In my March 3 post, I commented that the acquisition of Jazz would be an acquisition that makes sense for Air Canada, and a worthwhile use of Air Canada’s excess cash.
In late February, Chorus Aviation reported the company had agreed to buy regional aircraft lessor and management firm Falko in an $855m USD cash and debt deal. As part of the deal, Brookfield Asset Management will invest US$374 million in Chorus, including US$300 million of preferred equity and US$74 million of common equity.
In the following post from 18 months ago, a case was made for Air Canada to acquire the Jazz component of Chorus Aviation.
Thoughts on the Non-Binding Acquisition https://stockhouse.com/companies/bullboard?symbol=t.ac&postid=31810792 Shortly after retiring from Air Canada as President and CEO in February 2021, Calin Rovinescu was appointed a senior advisor to Brookfield Asset Management for acquisitions in the aerospace industry. According to the March 28, 2022,Management Proxy Circular, the Air Canada Board also retained the departing CEO for consulting services for the remainder of 2021.
Rovinescu is likely the architect behind the Chorus/Falko deal, a deal that transforms Chorus into a much more significant player in the global aircraft leasing business, and a deal that might also facilitate the acquisition of Jazz by Air Canada. If true, then we should expect an upcoming announcement by Chorus and Air Canada involving the sale of Jazz, the airline component of Chorus Aviation. Air Canada’s current holdings in Chorus Aviation represents approximately 8 percent of Chorus shares under the new arrangement with Brookfield. The acquisition of Jazz would represent Chorus Aviation’s exit from major contracted flying services.
For Air Canada, acquiring Jazz (at a favourable price) increases future free cash flow and removes inflexibilities associated with a third-party commercial arrangement, such as flight hour guarantees.