HALIFAX, July 28 /CNW/ - Jazz Air Income Fund (TSX: JAZ.UN) announced today that a mutually beneficial agreement has been reached with Air Canada to amend the terms of the Amended and Restated Capacity Purchase Agreement (CPA) between Jazz Air LP ("Jazz") and Air Canada. Jazz Air Income Fund also announced a 40% reduction in cash distributions.
"The amended CPA provides sustainable long term value to Jazz stakeholders as, among other things, the term of the contract has been extended to the end of 2020 and there is a commitment to commence fleet renewal," said Joseph Randell, President and Chief Executive Officer, Jazz. "Jazz is fundamental to serving communities across Canada. The strength in Jazz's cost efficiencies and high quality operational performance is an important part of the solution to the challenges facing Air Canada, and provides low costs to capitalize on growth opportunities."
Mr. Randell went on to say, "Jazz has an enviable track record for operational and financial performance having generated profitable results since becoming publicly traded in 2006 due to strong management practices, solid cost control and a constant focus on safety and operational excellence."
The highlights of the amendments, which are subject to Air Canada securing new financing in a minimum amount of $600 million and certain other conditions:
- An industry-leading term commitment whereby the term of the CPA is extended 5 years from December 31, 2015 to December 31, 2020; - Air Canada will target a minimum annual block hour forecast of 375,000 block hours; - The plan is to continue to operate 133 aircraft on behalf of Air Canada comprised of 125 covered aircraft and 8 'swing aircraft' that will facilitate CPA flying to 400,000 block hours and beyond. - The minimum fleet guarantee is reduced from 133 to 125 covered aircraft, and includes a commitment to commence fleet renewal in 2011; - Effective August 1, 2009, the current markup on controllable costs of 16.72% is reduced to 12.50% on a permanent basis for the first 375,000 block hours flown, and a 5% markup on block hours in excess of 375,000. - The minimum utilization guarantee for the fleet is unchanged at 339,000 block hours.
Cash distributions are being adjusted to reflect the amended CPA, the term extension of the contract, and to otherwise improve liquidity during this uncertain period.
Effective with the distribution payment to be paid in September to unitholders of record on August 31, 2009, cash distributions will be reduced by approximately 40% to $0.60 per unit annually.
Given the current state of the credit market and the overall economic uncertainty, this proactive measure will strengthen our position as we remain focused on growing our business and maintaining strong operational and financial results.
Ultimately, this measure will deliver more long term value to our unitholders, employees and partners.
Investor Conference Call and Webcast ------------------------------------
Jazz will hold an analyst call at 9:00 a.m. ET on Wednesday, July 29, 2009 to discuss today's announcement. The call may be accessed by dialing 1-800-587-1893 or (416) 644-3431 for the Toronto area. The call will be simultaneously audio webcast via: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2765400 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, Wednesday, August 5, 2009, by dialing (416) 640-1917 or toll-free 1-877-289-8525, and passcode - 21312378(number sign) (pound key).
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, 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 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.