Canadian Helicopters reports Q3 and nine-month 2007 results



    
    Highlights

    - Revenue +8.6% over Q3 2006; EBITDA +9.8% over Q3 2006
    - Nine-month revenue +6.9% over same period of 2006; nine-month EBITDA
      +27.9% over same period of 2006
    - Distributions to unitholders increased 5% per cent to $ 1.1025 annually
    

    MONTREAL, Nov. 13 /CNW Telbec/ - Canadian Helicopters Income Fund
(TSX: CHL.UN), the largest helicopter transportation services company
operating in Canada, today announced its financial performance for the three
and nine-month periods ended September 30, 2007.
    Revenue for the third quarter reached $55.7 million, compared to
$51.3 million for the same period of 2006, a gain of $4.4 million or 8.6 per
cent, despite a slight decrease in the number of hours flown. Operating
expenses - comprising primarily of expenses related to crew, maintenance, cost
of goods sold and SG&A - increased to $33.0 million, from $30.8 million for
the third quarter of 2006, resulting in EBITDA increasing to $22.5 million,
from $20.5 million for the comparable period in 2006, a gain of $2.0 million
or 9.8 per cent.
    Said Jean-Pierre Blais, President, Canadian Helicopters, "The significant
gain in third quarter revenue was achieved primarily through an increase in
VFR revenue associated with flying in resource-based activities and from an
increase in ancillary revenue associated with our activities in the Canadian
Forces Contracted Flying Training (CFTS) program, while IFR segment revenue
was stable. Overall, flying hours decreased slightly to 31,659 hours from
31,880 hours a year ago - a decrease of 0.7 per cent."

    Nine Months Results

    For the nine months ended September 30, 2007, Canadian Helicopters Income
Fund reported revenue of $119.2 million, compared to $111.5 million for the
same period of 2006, an increase of $7.7 million or 6.9 per cent. Operating
expenses increased to $87.5 million from $86.8 million in the first nine
months of 2006.
    EBITDA for the nine months to September 30, 2007 increased to
$31.6 million from $24.7 million for the same period of 2006, a gain of
$6.9 million, or 27.9 per cent. EBITDA margins improved from 22.2% to 26.5%
    EBITDA performance was attributed primarily to improvement in fleet rate
and slightly higher hours flown in the VFR segment, lower maintenance expenses
arising from timing differences, and lower insurance costs.
    "The conclusion of the third quarter also marks the end of the busiest
period of flying activity in Canada, as daylight shortens and weather becomes
less favorable for flying. As we have previously announced, we will use the
balance of the year and the start of the new year to focus on training and
maintenance activities while maintaining IFR segment activities at near
year-round levels," Blais added.
    Repair and maintenance expenses on flying assets are not incurred evenly
during a year and the timing of such expenses within a year may vary from one
year to another and is not representative of all quarters throughout the year.
    As fuel costs are passed through to customers, increases in fuel prices
do not materially affect Canadian Helicopters' financial performance.
    As a net buyer of U.S. dollars, Canadian Helicopters protects itself
against currency fluctuations with respect primarily to the purchase of
aircraft parts and insurance expenses through hedging.

    Distribution
    ------------

    We announced today that we will increase our annual cash distribution to
unitholders by five per cent to $1.1025, effective for the period from
November 1, 2007 to November 30, 2007. The November distribution will increase
to $0.091875 from $0.0875 per unit and will be paid on December 14, 2007 to
unitholders of record at the close of business on November 30, 2007.

    
    Conference call:

    The Canadian Helicopters Income Fund financial results conference call
will take place Wednesday, November 14 at 11:00 a.m. ET. To participate in
this conference call, please dial one of the following numbers approximately
five minutes prior to the commencement.

    Local number:      416-644-3424 (Toronto)
    Toll free number:  800-594-3615

    Please state that you are participating in the Canadian Helicopters Income
Fund call. Should you be unable to participate, an instant replay will be
available until November 21, 2007 by dialing:

    Local number:      416-640-1917 (Toronto)
    Toll free number:  877-289-8525
    Access code:       21249450 followed by #


    Forward-Looking Statements

    This press release contains forward-looking statements relating to the
future performance of the Fund. Forward-looking statements, specifically those
concerning future performance, are subject to certain risks and uncertainties,
and actual results may differ materially. Consequently, readers should not
place any undue reliance on such forward-looking statements. In addition,
these forward-looking statements relate to the date on which they were made.
The Fund disclaims any intention or obligation to update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise unless being required by applicable laws.

    Definition of EBITDA, Standardized Distributable Cash, Distributable Cash
    and Non-GAAP Measures

    References to "EBITDA" are to earnings (loss) before interest, income
taxes, depreciation and amortization, gain or loss on disposal of property,
plant and equipment and non-controlling interest, as disclosed in the Summary
of Selected Consolidated Financial Information.
    Standardized Distributable Cash is a non-GAAP measure recommended by the
Canadian Institute of Chartered Accountants ("CICA") in order to provide a
consistent and comparable measurement of distributable cash across entities.
Standardized Distributable Cash represents cash flows from operating
activities, less adjustments for net maintenance capital expenditures as
reported in accordance with GAAP.
    Management views Distributable Cash as an operating performance measure,
as it is a measure generally used by Canadian income funds as an indicator of
financial performance. Distributable Cash is defined as cash flows related to
operating activities plus the net change in non-cash working capital balances
less the net maintenance capital expenditures. Distributable Cash is important
as it summarizes the funds available for distribution to unitholders. As the
Fund will distribute a significant portion of its cash on an on-going basis
and since EBITDA is a metric used by many investors to compare issuers on the
basis of the ability to generate cash from operations, management believes
that, in addition to net earnings or loss, EBITDA is a useful supplementary
measure from which to make adjustments to determine Distributable Cash.
    EBITDA, Standardized Distributable Cash and Distributable Cash are not
earnings measures recognized under GAAP and do not have standardized meanings
prescribed by GAAP. Therefore, EBITDA, Standardized Distributable Cash and
Distributable Cash may not be comparable with similar measures presented by
other entities. Investors are cautioned that EBITDA, Standardized
Distributable Cash and Distributable Cash should not be construed as an
alternative to net earnings (loss) determined in accordance with GAAP as
indicators of the Fund's performance, or to cash flows from operating,
investing and financing activities as measures of liquidity and cash flows.

    Profile

    Through Canadian Helicopters Limited, Canadian Helicopters Income Fund is
the largest helicopter transportation services company operating in Canada and
one of the largest in the world based on the size of its fleet. From over
40 bases across Canada, and more than 120 aircraft operating across Canada,
Canadian Helicopters provides helicopter services to a broad range of sectors,
including emergency medical services, infrastructure maintenance, utilities,
oil and gas, forestry, mining and construction. In addition to helicopter
transportation services, Canadian Helicopters operates three flight schools
and provides third party repair and maintenance services. With 60 years of
experience, Canadian Helicopters is an industry leader in establishing safety
standards and operating procedures.

