Chorus Aviation increased its second-quarter adjusted net income 9%,  thanks largely to its growing aircraft leasing business, but unfavorable currency exchange rates helped dragged down the company’s year-over-year (YOY) 2Q net income down 61%.

The regional airline operator, lessor, and MRO specialist reported adjusted 2Q net income of C$29.4 million ($22.6 million), a C$2.5 million YOY increase. Chorus benefited from a C$14.9 million increase in adjusted third-party leasing revenue, as its fleet of leased aircraft went from two a year ago to 17 last quarter. It also added C$1.4 million in adjusted net income from leases to Air Canada to support the companies' capacity purchase agreement (CPA).

Chorus subsidiary Jazz Aviation is Air Canada’s primary regional feeder.

Second-quarter net income was C$16.2 million for the period, a decrease of $24.9 million. Bottom-line earnings were dragged down by a YOY change in unrealized foreign exchange loss of C$31.3 million.

Chorus has been revamping its business to become less reliant on the CPA, which had 116 aircraft flying to 78 destinations for Air Canada. Its third-party leasing portfolio has added two aircraft this year—both Bombardier CRJ900s—and now includes four CRJ1000s, five Q400s, six Embraer E190s/E195s, six ATR 72s, and the newest CRJs. It also leases 45 aircraft to Air Canada. It plans to spend about $C600 million in the next 12 months adding more aircraft, including some this year.

“We do anticipate to pick up a couple of deals [in the] last half of this year, and we hope to be in a position to announce the details of those transactions soon,” Chorus president and CEO Joe Randell said. “We have term sheets that we’re looking to turn into definitive agreements, and while there wasn’t a lot of announced activity in the first half, the year-over-year growth was substantial.”

The transition is bearing fruit. Chorus earned 89% of its revenue from the Air Canada CPA last quarter, down from 93% a year ago. 

Chorus also reported increased demand for its MRO services. It has parted out 10 Dash 8-300s to support both third-party customers and internal needs, and recently acquired two more. It also has completed six of at least 19 Dash 8-300 extended service plan (ESP) upgrades under a deal with Bombardier. ESP is designed to extend a Dash 8-300’s life by up to 15 years. 

Sean Broderick,