HALIFAX, Feb. 10 /CNW/ - Today, Jazz Air Income Fund (TSX: JAZ.UN)
announced the fourth quarter and year end 2008 results of Jazz Air LP
("Jazz"). The following are highlights of the financial performance of Jazz.
Q4 2008 HIGHLIGHTS
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- Operating revenue of $392.7 million, up 5.5%.
- Operating income of $39.7 million, up 10.3%.
- Performance incentive of $3.6 million.
- Net income of $34.9 million, down 0.5%.
- Distributable cash(1) of $37.4 million, up 13.1%.
Year end 2008 HIGHLIGHTS
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- Operating revenue of $1,636.3 million, up 9.4%.
- Operating income of $148.3 million, down 3.2%.
- Performance incentive of $15.7 million.
- Net income of $134.8 million, down 10.5%.
- Distributable cash(1) of $144.6 million, down 4.4%.
"I'm proud of Jazz's accomplishments in 2008, and despite the uncertain
economic environment and the weather-related operational challenges we faced,
we're reporting 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. "We have established our Capacity
Purchase Agreement rates for the next three years and delivered on our
commitments. Importantly, we took a number of steps to further strengthen our
foundation, to reduce costs, and to position us for continued stability and
growth in the years ahead. Safety remains our absolute priority and I commend
every Jazz employee for maintaining the highest standards of safety and
professionalism - today's positive results would not be possible without their
efforts."
Financial Performance - Fourth Quarter 2008 Compared to Fourth Quarter
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2007
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Operating revenue was $392.7 million, compared to $372.1 million,
representing an increase of $20.6 million or 5.5%. The increase in operating
revenue is attributable to a $6.8 million increase in revenues relating to
pass-through costs; a higher US dollar exchange rate; no margin adjustment
owing to Air Canada recorded in the quarter due to the year-to-date 2008
performance being below the target margin of 14.09% (an adjustment owing to
Air Canada was recorded in the fourth quarter of 2007); and annual rate
increases made pursuant to the Capacity Purchase Agreement (CPA) with Air
Canada.
Performance incentives payable by Air Canada to Jazz under the CPA
amounted to $3.6 million or 1.5% of Jazz's Scheduled Flights Revenue as
compared to $4.0 million or 1.8%. Jazz therefore earned 65% of the incentives
available under the CPA versus 76%. Incentives earned in this quarter were
lower primarily as a result of the consequential impact of inclement weather
conditions leading to lower on-time performance. Other revenue sources
increased from $1.4 million to $3.7 million.
In line with the growth in revenue, total operating expenses increased
from $336.1 million to $353.0 million, an increase of $16.9 million or 5.0%.
Pass-through costs, which rose primarily as a result of increased fuel prices,
represented $6.8 million or 40.5% of the total increase in operating costs.
Aircraft fuel costs increased by $6.0 million due to an increase of $12.2
million in fuel price which was offset by a $6.2 million decrease in fuel
usage related to reduced Block Hours flown and various fuel consumption
reduction initiatives. Controllable Costs represented $10.0 million or 59.5%
of the increase primarily as a result of aircraft rent increasing $7.7 million
due to higher US dollar exchange; the addition of one CRJ705 and two Dash 8
charter aircraft; and new lease arrangements with respect to certain aircraft.
Non-operating expenses amounted to $4.8 million, an increase of $3.9
million or 415.9%, from $0.9 million. The increase was mainly attributable to
increased net interest expense and to a foreign exchange loss arising as a
result of the reduction in value of the Canadian dollar relative to the US
dollar.
EBITDA(1) was $47.6 million compared to $42.9 million in 2007, an
increase of $4.7 million or 11.1%. Operating income of $39.7 million
represents an improvement of $3.7 million or 10.3%. Distributable cash was
$37.4 million up from $33.1 and increase of $4.3 million or 13.1%.
The Controllable Adjusted Actual Margin was 14.91%, which is over the
target of 14.09% by 82 basis points or approximately $1.9 million. This
compares to the fourth quarter of 2007 Controllable Adjusted Actual Margin of
14.15% which was approximately $0.1 million greater than the target of 14.09%.
CPA revenue increased from $223.7 million to $235.5 million, an increase
of 5.2% or $11.7 million as a result of no margin adjustment owing to Air
Canada being recorded in the quarter due to the year-to-date 2008 performance
being below the target margin of 14.09% (an adjustment owing to Air Canada was
recorded in the fourth quarter of 2007).