    Attachments:

    - Q3 and Nine- Month Financial Statements
    - Management's Discussion and Analysis of Financial Condition and Results
      of Operations



    Interim Consolidated Financial Statements

    Canadian Helicopters Income Fund
    Unaudited
    September 30, 2007


    Canadian Helicopters Income Fund

                     INTERIM CONSOLIDATED BALANCE SHEETS

    (unaudited)
    As at

                                                  September 30,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                        7,678,723     9,988,849
    Accounts receivable                             34,602,550    12,277,351
    Inventory                                       15,028,361    14,946,409
    Prepaid expenses                                 1,207,478       909,423
    -------------------------------------------------------------------------
    Total current assets                            58,517,112    38,122,032
    -------------------------------------------------------------------------
    Property, plant and equipment                  123,058,982   123,762,406
    Derivative financial instruments (note 2)          225,700             -
    Intangible assets                               22,518,000    23,164,875
    Goodwill                                        23,500,000    23,500,000
    -------------------------------------------------------------------------
                                                   227,819,794   208,549,313
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities        22,949,378    19,583,541
    Distributions payable                            1,162,000     1,162,000
    Advance payments from customers                  5,323,536     3,052,276
    -------------------------------------------------------------------------
    Total current liabilities                       29,434,914    23,797,817
    -------------------------------------------------------------------------
    Long-term debt (note 3)                         15,000,000    18,918,671
    Derivative financial instruments (note 2)        2,281,000             -
    Future income tax liabilities                   36,944,593    32,145,530
    Non-controlling interest (note 4)               30,316,106    27,723,741
    -------------------------------------------------------------------------

    Unitholders' equity
    Fund units (note 4)                            104,012,290   104,012,290
    Purchased and held in trust under the
     long-term incentive plan: 81,825 units           (910,046)            -
    Contributed surplus                                417,105             -
    Retained earnings                               11,822,832     1,951,264
    Accumulated other comprehensive income
     (loss) (notes 2 and 6)                         (1,499,000)            -
    -------------------------------------------------------------------------
                                                   113,843,181   105,963,554
    -------------------------------------------------------------------------
                                                   227,819,794   208,549,313
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    Canadian Helicopters Income Fund

                     INTERIM CONSOLIDATED STATEMENTS OF
                       EARNINGS AND RETAINED EARNINGS

    (Unaudited)

                       Three-month   Three-month    Nine-month    Nine-month
                      period ended  period ended  period ended  period ended
                         September     September     September     September
                          30, 2007      30, 2006      30, 2007      30, 2006
                                 $             $             $             $
    -------------------------------------------------------------------------

    Revenue             55,686,372    51,310,270   119,232,197   111,500,146
    Operating expenses  32,999,539    30,765,977    87,466,469    86,767,988
    -------------------------------------------------------------------------
    Earnings before
     undernoted items   22,686,833    20,544,293    31,765,728    24,732,158
    -------------------------------------------------------------------------
    Amortization of
     property, plant
     and equipment         776,113       797,994     2,393,362     2,381,456
    Amortization of
     intangible assets     215,625       215,625       646,875       646,875
    Gain on disposal
     of property,
     plant and
     equipment            (299,630)     (528,056)     (463,660)     (579,523)
    Net financing
     charges (note 3)      461,516       368,032       394,990     1,062,743
    Foreign exchange
     loss                  191,730        33,297       205,910        29,863
    -------------------------------------------------------------------------
                         1,345,354       886,892     3,177,477     3,541,414
    -------------------------------------------------------------------------
    Earnings before
     income taxes and
     non-controlling
     interest           21,341,479    19,657,401    28,588,251    21,190,744
    -------------------------------------------------------------------------
    Income taxes
     expense (recovery)
      Current                    -       (33,714)       85,255        99,672
      Future             5,744,685     5,208,181     5,581,063     1,052,841
    -------------------------------------------------------------------------
                         5,744,685     5,174,467     5,666,318     1,152,513
    -------------------------------------------------------------------------
    Earnings before
     non-controlling
     interest           15,596,794    14,482,934    22,921,933    20,038,231
    Non-controlling
     interest           (3,231,754)   (3,003,914)   (4,759,322)   (4,164,403)
    -------------------------------------------------------------------------
    Net earnings for
     the period         12,365,040    11,479,020    18,162,611    15,873,828

    Retained earnings
     (Deficit),
     beginning of
     period              2,221,473    (3,421,064)    1,951,264    (2,288,510)
    Distribution
     declared           (2,763,681)   (2,763,681)   (8,291,043)   (8,291,043)
    -------------------------------------------------------------------------
    Retained earnings,
     end of period      11,822,832     5,294,275    11,822,832     5,294,275
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     earnings per Unit      1.1745        1.0903        1.7251        1.5077
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     number of Units
     outstanding        10,528,311    10,528,311    10,528,311    10,528,311
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    Canadian Helicopters Income Fund

                     INTERIM CONSOLIDATED STATEMENTS OF
                                 CASH FLOWS

    (Unaudited)

                       Three-month   Three-month    Nine-month    Nine-month
                      period ended  period ended  period ended  period ended
                         September     September     September     September
                          30, 2007      30, 2006      30, 2007      30, 2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    OPERATING
     ACTIVITIES
    Net earnings
     for the period     12,365,040    11,479,020    18,162,611    15,873,828
    Items not
     affecting cash:
      Non-controlling
       interest          3,231,754     3,003,914     4,759,322     4,164,403
      Compensation
       expense under
       the long-term
       incentive plan      139,035             -       417,105             -
      Loss (gain) on
       derivative
       financial
       instruments         136,300             -      (355,700)            -
      Amortization of
       property, plant
       and equipment       776,113       797,994     2,393,362     2,381,456
      Amortization of
       intangible
       assets              215,625       215,625       646,875       646,875
      Amortization of
       deferred
       financing
       costs                56,930        12,199        81,329        36,598
      Gain on disposal
       of property,
       plant and
       equipment          (299,630)     (528,056)     (463,660)     (579,523)
      Future income
       taxes expense     5,744,685     5,208,181     5,581,063     1,052,841
    -------------------------------------------------------------------------
                        22,365,852    20,188,877    31,222,307    23,576,478
    Net change in
     non-cash working
     capital balances   (5,013,427)   (7,652,315)  (17,068,109)  (17,208,886)
    -------------------------------------------------------------------------
    Cash flows related
     to operating
     activities         17,352,425    12,536,562    14,154,198     6,367,592
    -------------------------------------------------------------------------
    INVESTING
     ACTIVITIES
    Additions to
     property, plant
     and equipment        (665,392)     (580,921)   (2,319,215)   (1,390,695)
    Proceeds from
     disposal of
     property, plant
     and equipment         439,099       448,389     1,092,937     1,052,639
    -------------------------------------------------------------------------
    Cash flows related
     to investing
     activities           (226,293)     (132,532)   (1,226,278)     (338,056)
    -------------------------------------------------------------------------
    FINANCING
     ACTIVITIES
    Increase
     (decrease) in
     long-term debt    (11,000,000)   (2,000,000)   (4,000,000)    7,000,000
    Purchase of units
     under the
     long-term
     incentive plan              -             -      (910,046)            -
    Proceeds from
     disposal of
     derivative
     financial
     instruments           130,000             -       130,000             -
    Distributions
     paid on Fund
     Units              (2,763,681)   (2,763,681)   (8,291,043)   (8,291,043)
    Distributions
     paid on Class B
     LP Units             (722,319)     (722,319)   (2,166,957)   (2,166,957)
    -------------------------------------------------------------------------
    Cash flows
     related to
     financing
     activities        (14,356,000)   (5,486,000)  (15,238,046)   (3,458,000)
    -------------------------------------------------------------------------
    Net increase
     (decrease) in
     cash and cash
     equivalents         2,770,132     6,918,030    (2,310,126)    2,571,536
    Cash and cash
     equivalents,
     beginning of
     period              4,908,591      (975,941)    9,988,849     3,370,553
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period       7,678,723     5,942,089     7,678,723     5,942,089
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental
     information
    Interest paid          268,287       355,833       669,362     1,026,145
    Income taxes
     paid (recovered)            -       (33,714)       85,255        99,672
    -------------------------------------------------------------------------

    See accompanying notes



    Canadian Helicopters Income Fund

                     INTERIM CONSOLIDATED STATEMENTS OF
                             COMPREHENSIVE INCOME

    (Unaudited)

                       Three-month   Three-month    Nine-month    Nine-month
                      period ended  period ended  period ended  period ended
                         September     September     September     September
                          30, 2007      30, 2006      30, 2007      30, 2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    Net earnings for
     the period         12,365,040    11,479,020    18,162,611    15,873,828

