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exchange income corporation

This tag is associated with 8 posts

SUMMARY: A small airline in Thunder Bay, Ontario, North Star Air Ltd. has been bought for $C 31M ($US 23M) by Winnipeg based North West Company (NWC), a large Canadian grocery and retail company with +218 stores, many in remote and isolated communities across Canada’s North. The driver of this deal was to control its distribution by having its own cargo airline, and not being dependent on what is basically a air cargo monopoly by Calm Air in the Manitoba, Nunavut and Kivalliq regions, where NWC has many stores, and where the First Nations communities are totally dependent on aircraft for all their local needs for most of the year. The acquisition raises the problem of a lack of competition in many parts of the North, where communities and suppliers have all but one choice of airline in and out of many communities, which in many cases allows for high margin “monopoly” pricing. Canada has no Essential Air Service (EAS) like the USA, which subsidizes scheduled air services to 150 markets of which 44 are in remote parts of Alaska with single engine turboprops like the CE-208B to SF340’s and CRJ-200’s at a cost of $250M a year (President Trump looking to cut that). Canadian passengers and suppliers in the North have no choice but to pay the very high fares and freight rates demanded by air operators. Time for a new fresh look at affordable air access in the North ? if we are to develop the North as Ottawa says, then we cannot burden and punish the people there with high fares and freight rates, that make life their very expensive as everything in most communities goes by air, from groceries, lumber to even fuel for electric generators.

It has been pretty quite on the Canadian airline mergers and acquisition front since the late June, 2016 acquisition of Transwest Airlines (Prince Albert, Saskatchewan) by local rival West Wind Aviation (Saskatoon, Saskatchewan). That deal created another Provincial regional airline monopoly, just as EIC (Exchange Income Corporation) has in neighboring Manitoba, where it now owns … Continue reading

UPDATE: Canadian regional airline consolidation continues as the once fragmented industry starts to consolidate around a single provincial operator. After 11 months under Canada’s CCAA (+/- Chapter 11 bankruptcy/reorganization), Quebec based regional airline, Pascan Aviation is acquired by 2 senior executives in a management buyout (MBO). Meanwhile Saskatchewan based WestWind Aviation, fresh from its acquisition of Osprey Wings last November, looks to takeover its main local competitor, Saab 340 operator Transwest Air, itself the product of two old local airlines and their pioneers (Athabasca Airways of Floyd Glass and La Ronge Aviation of Pat Campling) coming together in 2000, leaving WestWind Aviation a monopoly in Saskatchewan, much like Manitoba with Perimeter Airlines, Calm Air, Keewatin Air and Bearskin Airlines, all under one ownership. Times are changing for regional airlines in Canada, as the second generation of airline owners retire or sell of the businesses that their fathers and mothers built from scratch, usually with nothing more than a single Cessna 180 aircraft. Sad to see the old names disappear, it is the “circle of life”, but the legacies of our Canadian aviation pioneers will always remain with us.

UPDATE: As I wrote this, I found out that WestWind Aviation (80% First Nation owned) has bought Transwest Air for an undisclosed amount, now only 1 airline exists in Saskatchewan, like it or not.   This is my follow up to the January 5, 2016 article “Consolidation in the Canadian Regional Airline Industry”, as the … Continue reading

PRESENTATION: Finding the elusive sustainable airline business model in the Caribbean, a large graveyard for regional airlines for decades. The region has a great deal of potential, but government taxes (up to 100% of net ticket price) play havoc with passenger demand, poor intra regional connectivity and government protection for state subsidized airlines (LIAT, Caribbean Airlines, Bahamasair, Cayman Airways) limits any real competition. Time for real Open Skies, allowing freedom to serve any route by appropriately licensed carrier, and governments to get out of the airline business, and stop taxing airline tickets to the point where tourist traffic is 1/3 of what it was 10 years ago, the whole idea is to get tourist to the islands and then tax them, rather than tax them to death on airline tickets as they then chose other destinations to travel to, its all backwards. LIAT flies 35% of its routes on money losing “social routes” with ATR-72/42’s, time to get small regionals with 15-19 passenger turboprops to compliment and even replace LIAT services on money losing routes, frees up ATR capacity for money making routes and reduces or eliminates loses on “social routes”. Time for a more intelligent approach on air transport and air connectivity in the region, where tourism is still struggling after 8 years, and it is tourism that drives the economies in the Caribbean.

