then reduce the inventory. So whether you sell it directly from CapEx, from capital assets or from inventory there’s absolutely no impact on the financial statement.

No, fair enough.

If your question is actually about the sustainability of asset sales.

Right yes, should I be bake in like $10 million a quarter or…

I think it’s reasonable to assume that we’re going to continue to sell aircraft on a regular basis. Will they be exactly the same, no, but in terms of what it generates in the bottom line between our leasing portfolio, our part sales and our aircraft sales.

If the concern is that the quarter is driven by aircraft sales I would just take and look at the financial statements. We disclosed because some of our shareholders said we want to know what’s really going on in Regional One.

We disclosed the leasing portfolio. The leasing portfolio and Tammy help me here the leasing revenue went up by what this quarter?

It went up by $3.5 million from Q1 to Q2.

No, but the leasing revenue quarter-over-quarter, I think it was up about $10 million from last year?

Oh sorry. From last year yes close...

Yeah, so our increasing in leasing revenue is approximately $10 million quarter-over-quarter. And as we've discussed before, the EBITDA margin on a lease payment is high-90s it's virtually all flow through.

And so when you look at the increase in EBITDA something in the range of $15 million, $10 million jumps straight out of the lease category. And then our absent the plane sales, the part sales are way up and the part sales are way up at a much higher margin.

So if the concern is that the results aren't sustainable because we sold planes this quarter. I wouldn't be overly concerned about that, could it changed by revenues quarter-to-quarter a bit, sure it can.

If you sell an $8 million sale CRJ-700 that's a significant revenue hit. But the margins on the sale of aircraft are much lower.

Yes, and I would add that our -- if you look at the relative percentage of revenue source between parts, full aircraft and lease, like over the last 10 quarters, it stayed pretty constant. If the odd slight split if you do sell an aircraft, but it's not as profound as you might be thinking, Kevin.

It doesn’t fairly significant our big aircraft. Most of the sales we have are older CRJ-200-8 those kinds of aircraft.

We don't sell a lot of the bigger and newer aircraft as most of them are under lease. They do sell occasionally.

But what we do, the impact on the bottom line is not very big.

Yes, so I wasn’t suggesting that it wasn't sustainable. I was just wondering just for my own model perspective, would those three aircraft -- the three aircraft you sold in the quarter I guess reflect that $11.5 million on the cash flow statement, I'm just so reconciling it correctly.

And if I'm not…

You can see it in the capital assets section of the cash flow statement.

Yes, that's okay. Anyway I can take it offline, it's okay.

Just secondly, I was wondering as you make these acquisitions, it sounds like your pipeline is quite robust here. And I apologize if it’s somewhere that you've disclosed and haven't found it yet.

I'm wondering how the Board thinks about executive compensation, especially when I look at the most recent proxy, two of your more well paid executives are from recent acquisitions in Provincial and Regional One. And does the Board look at the same metric across when they judge yourself and Tammy relative to the presidents of these divisions that you're acquiring?

Or are they judged on different metrics. Because I presume the underlying business models are so different that a static compensation model might not reflect the associated risks with running these businesses?

Yes, when we look at an acquisition how we value how we determine the cash flow is based on what the ongoing compensation is of the people within those companies and what sustainable and what we're going to pay them. And the Board then approves that as part of the transaction.

That because it's factored into the cash flow of the company you're paying and what you're going to continue to pay to people. I mean it's something we're materially out of black and the bigger concern quite frankly is sometimes in private companies you may have an employee that's underpaid and you couldn't replace them for that value.

And so then effectively the cash so you're buying is overseeing it. And so we want to make sure that the people are paid at the market for the job they're doing.

And I've got no problem when we got Brian makes at Provincial or the guys at Regional One, when you look at the performance of that company.

Yes. So I guess what I am -- I'm not suggesting that they not performing well, but for example, if you're judged or at least the head office executives are judged on also EBITDA might not be an appropriate metric say for one of the businesses you acquired as Board when they look at the variable comp for these individuals do they make those adjustments or are the metrics static across all executives.

So the EBITDA for you, it's EBITDA for somebody else as well even if the underlying business model might be different?

Yes, it's not EBITDA for any one. It's all about free cash flow, it's reinvestments, and it's about earnings.

And each there are slightly difference -- we’re about generating free cash flow and so that’s a big part of everybody’s compensation plan, but the compensation plans are different between the companies.

Okay, no that’s helpful. And then just lastly, you did have a note in your MD&A about, I guess a partnership with CRJ Capital, can you just provide some inside exactly the opportunities I guess Regional One sees with CRJ Capital?

