New Capacity Purchase Agreement February 2015 Disclaimer Caution - PowerPoint PPT Presentation

New Capacity Purchase Agreement February 2015

Disclaimer Caution regarding forward-looking information Certain information in this presentation, and statements made during this presentation, may contain statements which are forward-looking statements. These forward-looking statements are identified by the use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would”, and similar terms and phrases, including references to assumptions. Such statements may involve but are not limited to comments with respect to strategies, expectations, planned operations or future actions. Forward-looking statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and other uncertain events. Forward-looking statements, by their nature, are based on assumptions, including those described below, and are subject to important risks and uncertainties, and that the Chorus dividend policy under which the Board evaluates the dividend on a regular basis and declares dividends at their discretion as further described in the Chorus MD&A. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to differ materially from those expressed in the forward-looking statements. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, risks relating to Chorus’ relationship with Air Canada, risks relating to the airline industry, airline leasing, energy prices, general industry, market, credit, and economic conditions,(including a severe and prolonged economic downturn allowing Air Canada to decrease the amounts it pays under the CPA during such downturn), competition, insurance issues and costs, supply issues, war, terrorist attacks, epidemic diseases, environmental factors, acts of God, changes in demand due to the seasonal nature of the business, the ability to reduce operating costs and employee counts, secure financing, employee relations, labour negotiations or disputes, restructuring, pension issues, currency exchange and interest rates, leverage and restructure covenants in future indebtedness, dilution of Chorus shareholders, uncertainty of dividend payments, managing growth, changes in laws, adverse regulatory developments or proceedings, pending and future litigation and actions by third parties. The forward-looking statements contained in this discussion represent Chorus’ expectations as of February 2, 2015, and are subject to change after such date. However, Chorus disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable 2 securities regulations.

Agenda The time is right to restructure the CPA Highlights of the new CPA Fleet benefits Key comparisons: Summary of components The value proposition 3

The time is right to restructure the CPA Air Canada growth creates a unique timing opportunity Previous CPA model not competitive for the long term given the changing competitive landscape Air Canada and Chorus fully aligned on improving cost structure and building a framework for a successful long term relationship Improved network flexibility; more efficient aircraft 4

Agenda The time is right to restructure the CPA Highlights of the new CPA Fleet benefits Key comparisons: Summary of components The value proposition 5

Highlights of the new CPA Effective January 1, 2015 Extension through to December 31, 2025 Moves Chorus to a very competitive position in regional sector Significant cost reductions Strengthens relationship with Air Canada Better aligns interests 6

The New CPA: Win – Win for Chorus and Air Canada The new CPA allows both parties to achieve and maintain competitive cost structures while securing a more cooperative and stable working relationship. Value to Chorus Value to Air Canada   Secure extension of CPA by 5 years to YE2025 Improved network strength   Platform for fleet renewal More operational and market flexibility  o Leveraging and unlocking value of owned Dash 8-100 aircraft Highly, and increasingly competitive ASM costs o Incremental larger gauge flying and related ownership benefits  Reduced cost risk  Enhanced value driven by leasing under the CPA  Supply of qualified pilots for projected demand  Cost competitive for the long term  Leverage economies of scale of Jazz operation  Compensation levels anticipated to support the dividend through to 2025  Previous CPA value secured to 2020; elimination of the 2015 Cost Benchmarking Value to Both Companies  Fleet renewal, including resolution of investment decision in Dash 8- 300 fleet  Long-term pilot collective agreement to 2025 matching CPA term with competitive terms  CPA structure promotes cost-efficiencies, rather than prior CPA where margins applied to costs failed to incent lower costs  Significantly lower execution risks versus waiting until CPA expiry 7

New pilot agreement Industry-leading 11-year agreement – Greater flexibility with cost competitive structure – Creates long-term stability Currently 85% of Jazz pilots at top of wage scale (based on seniority) Pilot Mobility Agreement allows senior pilots flow up to Air Canada Jazz transitions to a less senior pilot demographic Productivity enhancements Enhanced ongoing cost control through flow up 8

Agenda The time is right to restructure the CPA Highlights of the new CPA Fleet benefits Key comparisons: Summary of components The value proposition 9

Fleet simplification and modernization The Chorus fleet will transition to more efficient, larger aircraft with significant fleet simplification Jazz will transition to a mix of larger, newer technology regional jets (CRJ705s) and turboprops (Q400s) Aircraft 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Type Q400 27 37 39 39 39 44 44 44 44 44 44 CRJ200 16 13 10 10 10 0 0 0 0 0 0 CRJ705 16 16 16 16 16 16 16 16 16 16 16 Total 59 66 65 65 65 60 60 60 60 60 60 The to-be-formed classic airline will shrink in size over time to accommodate the addition of Q400s, replacing older, less efficient Dash 8-100s that have a higher value in alternative uses Aircraft 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Type Dash 8-100 28 19 16 15 15 15 12 12 4 1 0 Dash 8-300 26 26 26 26 26 26 26 26 26 26 26 Total 54 45 42 41 41 41 38 38 30 27 26 10

New CPA: Fleet Benefits to Chorus Unlocking the value in the fleet New Q400s: Dash 8 Classics: Existing Q400s: Leveraging Chorus Balance Solidifying Value Unlocking Value Sheet to Enhance Value Reduction of 19 Dash 8- Ensures return for Chorus Minimum addition of 13 100s prior to 2020 enables investment for a much new Q400s of the 23 Chorus to re-deploy these longer period of time Q400s to be introduced owned assets Solidifies the existing Leverage of the Chorus Remaining Dash 8-100s lease rates through expiry balance sheet to finance flown under existing of the financing the new Q400s at compensation structure attractive financing terms Market rates thereafter through to retirement through CPA expiry Differentiator to other Air Life extension program Canada regional providers investment for Dash 8- 300’s with AC financing * Jazz Charters current fleet of 2 Dash 8-300s and 1 CRJ-200 unchanged 11

Agenda The time is right to restructure the CPA Highlights of the new CPA Fleet benefits Key comparisons: Summary of components The value proposition 12