    Other
     comprehensive
     loss:
    Change in fair
     value of
     derivatives
     designated as
     cash flow
     hedges, net of
     income taxes
     of $337,000
     and $915,000
     for the periods
     of three and
     nine months
     ended September
     30, 2007,
     respectively.        (647,000)            -    (1,752,459)            -
    -------------------------------------------------------------------------
    Comprehensive
     income for the
     period             11,718,040    11,479,020    16,410,152    15,873,828
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Canadian Helicopters Income Fund


                        NOTES TO INTERIM CONSOLIDATED
                             FINANCIAL STATEMENTS


    September 30, 2007
    (Unaudited)


    1. BASIS OF PRESENTATION

    Canadian Helicopters Income Fund ("Canadian Helicopters" or the "Fund") is
an unincorporated trust established under the laws of the province of Québec
pursuant to a declaration of Trust dated July 25, 2005, as may be amended,
supplemented or restated from time to time.
    The unaudited interim consolidated financial statements include the
accounts of Canadian Helicopters and its subsidiaries and have been prepared
by management in accordance with Canadian generally accepted accounting
principles applicable to interim consolidated financial statements. Certain
information and disclosures normally required to be included in the notes to
the audited annual financial statements have been omitted or condensed. The
accounting principles applied are consistent with those as set out in the
Fund's annual consolidated financial statements for the period ended December
31, 2006, except for the new accounting policies described in note 2. These
interim consolidated financial statements and the notes thereto should be read
in conjunction with the audited consolidated financial statements of the Fund
for the year ended December 31, 2006.
    The business of Canadian Helicopters follows a seasonal pattern with the
lowest revenue occurring from November to April. In addition, repairs and
maintenance on flying assets are not incurred evenly during a year and the
timing of such expenses within a year may vary from one year to another.
Therefore, the Fund's results for the interim period covered are not
necessarily indicative of the results that may be expected for a full year.


    2. CHANGE IN ACCOUNTING POLICIES

    On January 1, 2007, the Fund adopted the following new accounting
standards issued by the Canadian Institute of Chartered Accountants (CICA):

    Section 1530, Comprehensive Income, introduces a new financial statement
which shows the change in equity of an enterprise from transactions and other
events and circumstances from non-owner sources.
    Section 3855, Financial Instruments - Recognition and Measurement,
establishes standards for recognizing and measuring financial instruments,
namely financial assets, financial liabilities and derivatives.
    The new standard lays out how financial instruments are to be recognized
depending on their classification. Depending on financial instruments'
classification, changes in subsequent measurements are recognized in net
income or comprehensive income.
    The Fund has implemented the following classification:

    - Cash and cash equivalents are classified as "Assets held for trading".
      These financial assets are marked-to-market through net income at each
      period end.
    - Accounts receivable are classified as "Loans and receivables". After
      their initial fair value measurement, they are measured at amortized
      cost using the effective interest rate method. For the Fund, the
      measured amount generally corresponds to the cost.
    - Accounts payable and accrued liabilities, distributions payable and
      long-term debt are classified as "Other financial liabilities". After
      their initial fair value measurement, they are measured at amortized
      cost using the effective interest rate method. For the Fund, the
      measured amount generally corresponds to the cost.

    Section 3865, Hedges, whose application is optional, establishes how hedge
accounting may be applied. The Fund, in keeping with its risk management
strategy, has decided to apply hedge accounting to its interest rate swap and
its foreign exchange and collar contracts and treat them as cash flow hedges.
These derivatives are marked-to-market at each period end and resulting
gains/losses are recognized in comprehensive income to the extent the hedging
relationship is effective. Any ineffective portion is recognized in net
income. The amounts recognized in other comprehensive income are reclassified
in income when the hedged items affect income.
    These new standards have to be applied retroactively without restatement
of prior period amounts. Upon initial application, all adjustments to the
carrying amount of financial assets and liabilities shall be recognized as an
adjustment to the opening balance of the deficit or accumulated other
comprehensive income, depending on the classification of existing financial
assets or financial liabilities. As at January 1, 2007, the Fund has
recognized a $253,459 adjustment to the opening balance of accumulated other
comprehensive income with respect to the unrealized gains on the interest rate
swap and the foreign exchange and collar contracts designated as cash flow
hedges. Finally, the deferred financing costs previously shown in the
long-term assets have been reclassified on a comparative basis as a reduction
of the long-term debt.
    During the second quarter of 2007, the Fund discontinued hedge accounting
on its interest-rate swap agreements when the hedging relationship ceased to
satisfy the conditions for hedge accounting. Subsequently, changes in the fair
value of the interest-rate swap agreements are being recorded in income. For
these derivatives, previously recorded gains or losses included in other
comprehensive income, which amounted to $323,000 (net of income taxes of
$169,000), were reclassified in income, under the caption "net financing
charges (income)", since they are not expected to be recovered in future
periods.

    New accounting standard
    -----------------------

    In June 2007, the CICA issued a new accounting standard - Section 3031
Inventories, which replaces the existing standard for inventories, Section
3030. The main features of the new Section are as follows:

    - Measurement of inventories at the lower of cost and net realizable
      value;
    - Consistent use of either first-in, first-out or a weighted average cost
      formula to measure cost;
    - Reversal of previous write-downs to net realizable value when there is
      a subsequent increase to the value of inventories.

    The new Section is effective for the Fund beginning January 1, 2008. The
Fund is currently assessing the impact on the financial statements.


    3. SECURED CREDIT FACILITIES

    The Fund has senior secured credit facilities consisting of a revolving
operating credit facility of up to $15 million expiring September 8, 2008 and
a revolving term credit facility of up to $40 million expiring September 8,
2010. Both facilities bear interest at a floating rate based on the Canadian
dollar prime rate, U.S. base rate, LIBOR or bankers' acceptance rates plus an
applicable margin to those rates. As at September 30, 2007, the floating
interest on the term credit facility was 4.30%, after the impact of interest
rate swap agreement. The Fund entered into an interest rate swap agreement
with a notional value of $20 million for its term debt to pay a fixed interest
rate ranging between 4.30% and 4.92% as at September 30, 2007.
    The revolving operating credit facility may be used for general corporate
purposes, including the payment of distributions required due to cash flows
fluctuations. Interest is paid monthly and there are no scheduled repayments
of principal required prior to maturity.
    Amounts drawn under the revolving operating and term credit facilities are
as follows:

                                                  September 30,  December 31,
                                                          2007          2006
                                                             $             $
    -------------------------------------------------------------------------

    Operating credit facility                                -             -
    Term credit facility                            15,000,000    19,000,000
    Deferred financing costs, net                            -       (81,329)
    -------------------------------------------------------------------------
                                                    15,000,000    18,918,671
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Under the terms of these facilities, the Fund is required, amongst other
conditions, to meet certain covenants. The Fund was in compliance with these
covenants as at September 30, 2007. The credit facilities are collateralized
by a hypothec and a security interest covering all present and future assets
of the Fund and its subsidiaries.


    Net financing charges

                       Three-month   Three-month    Nine-month    Nine-month
                      period ended  period ended  period ended  period ended
                         September     September     September     September
                          30, 2007      30, 2006      30, 2007      30, 2006
                                 $             $             $             $
    -------------------------------------------------------------------------

    Interest on
     long-term debt        244,793       346,491       781,618       993,003
    Other interest
     expense (income)       23,493         9,342      (112,257)       33,142
    Amortization of
     deferred
     financing costs        56,930        12,199        81,329        36,598
    Loss (gain) on
     derivative
     financial
     instruments           136,300             -      (355,700)            -
    -------------------------------------------------------------------------
                           461,516       368,032       394,990     1,062,743
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    4. UNITHOLDERS' EQUITY

    Fund units

    The Fund Declaration of Trust provides that an unlimited number of Units
and an unlimited number of Special Voting Units of the Fund may be issued.
Each Unit is transferable and represents an equal undivided beneficial
interest in any distributions of the Fund and in the net assets of the Fund.
All Units have equal rights and privileges. Each Unit entitles the holder to
participate equally in all allocations and distributions and to one vote at
all meetings of unitholders for each whole Unit held. The Special Voting Units
are only to be issued in connection with Canadian Helicopters Exchangeable
Class B LP units (the "Exchangeable Units") for the sole purpose of providing
voting rights at the Fund level to the holder of such securities. The Special
Voting Units entitle the holder to one vote per unit and do not participate to
any interest or share in the Fund. The Fund units are redeemable at any time
at the option of the holder at amounts related to market prices at the time to
a maximum of $50,000 in cash redemptions by the Fund in any particular month.
This limitation may be waived at the discretion of the Trustees of the Fund.
Redemptions in excess of this amount, assuming no waiving of the limitation,
shall be paid by way of a distribution in specie of Series 1 Trust Notes,
Series 2 Trust Notes and Series 3 Trust Notes.


