Canadian regional aviation specialist Chorus Aviation could become more active in end-of-life MRO activities following its recent acquisition of UK-headquartered lessor Falko Regional Aircraft.
Halifax-headquartered Chorus is a regional aircraft lessor, but it also has two airlines—Jazz Aviation and Voyageur Aviation—which are both active in regional-aircraft maintenance.
On Feb. 27, Chorus announced a $855 million deal to acquire Falko from Fortress Investment Group. This deal is significant because it joins two highly experienced regional-aircraft suppliers that are able to manage aircraft from new delivery to end-of-life, including repurposing, disassembly and part-out. The acquisition completed on May 3 and the Falko brand will be retained.
“This coming together is really about the total lifecycle of the assets,” Chorus president and CEO Joe Randell told Aviation Week.
Jazz performs in-house MRO on its own fleet, including C checks, D checks and some third-party work, while Voyager takes on MRO modification work, such as aircraft repurposing, freighter conversions, refurbishment, cockpit replacements and long-range fuel tank upgrades.
“The [Chorus and Falko] platforms are very complementary,” Randell said. “Chorus, in its leasing business, has focused more on new [aircraft] sale and leasebacks—where there were fewer opportunities in terms of synergies on the MRO side—whereas Falko has focused more than Chorus on mid- to end-of-life assets.”
This creates a perfect fit between Chorus’ MRO businesses and Falko’s older fleet. “I think that really differentiates us now, as a lessor, in terms of those capabilities and options going forward for the assets and doing those basically in-house,” Randell said.
He continued: “A big part of the growing Voyageur business is the part-out business and, if you're dealing with end-of-life assets, then obviously that can be a very appealing option, in terms of how you get value out of the assets. Voyager has grown this used serviceable material business quite a bit. COVID leveled it off, but now it's growing again and they have a lot of capabilities there.”
Randell is open to further expanding Chorus’ MRO capabilities, should any opportunities emerge. “Right now, it's more or less building and growing what's there,” he said.
Chorus is a highly experienced De Havilland Dash 8 and CRJ operator, with Embraers joining the group’s fleet more recently, for deployment with Air Canada. “We’ve been involved with Bombardier products in a big way,” Randell said.
This means Voyageur’s MRO unit has focused on De Havilland Dash 8 part-out work, because it has a good supply of aircraft from Jazz’s Air Canada Express operation. Voyageur has also done some CRJ part-outs. However, Randell said they have just acquired a couple of ATRs from a third party, enabling the company to expand into ATR parts.
“We’re moving into that [ATR] business, and the Embraer business is clearly there now, especially with Falko and those opportunities. So, we will have a complete scope of regional parts support, etc. We will continue to focus on the part-out business; that's clearly an area where we're filling a need in the market.”
Falko CEO Jeremy Barnes, who will lead the merged leasing business, said Falko’s average fleet age is 10 or 11 years, with the oldest aircraft sitting at around 15-17 years old. He has a couple of CRJ900s and E-Jets which are “at a crossroads” and their fate is currently being decided.
Previously, Falko has sourced MRO slots on the open market, using a range of providers. “We used to just grab slots at MROs wherever we could; it was pretty straightforward. We work on aeroplanes all over the place. We just have to be opportunistic,” Barnes said. “MRO slots are like hen's teeth.”
A proportion of Falko’s fleet is placed in North America, with operators like Delta Air Lines and Republic Airways, but the rest of the Falko portfolio is spread around the world. This means Falko will continue using third-party MRO providers, because Chorus is already at capacity with in-house work and it will not always be financially viable to fly Falko’s fleet to Chorus’ facilities.
“I think the real trick is finding ways where we can use the infrastructure and skills in Voyager to squeeze those last few pips out of some of our aeroplanes as we come to the end of their life and do other things that add value to the aeroplane, give it longer life, support residual values, all those sort of good things,” Barnes said.
Chorus has just performed life extensions on 17 ex-Air Canada Jazz Dash 8-300s that were coming up to their 80,000 cycle limit, increasing them to 120,000 cycles. Their interiors were also refurbished and a couple have now been placed on lease with other operators.
“If you think about it, there’s no replacement on the horizon for the CRJ900, or for the 100-seat E-190,” Barnes said. “I couldn't even tell you the average age of the fleet, or the cycles on each of those worldwide fleets, but at some point in time, assuming there is no new 100-seat regional jet coming on the market, then those aeroplanes, by definition, will have to get extended somehow.”
This may be some way off yet, but Randell observes that the lack of replacement aircraft will be good for residual values, making it “very advantageous” for Chorus to own these assets.
“I think there are going to be a lot of opportunities on the MRO side, but the role of the MRO in our case is really to support the broader strategy. It is really a facilitator, a differentiator, which allows us to move in different directions,” Randell said. “The plan and the strategy for MRO will be how best it can really support our overall strategy, as to how we extract value out of these assets. It's not a business that we are growing on its own in certain areas; it's really more of a supporting and facilitating role.”
Likewise, Chorus’ C and D check capacity is primarily taken up doing in-house MRO, rather than targeting third-party work. “We've approached that on the basis that, if we have the capacity we will do a third-party, rather than saying we're setting out to specifically target and grow that business,” Randell said.
Chorus and Falko’s combined owned, managed and operated fleet will initially total 348 regional aircraft, placed with 32 airlines in 23 countries and valued at approximately $4.5 billion. However, Chorus also plans to acquire interests in five aircraft trusts before the end of Q2, increasing the total to 353 aircraft.
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