Airline group united ‘like a quilt’

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This article was published 12/05/2016 (3820 days ago), so information in it may no longer be current.

THE company is based in Winnipeg, and its operations are spread across North America — from Newfoundland to Florida to Nunavut — but Exchange Income Corp.’s operations are really starting to work together nicely.

“It’s becoming like a quilt,” said Mike Pyle, the company’s CEO. “Everything is starting to fit together.”

EIC has a virtual lock on Manitoba regional airlines — it owns Perimeter, Calm Air, Keewatin and Bearskin. Three years ago it bought a large Florida aviation after-market company called Regional One that buys and sells planes and after-market parts.

And then last year it made its largest deal ever with the purchase of Provincial Aerospace Ltd. (PAL) based in St. John’s, N.L. PAL operates scheduled air service in Newfoundland and Labrador, maritime surveillance and maintenance, repair and overhaul work.

Now all the heavy maintenance for Perimeter Airline’s Dash-8s and Calm Air’s ATRs are done at PAL’s heavy-maintenance operations in St. John’s.

As well, EIC’s Manitoba airplane fleets as well as PAL’s own fleet of 22 planes regularly source parts from sister company, Regional One.

At EIC’s annual meeting Wednesday, held in Calm Air’s hangar with the din of airplanes taking off and landing in the background, Brian Chafe, PAL’s chief executive officer, said he sees all sorts of other opportunities for the sister companies to work together in the future.

For instance, PAL is making a name for itself around the world doing maritime surveillance work — in addition to working with the Department of Fisheries and Oceans in Canada, it also does surveillance work for the Caribbean island of Curaco as well as maintenance and management work for the United Arab Emirates.

“We see other synergies to come,” Chafe said.

For instance, EIC also owns Custom Helicopters in St. Andrew’s, and Chafe said in the future he sees PAL deploying helicopters in its surveillance work. As he said that, he was eyeing one of Regional One’s CRJ-700 parked in the Calm Air hangar.

“That could be a different surveillance solution platform for a different service than we offer today,” Chafe said. “It’s one of a bigger suite of opportunities down the road.”

In the meantime, EIC has funded the purchase of two new planes for PAL since the acquisition and has injected more than $25 million in capital expenditures in the East Coast operations. That includes supporting PAL’s participation in a $3-billion 25-year fixed-wing search-and-rescue request for proposal from Public Works and Government Services Canada issued just months after the EIC deal closed.

“We would not have participated in that tender bid without the support of EIC,” Chafe said.

That work is expected to be awarded by the end of this year or early next year, but EIC’s fortunes will not depend on that one contract.

With record numbers in the first-quarter results released this week, the company has increased its dividend for the third time in the last 18 months, up five per cent to an annualized $2.01 per share.

With revenue up 25 per cent to $217.9 million and free cash flow, a key metric for EIC, up 46 per cent to $34.9 million, the company continues to maintain a solid growth pace.

Trevor Johnson, an analyst with National Bank Financial, noted the company beat analyst forecasts on almost every metric for the quarter.

First-quarter results prompted Johnson to increase his target price for EIC from $33 to $38 per share.

“It’s not one thing, it’s a whole bunch of little things,” Pyle said of the company’s current successful dynamic.

“Our business model was designed to utilize diversification as a means of dealing with the cyclical challenges in the North American economy,” he said. “Never has the success of this strategy been more evident than in the first quarter of 2016.”

Despite low commodity prices, the volatility of the Canadian dollar and the fact the first quarter is the softest for EIC’s Manitoba airlines, the company still hit record revenue and earnings.

Company shares closed up 5.36 per cent to $32.06.

martin.cash@freepress.mb.ca