Jazz Air Income Fund announces first quarter 2009 financial results
May 14, 2009
HALIFAX, May 14 /CNW/ - Jazz Air Income Fund ("Jazz") (TSX: JAZ.UN) announced today its first quarter 2009 results. Q1 2009 HIGHLIGHTS ------------------ The following are highlights of the financial performance of Jazz for the period ended March 31, 2009. - Distributable cash(1) of $34.0 million. - Adjusted earnings per unit of $0.24(2). - EBITDA(1) of $39.1 million. - Performance incentive of $4.3 million. - Completed CPA Controllable Cost reset for the period 2009 to 2011. Please note that as of January 1, 2009, the financial results of Jazz Air LP (the Partnership) are no longer being reported separately. As a result, Jazz's year-to-date operating income, net earnings, and earnings per unit have been adjusted to remove the effect of certain consolidation amounts to arrive at comparable results to those previously reported for the Partnership. "Despite the economic challenges all companies are facing, I'm very encouraged by Jazz'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. "I commend our employees for improving customer satisfaction which contributed to the attainment of 75 per cent of the performance incentives available under our Capacity Purchase Agreement." "Jazz continues to maintain solid control on its costs as evidenced by an increase of 4.0 per cent in distributable cash in the quarter despite a 9.3 per cent drop in Billable Block Hours and an 8.0 per cent decrease in operating income before CPA amortization." Financial Performance - First Quarter 2009 Compared to First Quarter 2008 ------------------------------------------------------------------------- Operating revenue was $369.4 million, compared to $396.4 million, representing a decrease of 6.8%. The decrease in operating revenue was attributable primarily to a 24.8% reduction in revenues relating to pass-through costs, a 9.3% reduction in Billable Block Hours, and a 7.0% reduction in departures. These reductions were offset in part by a higher US dollar exchange rate and rate increases made pursuant to the Capacity Purchase Agreement (CPA). Performance incentives payable by Air Canada to Jazz under the CPA amounted to $4.3 million, as compared to $3.9 million. Jazz therefore earned 75% of the incentives available under the CPA versus 71% in the prior period. Incentives earned in this quarter were higher, primarily as a result of the increase in CPA controllable revenue and improvements in customer check-in and in-flight customer satisfaction. Other revenue sources decreased from $2.4 million to $2.1 million. Total operating expenses decreased from $362.0 million to $337.8 million, a decrease of 6.7%. Non-operating expenses amounted to $2.0 million, a decrease of $2.1 million. This decrease was mainly attributable to a $3.0 million fair value adjustment in the first quarter of 2008 related to Asset Backed Commercial Paper (with no such adjustment in the first quarter of 2009), increased net interest expense in the first quarter of 2009, and a foreign exchange loss arising as a result of the reduction in value of the Canadian dollar relative to the US dollar. CPA Controllable Costs increased by 7.5% primarily as a result of increases in aircraft rent (due to a higher US dollar exchange rate), and increases in aircraft maintenance, materials and supplies costs (due to increased rates under new maintenance contracts and a higher US dollar exchange rate on certain material purchases). EBITDA(1) was $39.1 million compared to $41.2 million in 2008, a decrease of 5.1%. Operating income of $21.1 million decreased 10.6% from $23.6 million in the first quarter of 2008. Distributable cash was $34.0 million up from $32.7 million, an increase of 4.0%. The Controllable Adjusted Actual Margin was 11.05%, which is less than the target of 14.32% by 327 basis points or approximately $8.0 million. This compares to the first quarter of 2008 Controllable Adjusted Actual Margin of 12.88% which was approximately 121 basis points or $2.8 million less than the target of 14.09%. Revenue rates have been established based on annual forecasted Billable Block Hour demand. In a quarter with less than average Block Hour activity, margins were compressed. In the first quarter of 2009, this margin compression represented $4.0 million of the shortfall from target level Controllable Adjusted Actual Margin. The balance of the shortfall was attributable to incentive compensation expenses which are excluded from the CPA revenue rate development. Prior period rates provided sufficient margin to cover incentive compensation expenses. CPA revenue increased 5.2%, as a result of an increase in the mark-up charged by Jazz under the contract (from 16.40% to 16.72%), due to Jazz's 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 (these increases were partially offset by a reduction in Billable Block Hours). Net income for the first quarter was $21.1 million compared to $21.8 million recorded last year, a decrease of 3.2%. Jazz Air Income Fund's unaudited interim consolidated financial statements for the period ended March 31, 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: firstname.lastname@example.org or (902) 873-5094. Quarterly Investor Conference Call / Audio Webcast -------------------------------------------------- Jazz will hold an analyst call at 12:00 p.m. ET on Friday, May 15, 2009 to discuss the first quarter results of Jazz Air Income Fund. The call may be accessed by dialing 1-800-595 8550 or (416) 644-3416 for the Toronto area. The call will be simultaneously audio webcast via: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2620420 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, Friday, May 22, 2009, by dialing (416) 640-1917 or toll-free 1- 877-289-8525, and passcode - 21303667# (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 Jazz'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 Jazz's and Jazz Air 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 was calculated based on adjusted net income. Adjusted net income is a non-GAAP measurement defined as: adjusted net income = net income + amortization of CPA asset + other operating expenses incurred by Jazz + recovery of future income taxes. CAUTION REGARDING FORWARD-LOOKING INFORMATION --------------------------------------------- This news release should be read in conjunction with Jazz's 2009 first quarter unaudited interim consolidated financial statements and MD&A dated May 14, 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 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, 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 Income Fund's annual MD&A dated May 14, 2009. The forward-looking statements contained in this discussion represent Jazz's expectations as of March 31, 2009, 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. 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 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) 457-8071, London; Analyst Contact: Nathalie Megann, (902) 873-5094; www.flyjazz.ca