    Fund units

                             September 30, 2007          December 31, 2006
                        -------------------------   -------------------------
                            Number        Amount        Number        Amount
                                               $                           $
    -------------------------------------------------------------------------

    Fund units
    Balances, beginning
     of period          10,528,311   104,012,290    10,528,311   104,012,290
    -------------------------------------------------------------------------
    Balances, end
     of period          10,528,311   104,012,290    10,528,311   104,012,290
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Exchangeable Class B LP Units

    As part of the creation of the Fund, 2,751,689 Exchangeable Class B LP
Units were issued from a subsidiary of the Fund as partial consideration for
the acquisition of Canadian Helicopters. The Exchangeable Units are classified
as non-controlling interest in the consolidated financial statements of the
Fund. The non-controlling interest is as follows:


                        Three-month period ended     Nine-month period ended
                              September 30, 2007         September  30, 2007
                        -------------------------   -------------------------
                            Number        Amount        Number        Amount
                                               $                           $
    -------------------------------------------------------------------------

    Balances, beginning
     of period           2,751,689    27,806,671     2,751,689    27,723,741
    Share of net income
     for the period                    3,231,754                   4,759,322
    Distributions
     declared                           (722,319)                 (2,166,957)
    -------------------------------------------------------------------------
    Balances, ending
     of period           2,751,689    30,316,106     2,751,689    30,316,106
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions on exchangeable Class B LP units coincide in amount per unit
and timing with those on the Fund Units.


    5. DISTRIBUTIONS

    The Fund makes monthly distributions to unitholders of record on the last
business day of each month, payable on or about the 15th day of the following
month. Distributions to unitholders are recorded on an accrual basis. The
September 2007 distribution in the amount of $921,227 was declared and accrued
in September 2007 and paid to unitholders on October 15, 2007. Distributions
for the nine-month period are as follows:

                                                                      Distri-
                                                                      bution
                                                          Per Unit    Amount
    Period         Record date         Payment date             $          $
    -------------------------------------------------------------------------
    January 2007   January 31, 2007    February 15, 2007   0.0875    921,227
    February 2007  February 28, 2007   March 15, 2007      0.0875    921,227
    March 2007     March 30, 2007      April 13, 2007      0.0875    921,227
    April 2007     April 30, 2007      May 15, 2007        0.0875    921,227
    May 2007       May 31, 2007        June 15, 2007       0.0875    921,227
    June 2007      June 29, 2007       July 13, 2007       0.0875    921,227
    July 2007      July 31, 2007       August 15, 2007     0.0875    921,227
    August 2007    August 31, 2007     September 14, 2007  0.0875    921,227
    September 2007 September 28, 2007  October 15, 2007    0.0875    921,227
    -------------------------------------------------------------------------
    Total                                                  0.7875  8,291,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

    The changes to the Accumulated Other Comprehensive Income (Loss) that
occurred during the nine-month periods were as follows:


                                                    Nine-month    Nine-month
                                                  period ended  period ended
                                                     September     September
                                                      30, 2007      30, 2006
                                                             $             $
    -------------------------------------------------------------------------

    Adjusted opening balance due to the change
     in accounting policies adopted regarding
     financial instruments, net of income taxes
     of $133,000 (note 2)                              253,459             -
    Other comprehensive loss                        (1,752,459)            -
    -------------------------------------------------------------------------
    Balance - end of period                         (1,499,000)            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Unrealized net losses of $881,400 included in the Accumulated Other
Comprehensive Income (Loss) will be reclassified into income in the next
twelve months.


    7. ECONOMIC DEPENDENCE

    For the three and nine-month periods ended September 30, 2007, 25.2% and
30.1% respectively (2006 - 26.6% and 32.5%) of total revenue was earned from
two customers.


    8. EMPLOYEE DEFINED CONTRIBUTION PLAN

    The Fund's contribution to the defined contribution plan for the three and
nine-month periods ended September 30, 2007 was $284,551 and $799,971
respectively (2006 - $255,681 and $709,408).


    9. SEGMENTED INFORMATION

    The Fund's activities are comprised of three segments which consist of
Canadian onshore helicopter transportation services, helicopters repairs and
maintenance business and flight training. The repairs and maintenance business
and the flight training represent each less than 10% of the Fund's overall
activities. No assets are held outside of Canada.



         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS - FOR THE THREE AND NINE- MONTH PERIODS
                           ENDED SEPTEMBER 30, 2007

    The following Management's Discussion and Analysis ("MD&A") of financial
condition and results of operations, dated November 13, 2007, of Canadian
Helicopters Income Fund (the "Fund") should be read together with the audited
consolidated financial statements and related notes for the year ended
December 31, 2006 and the unaudited interim consolidated financial statements
and related notes for the three and nine-month periods ended September 30,
2007 as well as the MD&A contained in the Fund's 2006 Annual Report. The
financial statements of the Fund are prepared in accordance with accounting
principles generally accepted in Canada ("GAAP"). The fiscal year of the Fund
ends on December 31. The Fund's reporting currency is the Canadian dollar. Per
unit amounts are calculated using the weighted average number of units
outstanding for the three and nine-month periods ended September 30, 2007.
    This MD&A contains forward-looking statements. Please see "Forward-Looking
Statements" for a discussion of the risks, uncertainties and assumptions
relating to these statements. This MD&A also makes reference to certain
non-GAAP measures to assist in assessing the Fund's financial performance.
Non-GAAP earnings measures do not have any standard meaning prescribed by GAAP
and are therefore unlikely to be comparable to similar measures presented by
other issuers. See "Definition of EBITDA, Standardized Distributable Cash,
Distributable Cash and Non-GAAP Measures" and "Selected Consolidated Financial
Information", for the reconciliation of EBITDA to net earnings or loss.

    The Fund

    The Fund is an unincorporated, open-ended, limited purpose trust
established under the laws of the Province of Québec, pursuant to a
Declaration of Trust dated July 25, 2005, as amended and restated. The Fund
was created to indirectly acquire and hold a limited partnership interest in
Canadian Helicopters Limited Partnership ("Canadian Helicopters LP"). Canadian
Helicopters LP holds all of the outstanding shares of Canadian Helicopters
Limited ("Canadian Helicopters"). The Fund holds a 79.3% indirect interest in
Canadian Helicopters.
    The Fund's units trade on the Toronto Stock Exchange under the symbol
CHL.UN.
    The Fund is entirely dependant on distributions from Canadian Helicopters
to make its own distributions.

    Business Overview

    Canadian Helicopters, the largest helicopter transportation services
company operating in Canada, is also one of the largest in the world based on
the size of its fleet. With over 40 bases operating across Canada and in
excess of 120 aircraft, Canadian Helicopters provides helicopter services to a
broad range of sectors, including emergency medical services ("EMS"),
infrastructure maintenance, utilities, oil and gas, forestry, mining and
construction. In addition to helicopter transportation services, Canadian
Helicopters operates three flight schools and provides third party repair and
maintenance services. With 60 years of experience, Canadian Helicopters is an
industry leader in establishing safety standards and operating procedures.

