HALIFAX, May 7 /CNW/ - Today, the first quarter 2008 results of Jazz Air
Income Fund (TSX: JAZ.UN) and Jazz Air LP ("Jazz") were announced.
Q1 2008 HIGHLIGHTS
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- Operating revenue of $396.4 million, up 8.8%.
- Performance incentives of $3.9, up 25.8%.
- Operating income of $34.4 million, down 5.4%.
- Net income of $30.3 million, down 14.3%.
- Controllable Cost per Available Seat Mile, down 2.6%.
- Distributable cash(1) of $32.9 million, down 2.1%.
"Jazz's performance in the first quarter of 2008 was strong," said Joseph
Randell, President and Chief Executive Officer of Jazz. "Our operational
performance this quarter improved significantly over last year, despite some
of the most challenging winter weather conditions in eastern Canada. These
operational improvements, as reflected in increased incentive revenues, are a
clear demonstration of great execution by the entire Jazz team."
Mr. Randell went on to say, "Safety is our top priority and maintaining
our fleet at a very high standard is absolutely our focus. We are currently
experiencing increased aircraft heavy maintenance costs as a result of staff
overtime and outsourcing requirements. This increased overtime and outsourcing
are being diligently managed and we expect this extra maintenance-related
activity to be completed by the beginning of the third quarter. We are
maintaining good cost control in all areas as evidenced by our 2.6% decrease
in controllable costs per available seat mile."
Financial Performance - First Quarter 2008
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For the first quarter of 2008, operating revenue was $396.4 million,
compared to $364.2 million in the same period of 2007, representing an
increase of $32.2 million or 8.8%. The increase in operating revenue is
attributable to an increase of 6.2% in the Block Hours flown and a 20.6%
increase in pass-through costs. For the three-month period ended March 31,
2008, performance incentives payable by Air Canada to Jazz under the CPA
amounted to $3.9 million or 1.7% of Jazz's Scheduled Flights Revenue as
compared to $3.1 million or 1.4% for the same period in 2007. This translates
to 71% of the incentives available under the CPA for the quarter versus a 57%
attainment in 2007. Incentives earned in 2008 were higher due to achieving
better on-time performance than 2007. Year-over-year for the first quarter,
other revenue sources increased from $1.9 million to $2.4 million.
Total operating expenses increased from $327.8 million in the first
quarter of 2007 to $362.0 million for the same period in 2008, an increase of
$34.2 million or 10.4%. Pass-through costs under the CPA, represented
$26.9 million or 78.9% of the total increase in operating costs. Pass-through
costs rose mainly as a result of the continuing rise in fuel prices and
increased de-icing costs due to inclement weather conditions. Controllable
Costs represented $7.2 million or 21.1% of the total increase in operating
costs, primarily as a result of salaries, wages and benefits and other
expenses.
For the first quarter of 2008, EBITDA(1) was $41.4 million compared to
$41.7 million in the first quarter 2007, a decrease of $0.3 million or 0.7%.
The operating income of $34.4 million represents a $1.9 million or
5.4% decrease from the same period last year. Controllable Costs per Available
Seat Mile for the three month period ended March 31, 2008, decreased by 2.6%
over the same period in 2007. Distributable cash was $32.9 million down
$0.7 million or 2.1% from the first quarter of 2007.
The Controllable Adjusted Actual Margin established under the CPA for the
first quarter of 2008 was 12.88%, which is under the CPA target of 14.09% by
121 basis points or approximately $2.8 million. This compares to the first
quarter of 2007 margin of 14.13 % which was approximately $0.1 million better
than the target of 14.09%.
During the quarter, the controllable costs related to the CPA were
affected by: increased overtime expense related to aircraft heavy maintenance
checks on the Jazz fleet by $0.7 million; increased maintenance full time
equivalent employees to support the ongoing heavy maintenance requirements for
$1.1 million; increased heavy maintenance outsourcing for $0.3 million;
increased training in the pilot and maintenance areas for $0.5 million; and
increased passenger inconvenience costs due to unfavourable weather conditions
for $0.4 million.
In the first quarter of 2008, non-operating expense amounted to
$4.1 million, an increase of $3.1 million from the first quarter 2007. The
change is mainly attributable to a $3.0 million fair value adjustment related
to Asset Backed Commercial Paper.
Net income for the first quarter was $30.3 million compared to
$35.3 million recorded in the first quarter last year, a decrease of
$5.0 million or 14.3%.
Jazz Air LP and Jazz Air Income Fund's unaudited consolidated financial
statements for the three month period ended March 31, 2008, and accompanying
Management's Discussion and Analysis (MD&A) are available on Jazz's website
www.flyjazz.ca and at www.sedar.com. A copy may also be obtained on request by
contacting Jazz's Investor Relations at: investorsinfo@flyjazz.ca or
(902) 873-5094.
Quarterly Investor Conference Call/Audio Webcast
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Jazz will hold an analyst call at 12:30 p.m. ET on Thursday, May 8, 2008
to discuss the first quarter results of Jazz Air Income Fund and Jazz Air LP.
The call may be accessed by dialing 1-800-594-3790 or (416) 644-3423 for the
Toronto area. The call will be simultaneously audio webcast via:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2147640 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, Thursday, May 15, 2008, by dialing (416) 640-1917 or toll-free
1-877-289-8525, and passcode - 21266737#. (pound key).
(1) Non-GAAP Financial Measures
EBITDA
EBITDA (earnings before interest, taxes, depreciation, amortization and
obsolescence) is a non-GAAP financial measure commonly used in all industries
to view operating results before interest expense, interest income,
depreciation amortization, gains and losses on property and equipment and
other non-operating income and expense. EBITDA is not a recognized measure for
financial statement presentation under GAAP, does not have a standardized
meaning and is therefore not comparable to similar measures presented by other
entities. Readers should refer to Jazz's and Jazz Air Income Fund's Management
Discussion and Analysis for a reconciliation of EBITDA to operating income
(loss).
DISTRIBUTABLE CASH
Distributable cash is a non-GAAP measure generally used by Canadian
open-ended trusts as an indication of financial performance. It should not
been seen as a measurement of liquidity or a substitute for comparable metrics
prepared in accordance with GAAP. Distributable cash may differ from similar
calculations as reported by other entities and, accordingly, may not be
comparable to distributable cash as reported by such entities. Readers should
refer to Jazz's and Jazz Air Income Fund's Management Discussion and Analysis
for a reconciliation of cash flows from operating activities.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
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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, by their nature, are based on assumptions 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, general
industry, market and economic conditions, war, terrorist attacks, changes in
demand due to the seasonal nature of the business, the ability to reduce
operating costs and employee counts, employee relations, labour negotiations
or disputes, restructuring, pension issues, energy prices, 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 LP's
and Jazz Air Income Fund's restated annual MD&A dated February 19, 2008, and
interim MD&A dated May 7, 2008. The forward-looking statements contained in
this discussion represent Jazz's expectations as of May 7, 2008, 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 regulations.
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.
About Jazz
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 owned by Jazz Air Income Fund (TSX: JAZ.UN).
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.
Also, the CPA reduces Jazz's financial and business risks, and provides a
stable foundation for day-to-day operations and future growth.
