Air Canada (AC, Montréal Trudeau) will acquire a 9.99% stake in Chorus Aviation as part of an amended and extended Capacity Purchase Agreement (CPA) between Air Canada and Chorus' Jazz Air (QK, Halifax) subsidiary.

Chorus said in a stock market disclosure that Air Canada would invest a total of CAD97.26 million Canadian dollars (USD73.41 million) into Chorus as part of the deal, which will now run until 2035.

In terms of the share sale, Air Canada will subscribe to 15,561,600 of Chorus's Class B Voting Shares by way of a private placement for CAD6.25 per share, which represents a 5.0% premium to the five-day volume weighted average price as of the close of trading on Thursday, January 10, 2019. Chorus and Air Canada will also enter into an investor rights agreement governing the terms of Air Canada’s investment in Chorus. The carrier will have a seat on Chorus’ board and will nominate Michael Rousseau, Air Canada’s Deputy Chief Executive Officer and Chief Financial Officer to the position.

Of the proceeds generated by the sale of shares, Chorus said approximately 60% will go towards the purchase of nine additional new 76-seat CRJ900s which will be used to modernize Jazz’s fleet and generate additional lease revenue under the CPA. Chorus has thus conditionally secured the ability to purchase the CRJ-900s. The remaining balance will be deployed by Chorus to acquire and lease aircraft outside of the CPA.

The CPA guarantees Jazz Air with a minimum covered fleet of 105 aircraft to 2025 and a minimum of eighty 75-seater aircraft between 2026 and 2035. According to the ch-aviation fleets module, Jazz Air currently operates ten CRJ200s, twenty-one CRJ-900s, fifteen DHC-8-100s, twenty-six DHC-8-300s, and forty-four DHC-8-400s.

In total, Chorus said the 17-year CPA contract will provide CAD2.5 billion (USD1.89 billion) in minimum contracted revenues of which CAD1.6 billion (USD1.21 billion), or 65%, will be generated from aircraft leasing revenue, supporting the continued transformation of Chorus’ business through the migration of CPA earnings to aircraft leasing.