Jazz Air Income Fund announces fourth quarter and year end 2007 financial results
Feb 6, 2008
HALIFAX, Feb. 6 /CNW/ - Today, the fourth quarter and year end 2007 results of Jazz Air Income Fund (TSX: JAZ.UN) and Jazz Air LP ("Jazz") were announced. Q4 2007 HIGHLIGHTS ------------------ - Operating revenue of $372.1 million, up 5.8%. - Operating income of $36.0 million, up 10.1%. - Net income of $35.1 million, up 9.9%. - Distributable cash(1) of $33.1 million, up 9.2%. Year end 2007 HIGHLIGHTS ------------------------ - Operating revenue of $1,495.4 million, up 8.3%. - Operating income of $153.2 million, up 6.5%. - Net income of $150.7 million, up 7.6%. - Distributable cash(1) of $151.3 million, up 10.8%. "The year 2007 marked many accomplishments and events for Jazz, including positive financial results, strong operational performance and a significant change in ownership structure," said Joseph Randell, President and Chief Executive Officer of Jazz. "I am very pleased with the improvements we made in all areas over 2006 - which in itself was also a good year for Jazz. We've met our target cash distribution levels for the year and are confident this trend will continue into 2008." Financial Performance - Fourth Quarter 2007 ------------------------------------------- For the fourth quarter of 2007, operating revenue was $372.1 million, compared to $351.9 million in the same period of 2006, representing an increase of $20.3 million or 5.8%. The increase in operating revenue is attributable to an increase of 3.7% in the Block Hours flown and a $17.7 million increase in pass-through costs. For the three-month period ended December 31, 2007, performance incentives payable by Air Canada to Jazz under the CPA amounted to $4.0 million or 1.8% of Jazz's Scheduled Flights Revenue as compared to $3.1 million or 1.4% for the same period in 2006. Incentives earned in this quarter were higher due to fewer controllable flight cancellations as a result of technology and process improvements. Year-over-year for the fourth quarter, other revenue sources increased from $1.3 million to $1.4 million. In line with the growth in revenue, total operating expenses increased from $319.1 million in the fourth quarter of 2006 to $336.1 million for the same period in 2007, an increase of $16.9 million or 5.3%. This translated into a unit cost increase on a CASM basis of 2.3%. Fuel saw the largest dollar increase which amounted to $14.2 million and was driven mostly as a result of jet fuel price increases. CASM, excluding fuel, was down 1.8% for the period, and when isolated to Controllable Cost, was down 3.2%. Part of the decrease in controllable CASM was a result of the impact of the lower US dollar exchange rate in aircraft rent offset by maintenance costs. For the fourth quarter of 2007, EBITDAR(1) was $71.6 million compared to $71.7 million in the fourth quarter 2006, a decrease of $0.1 million or 0.1%. The operating income of $36.0 million represents an improvement of $3.3 million or 10.1% over the same period last year. Distributable cash was $33.1 million up 9.2% from the fourth quarter of 2006. The Controllable Adjusted Actual Margin for the fourth quarter of 2007 was 14.15%, which is over the target of 14.09% by 6 basis points or approximately $0.1 million. This compares to the fourth quarter of 2006 margin of 13.0% which was approximately $2.4 million less than the target of 14.09%. Overall during the fourth quarter, the CPA Scheduled Flights Revenue decreased on an Available Seat Mile (ASM) basis by 2.2% while Controllable Costs decreased by 3.2%. 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 decrease in Controllable Cost on an ASM basis is a result of lower aircraft rent units costs as a result of lower US exchange rates, offset by an increase in maintenance unit cost due to the majority of new CRJs coming off warranty in 2007, the heavy check cycle on the CRJ705 fleet, heavy maintenance work on the Dash 8 fleet, and general price level increases on certain annual service contracts. Net income for the fourth quarter was $35.1 million compared to $31.9 million recorded in the fourth quarter last year, an improvement of $3.2 million or 9.9%. Financial Performance - Year end 2007 ------------------------------------- For the year end of 2007, operating revenue was $1,495.4 million, compared to $1,381.2 million in the same period of 2006, representing an increase of $114.2 million or 8.3%. The increase in operating revenue is attributable to an increase in the number of aircraft operated by Jazz, an 8.3% increase in the Block Hours flown, as well as a $58.6 million increase in pass-through costs. For the year ended December 31, 2007, Jazz earned 78% of the incentives available under the CPA. Performance incentives payable by Air Canada to Jazz under the CPA amounted to $16.7 million or 1.8% of Jazz's Scheduled Flights Revenue as compared to $13.5 million or 1.6% for year end 2006. Year-over-year, other revenue sources increased from $7.0 million to $8.3 million. In 2007, total operating expenses increased from $1,237.4 million in 2006 to $1,342.2 million, an increase of $104.8 million or 8.5%. This correlates with an 8.3% increase in Block Hours flown and an 8.6% increase in ASMs for the year. Correspondingly, the unit cost on a CASM basis was relatively consistent year-over-year. Fuel saw the largest dollar increase which amounted to $35.6 million as a result of the increased volume of flying, mostly with regional jet equipment, and the price increase experienced in jet fuel. CASM, excluding fuel, was down 1.2% and Controllable CASM was down 2.2% for the year. For the year end of 2007, EBITDAR was $304.5 million compared to $299.0 million at the end of 2006, an increase of $5.5 million or 1.8%. The operating income of $153.2 million represents an improvement of $9.4 million or 6.5% over the same period last year. Distributable cash was $151.3 million up 10.8% from 2006. The Controllable Adjusted Actual Margin for 2007 was 14.54%, which is over the target of 14.09% by 45 basis points or approximately $4.1 million. This compares to the year end 2006 margin of 14.77% which was approximately $5.8 million better than the target of 14.09%. The year ended margin during 2006 and the CPA revenue rates were developed on an annualized basis of planned Controllable Costs. This had the effect of providing a relatively higher margin in the first half of 2006 until Controllable Costs had actually been incurred in support of the additional fleet. Net income for year end 2007 was $150.7 million compared to $140.0 million recorded for year end 2006, an improvement of $10.6 million or 7.6%. Jazz Air LP and Jazz Air Income Fund's audited consolidated financial statements for the year ended December 31, 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: firstname.lastname@example.org or (902) 873-5000. Recent Events ------------- On January 24, 2008, ACE Aviation Holdings Inc. sold 13 million units of Jazz Air Income Fund, thus reducing its ownership level to 9.5%. Quarterly Investor Conference Call / Audio Webcast -------------------------------------------------- Jazz will hold an analyst call at 12:30 p.m. ET on Thursday, February 7, 2008 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 1-800-594-3790 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=2147640 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, February 14, 2008, by dialing (416) 641-1917 or toll-free 1-877-289-8525, and passcode - 21260766# (pound key). (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 in the Risk Factors section of Jazz Air LP's and Jazz Air Income Fund's annual MD&A dated February 6, 2008. The forward-looking statements contained in this discussion represent Jazz's expectations as of February 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 significantly reduces Jazz's financial and business risks, and provides a stable foundation for day-to-day operations and future growth.
For further information:
For further information: Media Contacts: Manon Stuart, (902) 873-5054 Halifax; Debra Williams, (519) 659-5696 London; Analyst Contact: Nathalie Megann, (902) 873-5094; www.flyjazz.ca