Chorus Group reported a net income of $20.3 million with an increase of $60.7 million quarter-over-quarter (Q-O-Q). The lessor reported adjusted earnings of $15.5 million, a decrease of $6.2 million quarter-over-quarter and adjusted EBITDA of $110.7 million, an increase of $5.9 million Q-O-Q. The airline released its second quarter (Q2) financial results recently. The free cash flow almost doubled to close at $70.3 million with increase of $36.0 million or approximately 105.0%.
"I am pleased to report Chorus' solid financial performance for the quarter, delivering improvements in Leverage Ratio and Free Cash Flow. Free Cash Flow has more than doubled year-over-year to $70.3 million, and our Leverage Ratio has improved to 3.8 at June 30, 2023, from 4.4 at December 31, 2022. As a result of our contractual earnings, we are on track to meet our guidance for 2023," said Colin Copp, president and chief executive officer, Chorus.
The (Regional Aircraft Leasing) RAL segment's Adjusted EBITDA was $57.3 million, an increase of $6.8 million primarily due to three months of Falko's earnings in the second quarter of 2023 versus two months in the second quarter of 2022 partially offset by decreased revenue related to the sale of wholly-owned aircraft in the second half of 2022.
The RAS segment's Adjusted EBITDA was $61.8 million and was in-line with the second quarter of 2022. Q2 was impacted by an increase in aircraft leasing revenue under the CPA of $1.5 million primarily due to a higher US dollar exchange rate, an increase in other revenue of $1.3 million due to an increase in parts sales, MRO activity and contract flying; offset by a contracted decrease in Fixed Margin of $0.8 million.
The impact was also felt due to decrease in capitalization of major maintenance overhauls on owned aircraft of $0.8 million; and an increase in general administrative expenses attributable to increased operations.
Adjusted net income was $25.6 million for the quarter, a decrease of $2.0 million over the second quarter of 2022 due to an increase in depreciation expense of $4.4 million primarily attributable to Falko and capital expenditures in 2022; an increase of $2.9 million in income tax expense and a change in net foreign exchange of $2.7 million; partially offset by a $5.9 million increase.
The lessor reported a decrease in net interest costs of $1.5 million primarily related to the redemption of the 6.00% Debentures in December 2022 and the recognition of income related to the discontinuance of hedge accounting on an interest rate swap; partially offset by interest on long-term debt assumed as part of the Falko Acquisition and the draw on the Operating Credit Facility.
The Group’s Net income increased $60.7 million over the second quarter of 2022 with a change in net unrealized foreign exchange of $27.9 million; a decrease in impairment provisions of $20.5 million and lease repossession costs of $10.7 million; a decrease in restructuring expected credit loss provision of $10.4 million; and a decrease in strategic advisory fees of $5.7 million; partially offset by the previously noted decrease in Adjusted net income of $2.0 million; and an increase in income tax expense on adjusted items of $12.8 million.
For the first half (H1) of 2023, Chorus reported Adjusted EBITDA of $228.8 million for 2023, an increase of $40.7 million over the same prior year period. The RAL segment's Adjusted EBITDA was $118.9 million, an increase of $36.7 million primarily due to six months of Falko's earnings versus two months in the first half of 2022; partially offset by decreased revenue related to the sale of aircraft in the second half of 2022.
The RAS segment's Adjusted EBITDA was $125.7 million, an increase of $6.4 million due to an increase in other revenue of $8.0 million due to an increase in parts sales, MRO activity and contract flying; and an increase in aircraft leasing revenue under the CPA of $3.9 million primarily due to a higher US dollar exchange rate; partially offset by a decrease in capitalization of major maintenance overhauls on owned aircraft of $1.8 million; contracted decrease in Fixed Margin of $1.5 million.
"The market for regional aviation remains strong. In the second quarter, Falko had 20 aircraft transactions with nine distinct airline customers across six continents. In addition, as of June 2023, regional current market values and lease rates have shown signs of recovery from pandemic lows, reflecting a positive forward outlook," noted Copp. "We continue to see many opportunities to deploy funds in regional aircraft leasing to earn strong mid-teen returns and look forward to providing an update upon concluding discussions with our investors."
The Group reported H1 adjusted net income of $56.4 million, an increase of $11.1 million over the same prior year period primarily due to a $40.7 million increase in Adjusted EBITDA as previously described; partially offset by an increase in depreciation expense of $17.4 million primarily attributable to Falko and capital expenditures in 2022; an increase of $8.2 million in income tax expense; and an increase in net interest costs of $4.0 million primarily related to interest on long-term debt assumed as part of the Falko Acquisition and the draw on the Operating Credit Facility partially offset by the redemption of the 6.00% Debentures in December 2022 and the recognition of income related to the discontinuance of hedge accounting on an interest rate swap.
The Group’s net income of $52.3 million, an increase of $69.8 million over the same prior year period.
Going ahead, the Group expects its revenue to be between $250.0 million and $275.0 million, Adjusted EBITDA is expected to be between $210.0 million and $235.0 million and Adjusted EBT is expected to be between $70.0 million and $85.0 million for the year ending December 31, 2023.