Jazz Air Income Fund announces first quarter 2008 financial results
May 7, 2008
HALIFAX, May 7 /CNW/ - Today, the first quarter 2008 results of Jazz Air Income Fund (TSX: JAZ.UN) and Jazz Air LP ("Jazz") were announced. Q1 2008 HIGHLIGHTS ------------------ - Operating revenue of $396.4 million, up 8.8%. - Performance incentives of $3.9, up 25.8%. - Operating income of $34.4 million, down 5.4%. - Net income of $30.3 million, down 14.3%. - Controllable Cost per Available Seat Mile, down 2.6%. - Distributable cash(1) of $32.9 million, down 2.1%. "Jazz's performance in the first quarter of 2008 was strong," said Joseph Randell, President and Chief Executive Officer of Jazz. "Our operational performance this quarter improved significantly over last year, despite some of the most challenging winter weather conditions in eastern Canada. These operational improvements, as reflected in increased incentive revenues, are a clear demonstration of great execution by the entire Jazz team." Mr. Randell went on to say, "Safety is our top priority and maintaining our fleet at a very high standard is absolutely our focus. We are currently experiencing increased aircraft heavy maintenance costs as a result of staff overtime and outsourcing requirements. This increased overtime and outsourcing are being diligently managed and we expect this extra maintenance-related activity to be completed by the beginning of the third quarter. We are maintaining good cost control in all areas as evidenced by our 2.6% decrease in controllable costs per available seat mile." Financial Performance - First Quarter 2008 ------------------------------------------ For the first quarter of 2008, operating revenue was $396.4 million, compared to $364.2 million in the same period of 2007, representing an increase of $32.2 million or 8.8%. The increase in operating revenue is attributable to an increase of 6.2% in the Block Hours flown and a 20.6% increase in pass-through costs. For the three-month period ended March 31, 2008, performance incentives payable by Air Canada to Jazz under the CPA amounted to $3.9 million or 1.7% of Jazz's Scheduled Flights Revenue as compared to $3.1 million or 1.4% for the same period in 2007. This translates to 71% of the incentives available under the CPA for the quarter versus a 57% attainment in 2007. Incentives earned in 2008 were higher due to achieving better on-time performance than 2007. Year-over-year for the first quarter, other revenue sources increased from $1.9 million to $2.4 million. Total operating expenses increased from $327.8 million in the first quarter of 2007 to $362.0 million for the same period in 2008, an increase of $34.2 million or 10.4%. Pass-through costs under the CPA, represented $26.9 million or 78.9% of the total increase in operating costs. Pass-through costs rose mainly as a result of the continuing rise in fuel prices and increased de-icing costs due to inclement weather conditions. Controllable Costs represented $7.2 million or 21.1% of the total increase in operating costs, primarily as a result of salaries, wages and benefits and other expenses. For the first quarter of 2008, EBITDA(1) was $41.4 million compared to $41.7 million in the first quarter 2007, a decrease of $0.3 million or 0.7%. The operating income of $34.4 million represents a $1.9 million or 5.4% decrease from the same period last year. Controllable Costs per Available Seat Mile for the three month period ended March 31, 2008, decreased by 2.6% over the same period in 2007. Distributable cash was $32.9 million down $0.7 million or 2.1% from the first quarter of 2007. The Controllable Adjusted Actual Margin established under the CPA for the first quarter of 2008 was 12.88%, which is under the CPA target of 14.09% by 121 basis points or approximately $2.8 million. This compares to the first quarter of 2007 margin of 14.13 % which was approximately $0.1 million better than the target of 14.09%. During the quarter, the controllable costs related to the CPA were affected by: increased overtime expense related to aircraft heavy maintenance checks on the Jazz fleet by $0.7 million; increased maintenance full time equivalent employees to support the ongoing heavy maintenance requirements for $1.1 million; increased heavy maintenance outsourcing for $0.3 million; increased training in the pilot and maintenance areas for $0.5 million; and increased passenger inconvenience costs due to unfavourable weather conditions for $0.4 million. In the first quarter of 2008, non-operating expense amounted to $4.1 million, an increase of $3.1 million from the first quarter 2007. The change is mainly attributable to a $3.0 million fair value adjustment related to Asset Backed Commercial Paper. Net income for the first quarter was $30.3 million compared to $35.3 million recorded in the first quarter last year, a decrease of $5.0 million or 14.3%. Jazz Air LP and Jazz Air Income Fund's unaudited consolidated financial statements for the three month period ended March 31, 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: email@example.com or (902) 873-5094. Quarterly Investor Conference Call/Audio Webcast -------------------------------------------------- Jazz will hold an analyst call at 12:30 p.m. ET on Thursday, May 8, 2008 to discuss the first quarter 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, May 15, 2008, by dialing (416) 640-1917 or toll-free 1-877-289-8525, and passcode - 21266737#. (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, 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 restated annual MD&A dated February 19, 2008, and interim MD&A dated May 7, 2008. The forward-looking statements contained in this discussion represent Jazz's expectations as of May 7, 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.
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