Chorus Aviation Inc. (ticker: CHR_A.TO, exchange: Toronto Stock Exchange (.TO))
News Release -
Jazz Air Income Fund growth delivers 51% increased profits - Net Income of $35.6 million
HALIFAX, Aug. 10, 2006 (Canada NewsWire via COMTEX News Network) -- Today, Jazz Air Income Fund (TSX: JAZ.UN) ("Jazz Air Fund") announced the second quarter results of Jazz Air LP (Air Canada Jazz), with a profit of $35.6 million - an improvement of 50.6% over the same quarter 2005. These results were primarily generated under a Capacity Purchase Agreement (CPA) with Air Canada that became effective January 1, 2006. Jazz Air Income Fund has a 20.3% ownership interest in Jazz Air LP.
Q2 2006 HIGHLIGHTS
-Operating revenue of $340.1 million, up 47.1%.
-EBITDAR(1) of $76.5 million, up 61.9%.
-Operating income of $36.5 million, up 33.2%.
-Net income of $35.6 million, up 50.6%.
-Distributable cash(1) of $33.9 million, up 72.1%.
-Unit cost reductions achieved in all expense categories except fuel,
which is a pass-through cost to Air Canada, and aircraft rent.
"I am pleased with our results for this quarter as we continue to perform well pursuant to our capacity purchase agreement with Air Canada," said Joseph Randell, President and Chief Executive Officer of Air Canada Jazz. "The operating income of $36.5 million represents an improvement of $9.1 million or 33.2%, while our estimated distributable cash was $33.9 million compared to $19.7 million in 2005, an increase of 72.1%. I commend our employees for their continued dedication to safety, customer service and operational integrity. This quarter, for the first time since its inception, Jazz employees each earned the maximum payout of $450 under our operational incentive program - Jazz Ensemble."
For the second quarter of 2006, operating revenue was $340.1 million, compared to $231.3 million in the same period of 2005, representing an increase of $108.9 million or 47.1%. The increase in revenues is attributable to a net increase in the number of aircraft operated by Jazz, a 27.8% increase in the Block Hours flown and a $54.9 million or 81.3% increase in pass-through costs, including fuel costs which are reimbursed by Air Canada on an at cost basis. For the three-month period ended June 30, 2006, performance incentives reached a record 2.2%, equating to a $4.7 million contribution towards our operating revenue. This is significant as the maximum incentive opportunity is 2.36%.
Year over year for the second quarter, other revenue decreased from $2.8 million to $1.9 million. Other revenue is derived from charter flights, maintenance, repair and overhaul (MRO) operation and other sources such as groundhandling and flight simulator revenue.
In line with the growth in revenue, total operating expenses increased by $99.8 million or 48.9% compared to the second quarter of 2005. Pass-through fuel expense to Air Canada increased by $34.0 million or 91.6%, due to the increasing price of fuel, Block Hours flown and regional jet flying. Aircraft rent increased by $18.2 million or 118.9%, mainly due to the eight CRJ-200s, twelve CRJ-705s and twenty-four CRJ-100s that were received in the last half of 2005 and the first half of 2006. These cost increases account for 52.5% of the total increase in operating expenses. Capacity, as measured by available seat miles (ASM), increased by 66.8%. Costs per available seat mile (CASM), as measured by operating expenses per ASM, decreased by 11.1%, or 18.2% when fuel is excluded, from the first half of 2005. Unit cost reductions were achieved in all expense categories except fuel and aircraft rent.
For the second quarter of 2006, EBITDAR was $76.5 million compared to $47.3 million in the second quarter 2005, an increase of $29.2 million or 61.7%. This improvement was achieved through increased capacity and cost control. The operating income of $36.5 million represents an improvement of $9.1 million or 33.2%. In the quarter, estimated distributable cash was $33.9 million compared to $19.7 million in 2005, an increase of 72.1%.
In the second quarter of 2006, non-operating expenses amounted to $0.9 million, a decrease of $2.8 million from 2005. The cost savings are mainly due to the restructuring of long-term debt of Jazz Air LP after the initial public offering of Jazz Air Income Fund and increased interest income from short term investments.
Net income for the second quarter was $35.6 million compared to $23.6 million recorded in the second quarter last year, an improvement of $11.9 million or 50.6%. As outlined above, the increase is due to the larger fleet and effective cost control.
Air Canada Jazz's and Jazz Air Income Fund's unaudited interim consolidated financial statements for the period ended June 30, 2006 and accompanying Management's Discussion and Analysis (MD&A) are available on Air Canada Jazz's website www.flyjazz.ca and at www.sedar.com. A copy may also be obtained on request by contacting Air Canada Jazz's Investor Relations at: firstname.lastname@example.org or (902) 873-5000.
For the year-to-date ended June 30, 2006, Jazz had an average of 4,032 full time equivalent (FTE) employees compared to an average of 3,425 FTE employees in 2005. This reflects a 17.7% increase over the same period of 2005. The increase in the number of employees is due to Jazz's growing operation. As a result, Jazz's operational departments have grown significantly. Specifically, operational departments such as In-flight Services, Flight Operations, and Maintenance and Engineering grew by 33.8%, 20.5% and 21.5% respectively. Management carefully monitors growth and these employment increases are considered prudent in comparison with capacity growth of 73.5% as measured by ASMs.
