Discovery Air Inc. announces results for its first quarter ended April 30,
2010 ("Q1 2011")

YELLOWKNIFE, June 11 /CNW/ -

President and CEO's Comments

Discovery Air continues to benefit from its diverse line of services and our strategy going forward is to expand our diversity as a means to achieve our Overarching Objective. I am pleased that the Northern Services segment of our business showed significant improvement over last year's comparable quarter, which offset a temporary shortfall in the Government Services segment as compared to last year's Q1. While there is early tangible evidence of an economic turnaround in the North, I am most pleased with our team in the North's ability to seize the opportunity to successfully seek out new revenue sources. Our team has gone beyond our traditional markets and has found ways to expand our services for our customers. No greater example can be found than our helicopter operations beginning operations in Peru this quarter.

Coming into fiscal 2011, we are in a significantly stronger cash flow and liquidity position compared to the same period a year ago. Our cash flow from operations was $2.1 million higher than a year ago and at the end of the current quarter we drew $6.7 million less on the operating line of credit than at the same time a year ago. This affords us a greater opportunity not only to fund our traditional businesses entering into our peak season but also to fund new growth opportunities.

We hope to see a continued economic upswing in the markets we serve; however, in order for us to achieve our Overarching Objective it will require our organization to actively seek untapped opportunities regardless of market conditions. Our hope is that we begin seeing tangible evidence of this emphasis on new markets in the upcoming quarters.

Financial Highlights

    
    -   Consolidated revenues of $25.9 million for Q1 2011 represent a 1%
        year over year increase from Q1 2010. While year over year revenues
        were similar, Q1 2011's revenue composition reflects a substantial
        change from Q1 2010. The Corporation's Northern Services segment
        recorded a 32% increase in revenues due largely to a significant
        increase in demand for services from its resource-based customers.
        Resource-based revenues increased by 87% from the prior period. The
        Corporation also benefited from a year over year increase in demand
        for airborne forest fire management and suppression services during
        the current quarter. Quarterly revenues in the Government Services
        segment decreased by 25% due to reduced flight hour demand from the
        Department of National Defence and Canadian Forces. Revenue from this
        customer is subject to month to month variability due to short-term
        shifts in priorities within a year, and the flight hour demand in the
        first quarter is not necessarily indicative of flight hour demand
        over the full year.

    -   The Corporation's Q1 2011 EBITDA of $1.5 million increased from $0.7
        million in Q1 2010. The positive variance was attributable to the
        Corporation incurring in the comparative quarter last year $1.2
        million in relocation costs. Adjusted EBITDA, which normalizes for
        these non-recurring costs, was $1.5 million in Q1 2011 compared to
        $1.8 million in Q1 2010. The negative variance was largely
        attributable to lower revenues from the Government Services segment.

    -   The Corporation's loss of $3.9 million in Q1 2011 represents a $1.2
        million positive variance from Q1 2010, attributable to the
        relocation costs noted above and to a one-time financing charge of
        $0.8 million incurred in Q1 2010 to establish an operating line of
        credit, and to fees to amend existing long-term debt arrangements
        related to covenant reporting.

    -   The Corporation continues to closely monitor its costs, working
        capital and levels of capital investments to ensure liquidity is
        maintained at a level sufficient to fund operations and desirable
        capital expenditures. As at Q1 2011, working capital of $13.7 million
        improved from Q1 2010's working capital balance of $11.9 million due
        to reduced draws on the Corporation's operating line of credit.

    -   On June 9, 2010, the Corporation successfully renewed its operating
        line of credit for a twelve month term. Conditions were substantially
        consistent with those previously applicable, except for an amendment
        to include a stand-by fee of 75 basis points per annum on amounts
        authorized but not drawn; and an amendment to include a prepayment
        fee of $156,000 payable if the facility is paid in full on or before
        December 9, 2010.
    

The table below summarizes selected financial information for the current and comparative quarters:

    
    (thousands of dollars,
    except per share amounts)                            Q1 2011     Q1 2010
    -------------------------------------------------------------  ----------
    Results of operations
      Revenue                                          $  25,914   $  25,566
      Operating expenses                               $  24,401   $  23,728
      -----------------------------------------------------------------------
      Earnings before undernoted items                 $   1,513   $   1,838
      Interest expense                                 $   3,658   $   3,499
      Amortization                                     $   3,368   $   3,398
      Relocation of corporate office                   $      51   $   1,173
      Financing transaction costs                      $       -   $     830
      Loss                                             $  (3,924)  $  (5,121)
      Basic and diluted loss per common share          $   (0.03)  $   (0.04)

    Financial position and liquidity
      Total assets                                     $ 263,721   $ 268,333
      Total long-term debt                             $ 145,291   $ 144,137
      Cash provided by operations                      $  (9,815)  $ (11,919)
      Working capital                                  $  13,666   $  11,936

    Key non-GAAP performance measures*
      Adjusted loss                                    $  (3,888)  $  (4,293)
      EBITDAR                                          $   3,008   $   2,017
      Adjusted EBITDAR                                 $   3,059   $   3,190
      EBITDA                                           $   1,462   $     665
      EBITDA Margin                                           6%          3%
      Adjusted EBITDA                                  $   1,513   $   1,838
      Adjusted EBITDA Margin                                  6%          7%


    * References to "EBITDA" are to net earnings before interest, financing
    transaction costs, income taxes, depreciation and amortization (except
    for amortization of rotable and overhauled components which are treated
    as operating expenses), goodwill and intangible asset impairment charge,
    and non-controlling interest. "EBITDAR" is EBITDA before aircraft lease
    cost. "Adjusted EBITDA" is EBITDA adjusted for relocation of corporate
    office charge. "Adjusted EBITDAR" is EBITDAR adjusted for relocation of
    corporate office charge. "Adjusted earnings (loss)" is net earnings
    (loss) adjusted to exclude charges arising from impairment of goodwill
    and intangible assets, relocation of corporate office and related income
    tax recovery. "Adjusted EBITDA margin" is Adjusted EBITDA expressed as a
    percentage of revenues.
    

The Corporation's interim financial statements and Management's Discussion and Analysis for the quarter ended April 30, 2010 have been filed concurrently and are available on Discovery Air's website at www.discoveryair.com and on SEDAR at www.sedar.com. The reader is encouraged to review the interim financial statements and Management's Discussion and Analysis for more complete disclosure on Discovery Air's financial condition and results of operations.

Discovery Air's Class A common shares and debentures trade on the Toronto Stock Exchange under the symbols DA.A and DA.DB respectively.

SOURCE Discovery Air Inc.

For further information: For further information: Rolf S. Dawson, Vice President Corporate Finance and Administration, Rolf.Dawson@discoveryair.com, (867) 873-5350, Extension 304; Sheila Venman, Investor Relations, sheilavenman@discoveryair.com, 1-866-903-3247


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