Solid management practices and efficient operations consistently
deliver industry-leading performanceHALIFAX, Aug. 5 /CNW/ - Jazz Air Income Fund (the "Fund") (TSX: JAZ.UN)
announced today strong financial results for the second quarter of 2009. Jazz
is among the few airlines in North America to post a profit in the second
quarter.Q2 2009 HIGHLIGHTS
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The following are highlights of the Fund's financial performance for the
three month period ended June 30, 2009, compared to the same period in 2008.
- Distributable cash(1) of $40.6 million, up 34.0%.
- Adjusted earnings per unit of $0.29, up 31.8%(2).
- EBITDA(1) of $44.3 million, up 19.4%.
- Performance incentive of $4.7 million, up 17.0%.
- Cost per Available Seat Mile down 10.6%.
- Net income of $25.4 million, up 7.7%.Please note that as of January 1, 2009, the financial results of Jazz Air
LP ("Jazz") are no longer being reported separately. As a result, the Fund's
year-to-date operating income, net earnings, and earnings per unit have been
adjusted to remove the effect of certain consolidation amounts and to arrive
at comparable results to those previously reported for Jazz.
"Despite the economic challenges all companies are facing, I'm very
encouraged by the Fund'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.
"The strength in our performance is indicative of our solid management
practices, cost control and never-relenting attention to safety and
operational excellence. Our employees are amongst the best in the industry."
Mr. Randell went on to say, "I'm confident we'll deliver value to our
stakeholders under the terms of our amended Capacity Purchase Agreement with
Air Canada announced on July 28, 2009. The amended agreement maintains a
minimum annual Block Hour level of 339,000 with a target of 375,000 annual
Block Hours. With this reduced revenue base, we anticipate being able to
sustain the revised cash distribution of $0.60 per unit annually, including
when the new tax regime relating to Specified Investment Flow-Through entities
takes effect in 2011."Financial Performance - Second Quarter 2009 Compared to Second Quarter
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2008
----Operating revenue was $373.6 million, compared to $409.8 million,
representing a decrease of 8.8%. The decrease in operating revenue was
primarily attributable to a 31.8% reduction in revenues relating to
pass-through costs under the Capacity Purchase Agreement (the "CPA"), a 2.4%
reduction in Billable Block Hours, and a 2.5% reduction in departures. These
reductions were offset in part by a higher US dollar exchange rate and rate
increases made pursuant to the CPA.
Performance incentives payable by Air Canada to Jazz under the CPA
amounted to $4.7 million, as compared to $4.0 million. Jazz therefore earned
79% of the incentives available under the CPA versus 73% in the prior period.
Incentives earned in this quarter were higher primarily as a result of an
increase in CPA controllable revenue and improvements in customer check-in and
in-flight customer satisfaction. Other revenue sources decreased from $3.1
million to $2.4 million.
Total operating expenses decreased 11.6% from $381.0 million to $336.9
million. Non-operating expenses amounted to $0.8 million, a decrease of $0.6
million. This decrease was mainly attributable to the effect of a higher US
dollar exchange rates and a gain on the disposal of property and equipment;
offset by increased net interest expense.
CPA Controllable Costs increased by 5.4% primarily as a result of
increases in aircraft rent arising as a result of a higher US dollar exchange
rate; increases in aircraft maintenance, material and supply costs due to
increased rates payable under new maintenance contracts and a higher US dollar
exchange rate.
EBITDA(1) was $44.3 million compared to $37.1 million in 2008,
representing an increase of 19.4%. Operating income of $26.2 million increased
41.5% from $18.5 million in the second quarter of 2008. Distributable cash was
$40.6 million up from $30.3 million, an increase of 34.0%.
The Controllable Adjusted Actual Margin was 12.74%, which is less than
the target of 14.32% by 158 basis points or approximately $3.9 million. This
shortfall was primarily attributable to incentive compensation expense which
is excluded from the CPA revenue rate development. Prior period rates provided
sufficient margin to cover incentive compensation expenses. This compares to
the second quarter of 2008 Controllable Adjusted Actual Margin of 10.53%,
which was 356 basis points or approximately $8.2 million less than the target
margin of 14.09%.
CPA revenue increased 8.0%, primarily as a result of an increase in the
mark-up charged by Jazz under the CPA contract from 16.40% to 16.72% (Jazz was
entitled to this increase due its 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; offset by a reduction in
Billable Block Hours.
Net income for the second quarter was $25.4 million compared to $23.6
million, representing an increase of 7.7%.
The Fund's unaudited interim consolidated financial statements for the
period ended June 30, 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
--------------------------------------------------Jazz will hold an analyst call at 09:00 a.m. ET on Thursday, August 6,
2009 to discuss the second quarter results of the Fund. The call may be
accessed by dialing 1-800-594- 3615 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=2729540 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 13, 2009, by dialing (416) 640-1917 or toll-free
1- 877-289-8525, and passcode - 21310635# (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 the Fund'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 the 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 of the Fund was calculated based on adjusted net
income. Adjusted net income is a non-GAAP measurement defined as: net income
before amortization of CPA asset, other operating expenses incurred by Jazz,
and recovery of future income taxes.CAUTION REGARDING FORWARD-LOOKING INFORMATION
---------------------------------------------This news release should be read in conjunction with the Fund's 2009
second quarter unaudited interim consolidated financial statements and MD&A
dated August 5, 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 credit 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, secure
financing, 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 the Fund's annual MD&A dated August 5, 2009. The
forward-looking statements contained in this discussion represent the
expectations of the Fund and Jazz as of June 30, 2009, and are subject to
change after such date. However, the Fund and Jazz disclaim 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
The 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.
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 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.
