DISCOVERY AIR INC. ANNOUNCES $11.8 MILLION IN NET EARNINGS FOR ITS SECOND
QUARTER ENDED JULY 31, 2010

YELLOWKNIFE, Sept. 14 /CNW/ -

Second Quarter Financial Highlights

    
    -   Revenues were $58.4 million for the quarter and $84.3 million year-
        to-date compared to revenues of $45.7 million and $71.3 million for
        the comparative periods last year.
    -   EBITDA was $24.8 million for the quarter and $26.3 million year-to-
        date compared to $18.8 million and $19.5 million for the comparative
        periods last year.
    -   Net earnings for the quarter were $11.8 million or $0.09 per share
        ($0.09 diluted) compared to net earnings of $8.0 million or $0.06 per
        share ($0.06 diluted) for the same period last year.
    -   Year-to-date net earnings were $7.9 million or $0.06 per share ($0.06
        diluted) compared to $2.9 million or $0.02 per share ($0.02 diluted)
        last year.
    

Discovery Air Inc.'s President and CEO Dave Jennings commented on the quarter: "In generating $11.8 million in net earnings this quarter we realized our highest quarterly earnings ever. Our strong quarterly earnings benefited from revenue levels seen prior to the economic downturn, as well as from continued monitoring of our operating costs. This was demonstrated in our year over year increase in quarterly EBITDA of 32% and net earnings increase of 48% on a revenue increase of 28%."

Additional Highlights

    
    -   Consolidated revenues of Discovery Air Inc. (the "Corporation") for
        the current quarter ("Q2 2011") and year to date ("year-to-date
        2011") ending July 31, 2010 were $58.4 million and $84.3 million,
        respectively. This represents an increase of 28% and 18%,
        respectively, over prior year comparatives ("Q2 2010" and "year-to-
        date 2010"). The year over year increase in the Corporation's Q2 2011
        revenue was largely attributable to a significant increase in demand
        for resource and forest fire-based services. Increased activities in
        these sectors resulted in the Corporation's Northern Services segment
        recording a 38% increase in revenues for Q2 2011 and a 37% increase
        in revenue for year-to-date 2011 over prior period comparatives. The
        Corporation's Government Services segment recorded a 13% increase in
        revenues in Q2 2011, while year-to-date 2011 revenues were lower by
        3% compared to the prior period comparative. The Government Services
        segment benefited from increased forest fire management activity in
        Q2 2011 compared to the prior period comparative, which brought the
        segment's year to date revenues closer in line with year ago results.

    -   The Corporation reported EBITDA of $24.9 million for Q2 2011 and
        $26.3 million for year-to-date 2011, representing a year over year
        increase of 32% and 35%. While the increase in earnings from
        operations is largely attributable to increased revenue, the
        Corporation also benefited from lower incremental operating costs in
        relation to the increase in revenue. The strong cost management
        discipline seen in the past year continued to be maintained in the
        current year to date, contributing to increased margins.

    -   The Corporation generated net earnings of $11.8 million and $7.9
        million for Q2 2011 and year-to-date 2011, respectively, a year over
        year increase of 48% and 174%. The Corporation incurred a financing
        charge of $0.3 million in the current quarter for the renewal of its
        operating line of credit compared to $0.8 million incurred in Q1 2010
        for the setup of an operating line of credit and other related
        finance fees. With Q2 2011 and year-to-date 2011 amortization expense
        largely unchanged and an interest expense increase of only
        approximately 6% compared to the prior period comparatives, the
        higher incremental earnings from operations resulted in higher net
        earnings.
    

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

    
                                3 months    3 months    6 months    6 months
                                   ended       ended       ended       ended
                                 July 31,    July 31,    July 31,    July 31,
                                    2010        2009        2010        2009
    (thousands of dollars,          ("Q2        ("Q2   ("Year-to-  ("Year-to-
     except per share amounts)     2011")      2010") date 2011") date 2010")
    ------------------------------------- ----------- ----------- -----------
                              (unaudited) (unaudited) (unaudited) (unaudited)
    Results of operations
      Revenue                  $  58,390   $  45,733   $  84,304   $  71,299
      Operating expenses       $  33,420   $  26,584   $  57,821   $  50,312
      -----------------------------------------------------------------------
      Earnings before
       undernoted items        $  24,970   $  19,149   $  26,483   $  20,987

      Interest and financing
       charges                 $   4,314   $   3,824   $   7,972   $   8,153
      Amortization             $   3,435   $   3,405   $   6,803   $   6,803
      Relocation of corporate
       office                  $     107   $     318   $     158   $   1,491
      Net earnings and
       comprehensive income    $  11,810   $   8,004   $   7,886   $   2,883
      Basic and diluted
       earnings per share      $    0.09   $    0.06   $    0.06   $    0.02

    Financial position and
     liquidity
      Total assets                                     $ 279,514   $ 269,072
      Total long-term debt                             $ 142,100   $ 142,246
      Cash provided by (used
       in) operations          $   2,469   $   9,177   $  (7,346)  $  (2,742)
      Working capital                                  $  25,743   $  23,946

    Key non-GAAP performance
     measures*
      EBITDAR                  $  28,523   $  21,229   $  31,531   $  23,247
      EBITDA                   $  24,863   $  18,831   $  26,325   $  19,496
      EBITDA Margin                  43%         41%         31%         27%
    

* 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. The EBITDA margin and EBITDAR margin are EBITDA and EBITDAR as a percentage of revenue. Management believes EBITDA and EBITDAR to be important measures as they exclude the effects of items which primarily reflect the impact of long-term investment decisions from the performance of the Corporation's day-to-day operations. Management believes these measurements are useful to measure a company's ability to service debt and to meet other payment obligations or as a valuation measurement.

FORWARD-LOOKING STATEMENTS

Forward-looking information and statements are included in this earnings release. Please refer to the statement regarding forward-looking statements contained in the Corporation's Management's Discussion and Analysis for the quarter ended July 31, 2010 which is incorporated herein by reference. That statement provides an explanation as to what forward-looking statements are, and the factors, uncertainties and potential events that the Corporation has specifically identified for the attention of readers. When relying on forward-looking information and statements to make decisions, investors and others should carefully consider these factors and other uncertainties and potential events. There is no undertaking to update any forward-looking statement that is contained in this earnings release or made from time to time by the Corporation.

The Corporation's interim financial statements and Management's Discussion and Analysis for the quarter ended July 31, 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.

For further information: Rolf S. Dawson, Vice President Corporate Finance and Administration, [email protected], [phone], Extension 304; Sheila Venman, Investor Relations, [email protected], 1-866-903-3247