    Distributions

    The Fund makes monthly distributions to holders ("Unitholders") of trust
units (the "Units") and Canadian Helicopters LP makes distributions to holders
of Class B Limited Partnership units (the "Class B LP Units") of record on the
last business day of each month, payable on or about the 15th day of the
following month. The September 2007 distribution in the amount of $1,162,000
was declared in September 2007 and paid to Unitholders and holders of Class B
LP Units on October 15, 2007 at the rate of $0.0875 per unit.
    Distributions declared on Units from January 1, 2007 to September 30,
2007, were as follows:

                                                     Distribution Amount
                                             --------------------------------
                                                 Unit-   Class B
              Record     Payment  Per Unit    holders         LP       Total
    Period    date       date            $          $          $           $
    -------------------------------------------------------------------------

    January   January    February
     2007      31, 2007   15, 2007  0.0875    921,227    240,773   1,162,000
    February  February   March
     2007      28, 2007   15, 2007  0.0875    921,227    240,773   1,162,000
    March     March      April
     2007      30, 2007   13, 2007  0.0875    921,227    240,773   1,162,000
    April     April      May
     2007      30, 2007   15, 2007  0.0875    921,227    240,773   1,162,000
    May       May        June
     2007      31, 2007   15, 2007  0.0875    921,227    240,773   1,162,000
    June      June       July
     2007      29, 2007   13, 2007  0.0875    921,227    240,773   1,162,000
    July      July       August
     2007      31, 2007   15, 2007  0.0875    921,227    240,773   1,162,000
    August    August     September
     2007      31, 2007   14, 2007  0.0875    921,227    240,773   1,162,000
    September September  October
     2007      28, 2007   15, 2007  0.0875    921,227    240,773   1,162,000
    -------------------------------------------------------------------------
    Total                           0.7875  8,291,043  2,166,957  10,458,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Class B LP Units were issued by Canadian Helicopters LP to former
shareholders of Canadian Helicopters upon the acquisition of all the shares of
Canadian Helicopters and are classified as non-controlling interest in the
consolidated financial statements. Distributions on such Class B LP Units
coincide in amount per unit and timing with distributions on the Units.
    The source of funding for distributions made in the current period was
from existing cash balances and credit facilities.
    See Recent Events section describing the 5% increase on the November 2007
distribution payable in December.

    Definition of EBITDA, Standardized Distributable Cash, Distributable Cash
    and Non-GAAP Measures

    References to "EBITDA" are to earnings (loss) before interest, income
taxes, depreciation and amortization, gain or loss on disposal of property,
plant and equipment and non-controlling interest, as disclosed in the Summary
of Selected Consolidated Financial Information.
    Standardized Distributable Cash is a non-GAAP measure recommended by the
Canadian Institute of Chartered Accountants ("CICA") in order to provide a
consistent and comparable measurement of distributable cash across entities.
Standardized Distributable Cash represents cash flows from operating
activities, less adjustments for net maintenance capital expenditures as
reported in accordance with GAAP.
    Management views Distributable Cash as an operating performance measure,
as it is a measure generally used by Canadian income funds as an indicator of
financial performance. Distributable Cash is defined as cash flows related to
operating activities plus the net change in non-cash working capital balances
less the net maintenance capital expenditures. Distributable Cash is important
as it summarizes the funds available for distribution to unitholders. As the
Fund will distribute a significant portion of its cash on an on-going basis
and since EBITDA is a metric used by many investors to compare issuers on the
basis of the ability to generate cash from operations, management believes
that, in addition to net earnings or loss, EBITDA is a useful supplementary
measure from which to make adjustments to determine Distributable Cash.
    EBITDA, Standardized Distributable Cash and Distributable Cash are not
earnings measures recognized under GAAP and do not have standardized meanings
prescribed by GAAP. Therefore, EBITDA, Standardized Distributable Cash and
Distributable Cash may not be comparable with similar measures presented by
other entities. Investors are cautioned that EBITDA, Standardized
Distributable Cash and Distributable Cash should not be construed as an
alternative to net earnings (loss) determined in accordance with GAAP as
indicators of the Fund's performance, or to cash flows from operating,
investing and financing activities as measures of liquidity and cash flows.

    Distributable Cash

    Information about Distributable Cash has been prepared, in all material
respects, in accordance with National Policy 41-201 - Income Trusts and Other
Indirect Offerings published by the Canadian Securities Administrator in July
2007. The following table reconciles cash flows related to operating
activities to Standardized Distributable Cash (as defined by the CICA in the
release "Standardized Distributable Cash in Income Trusts and other
Flow-Through Entities" issued in July 2007 and to Distributable Cash as
defined by the Fund:


                              Three months ended          Nine months ended
    ($000's except for units     September 30,               September 30,
     and per unit amounts)    2007          2006          2007          2006
    -------------------------------------------------------------------------

    Cash flows related to
     operating activities   17,352        12,537        14,154         6,368
    Net maintenance
     capital expenditures     (226)         (133)       (1,226)         (338)
    -------------------------------------------------------------------------
    Standardized
     Distributable Cash
     (Units and Class B
     LP Units)              17,126        12,404        12,928         6,030
    -------------------------------------------------------------------------
    Net change in non-cash
     working capital(1)      5,013         7,652        17,068        17,209

    -------------------------------------------------------------------------
    Distributable Cash
     (Units and Class B
     LP Units)              22,139        20,056        29,996        23,239
    -------------------------------------------------------------------------
    Distributions
     declared                3,486         3,486        10,458        10,458
    Weighted average
     number of Units
     and Class B
     LP Units           13,280,000    13,280,000    13,280,000    13,280,000
    Distributable Cash
     per Unit and
     Class B LP Unit        1.6671        1.5102        2.2588        1.7499
    Distributions
     declared per
     Unit and Class B
     LP Unit                0.2625        0.2625        0.7875        0.7875
    Payout ratio -
     Distributions
     declared/
     Distributable
     Cash(1)                  15.7%         17.4%         34.9%         45.0%
    Cumulative
     Distributable Cash
     since inception(1)     52,423
    Cumulative
     distributions
     declared since
     inception(1)           28,741
    Cumulative payout
     ratio since
     inception(1)             54.8%
    -------------------------------------------------------------------------

    (1) The Fund has excluded the impact of the net change in non-cash
        working capital balances in the calculation of Distributable Cash as
        the changes in non-cash working capital components are often
        temporary by nature and due to the Fund's seasonality and can be
        financed, if needed, with the Fund's operating line of credit, which
        is available up to a maximum of $15 million. Consequently, the
        Distributable Cash has been used to calculate the payout ratios and
        the cumulative distributions since inception.

    For the quarter ended September 30, 2007, the Fund distributed $0.2625 per
Unit compared with $1.67 of Distributable Cash per Unit per the above
calculation. This difference reflects the Fund's seasonal fluctuation in
earnings since the Fund generates the majority of its Distributable Cash in
the second and third quarters. Given the seasonal nature of the Fund's
operations, it is important to view Distributable Cash on an annual basis.

