HALIFAX, Aug. 8 /CNW/ - Today, Jazz Air Income Fund (TSX: JAZ.UN) ("Jazz
Air Fund") announced the second quarter 2007 results of Jazz Air LP, with a
net income of $40.6 million - an improvement of 14% over the same quarter in
2006. These results were generated under a Capacity Purchase Agreement (CPA)
with Air Canada that became effective January 1, 2006. Jazz Air Fund has 100%
beneficial ownership interest in Jazz Air LP ("Air Canada Jazz").Q2 2007 HIGHLIGHTS
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- Operating revenue of $375.3 million, up 10.3%.
- EBITDAR(1) of $78.5 million, up 2.6%.
- Operating income of $39.9 million, up 9.4%.
- Net income of $40.6 million, up 14%.
- Distributable cash(1) of $41.1 million."I am pleased with our earnings results for the second quarter of 2007,"
said Joseph Randell, President and Chief Executive Officer of Air Canada Jazz.
"The investments we have made in information technology, maintenance
infrastructure and our focus on service excellence have all positively
contributed to our operational and financial performance. I am also encouraged
by our continued process improvements and cost containment achievements as
evidenced by an approximate six percent reduction in Controllable Cost per
Available Seat Mile this quarter."
Financial Performance
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For the second quarter of 2007, operating revenue was $375.3 million,
compared to $340.1 million in the same period of 2006, representing an
increase of $35.2 million or 10.3%. The increase in operating revenue is
attributable to an increase of 13.1% in the Block Hours flown and a
$17.1 million increase in pass-through costs. For the three-month period ended
June 30, 2007, performance incentives payable by Air Canada to Air Canada Jazz
under the CPA amounted to $4.6 million or 2.0% of Jazz's Scheduled Flights
Revenue as compared to $4.7 million or 2.2% for the same period in 2006. Year
over year for the second quarter, other revenue sources increased from
$1.6 million to $2.3 million.
In line with the growth in revenue, total operating expenses increased
from $303.7 million in the second quarter of 2006 to $335.4 million for the
same period in 2007, an increase of $31.7 million or 10.5%. Pass-through fuel
expense increased by $10.1 million or 14.2% due to an $11.8 million increase
in fuel usage which corresponds to the 13.1% increase in Block Hours flown.
Aircraft rent decreased by approximately $0.6 million or 1.8% over the
previous second quarter mainly due to U.S. Dollar exchanges rate and new lease
arrangements with respect to certain aircraft. Capacity, as measured by
available seat miles (ASM), increased by 15.1%. Controllable Costs per
Available Seat Mile decreased by 6.1% in the second quarter of 2007 from the
second quarter of 2006.
For the second quarter of 2007, EBITDAR was $78.5 million compared to
$76.5 million in the second quarter 2006, an increase of $2.0 million or 2.6%.
This improvement was achieved through increased capacity. The operating income
of $39.9 million represents an improvement of $3.4 million or 9.4%. In the
quarter, distributable cash was $41.1 million.
In the second quarter of 2007, non-operating income amounted to
$0.6 million, an increase of $1.6 million from 2006. The change is mainly due
to an increase in interest revenue from short-term investments and favorable
fluctuations in the monthly exchange rate.
The Controllable Adjusted Actual Margin for the second quarter of 2007
was 14.89%, which is over the target of 14.09% by 80 basis points or
approximately $1.8 million. This compares to the second quarter of 2006 margin
of 14.61% which was approximately $1.2 million better than the target of
14.09%.
Net income for the second quarter was $40.6 million compared to
$35.6 million recorded in the second quarter last year, an improvement of
$5.0 million or 14.0%.
On May 24, 2007, ACE Aviation Holdings Inc. ('ACE") distributed
12,000,000 units of Jazz Air Fund to its shareholders through a special
distribution. Immediately following this distribution, ACE's ownership of Jazz
Air Fund went from 58.8% to 49.0%. As a result of the May 24, 2007
transaction, Air Canada Jazz is now consolidated, as a variable interest
entity in the accounts of Jazz Air Fund and accordingly, as of May 24, 2007,
Jazz Air Fund has changed its basis of accounting for its investment in Air
Canada Jazz from the equity method to consolidation.
Under the provisions of Bill C-52, Budget Implementation Act, 2007, which
received Royal Assent on June 22, 2007, Jazz Air Fund, as a publicly traded
income trust, is considered a specified investment flow-through ("SIFT") and
will become subject to tax commencing January 1, 2011. Future tax will be
assessed based on temporary differences expected to reverse after 2011 at the
substantively enacted tax rate for that period of 31.5%. The tax effects of
temporary differences that give rise to significant portions of the future tax
assets and future tax liabilities at June 30, 2007 is a net $60.8 million
liability and expected to reverse in 2011.