I attended the Carib Avia’s 1st annual Caribbean Aviation Meetup between June 14-16, 2016 in Roseau the capital city of the beautiful Commonwealth of Dominica, and attached is the 2 hour presentation from the Conference. The Presentation covers airlines that have gone bust, regional aircraft, multi-government owned airlines, airline business models, regional airline valuations to … Continue reading

ABSTRACT: Chorus Aviation, the biggest Air Canada Express partner with 122 aircraft, is buying DHC-8 / CRJ-200 ACMI operations specialist Voyageur Airways for $C 80 million on the heels of an amended CPA (capacity purchase agreement) with Air Canada (AC) that now extends into 2025, and one that requires Chorus to lower its costs, one way to do that is to set up a separate low cost unit (Voyageur Airways) to operate the older DHC-8-100/300’s at a lower cost base , and another unit will continue to operate the newer and bigger Q400’s, CRJ-705’s and the CRJ-200’s, it is a strategic move to lower labor costs (at $95,442 per employee, 9% higher than at AC) and to stop other regional airlines like Sky Regional and Air Georgian from winning new AC CPA business in the future, Chorus Aviation is paying a rather high 4.7 times EBITDA to have its ‘low cost subsidiary’, the old and out of production DHC-8’s (average 26 years old) have become a burden on Chorus which generates 99.2% of its business from AC, its previous attempts to diversity have all failed, a regional LCC is a fantasy, too little room for extra seats or extra utilization to drive CASM’s down, Chorus Aviation’s 2014 Net Income margin of 3.9% is very low and cash flow was negative $C 45 million, AC needs low cost regional partners more than ever now and it just gave Chorus a 10 year life line to shape up.

Canada’s Chorus Aviation Inc.  (TSX: CHR.B, CHR.A) is to buy all of the issued shares of 519222 Ontario Ltd. A holding company that owns North Bay, Ontario based Voyageur Airways and its affiliated companies for around $C 80.0 million to be its ‘low cost’ DHC-8-100/300 operator, a mini version of Rouge, which is Air Canada’s … Continue reading

ABSTRACT: Fast growing Exchange Income Corporation (EIC) of Winnipeg buys its 7th aviation company for $246 million, Provincial Aerospace Ltd. (PAL) and is now the 3rd largest fixed wing commercial aircraft operator in Canada with around 117 aircraft and few have heard of the company, yet it has what we need in Canadian aviation, vision, desire to grow, good leadership and ability to source financing, who said you can’t make money in this industry ? it takes financial experts working closely with experienced aviation executives and letting them do their jobs ! finally a quick look at the Maritime Patrol Market that PAL is in.

Back on January 31, 2013, I wrote a blog entitled “Consolidation through mergers and acquisitions in the Canadian regional airline industry and how to Value them ?”. I introduced the Exchange Income Corporation (EIC) (TSX: EIF) run by Mr. Mike Pyle out of Winnipeg, which today owns 6 aviation companies, 4 are regional airlines in … Continue reading

Passenger Airlines in Canada, a Fast Changing Landscape is Unfolding – The Few Small 704 Operators Left

Recently I read a presentation by WestJet that showed future market opportunities in Canada, and on the domestic side AC and WJ have $3.8 billion of the domestic market, but apparently there is an opportunity in the domestic market “Small Aircraft <50 seats” worth $1.1 billion, that sounded interesting and a little frightening for those … Continue reading

WestJet Airlines Search for a Sustainable Business Model, means more trouble for Air Canada and other Canadian Carriers

Calgary based WestJet Airlines has reported another good year for 2012. Revenue topped $CDN 3.42 billion resulting in Net Earnings of $CDN 242 million (7.1% net margin), and 2013 is shaping up to be a big year for the airline. The airline has 100 B737NG aircraft (16 x B737-600’s, 69 x B737-700’s and 18 x … Continue reading

Consolidation through Mergers and Acquisitions in the Canadian regional airline industry and how to Value them ?

I have worked overseas for 20 years working with 30+ airlines all over the world on strategy and now back in Canada I have found it difficult to find out how well Canadian airlines do financially and why more consolidation has not happened. With some M&A (mergers and acquisitions) experience and airline privatizations behind me, … Continue reading