Employee Unit Purchase Program
Participation in the Employee Unit Purchase Program for the Jazz Air Income Fund has been very favorable with 2216 employees signing on; this is approximately half of Jazz's current employee count.
Wage Review Award for CAW Employees
On July 19, 2006, Arbitrator Michel Picher released his wage review award for Maintenance and Engineering employees, Customer Sales and Service employees, and Crew Schedulers represented by the Canadian Auto Workers (CAW) union.
Aside from modest fixed adjustments to the scales applicable to employees hired after July 31, 2003, Mr. Picher's award granted CAW-represented employees a 1.00% wage increase effective July 2006, 1.75% effective July 2007, and 1.75% effective July 2008.
This award is the first in the ongoing wage review negotiation process with all union groups, with the exception of Jazz's pilots who are represented by the Air Line Pilots Association (ALPA) whose collective agreement does not include a wage review.
Negotiations with Teamsters Canada, who represent flight attendants, will begin in early August. Negotiations with the Canadian Air Line Dispatchers Association have not yet been scheduled.
Cost Savings Initiative
Continuous improvement through the employment of Six Sigma methodology and cost savings remain a major focus at Jazz. This is evidenced by the fact that costs per available seat mile decreased by 11.1%, or 18.2% when fuel is excluded, from the first half of 2005.
Cost savings achieved year-to-date in both the controllable and pass through categories include; but are not limited to, ensuring controlled and efficient growth in staff levels, reductions in space at many airports as leases are renewed and improvements in airport operations.
Jazz has also initiated an internal team to develop fuel efficiency programs. The team has identified approximately $4.3 million in fuel saving initiatives for 2006. Some of these initiatives include better fuel-tankering procedures, increased aircraft towing instead of taxing to and from gates at major bases, and galley weight reductions.
Quarterly Investor Conference Call / Audio Webcast
Jazz Air Income Fund will hold an analyst call at 12:30 p.m. EDT on Friday, August 11, 2006 to discuss its second quarter results. The call may be accessed by dialing 1-800-814-4941 (toll free) or (416) 644-3423 within the Toronto area. The call will be simultaneously audio webcast at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1553860
The conference call webcast will be archived on Air Canada Jazz's investor relations website at www.flyjazz.ca. A playback of the call can also be accessed until midnight EDT, Friday, August 18, 2006 by dialing 1-877- 289-8525 (toll free) or (416) 640-1917 within the Toronto area and passcode 21198280(pound key).
(1)Non-GAAP Financial Measures
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 public entities. Readers should refer to Air Canada Jazz's Management Discussion and Analysis for a reconciliation of EBITDAR to operating income (loss).
Cash available for distributions or 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. Cash available for distributions may differ from similar calculations as reported by other entities and, accordingly, may not be comparable to cash available for distributions as reported by such entities. Readers should refer to Air Canada Jazz's Management Discussion and Analysis for a reconciliation of distributable cash to operating income (loss).
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. 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's filings with securities regulators in Canada and those identified in the risk factors section of Jazz Air Limited Partnership 2005 MD&A dated March 16, 2006.The forward-looking statements contained in this discussion represent Air Canada Jazz's expectations as of August 10, 2006, and are subject to change after such date. However, Air Canada 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 laws.
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 (Air Canada Jazz) is the second largest airline in Canada based on fleet size and the number of routes operated. Air Canada Jazz operates more flights and flies to more Canadian destinations than any other Canadian carrier. Air Canada Jazz forms an integral part of Air Canada's domestic and transborder market presence and strategy.
Air Canada Jazz and Air Canada are parties to a Capacity Purchase Agreement (CPA) pursuant to which Air Canada currently purchases substantially all of Air Canada Jazz's fleet capacity based on predetermined rates. Air Canada Jazz provides all crews, airframe maintenance and, in some cases, airport operations. In turn, Air Canada determines routes and controls scheduling, ticket prices, product distribution, seat inventories, marketing and advertising for these flights.
Air Canada Jazz is not a typical airline. Currently, 99% of Air Canada Jazz's revenues are derived from the CPA. Air Canada Jazz is isolated from most of the risks typically associated with airlines such as fuel and navigation costs since these costs are passed-through to Air Canada.
Under the CPA with Air Canada, Air Canada Jazz provides service to and from lower density markets as well as higher density markets at off-peak times throughout Canada and to and from certain destinations in the United States. As of August 1, 2006 Air Canada Jazz operated scheduled passenger service on behalf of Air Canada with approximately 861 departures per weekday to 56 destinations in Canada and 29 destinations in the United States with a fleet of 134 aircraft.
Air Canada Jazz is the focal point of Air Canada's regional passenger strategy. Air Canada Jazz and Air Canada have linked their regional and mainline networks in order to serve connecting passengers more efficiently and to provide valuable feed traffic to Air Canada's mainline routes.
SOURCE: JAZZ AIR INCOME FUND
SOURCE: AIR CANADA JAZZ
Media Contacts: Manon Stuart, (902) 873-5054 Halifax; Debra Williams, (519) 659-5696