Air Canada Jazz's and Jazz Air Fund's unaudited interim consolidated
financial statements for the period ended June 30, 2007, and accompanying
Management's Discussion and Analysis (MD&A) are available on Air Canada Jazz's
website www.flyjazz.ca and at www.sedar.com. A copy may also be obtained on
request by contacting Air Canada Jazz's Investor Relations at:
investorsinfo@flyjazz.ca or (902) 873-5000.
Recent Events
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People
For the period ended June 30, 2007, Jazz had an average of 4,405 full
time equivalent (FTE) employees compared to an average of 4,032 FTE employees
in 2006. This reflects a 9.3% increase from the first six months of 2006.
Management carefully monitors growth and these employment increases are
considered appropriate with capacity growth of 14.1% as measured by ASMs.
Wage Reviews with Canadian Air Line Dispatchers Association
Arbitrator Martin Teplitsky released his wage review award for the
dispatchers represented by the Canadian Air Line Dispatchers Association
(CALDA). Aside from fixed adjustments to the scales applicable to employees
hired after July 31, 2003, Mr. Teplitsky's award granted CALDA-represented
employees a 1.5% wage increase effective August 1, 2006, 1.5% effective
August 1, 2007, and 1.5% effective August 1, 2008.
Quarterly Investor Conference Call / Audio Webcast
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Air Canada Jazz will hold an analyst call at 12:30 p.m. ET on Thursday,
August 9, 2007, to discuss the second quarter results of Jazz Air Fund and
Jazz Air LP. The call may be accessed by dialing 1-866-250-4909 (toll free) or
(416) 644-3433 within the Toronto area. The call will be simultaneously audio
webcast http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1944360
The conference call webcast will be archived on Air Canada Jazz's
Investor Relations website at www.flyjazz.ca. A playback of the call can also
be accessed until midnight ET, Thursday, August 16, 2007, by dialing
1-877-289-8525 (toll free) or (416)-640-1917 within the Toronto area and
passcode 21241684#.
(1)Non-GAAP Financial Measures
EBITDAR
EBITDAR (earnings before interest, taxes, depreciation, amortization and
obsolescence and aircraft rent) is a non-GAAP financial measure commonly used
in the airline industry to view operating results before aircraft rent and
ownership costs, including the impact of foreign exchange on monetary items as
these costs can vary significantly among airlines due to differences in the
way airlines finance their aircraft and asset acquisitions. EBITDAR 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 public entities. Readers should refer to Air
Canada Jazz's and Jazz Air Fund's Management Discussion and Analysis for a
reconciliation of EBITDAR to operating income (loss).
DISTRIBUTABLE CASH
Cash available for distributions or 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. Cash
available for distributions may differ from similar calculations as reported
by other entities and, accordingly, may not be comparable to cash available
for distributions as reported by such entities. Readers should refer to Air
Canada 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, 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 throughout Jazz Air Fund's filings with
securities regulators in Canada and in particular those identified in the Risk
Factors section of Air Canada Jazz's and Jazz Air Fund's annual MD&A dated
February 7, 2007.The forward-looking statements contained in this discussion
represent Air Canada Jazz's expectations as of August 8, 2007, and are subject
to change after such date. However, Air Canada 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 law.
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 Air LP
Jazz Air LP (Air Canada Jazz) is the second largest airline in Canada
based on fleet size and the number of routes operated. Air Canada Jazz
operates more flights and flies to more Canadian destinations than any other
Canadian carrier. Air Canada Jazz forms an integral part of Air Canada's
domestic and transborder market presence and strategy.
Air Canada Jazz and Air Canada are parties to a Capacity Purchase
Agreement (CPA) pursuant to which Air Canada currently purchases substantially
all of Air Canada Jazz's fleet capacity based on predetermined rates. Air
Canada Jazz provides all crews, airframe maintenance and, in some cases,
airport operations. In turn, Air Canada determines routes and controls
scheduling, ticket prices, product distribution, seat inventories, marketing
and advertising for these flights.
Air Canada Jazz is not a typical airline. Currently, over 99% of Air
Canada Jazz's revenues are derived from the CPA. Air Canada Jazz is isolated
from some of the risks typically associated with airlines such as fuel and
navigation costs since these costs are passed-through to Air Canada. The CPA
provides commercial flexibility, low trip costs and connecting network traffic
to Air Canada.
Under the CPA with Air Canada, Air Canada Jazz provides service to and
from lower density markets as well as higher density markets at off-peak times
throughout Canada and to and from certain destinations in the United States.
As of August 1, 2007, Air Canada Jazz operated scheduled passenger service on
behalf of Air Canada with approximately 888 departures per weekday to 56
destinations in Canada and 28 destinations in the United States with a fleet
of 134 aircraft.
Air Canada Jazz is the focal point of Air Canada's regional passenger
strategy. Air Canada Jazz and Air Canada have linked their regional and
mainline networks in order to serve connecting passengers more efficiently and
to provide valuable feed traffic to Air Canada's mainline routes.
