HALIFAX, Nov. 7 /CNW/ - Today, Jazz Air Income Fund (TSX: JAZ.UN) ("Jazz
Air Fund") announced the third quarter 2007 results of Jazz Air LP, with a net
income of $39.7 million - an improvement of 1.5% 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 ("Jazz").
Q3 2007 HIGHLIGHTS
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- Operating revenue of $383.8 million, up 3.9%.
- EBITDAR(1) of $78.2 million, down 1.4%.
- Operating income of $40.9 million, up 4.2%.
- Net income of $39.7 million, up 1.5%.
- Distributable cash(1) of $43.5 million, up 26.5%.
"I am pleased with our results for the third quarter of 2007," said
Joseph Randell, President and Chief Executive Officer of Jazz. "Our
operational performance this quarter was excellent, especially in light of the
fact that the third quarter is traditionally one with many operational
challenges for the industry. Our employees were prepared for these events and
delivered a very safe, reliable and comfortable operation for our passengers
as evidenced by achieving $5.0 million in performance incentives in the
quarter."
Financial Performance
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For the third quarter of 2007, operating revenue was $383.8 million,
compared to $369.3 million in the same period of 2006, representing an
increase of $14.5 million or 3.9%. The increase in operating revenue is
attributable to an increase of 5.3% in the Block Hours flown and a
$3.0 million increase in pass-through costs. For the three-month period ended
September 30, 2007, performance incentives payable by Air Canada to Jazz under
the CPA amounted to $5.0 million or 2.1% of Jazz's Scheduled Flights Revenue
as compared to $1.6 million or 0.7% for the same period in 2006. Year over
year for the third quarter, other revenue sources increased from $2.0 million
to $2.7 million.
In line with the growth in revenue, total operating expenses increased
from $330.0 million in the third quarter of 2006 to $342.9 million for the
same period in 2007, an increase of $12.9 million or 3.9%. Salaries, wages and
benefits, depreciation, airport and navigation fees and aircraft maintenance
increased by $16.4 million resulting in unit cost increases of 6.2%, quarter
over quarter, as measured by Cost per Available Seat Mile (CASM). These unit
cost increases are reflective of the change in fleet mix as a majority of the
quarter over quarter increase in Block Hours is attributable to the regional
jet fleet. The maintenance unit cost increase was driven by heavy maintenance
work on the Dash 8 fleet, the heavy check cycle on the CRJ705 fleet, as well
as the majority of the new CRJs were under warranty in 2006. Airport and
navigational fees are pass-through costs. These unit cost increases were more
than offset by a decrease in all other areas on a unit basis, resulting in an
overall net decrease of 0.8% as measured by CASM.
For the third quarter of 2007, EBITDAR was $78.2 million compared to
$79.3 million in the third quarter 2006, a decrease of $1.1 million or 1.4%.
The operating income of $40.9 million represents an improvement of
$1.7 million or 4.2% over the same period last year. Distributable cash was
$43.5 million up $9.1 million or 26.5% from the third quarter of 2006.
The Controllable Adjusted Actual Margin for the third quarter of 2007 was
14.93%, which is over the target of 14.09% by 84 basis points or approximately
$2.0 million. This compares to the third quarter of 2006 margin of 16.59%
which was approximately $5.6 million better than the target of 14.09%.
Overall during the third quarter, the CPA Scheduled Flights Revenue
decreased on an Available Seat Mile (ASM) basis by 1.3% while Controllable
Costs increased by 0.5%. The reduction in revenue on an ASM basis is primarily
a result of fixed revenue fees being unitized over more ASMs as generated by
the regional jet fleet and lower US exchange rates on aircraft leases. The
increase in Controllable Cost on an ASM basis is a result of salary and wage
increases from additional Full Time Equivalent (FTE) employees used to support
the ongoing fleet requirements and unionized wage and scale increases as a
result of collective agreement provisions, increased maintenance costs
associated with the heavy check cycle on the CRJ705 fleet and increased heavy
maintenance work on the Dash 8 fleet, and general price level increases on
certain annual service contracts.
Net income for the third quarter was $39.7 million compared to
$39.1 million recorded in the third quarter last year, an improvement of
$0.6 million or 1.5%.
Jazz's and Jazz Air Fund's unaudited interim consolidated financial
statements for the period ended September 30, 2007, 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) 873-5000.
Recent Events
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On October 22, 2007, pursuant to a secondary offering, ACE Aviation
Holdings Inc. sold 35.5 million units of Jazz Air Income Fund, thus reducing
its ownership level to 20.1%.
Quarterly Investor Conference Call / Audio Webcast
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Jazz will hold an analyst call at 12:30 p.m. ET on Thursday, November 8,
2007, to discuss the third quarter results of Jazz Air Fund and Jazz Air LP.
The call may be accessed by dialing 1-800-594-3790 (toll free) or
(416) 644-3424 within the Toronto area. The call will be simultaneously audio
webcast via: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2048200
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, November 15, 2007, by dialing 1-877-289-8525 (toll
free) or (416) 640-1917 within the Toronto area and passcode 21250255#.
(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 entities. Readers should refer to Jazz's and Jazz
Air Fund's Management Discussion and Analysis for a reconciliation of EBITDAR
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 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 Jazz's and Jazz Air Fund's annual MD&A dated February 7,
2007 and in Jazz's and Jazz Air Fund's MD&A dated November 7, 2007. The
forward-looking statements contained in this discussion represent Jazz's
expectations as of November 7, 2007, 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 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 (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.
