Jazz Air Income Fund announces strong second quarter 2009 financial results
Aug 5, 2009
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 ------------------ 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 ---------------------------------------------------------------------- 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: firstname.lastname@example.org 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.
For further information:
For further information: Media Contacts: Manon Stuart, (902) 873-5054, Halifax, email@example.com; Debra Williams, (519) 457-8071, London, firstname.lastname@example.org; Analyst Contact: Nathalie Megann, (902) 873-5094; www.flyjazz.ca