Jazz Air Income Fund announces agreement with Air Canada to amend their capacity purchase agreement, and a reduction in cash distributions – Amended contract features a contract term extension and fleet renewal

    HALIFAX, July 28 /CNW/ - Jazz Air Income Fund (TSX: JAZ.UN) announced
today that a mutually beneficial agreement has been reached with Air Canada to
amend the terms of the Amended and Restated Capacity Purchase Agreement (CPA)
between Jazz Air LP ("Jazz") and Air Canada. Jazz Air Income Fund also
announced a 40% reduction in cash distributions.
    "The amended CPA provides sustainable long term value to Jazz
stakeholders as, among other things, the term of the contract has been
extended to the end of 2020 and there is a commitment to commence fleet
renewal," said Joseph Randell, President and Chief Executive Officer, Jazz.
"Jazz is fundamental to serving communities across Canada. The strength in
Jazz's cost efficiencies and high quality operational performance is an
important part of the solution to the challenges facing Air Canada, and
provides low costs to capitalize on growth opportunities."
    Mr. Randell went on to say, "Jazz has an enviable track record for
operational and financial performance having generated profitable results
since becoming publicly traded in 2006 due to strong management practices,
solid cost control and a constant focus on safety and operational excellence."
    The highlights of the amendments, which are subject to Air Canada
securing new financing in a minimum amount of $600 million and certain other
conditions:- An industry-leading term commitment whereby the term of the CPA is
      extended 5 years from December 31, 2015 to December 31, 2020;
    - Air Canada will target a minimum annual block hour forecast of
      375,000 block hours;
    - The plan is to continue to operate 133 aircraft on behalf of Air Canada
      comprised of 125 covered aircraft and 8 'swing aircraft' that will
      facilitate CPA flying to 400,000 block hours and beyond.
    - The minimum fleet guarantee is reduced from 133 to 125 covered
      aircraft, and includes a commitment to commence fleet renewal in 2011;
    - Effective August 1, 2009, the current markup on controllable costs of
      16.72% is reduced to 12.50% on a permanent basis for the first
      375,000 block hours flown, and a 5% markup on block hours in excess of
    - The minimum utilization guarantee for the fleet is unchanged at
      339,000 block hours.Cash distributions are being adjusted to reflect the amended CPA, the
term extension of the contract, and to otherwise improve liquidity during this
uncertain period.
    Effective with the distribution payment to be paid in September to
unitholders of record on August 31, 2009, cash distributions will be reduced
by approximately 40% to $0.60 per unit annually.
    Given the current state of the credit market and the overall economic
uncertainty, this proactive measure will strengthen our position as we remain
focused on growing our business and maintaining strong operational and
financial results.
    Ultimately, this measure will deliver more long term value to our
unitholders, employees and partners.Investor Conference Call and Webcast
    ------------------------------------Jazz will hold an analyst call at 9:00 a.m. ET on Wednesday, July 29,
2009 to discuss today's announcement. The call may be accessed by dialing
1-800-587-1893 or (416) 644-3431 for the Toronto area. The call will be
simultaneously audio webcast via:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2765400 or in the
Investor Relations section of Jazz's website at www.flyjazz.ca. This is a
listen-in only audio webcast. Media Player or Real Player is required to
listen to the broadcast; please download well in advance of the call.
    The conference call webcast will be archived on Jazz's Investor Relations
website at www.flyjazz.ca. A playback of the call can also be accessed until
midnight ET, Wednesday, August 5, 2009, by dialing (416) 640-1917 or toll-free
1-877-289-8525, and passcode - 21312378# (pound key).CAUTION REGARDING FORWARD-LOOKING INFORMATION
    ---------------------------------------------This news release should be read in conjunction with Jazz's 2009 first
quarter unaudited interim consolidated financial statements and MD&A dated May
14, 2009, filed with Canadian Securities regulatory authorities (available at
    Certain statements in this news release may contain statements which are
forward-looking statements. These forward-looking statements are identified by
the use of terms and phrases such as "anticipate", "believe", "could",
"estimate", "expect", "intend", "may", "plan", "predict", "project", "will",
"would", and similar terms and phrases, including references to assumptions.
Such statements may involve but are not limited to comments with respect to
strategies, expectations, planned operations or future actions.
Forward-looking statements relate to analyses and other information that are
based on forecasts of future results, estimates of amounts not yet
determinable and other uncertain events. Forward-looking statements, by their
nature, are based on assumptions, including those described below, and are
subject to important risks and uncertainties. Any forecasts or forward-looking
predictions or statements cannot be relied upon due to, amongst other things,
changing external events and general uncertainties of the business. Such
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements to differ
materially from those expressed in the forward-looking statements. Results
indicated in forward-looking statements may differ materially from actual
results for a number of reasons, including without limitation, energy prices,
general industry, market, credit and economic conditions, competition,
insurance issues and costs, supply issues, war, terrorist attacks, epidemic
diseases, acts of God, changes in demand due to the seasonal nature of the
business, the ability to reduce operating costs and employee counts, secure
financing, employee relations, labour negotiations or disputes, restructuring,
pension issues, currency exchange and interest rates, changes in laws, adverse
regulatory developments or proceedings, pending and future litigation and
actions by third parties, as well as the factors identified in the Risk
Factors section of Jazz Air Income Fund's annual MD&A dated May 14, 2009. The
forward-looking statements contained in this discussion represent Jazz's
expectations as of March 31, 2009, and are subject to change after such date.
However, Jazz disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future
events or otherwise, except as required under applicable securities

    About Jazz Air Income Fund

    Jazz Air Income Fund is an unincorporated, open-ended trust established
under the laws of the Province of Ontario, created to indirectly acquire and
hold an interest in the outstanding limited partnership units of Jazz Air LP.
    Jazz is the second largest airline in Canada based on fleet size and the
number of routes operated. Jazz operates more flights and flies to more
Canadian destinations than any other Canadian carrier. Jazz forms an integral
part of Air Canada's domestic and transborder market presence and strategy.
    Jazz is not a typical airline. The airline has a commercial agreement
with Air Canada that is the core of its business. Under the Capacity Purchase
Agreement (CPA), Air Canada currently purchases substantially all of Jazz's
fleet capacity based on predetermined rates. The CPA provides commercial
flexibility, low trip costs and connecting network traffic to Air Canada.