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Chorus Aviation hikes its dividend 50%

Dec. 10, 2013, Halifax - Chorus Aviation Inc. hiked its dividend by 50% Tuesday in the aftermath of winning its protracted rate dispute with the country’s largest carrier last month.


December 10, 2013
By The Financial Post

Shares in the company jumped 7% in early morning trading to $3.99 a share as of 9:42 a.m. on the Toronto Stock Exchange.

 

The move will see Chorus’ quarterly dividend jump to 11.25¢ a share,
from 7¢ a share previously, payable to shareholders on or after January
17, 2014.

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“Our business is strong and we remain focused on improving our cost
competitiveness,” said Joseph Randell, Chorus chief executive,
announcing the move.

 

The new 45¢ a share annual distribution is, however, less than the 60¢ a
share Chorus used to pay prior to slashing its dividend last May due to
the ongoing uncertainty of the outcome of its dispute with Air Canada.

 

The disagreement centred on the rate at which Chorus is paid over and
above its controllable costs to operate regional flights on Air
Canada’s behalf.

 

Air Canada argued the mark up rate should be in the range of 7% to
10% while Chorus’ successfully argued that it should remain at 12.5%.

 

In late November, an arbitration panel sided with Chorus in the dispute.

 

Mr. Randell said the new payout would allow the company to continue
with its cost cutting efforts but also to reward shareholders.

 

“This dividend level has been set to allow the company to pay down
current maturing debt, to continue to fund initiatives to reduce our
costs, and to support capital projects and other growth opportunities.
Our board remains committed to delivering value to our shareholders,” he
said.

 

Walter Spracklin, RBC Capital Markets analyst, said while the market
had already priced in a favorable ruling in the dispute with Air
Canada., it has yet to value the improved cash flow profile of the
company on a go-forward basis.

 

“With a dividend increase now approved, we believe this will provide
the confirmation that there is an indeed a sustainable improved cash
flow profile,” he said in a note to clients. “Accordingly, we see the
CHR shares moving higher following today’s dividend increase
announcement.”