    Summary of Revenue and Operating Expenses

    Revenue

    Canadian Helicopters' revenue is primarily generated from its helicopter
transportation services. Canadian Helicopters also provides ancillary
services, such as flight training and third party repair and maintenance
services. For the three and nine-month periods ended September 30, 2007, 92.1%
and 89.9% respectively of Canadian Helicopters' revenue were derived from
helicopter transportation services (92.8% and 89.6% respectively for the three
and nine-month periods ended September 30, 2006), with the remainder derived
from ancillary services. Canadian Helicopters operates IFR (helicopters
services operated under instrument flight rules) and VFR (helicopters services
operated under visual flight rules) helicopters, which respectively accounted
for 30.4% and 69.6% of helicopter transportation services revenue for the
period of three months ended September 30, 2007 (32.8% and 67.2% respectively
for the three months ended September 30, 2006) and 38.5% and 61.5% for the
nine months ended September 30, 2007 (41.1% and 58.9% respectively for the
nine months ended September 30, 2006).
    IFR helicopters operate with the aid of instruments and they are capable
of operating in poor visibility environment. IFR helicopters are used
primarily to provide EMS and infrastructure support to governmental and
quasi-governmental entities. Contracts are usually longer-term in nature and
revenues are, to a large extent, earned evenly throughout the year. The most
significant IFR contracts include those with Ornge, an organization providing
EMS in Ontario, and the United States Air Force ("USAF"), accounting together
for 25.2% and 30.1% of Canadian Helicopters' total revenue for the periods of
three and nine months ended September 30, 2007, respectively (26.6% and 32.5%
for the periods of three and nine months ended September 30, 2006,
respectively).
    VFR helicopters are primarily used to provide services to utility
companies and resource-based industries. Contracts are usually for a short
period or a season. Revenues from VFR operations are influenced by weather and
daylight hours and are significantly reduced from November through April.

    Operating Expenses

    Operating expenses consist of fixed and variable expenses, including:
(i) crew, maintenance and cost of goods sold, (ii) selling, general and
administrative expenses and (iii) other expenses.
    Crew and maintenance costs are the largest expense categories,
representing in the aggregate 43.8% and 54.3% of revenue for the periods of
three and nine months ended September 30, 2007, respectively (42.5% and 57.1%
for the periods of three and nine months ended September 30, 2006,
respectively). Crew costs are comprised of wages, benefits and training for
pilots, engineers and, in 2006 the paramedics. While a significant portion of
these costs are fixed, a portion of pilots' and engineers' compensation is
based on flight hours. In addition, due to the seasonality of Canadian
Helicopters' VFR & IFR operations, additional crews are hired on a contractual
basis to ensure that summer operational requirements are met. Maintenance
costs consist of repair of engine, major components, airframes and
accessories, which are normally replaced based on their calendar lives or
number of flight hours. As such, Canadian Helicopters has been able to
estimate its annual maintenance costs based on the expected number of flight
hours. Canadian Helicopters' Mid-Time Policy(1) has historically resulted in
fairly stable annual maintenance expenses, although significant variability
occurs on a quarterly basis. However, as Canadian Helicopters attempts to
perform most airframe repair and refurbishment during the slower season,
variations in maintenance costs within a year do not depend solely on flight
hours. Cost of goods sold consists of cost associated with revenues from third
party repairs and maintenance contracts and miscellaneous parts sales.

    ------------------------------------
    (1) "Mid-Time Policy" means the policy of Canadian Helicopters to
        maintain its flying assets, on a group basis, at any given moment in
        time, at least at the mid-time of the useful life of such assets.

    Selling, general and administrative expenses represented in the aggregate
14.1% and 17.7% of revenue for the periods of three and nine months ended
September 30, 2007, respectively (16.3% and 19.4% for the periods of three and
nine months ended September 30, 2006, respectively). Selling, general and
administrative expenses are mainly comprised of wages, base costs, insurance
costs and other overhead costs. Base costs, which include base facility costs,
travel, meals and accommodations, contain a fixed and variable portion, while
insurance costs are negotiated annually and are fixed through the term.

    Summary of Selected Consolidated Financial Information

                             Three-month period           Nine-month period
                             ended September 30,         ended September 30,
                        -------------------------   -------------------------
    ($000's except for
     Units and per
     Unit amounts)            2007          2006          2007          2006
    -------------------------------------------------------------------------

    Revenue                 55,686        51,310       119,232       111,500
    Operating expenses      32,999        30,766        87,466        86,768
    Foreign exchange loss      192            33           206            30
    -------------------------------------------------------------------------
    EBITDA(1)               22,495        20,511        31,560        24,702
    -------------------------------------------------------------------------
    - Amortization             992         1,014         3,040         3,028
    - Gain on disposal
       of property, plant
       and equipment          (300)         (528)         (463)         (580)
    - Net financing
       charges                 462           368           395         1,063
    -------------------------------------------------------------------------
    Earnings before income
     taxes and
     non-controlling
     interest               21,341        19,657        28,588        21,191
    -------------------------------------------------------------------------
    Net earnings            12,365        11,479        18,163        15,874
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per Unit
     basic and diluted      1.1745        1.0903        1.7251        1.5077
    Distributions
     declared per Unit      0.2625        0.2625        0.7875        0.7875
    Total assets           227,820       223,891       227,820       223,891
    Term credit facility    15,000        28,000        15,000        28,000
    -------------------------------------------------------------------------

    (1) See "Definition of EBITDA, Standardized Distributable Cash,
        Distributable Cash and Non-GAAP Measures". EBITDA is not a recognized
        measure under GAAP and does not have a standardized meaning
        prescribed by GAAP. EBITDA may not be comparable to similar measures
        presented by other issuers.


    Summary of Quarterly Results

    Certain of Canadian Helicopters' operations are subject to seasonal
fluctuations due to variations in daylight hours and changes in weather
conditions, with the highest demand generally occurring from May to October.
While some of Canadian Helicopters' operations are dependent on flight hours
and are managed to mitigate the impact of seasonality, a significant portion
of operating costs are associated with its crew and fleet and are fixed.
Canadian Helicopters takes advantage of the off-season period to conduct
repairs and maintenance on its helicopters and provide training to its crews
in order to minimize downtime during the peak season. This strategy,
necessitated by seasonality, significantly reduces profits during the quarters
ending December 31 and March 31 and has historically resulted in losses.
Therefore, results for any single quarter may not be indicative of the results
that may be expected for the full year.
    The following table presents a summary of operating results of the Fund
and Canadian Helicopters on a quarterly basis from October 1, 2005 to
September 30, 2007.

     (in thousand of dollars except for per unit amounts)

                Sept.   June   March     Dec     Sep    June     Mar     Dec
                  30,     30,     31,     31,     30,     30,     31,     31,
                2007    2007    2007    2006    2006    2006    2006    2005
    -------------------------------------------------------------------------
    Revenues  55,686  39,220  24,326  24,167  51,310  36,332  23,857  26,926
    EBITDA
     (loss)
     (1)      22,495  10,781  (1,716) (1,237) 20,511   7,834  (3,643)   (792)
    Net
     earnings
     (loss)   12,365   6,704    (907)   (579) 11,479   6,267  (1,872)   (748)
    Net
     earnings
     (loss)
     per Unit
     basic
     and
     diluted  1.1745  0.6368 (0.0861)(0.0550) 1.0903  0.5952 (0.1778)(0.0710)
    -------------------------------------------------------------------------

    Notes:

    (1) See "Definition of EBITDA, Standardized Distributable Cash,
        Distributable Cash and other Non-GAAP Measures". EBITDA is not a
        recognized measure under GAAP and does not have a standardized
        meaning prescribed by GAAP. EBITDA may not be comparable to similar
        measures presented by other issuers.

    Results of Operations

    Three months ended September 30, 2007 compared to three months ended
    September 30, 2006.

    Revenue

    Canadian Helicopters flew 31,659 hours over the three months ended
September 30, 2007 compared to 31,880 hours in the same period in 2006,
representing a decrease of 221 hours or (0.7)%. Revenue was $55.7 million
compared to $51.3 million for the comparative period in 2006, representing an
increase of $4.4 million or 8.6%. This variation is primarily explained by an
increase of $3.7 million in VFR revenue from resource based activity, stable
IFR revenue and an increase of $0.7 million in ancillary revenue including the
Canadian Forces Contracted Flying Training ("CFTS") contract.

