FEBRUARY 8TH, 2011
CHORUS AVIATION INC. ANNOUNCES FOURTH QUARTER AND YEAR END 2010 FINANCIAL RESULTS
HALIFAX, Feb. 7, 2011 (Canada NewsWire via COMTEX) —
Strong year end net income of $125.8 million, an increase of 35.8%
Chorus Aviation Inc. (“Chorus”) (TSX: CHR.B, CHR.A, CHR.DB), formerly Jazz Air Income Fund, today announced its fourth quarter and year end 2010 financial results.
<< Q4 2010 HIGHLIGHTS- $70 million was related to the release of a valuation allowance on
certain tax assets as a result of the successful completion of the
corporate conversion arrangement.
(xx) Adjusted net income equals net income before amortization of the
capacity purchase agreement (“CPA”) asset, and recovery of future
income taxes.
(xxx) Previously reported as distributable income.
MILESTONES ACHIEVED IN 2010
-————————————
– Finalized purchase agreement for 15 Q400 NextGen aircraft with
Bombardier, and an agreement with Air Canada for Chorus Aviation Inc.
to acquire and lease these aircraft to Jazz Aviation LP (“Jazz”) as
covered aircraft under the CPA, using a market lease structure
accretive to Chorus’ consolidated earnings.
– Completed investment in South American regional carrier, Pluna.
– Successfully launched new flight services agreement with Thomas Cook
Canada to operate six Boeing 757-200 aircraft to various sun
destinations for a five year period.
– Added one CRJ-200 to Jazz Aviation LP’s dedicated charter fleet.
– Concluded labour negotiations with all bargaining units including six
year collective agreements with the pilot and flight attendant groups.
– Converted from an income trust to a taxable corporate structure
facilitating the reversal of a $70 million valuation allowance on
certain tax assets.
– Maintained amongst the strongest financial and operational performance
within the North American airline industry.
– In the fourth quarter, operated 7.7% more billable block hours and 4.8%
more flight departures notwithstanding the average utilization of 9
less CRJs over the same period in 2009.
>>
“In 2010 we made significant progress as we moved forward on a number of strategic initiatives to grow and diversify our revenue base,” said Joseph Randell, President and Chief Executive Officer, Chorus. “Our employees rose to every challenge, never wavering from our top priority of safety. Despite the rapid start-up of the Boeing 757 operation and our corporate conversion, we provided consistent cash distributions to our investors and maintained amongst the strongest financial and operational results within the North American industry.”
“Looking ahead, we remain focused on our stated strategies,” said Mr. Randell. “With our conversion to a dividend paying corporation, Chorus Aviation Inc., we are confident in our ability to continue to build on these achievements and deliver value to our shareholders, employees and customers.”
Mr. Randell also noted, “We are preparing for the arrival of our new Q400 NextGen aircraft, and we do not expect our decision to take an ownership stake in this fleet to affect our ability to provide the planned cash dividends to our investors in 2011.”
<< Financial Performance – Fourth Quarter 2010 Compared to Fourth QuarterOperating revenue increased from $351.2 million to $392.7 million, representing an increase of $41.5 million or 11.8%. The increase in operating revenue was primarily due to an increase in pass-through costs of $30.8 million, which included $19.6 million related to fuel. Passenger revenue, excluding these pass-through costs, increased by $10.7 million or 4.7% mostly due to a 7.7% increase in Billable Block Hours, a 4.8% increase in departures, and new revenue earned under the Thomas Cook arrangement which became effective November, 2010; offset by a lower US dollar exchange rate, and a $1.9 million reduction in incentives earned under the CPA.
Total operating expenses increased from $325.9 million to $372.4 million, an increase of $46.5 million or 14.3%. The increase in pass-through costs represented $30.8 million or 66.2% of this quarter-over-quarter increase. Controllable costs represented $15.7 million or 33.8%, of the increase, which included $10.0 million in other expenses such as professional fees related to the corporate conversion of $1.5 million and other costs related to the Thomas Cook start-up operation of $4.0 million.
Salaries, wages and benefits increased by $8.6 million due to wage and scale increases under new collective agreements, increased pension expense resulting from a revised actuarial valuation, and increased full time equivalent employees to facilitate growth; offset by decreased incentive compensation expense.