And just kind of when you decide to make these partnerships what exactly triggers it?

Generally speaking the partnership you are talking about is with the founder of Regional One and his initial contract was coming near to end. And as I disclosed in marketing meetings over the last quarter, we have been trying to find a way to make sure we tie him up for the long run.

And so we have allowed him to make minority investments into certain acquisitions of aircraft, provided that minority position is approved at the time that acquisition is made. So you can buy in later it’s approved by head office and he puts its capital up front.

In return his non-compete is extended for a period beyond the end of the life of the partnership. And so, we view it as a win-win, we don’t have any of those with anyone else and at this point, we don’t anticipate having any other one.

Is there an asset difference like I presume things like the regional jets stuff you prefer to keep wholly within Regional One does CRJ Capital might be focused on a different aircraft type.

They would tend to be small -- they are still largely regional jets but they would be smaller planes and stuff that as a shorter life span that tend to transact more quickly. But that’s neither here nor there it’s -- he is making smaller investments into certain transactions and in return the non-competition cause is extended.

Great thanks for taking my questions, Mike and Tamara.

Hey, Derek.

So you are comfortable with EBITDA in 2017, it around 13% growth rate year-over-year. Looking out into 2018 and the recent the investments that you have made to-date consensus roughly 10% year-over-year from ‘17 and ‘18, are you comfortable with that number at this point?

Yes, I mean to be perfectly honest we haven’t done a budget going out that far yet, but the quantum of the growth expect is entirely reasonable. And so at this point I would say yes, we are comfortable with that and by the time we get to the end of the next quarter, I’ll be able to give much better more thoughtful guidance on 2018, it’s a little early in the year for us in terms of budgeting.

But in terms of a big picture point of view do we think that that’s reasonable, yes we do.

Okay, great. And David welcome on board.

The -- have you gone through the Legacy airlines at EIF at this point, is that still to be done? And as you standardize the aircraft safety and maintenance processes across the Legacy airlines, do you think that could lead to like a higher maintenance intensity going forward?

Thanks for that question it’s a good question, I have been here a year as I stated. I have been though the Legacy airlines as I have been through many, many airlines over the last 15 years and what we see is the higher bar standard as I talk about, rain in people from the various companies to assist and looking at different companies and bringing in those standardize practices in a way of looking doing business.

Does that translate into investing more money into the maintenance side, that’s not how this program works, as Mike did a good job earlier on. When you look at maintenance on aircraft, it is fairly predictable overtime.

Upping the standard or upping the way we look at them and bringing me online, this means we have more frequent inspection, we up the standard of how we do business. We up the standard of how we look at how our guys are doing business and we continue to do business in the safe way we have for the past 50 years in certain areas.

And that doesn’t translate into a financial change that translates into a better standard across all our subsidiaries. That's more of the comparison I would make them that.

Okay, fair enough. And two more really quickly if I could, are any of your fuselages in your Legacy airlines are they beginning to reach its end of life?

Yes that happens, I mean I think we have in the last two to three years I think we had one or two metros that have reached end of their useful life and by the time that happens generally speaking the fuselages been depreciated to zero or a very, very close to zero. And we are not happens, we actually literally then will harvest the consumable parts off with the engines will come back off, landing gear certain avionic parts and then we’ll actually park it and we say now it’s standing it has no value we will save fuselage did we may take an elevator off or some other strange parts that’s hard to find and have them.

But they are fully relieved from the books. In terms of the average life of the asset that's not a material issue on a going forward basis, we will have a small number over the next couple of years and in which case we would simply go get a replacement fuselage.

And brought backup and overhaul it and put the glass cockpit in and do the things we do and then continue on.

Okay, great. And last one from me, do you leverage Regional One at all to source or sell any components or parts into your Legacy airlines?

Oh for sure, absolutely did that when we first looked that Regional One, the very first thing we thought of was they can outsource our parts for us for the regional airlines. We’ve actually set up a Winnipeg based operation one by Regional One to provide parts to the airlines especially in the bigger aircraft where they specialize.

They are less helpful on the king airs and the metros because they don’t have a lot of expertise in that fleet type. And then before someone else asks when you sell a part from Regional One to one of the airlines it’s transferred at cost in our external financial statements, there is absolutely no profit or anything reported on that transfer.

Okay, great. That's all my questions.

Thanks.

Given that there is no further questions I would like to thank everyone for participating on today’s call. And I look forward to updating you on our progress in the quarters ahead.

Have a great day.