    Operating Expenses

    Operating expenses, before foreign exchange loss, amounted to
$33.0 million for the three months ended September 30, 2007 compared to
$30.8 million in the comparative period in 2006, representing an increase of
$2.2 million or 7.1%.
    Maintenance costs increased by $1.9 million over the comparative period in
2006. Repairs and maintenance on flying assets are not incurred evenly during
a year and the timing of such expenses within a year may vary from one year to
another as a result of timing differences and is not representative of all
quarters throughout the year. Costs associated with ancillary revenues,
including repair and maintenance contracts, increased in connection with the
higher revenues earned during the quarter. Finally, crew costs for the period
of three months ended September 30, 2007 increased by $0.6 million over the
comparative period in 2006 primarily due to salary escalation.
    Selling, general and administrative expenses decreased by $0.4 million in
the three months ended September 30, 2007 compared to the same period in 2006.
This decrease is primarily due to lower insurance deductible costs incurred
partially offset by increased in employee compensation.
    Expenses related to operating leases amounted to $0.7 million in the three
months ended September 30, 2007 compared to $0.6 million for the comparative
period in 2006.

    EBITDA

    As a result of the changes described above, EBITDA for three months ended
September 30, 2007 was $22.5 million which is higher by $2.0 million or 9.8%
over EBITDA of $20.5 million for the same period in 2006.

    Net Financing Charges

    Net financing charges amounted to $0.5 million for the three months ended
September 30, 2007 compared to a charge of $0.4 million in the 2006
comparative period, representing a variation of $0.1 million. This increase
was due to a loss on the interest rate swap agreement partially offset by
lower interest expenses due to lower average outstanding long-term debt when
compared to the last year's comparative period.

    Other Items

    The aggregate amortization expense for the three-month periods ended
September 30, 2007 and September 30, 2006 amounted to $1.0 million.

    Earnings Before Income Taxes and Non-Controlling Interest

    Due to the changes in revenue and expenses described herein, earnings
before income taxes and non-controlling interest increased by $1.7 million
from the comparable period in 2006. Earnings before income taxes and
non-controlling interest was $21.3 million for the three months ended
September 30, 2007.

    Income Taxes

    For the three-month period ended September 30, 2007, the Fund recorded an
income tax expense of $5.7 million ($5.2 million income tax expense for the
comparative period in 2006). This variance is primarily attributable to higher
earnings in 2007.

    Net Earnings

    As a result of the above, net earnings for the three-month period ended
September 30, 2007 was $12.4 million compared to $11.5 million for the same
comparative period, representing an increase of $0.9 million or 7.8%.

    Nine months ended September 30, 2007 compared to nine months ended
    September 30, 2006.

    Revenue

    Canadian Helicopters flew 65,432 hours over the nine months ended
September 30, 2007 compared to 64,568 hours in the same period in 2006,
representing an increase of 864 hours or 1.3%. Revenue was $119.2 million
compared to $111.5 million for the comparative period in 2006, representing an
increase of $7.7 million or 6.9%. This variation is primarily explained by an
increase of $7.1 million in VFR revenue due to increased resource based
activity, an increase of $0.1 million in IFR revenue from Oil and Gas activity
in western Canada and an increase of $0.5 million in ancillary revenue
including the CFTS contract.

    Operating Expenses

    Operating expenses, before foreign exchange loss, amounted to
$87.5 million for the nine months ended September 30, 2007 compared to
$86.8 million for the comparable period in 2006, representing an increase of
$0.7 million or 0.8%.
    Maintenance costs decreased by $1.0 million over the comparative period in
2006. Repairs and maintenance on flying assets are not incurred evenly during
a year and the timing of such expenses within a year may vary from one year to
another as a result of timing differences and is not representative of all
quarters throughout the year. Costs associated with ancillary revenues,
including repair and maintenance contracts, increased in connection with the
higher revenues earned during the period. Finally, crew costs increased by
$1.8 million in the nine months ended September 30, 2007 over the comparative
period in 2006, primarily due to salary escalation.
    Selling, general and administrative expenses decreased by $0.5 million for
the nine months ended September 30, 2007 compared to the same period in 2006,
primarily due to a lower insurance expense partially offset by inflationary
expenses.
    Expenses related to operating leases amounted to $1.6 million during the
nine-month period ending September 30, 2007 compared to $1.5 million for the
comparative period in 2006.

    EBITDA

    As a result of the changes described above, EBITDA for nine months ended
September 30, 2007 was $31.6 million which increased by $6.9 million or 27.9%
over EBITDA of $24.7 million for the same period in 2006.

    Net Financing Charges

    Net financing charges amounted to $0.4 million for the nine months ended
September 30, 2007 compared to charges of $1.1 million in the 2006 comparative
period, representing a variation of $0.7 million. This variation was due to a
decrease in the average outstanding long-term debt balance when compared to
the last year's comparative period and the recognition of the gain on the
interest-rate swap agreements in the amount of $0.4 million in 2007.

    Other Items

    The aggregate amortization expense for the nine months ended September 30,
2007 and September 30, 2006 amounted to approximately $3.0 million.

    Earnings Before Income Taxes and Non-Controlling Interest

    Due to the changes in revenue and expenses described herein, earnings
before income taxes and non-controlling interest increased by $7.4 million
over the comparable nine-month period. The earnings before income taxes and
non-controlling interest were $28.6 million for the nine months ended
September 30, 2007.

    Income Taxes

    For the nine-month period ended September 30, 2007, the Fund recorded an
income tax expense of $5.6 million ($1.2 million income tax expense for the
comparative period in 2006). This variance is primarily attributable to
changes in income tax rates (both Federal and Provincial) which were
substantively enacted in the second quarters of 2007 and 2006 and to higher
earnings in 2007.

    Earnings Before Non-Controlling Interest and Net Earnings

    As a result of the above, earnings before non-controlling interest for the
nine months ended September 30, 2007 were $22.9 million while net earnings for
the nine months ended September 30, 2006 were $20.0 million.

    Economic Dependence

    For the three months ended September 30, 2007, 25.2% of total revenue was
earned from two customers compared to 26.6% for the comparative period of
2006. For the nine months ended September 30, 2007, 30.1% of total revenue was
earned from two customers compared to 32.5% for the comparative period of
2006.

    Segmented Information

    The Fund's activities are divided into three segments: helicopter
transportation services; helicopter repair and maintenance services and flight
training. The repair and maintenance and flight training services each
represent less than 10% of the Fund's overall activities on an annual basis.
No assets are held outside of Canada.

    Liquidity and Financial Resources

    For the nine-month period ended September 30, 2007, cash and cash
equivalents decreased by $2.3 million when compared to December 31, 2006. This
is mainly attributable to the repayments of the revolving term credit facility
and distributions paid partially offset by the cash flows related to operating
activities during the corresponding period.

    Operating Activities

    Cash flows related to operating activities (before net change in non-cash
working capital balances) were $22.4 million and $31.2 million for the three
and nine-month periods ended September 30, 2007, respectively ($20.2 million
and $23.6 million, respectively for the comparative periods in 2006). The
variances of $2.2 million and $7.6 million for the three and nine month
periods ended September 30, 2007, when compared to the corresponding periods
in 2006, were mainly due to the increased earnings before income taxes and
non-controlling interest for the periods.

    Investing Activities

    Cash flows related to investing activities were $(0.2) million and
$(1.2) million for the three and nine-month periods ended September 30, 2007,
respectively (($0.1) million and ($0.3) million respectively for the
comparative periods in 2006). The variances of $(0.1) million and
$(0.9) million for the three and nine month periods ended September 30, 2007,
when compared to the corresponding periods in 2006, are mainly due to the net
additions of property, plant and equipment.
    The Fund finances maintenance capital expenditures through internally
generated cash flows from operating activities, cash on hand and through the
use of its credit facilities.