Net income for the fourth quarter was $34.9 million compared to $35.1
million recorded last year, a decrease of $0.2 million or 0.5%.
Financial Performance - Year End 2008 Compared to Year End 2007
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Operating revenue was $1,636.3 million, compared to $1,495.4 million in
2007, representing an increase of $140.9 million or 9.4%. The increase in
operating revenue is mainly attributable to a 1.0% increase in Billable Block
Hours; a $111.8 million increase in revenues relating to pass-through costs;
no margin adjustment owing to Air Canada recorded due to the year-to-date 2008
performance being below the target margin of 14.09% (an adjustment owing to
Air Canada was recorded in respect of the 2007 fiscal year); and annual rate
increases made pursuant to the CPA.
Jazz earned 71% of the incentives available under the CPA. Performance
incentives payable by Air Canada to Jazz under the CPA amounted to $15.7
million or 1.7% of Jazz's Scheduled Flights Revenue as compared to $16.7
million or 1.8% for 2007. Other revenue sources increased from $8.3 million to
$13.4 million, representing an increase of $2.3 million or 16.4%.
Total operating expenses increased from $1,342.2 million in 2007 to
$1,488.0 million, an increase of $145.8 million or 10.9%. Pass-through costs
rose primarily as a result of the rise in fuel prices and increased de-icing
costs due to inclement weather conditions. Controllable Costs represented
$34.0 million, or 23.3% of the total increase in operating costs, which rose
primarily as a result of increased costs related to aircraft maintenance,
depreciation, and salaries, wages and benefits.
Non-operating expenses rose from $2.5 million to $13.4 million, an
increase of $10.9 million or 436.1%. The increase was mainly attributable to
increased net interest expense resulting from lower interest income; a foreign
exchange loss as a result of the reduction value of the Canadian dollar
relative to the US dollar; and a fair value adjustment made in respect of an
asset back commercial paper investment held by Jazz.
EBITDA was $178.7 million compared to $177.5 million at the end of 2007,
an increase of $1.2 million or 0.7%. Operating income of $148.3 million
represents a decrease of $4.9 million or 3.2% from $153.2 million.
Distributable cash of $144.6 million was down from $151.3 million, or $6.7
million or 4.4%.
The Controllable Adjusted Actual Margin was 13.79%, which is less than
the target of 14.09% by 30 basis points or approximately $2.8 million. This
compares to the year 2007 Controllable Adjusted Actual Margin of 14.54% which
was approximately $4.1 million better than the target. The CPA controllable
cost growth of 3.6% or $28.4 million, outpaced the CPA revenue growth which
generated a decrease of $3.4 million in the Controllable Adjusted Actual
Margin.
CPA revenue increased by 2.7% or $25.0 million as a result of: no margin
adjustment owing to Air Canada recorded due to the year-to-date 2008
performance being below the target margin of 14.09% (an adjustment owing to
Air Canada was recorded in respect of the 2007 fiscal year); annual rate
increases made pursuant to the CPA; increased Billable Block Hours; and a
change in the fleet mix due to the addition of one CRJ705 in November 2007.
Net income for year end 2008 was $134.8 million compared to $150.7
million recorded for 2007, a decrease of $15.8 million or 10.5%.
Jazz Air Income Fund has recorded a non-cash goodwill impairment of
$153.2 million, and a related future income tax recovery of $51.0 million
which is attributed to the impairment and other tax components. As a result,
for the year ended December 31, 2008, Jazz Air Income Fund reported a net loss
of $9.4 million. The goodwill impairment does not have any effect on the
financial statements or the year end results of Jazz Air LP.
Jazz Air LP and Jazz Air Income Fund's audited consolidated financial
statements for the year ended December 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 9:00 a.m. ET on Wednesday, February 11,
2009 to discuss the fourth quarter and year end results of Jazz Air Income
Fund and Jazz Air LP. 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=2524500
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, February 18, 2009, by dialing (416) 640-1917 or
toll-free 1-877-289-8525, and passcode - 21295235# (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.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
---------------------------------------------
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 LP's
and Jazz Air Income Fund's annual MD&A dated February 10, 2009. The
forward-looking statements contained in this discussion represent Jazz's
expectations as of February 10, 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.
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 significantly reduces Jazz's financial and business risks, and
provides a stable foundation for day-to-day operations and future growth.
