HALIFAX, Aug. 6 /CNW/ - Today, the second quarter 2008 results of Jazz
Air Income Fund (TSX: JAZ.UN) and Jazz Air LP ("Jazz") were announced.
Q2 2008 HIGHLIGHTS
------------------- Operating revenue of $409.8 million, up 9.2%.
- Performance incentives of $4.0 million, down 13%.
- Operating income of $28.8 million, down 27.8%.
- Net income of $27.4 million, down 32.4%.
- Controllable Cost per Available Seat Mile, up 9.6 %.
- Distributable cash(1) of $30.1 million, down 26.8%."We've performed well this quarter despite significant weather-related
challenges in central Canada and the US eastern seaboard from an operational
point of view. Our employees continue to deliver a safe and reliable service
as evidenced by our achievement of 73% of the performance incentives available
under the CPA," said Joseph Randell, President and Chief Executive Officer of
Jazz. "Consistent with the guidance we provided earlier this year, we've
completed both the planned outsourced work and excess overtime charges related
to heavy maintenance. These costs are reflected in this quarter's results."
Financial Performance - Second Quarter 2008
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For the second quarter of 2008, operating revenue was $409.8 million,
compared to $375.3 million in the same period of 2007, representing an
increase of $34.5 million or 9.2%. The increase in operating revenue was
attributable to an increase of 0.5% in the Block Hours flown and a 23.3%
increase in pass-through costs under the Capacity Purchase Agreement (CPA)
with Air Canada. For the three-month period ended June 30, 2008, performance
incentives payable by Air Canada to Jazz under the CPA amounted to
$4.0 million or 1.7% of Jazz's Scheduled Flights Revenue as compared to
$4.6 million or 2.0% for the same period in 2007. This translates to 73% of
the incentives available under the CPA for the quarter versus an 86%
attainment in 2007. Incentives earned in the second quarter of 2008 were lower
primarily due to the consequential impact of inclement weather conditions
which led to lower on-time performance than 2007. Year-over-year, for the
second quarter, other revenue sources increased from $2.3 million to $3.1
million.
Total operating expenses increased from $335.4 million in the second
quarter of 2007 to $381.0 million for the same period in 2008, an increase of
$45.6 million or 13.6 %. Pass-through costs represented $32.5 million or 71.3%
of the total increase in operating costs, rising primarily as a result of the
continuing rise in fuel prices. Controllable Costs represented $13.1 million
or 28.7% of the total increase in operating costs, rising primarily as a
result of increased costs related to aircraft maintenance, depreciation,
salaries, wages and benefits and other expenses.
For the second quarter of 2008, EBITDA(1) was $36.9 million compared to
$45.6 million in the second quarter 2007, a decrease of $8.7 million or 19.0%.
Operating income of $28.8 million represents an $11.1 million or 27.8%
decrease from the same period last year.
Controllable Costs per Available Seat Mile, excluding fuel, for the three
month period ended June 30, 2008, increased by 7.5% over the same period in
2007. During the quarter, the Controllable Costs related to the CPA were
affected by increased heavy maintenance related costs and training expenses.
Distributable cash was $30.1 million down $11.0 million or 26.8% from the
second quarter of 2007.
The Controllable Adjusted Actual Margin established under the CPA for the
second quarter of 2008 was 10.53%, which is under the CPA target of 14.09% by
356 basis points or the equivalent of approximately $8.2 million. This
compares to the second quarter of 2007 margin of 14.89% which was better than
the target of 14.09% by 80 basis points or the equivalent of approximately
$1.8 million.
In the second quarter of 2008, non-operating expense amounted to
$1.4 million, an increase of $2.1 million from the second quarter 2007. The
change is mainly attributable to increased net interest expense resulting from
lower interest income, and a foreign exchange loss compared to a gain in 2007
due to the strengthening Canadian dollar against the US dollar.
Net income for the second quarter of 2008 was $27.4 million compared to
$40.6 million recorded in the second quarter last year, a decrease of
$13.2 million or 32.4%.
Jazz Air LP and Jazz Air Income Fund's unaudited consolidated financial
statements for the three month period ended June 30, 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
--------------------------------------------------
Jazz will hold an analyst call at 12:30 p.m. ET on Thursday, August 7,
2008 to discuss the second quarter results of Jazz Air Income Fund and Jazz
Air LP. The call may be accessed by dialing 1-800-590-1817 or (416) 644-3424
for the Toronto area. The call will be simultaneously audio webcast via:
www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2338600 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, August 14, 2008, by dialing (416) 640-1917 or toll-free
1- 877-289-8525, and passcode - 21278245No. (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
---------------------------------------------
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,
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 restated annual MD&A dated February 19, 2008, and
interim MD&A dated August 6, 2008. The forward-looking statements contained in
this discussion represent Jazz's expectations as of August 6, 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.
