Today, the third quarter 2008 results of Jazz Air Income Fund (TSX: JAZ.UN) and Jazz Air LP were announced.
Q3 2008 HIGHLIGHTS
- Operating revenue of $437.4 million, up 14.0%.
- Performance incentives of $4.1 million.
- Operating income of $45.4 million, up 10.9%.
- Distributable cash(1) of $44.3 million, up 1.8%.
- Net income of $42.3 million, up 6.4%.
"I am very pleased with our results this quarter, especially in light of these difficult economic times," said Joseph Randell, President and Chief Executive Officer of Jazz. "The Jazz team's delivery of excellent operational performance, and focus on cost control have contributed to record profit performance with an impressive $42.3 million in net income."
"We are running an efficient airline and have addressed the one-time maintenance expenses which negatively affected our results in the first six months of this year. Distributable cash increased by 1.8% in the quarter, and demand remains high for our fuel-efficient Dash 8 aircraft as evidenced by our increased charter activity. We remain focused on opportunities to diversify our business and are cautiously optimistic about our future," concluded Mr. Randell.
Financial Performance - Third Quarter 2008
For the third quarter of 2008, operating revenue was $437.4 million, compared to $383.8 million in the same period of 2007, representing an increase of $53.7 million or 14.0%. The increase in operating revenue was primarily attributable to a $45.5 million increase in pass-through costs under the Capacity Purchase Agreement (CPA) with Air Canada. For the three-month period ended September 30, 2008, performance incentives payable by Air Canada to Jazz under the CPA amounted to $4.1 million or 1.7% of Jazz's Scheduled Flights Revenue, as compared to $5.0 million or 2.1% for the same period in 2007. This translates to 73% of the incentives available under the CPA for the quarter versus a 91% attainment in 2007. Incentives earned in the third quarter of 2008 were lower primarily due to the consequential impact of inclement weather conditions which led to lower on-time performance than 2007. Quarter-over-quarter, other revenue (charter flights and other revenue sources) increased from $2.7 million to $4.1 million.
Total operating expenses increased from $342.9 million in the third quarter of 2007 to $392.1 million for the same period in 2008, an increase of $49.2 million or 14.3%. Pass-through costs represented $45.5 million or 92.5% of the total increase in operating costs, rising primarily as a result of the continuing rise in fuel prices. Controllable Costs (includes costs related to operations not covered under the CPA) represented $3.7 million or 7.5% of the total increase in operating costs, rising primarily as a result of increased costs related to depreciation, salaries, wages and benefits and other expenses.
For the third quarter of 2008, EBITDA(1) was $52.8 million compared to $47.4 million in the third quarter 2007, an increase of $5.4 million or 11.4%. Operating income of $45.4 million represented a $4.5 million or 10.9% increase from the same period last year.
Costs per Available Seat Mile, excluding fuel, for the three month period ended September 30, 2008, increased by 3.9% over the same period in 2007. Distributable cash was $44.3 million up $0.8 million or 1.8% from the third quarter of 2007.
The Controllable Adjusted Actual Margin established under the CPA for the third quarter of 2008 was 16.70%, which is greater than the CPA target of 14.09% by 261 basis points or the equivalent of approximately $6.3 million. This compares to the third quarter of 2007 margin of 14.93% which was greater than the target of 14.09% by 84 basis points or the equivalent of approximately $2.0 million.
In the third quarter of 2008, non-operating expense amounted to $3.1 million, an increase of $1.9 million from the third quarter 2007. The change is mainly attributable to increased net interest expense resulting from lower interest income, and a foreign exchange loss arising as a result of the reduction in value of the Canadian dollar relative to the US dollar.
Net income for the third quarter of 2008 was $42.3 million compared to $39.7 million recorded in the third quarter last year, an increase of $2.5 million or 6.4%. -- www.cnxmarketlink.com
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