    Financing Activities

    Cash flows related to financing activities were $(14.4) million and
$(15.2) million for the three and nine-month periods ended September 30, 2007,
respectively (($5.5) million and ($3.5) million respectively for the
comparative periods in 2006). This primarily represents the distributions paid
on Units and the decrease of the revolving term credit facility by
$11.0 million and $4.0 million respectively for the three and nine-month
periods ended September 30, 2007.
    The Fund also purchased Units for the benefit of certain executives of the
Fund under the Long Term Incentive Plan (LTIP) for an amount of $0.9 million
during the nine-month period ended September 30, 2007.
    On August 17, 2007, the revolving operating credit facility was extended
to September 8, 2008 and the revolving term credit facility was increased from
$35 million to $40 million and extended to September 8, 2010. Other terms and
conditions remain comparable to the initial credit facilities agreement.

    Financial Condition and Capitalization

                                                  September 30,  December 31,
                                                          2007          2006
    (in thousands of dollars)                                $             $
    -------------------------------------------------------------------------

    Working capital                                     29,082        14,324
    Total assets                                       227,820       208,549
    -------------------------------------------------------------------------
    Total long-term debt                                15,000        18,919
    -------------------------------------------------------------------------
    Unitholders' equity                                113,843       105,964
    -------------------------------------------------------------------------
    Long-term debt to equity ratio                        13.2%         17.9%
    -------------------------------------------------------------------------

    The Fund's long-term debt to equity ratio has decreased since December
2006 due to the Fund's earnings in 2007 in excess of distributions declared
and because of the temporary reduction of the long-term debt.
    As at November 13, 2007, the Fund had 10,528,311 Units outstanding
representing a 79.3% indirect interest in Canadian Helicopters LP and
2,751,689 Special Voting Units outstanding.
    Each Unit is transferable and represents an equal undivided beneficial
interest in any distributions of the Fund and in the assets of the Fund. All
Units have equal rights and privileges.
    Each Unit entitles the holder to participate equally in all allocations
and distributions and to one vote at all meetings of unitholders of the Fund
for each whole Unit. The Special Voting Units are not entitled to any interest
or share in the Fund, in any distributions from the Fund or in the net Fund
property. Each Special Voting Unit is issued in conjunction with the Class B
LP Units of Canadian Helicopters LP and is entitled to one vote at all
meetings of unitholders of the Fund.
    Each Class B LP Unit entitles the holder to participate equally in all
allocations and distributions from Canadian Helicopters LP but does not
entitle the holder to any votes. Each Class B LP Unit may be exchanged for a
Unit, at which time the associated Special Voting Unit will be simultaneously
cancelled. The Canadian Helicopters Class B LP Units are classified as
non-controlling interest in the interim consolidated financial statements of
the Fund.

    Off-Balance Sheet Arrangements

    Operating lease commitments have been disclosed in the Funds' audited
consolidated financial statements as at December 31, 2006 and did not
significantly change since that date.

    Change in Accounting Policies

    On January 1, 2007, the Fund has adopted three new accounting standards
issued by the Canadian Institute of Chartered Accountants (CICA): section
1530, Comprehensive Income; section 3855, Financial Instruments - Recognition
and Measurement; and section 3865, Hedges. These new standards establish
standards for recognizing and measuring financial instruments, namely
financial assets, financial liabilities and derivatives. Certain changes in
the value of these financial instruments are presented in a new financial
statement, Comprehensive Income. The application of these new standards had a
negligible effect on the Fund's financial statements and financial position.
    The Fund refers the readers to note 2 of the interim consolidated
financial statements for the third quarter ended September 30, 2007 for
further details regarding the adoption of the new standards.

    New accounting standard
    -----------------------

    In June 2007, the CICA issued a new accounting standard - Section 3031
Inventories, which replaces the existing standard for inventories,
Section 3030. The main features of the new Section are as follows:

    - Measurement of inventories at the lower of cost and net realizable
      value;
    - Consistent use of either first-in, first-out or a weighted average cost
      formula to measure cost;
    - Reversal of previous write-downs to net realizable value when there is
      a subsequent increase to the value of inventories.

    The new Section is effective for the Fund beginning January 1, 2008. The
Fund is currently assessing the impact on the financial statements.

    Recent Events

    In April 2007, The Fund acquired 81,825 of its units in the secondary
market for an amount of $910,046 earned in 2006 for certain of its executives
under the Fund's long-term incentive plan.
    On May 30, 2007, the Fund entered into an amending agreement with Ornge,
an organization providing EMS in Ontario, to extend the two EMS contracts it
holds for approximately six additional months to expire on March 31, 2009. The
extension has been agreed to under similar terms and conditions as the
existing contracts and is not expected to have a material impact on the Fund's
financial results.
    Proposed legislation first introduced in October 2006 included a provision
to eliminate the deduction of distributions from taxable income for certain
forms of publicly traded income trusts and partnerships that meet the
definition of a Specified Investment Flow-Through Entity or "SIFT" under the
proposed legislation. However, amounts distributed will be taxed at the SIFT
rate rather than the full trust tax rate. This proposed legislation, with
certain modifications, passed third reading in the House of Commons on June
12, 2007 and is considered substantially enacted during the Fund's second
quarter of 2007. For the Fund, the proposals are not intended to apply to
taxation years ending prior to 2011. The impact of these proposals is not
expected to have a significant impact on the Fund's financial condition and
earnings.
    On October 11, 2007, the Fund declared the distribution for the period
from October 1, 2007 to October 31, 2007 on Units and Class B LP Units, in the
amount of $1.162 million or $0.0875 per unit, for registered Unitholders and
Class B LP Units holders on October 31, 2007. This distribution will be paid
on November 15, 2007.
    On November 13, 2007, the Fund declared the distribution for the period
from November 1, 2007 to November 30, 2007 on Units and Class B LP Units, in
the amount of $1.220 million or $0.091875 per unit, for registered Unitholders
and Class B LP Units holders on November 30, 2007. This distribution will be
paid on December 14, 2007. This is an increase of 5% on the monthly
distribution which represents an annualized distribution of $1.1025 per unit.

    Controls and Procedures

    The Fund's President and Chief Executive Officer and the Fund's Chief
Financial Officer have evaluated whether there were changes to the Internal
Controls over Financial Reporting ("ICFR") during the three-month period ended
September 30, 2007. There were no changes in the Fund's ICFR during the most
recent interim period that have materially affected, or are reasonably likely
to materially affect, the Fund's ICFR.

    Risk Factors

    As a result of operations, business prospects and financial condition, the
Fund is subject to a number of risks and uncertainties, and is affected by a
number of factors outside the control of the its management. Details are
provided in the "Risk Factors" section of the Fund's Annual Information Form,
dated March 28, 2007 (which can be found at www.sedar.com).

    Forward-Looking Statements

    Certain statements in this management's discussion and analysis contain
"forward looking" statements that involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Fund or Canadian Helicopters to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. When used in this MD&A, such statements use
such words as "may," "will," "intend," "should," "expect," "believe," "plan,"
"anticipate," "estimate," "predict," "potential," "continue," the negative of
these terms or other similar terminology. These statements reflect current
expectations regarding future events and operating performance and speak only
as of the date of this MD&A. Forward-looking statements involve significant
risks and uncertainties, should not be read as guarantees of future
performance or results, and will not necessarily be accurate indications of
whether or not such results will be achieved. A number of factors could cause
actual results to differ materially from the results discussed in the
forward-looking statements, including, but not limited to, customer
concentration, reliance on suppliers and other risks described in the Fund's
Annual Information Form. These forward-looking statements contained in this
MD&A are made as of the date of release of this MD&A, and the Fund does not
assume any obligation to update or revise them to reflect new events or
circumstances unless being required by applicable laws.

    Additional Information

    Additional information relating to the Fund and Canadian Helicopters,
including the Fund's Annual Information Form, is available on SEDAR at
www.sedar.com.
    
    %SEDAR: 00022513EF




For further information:

For further information: Canadian Helicopters Limited: Jean-Pierre
Blais, President, (450) 452-3007; Don Wall, Senior Executive Vice President,
(780) 429-6919

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