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Damaged Edmonton Plane Will Return To Service, If Possible

11/13/2014 12:31 EST | Updated 01/13/2015 05:59 EST
MONTREAL - A Bombardier Q400 plane that sustained heavy damage during an Air Canada Express emergency landing in Edmonton last week will go back into service if it can be repaired, Chorus Aviation said Thursday.

The plane's landing gear collapsed shortly after landing at Edmonton International Airport, causing a propeller blade to pierce a window and the surrounding fuselage. Four people were injured but all 71 passengers and four crew survived.

Halifax-based Chorus, which operated the flight as an Air Canada regional partner, said it hasn't determined whether the two-engine aircraft can be fixed or if it must scrapped.

"The extent of the damage is still being established," CEO Joseph Randell said Thursday during a conference call about the company's third-quarter results.

He said an insurance adjuster has been assigned to the case.

The Q400 turboprop took off from the Calgary airport on Nov. 7 on its way to Grande Prairie, Alta. but was diverted to Edmonton after the pilot reported that the plane had blown a tire.

The flight was diverted to Edmonton because officials felt conditions for a landing were safer there.

"I deeply regret the stress our passengers experienced," Randell told analysts.

He said it could take some time before the Transportation Safety Board completes its investigation. Chorus is also conducting its own investigation.

Meanwhile, Chorus (TSX:CHR.B) said it is hopeful of negotiating a new agreement with Air Canada (TSX:AC) that governs its relationship before the existing contract expires in 2020.

Randell wouldn't say if a deal might be concluded next year, but he said Chorus is "working hard" on a deal that would benefit both sides.

"I think there's an interest on Air Canada's part in not waiting until 2018 or 2020 to do this," he said.

Meanwhile, analysts say a recently approved 10-year contract agreement between Air Canada and its pilots will give the airline more flexibility by allowing its regional partners to fly larger aircraft.

"The new labour deal could be a key milestone towards contract changes between Air Canada and Chorus," wrote Cameron Doerksen of National Bank Financial.

He said a new agreement would lower costs charged to Air Canada — likely in exchange for allowing Chorus to replace 50-seat planes with larger aircraft, which would help Chorus reduce its cost structure.

Walter Spracklin of RBC Capital Markets said a renegotiated deal would allow Chorus to sustain its current dividend and be a catalyst for the company's share valuations.

"Waiting to 2020 is not realistic," he wrote, adding that developing another regional partner is less attractive.

Air Canada and its regional partners such as Chorus and Sky Regional operate the country's largest regional fleet. But WestJet Airlines (TSX:WJA) is expanding its Encore regional service to Eastern Canada and eventually to the United States.

Chorus Aviation's third-quarter results beat analyst expectations as net profit excluding a currency swing increased to $29 million in the third quarter from $27.7 million a year earlier.

The Halifax-based company said it earned 24 cents per share in adjusted profits for the period ended Sept. 30, compared with 23 cents per share last year. Operating revenues were largely unchanged at $432.6 million as higher rates and currency fluctuations were offset by fewer hours of flying.

The company had been expected to earn $23.6 million or 19 cents per share in adjusted profits on $424 million of revenues, according to analysts polled by Thomson Reuters.

Including an unrealized $17.75 million currency loss in the quarter, Chorus says its net income was $11.3 million. That was down from $36 million in the prior year when it recorded a $8.3 million currency gain.

Chorus Aviation's Jazz subsidiary operates about 766 departures daily to 54 destinations in Canada and 18 in the U.S. with a fleet of 122 Bombardier turbo and jets.

On the Toronto Stock Exchange, Chorus' shares closed at $4.51, down 12 cents or 2.7 per cent on Thursday.

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