Non-operating expenses amounted to $1.3 million, representing a decrease of $0.9 million. This change was mainly attributable to a foreign exchange gain; and a lower net interest expense; offset by a reduction in gain on disposal of property and equipment, and the absence in this quarter of any gain on Asset Backed Commercial Paper (in the fourth quarter of 2009, Chorus recorded a gain on Asset Backed Commercial Paper).
EBITDA was $27.7 million compared to $33.3 million in 2009, a decrease of $5.6 million or 16.9%. Operating income, before the amortization of the CPA asset, of $20.3 million represents a reduction of $5.0 million or 19.9%, which includes non-recurring expenses of $5.5 million related to Thomas Cook start-up and corporate conversion. Free Cash Flow was $22.7 million, down $4.0 million or 15.0% from $26.7 million.
Net income of $84.6 million for the three months December 31, 2010, a $63.8 million increase over fourth quarter 2009, was impacted by a future tax recovery of $73.7 million, of which $70.0 million was related to the release of a valuation allowance on cumulative eligible capital as a result of the successful completion of the corporate conversion arrangement.
<< Financial Performance – Year End 2010 Compared to Year End 2009Operating revenue was $1,486.2 million, compared to $1,473.9 million, representing an increase of $12.3 million or 0.8%. The increase in operating revenue was mainly attributable to pass-through costs of $53.5 million, which included $43.5 million related to fuel. Passenger revenue, excluding pass-through costs, decreased by $41.2 million or 4.2% primarily due to a reduction in the mark-up from 16.72% to 12.50% charged by Chorus under the CPA which became effective on August 1, 2009. Other factors included a reduction in the number of Covered Aircraft, a 1.2% reduction in Billable Block Hours, a 0.1% decrease in departures, a lower US dollar exchange rate and a $4.1 million reduction in incentives earned under the CPA; offset by new revenue earned under the Thomas Cook arrangement which became effective November 2010 and rate increases made pursuant to the CPA.
Total operating expenses increased from $1,345.5 million to $1,395.3 million, an increase of $49.8 million or 3.7%. The increase in pass-through costs represented $53.5 million or 107.4%. Controllable costs decreased $3.7 million and were impacted by two non-recurring items during 2010: corporate conversion related expenses of $2.5 million and the Thomas Cook start-up cost of $6.0 million.
Salaries, wages and benefits increased by $16.6 million due to wage and scale increases under new collective agreements, increased pension expense resulting from a revised actuarial valuation, and increased full time equivalent employees to facilitate growth; offset by decreased incentive compensation expense.
Non-operating expenses amounted to $8.1 million, representing an increase of $1.7 million. This change was mainly attributable to an increase in net interest expense relating to the convertible debentures issued by Chorus in 2009, a reduction in gain on disposal of property and equipment, and the absence of any gain on Asset Backed Commercial Paper (in 2009, Chorus recorded a gain on Asset Backed Commercial Paper); offset by a reduction in foreign exchange loss.
EBITDA was $120.7 million compared to $159.1 million in 2009, a decrease of $38.4 million or 24.1%. Operating income, before the amortization of the CPA asset, of $90.9 million represents a reduction of $37.5 million or 29.2%. Free Cash Flow was $100.7 million, down $38.6 million or 27.7% from $139.3 million. These year-over-year decreases were primarily attributable to a reduction in the mark-up charged by Chorus under the CPA, effective August 1, 2009 from 16.72% to 12.50%, the Thomas Cook start-up, reduction in incentives earned under the CPA and corporate conversion.
Net income of $125.8 million for the year ended December 31, 2010, a $33.2 million increase over 2009, impacted by a future tax recovery of $75.3 million, of which $70.0 million was related to the release of a valuation allowance on cumulative eligible capital as a result of the successful completion of the corporate conversion arrangement.
Chorus Aviation Inc.‘s financial statements for the year ended December 31, 2010, and accompanying Management’s Discussion and Analysis (MD&A) are available at www.flyjazz.ca and at www.sedar.com. A copy may also be obtained on request by contacting Investor Relations at: investorsinfo@flyjazz.ca or (902) 873-5094.