HALIFAX, May 14 /CNW/ - Jazz Air Income Fund ("Jazz") (TSX: JAZ.UN)
announced today its first quarter 2009 results.
Q1 2009 HIGHLIGHTS
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The following are highlights of the financial performance of Jazz for the
period ended March 31, 2009.
- Distributable cash(1) of $34.0 million.
- Adjusted earnings per unit of $0.24(2).
- EBITDA(1) of $39.1 million.
- Performance incentive of $4.3 million.
- Completed CPA Controllable Cost reset for the period 2009 to 2011.
Please note that as of January 1, 2009, the financial results of Jazz Air
LP (the Partnership) are no longer being reported separately. As a result,
Jazz's year-to-date operating income, net earnings, and earnings per unit have
been adjusted to remove the effect of certain consolidation amounts to arrive
at comparable results to those previously reported for the Partnership.
"Despite the economic challenges all companies are facing, I'm very
encouraged by Jazz's ability to report again this quarter some of the more
positive financial and operational results within the North American aviation
industry," said Joseph Randell, President and Chief Executive Officer of Jazz.
"I commend our employees for improving customer satisfaction which contributed
to the attainment of 75 per cent of the performance incentives available under
our Capacity Purchase Agreement."
"Jazz continues to maintain solid control on its costs as evidenced by an
increase of 4.0 per cent in distributable cash in the quarter despite a 9.3
per cent drop in Billable Block Hours and an 8.0 per cent decrease in
operating income before CPA amortization."
Financial Performance - First Quarter 2009 Compared to First Quarter 2008
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Operating revenue was $369.4 million, compared to $396.4 million,
representing a decrease of 6.8%. The decrease in operating revenue was
attributable primarily to a 24.8% reduction in revenues relating to
pass-through costs, a 9.3% reduction in Billable Block Hours, and a 7.0%
reduction in departures. These reductions were offset in part by a higher US
dollar exchange rate and rate increases made pursuant to the Capacity Purchase
Agreement (CPA).
Performance incentives payable by Air Canada to Jazz under the CPA
amounted to $4.3 million, as compared to $3.9 million. Jazz therefore earned
75% of the incentives available under the CPA versus 71% in the prior period.
Incentives earned in this quarter were higher, primarily as a result of the
increase in CPA controllable revenue and improvements in customer check-in and
in-flight customer satisfaction. Other revenue sources decreased from $2.4
million to $2.1 million.
Total operating expenses decreased from $362.0 million to $337.8 million,
a decrease of 6.7%. Non-operating expenses amounted to $2.0 million, a
decrease of $2.1 million. This decrease was mainly attributable to a $3.0
million fair value adjustment in the first quarter of 2008 related to Asset
Backed Commercial Paper (with no such adjustment in the first quarter of
2009), increased net interest expense in the first quarter of 2009, and a
foreign exchange loss arising as a result of the reduction in value of the
Canadian dollar relative to the US dollar.
CPA Controllable Costs increased by 7.5% primarily as a result of
increases in aircraft rent (due to a higher US dollar exchange rate), and
increases in aircraft maintenance, materials and supplies costs (due to
increased rates under new maintenance contracts and a higher US dollar
exchange rate on certain material purchases).
EBITDA(1) was $39.1 million compared to $41.2 million in 2008, a decrease
of 5.1%. Operating income of $21.1 million decreased 10.6% from $23.6 million
in the first quarter of 2008. Distributable cash was $34.0 million up from
$32.7 million, an increase of 4.0%.
The Controllable Adjusted Actual Margin was 11.05%, which is less than
the target of 14.32% by 327 basis points or approximately $8.0 million. This
compares to the first quarter of 2008 Controllable Adjusted Actual Margin of
12.88% which was approximately 121 basis points or $2.8 million less than the
target of 14.09%. Revenue rates have been established based on annual
forecasted Billable Block Hour demand. In a quarter with less than average
Block Hour activity, margins were compressed. In the first quarter of 2009,
this margin compression represented $4.0 million of the shortfall from target
level Controllable Adjusted Actual Margin. The balance of the shortfall was
attributable to incentive compensation expenses which are excluded from the
CPA revenue rate development. Prior period rates provided sufficient margin to
cover incentive compensation expenses.
CPA revenue increased 5.2%, as a result of an increase in the mark-up
charged by Jazz under the contract (from 16.40% to 16.72%), due to Jazz's
out-performance of the controllable target margin from 2006 to 2008, an
increase in CPA Controllable Costs rates for 2009 to 2011, and a higher US
dollar exchange rate (these increases were partially offset by a reduction in
Billable Block Hours).
Net income for the first quarter was $21.1 million compared to $21.8
million recorded last year, a decrease of 3.2%.
Jazz Air Income Fund's unaudited interim consolidated financial
statements for the period ended March 31, 2009, 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 12:00 p.m. ET on Friday, May 15, 2009
to discuss the first quarter results of Jazz Air Income Fund. The call may be
accessed by dialing 1-800-595 8550 or (416) 644-3416 for the Toronto area. The
call will be simultaneously audio webcast via:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2620420 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, Friday, May 22, 2009, by dialing (416) 640-1917 or toll-free 1-
877-289-8525, and passcode - 21303667# (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 throughout all
industries to view operating results before interest expense, interest income,
depreciation and amortization, gains and losses on property and equipment and
other non-operating income and expense. Management believes EBITDA assists
investors in comparing Jazz's performance on a consistent basis without regard
to depreciation and amortization, which are non-cash in nature and can vary
significantly depending on accounting methods and non-operating factors such
as historical cost. EBITDA should not be used as an exclusive measure of cash
flow because it does not account for the impact on working capital growth,
capital expenditures, debt repayments and other sources and uses of cash,
which are disclosed in the statement on cash flows.
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 Fund's Management Discussion and Analysis for a
reconciliation of distributable cash to cash provided by operating activities.
(2) EARNINGS PER UNIT CALCULATION
Earnings per unit was calculated based on adjusted net income. Adjusted
net income is a non-GAAP measurement defined as: adjusted net income = net
income + amortization of CPA asset + other operating expenses incurred by Jazz
+ recovery of future income taxes.
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
www.sedar.com).
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 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, 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 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.
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.
Also, the CPA significantly reduces Jazz's financial and business risks, and
provides a stable foundation for day-to-day operations and future growth.
