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Press release from CNW Group

CHORUS AVIATION INC. ANNOUNCES FOURTH QUARTER AND YEAR END 2010 FINANCIAL RESULTS

Monday, February 07, 2011

CHORUS AVIATION INC. ANNOUNCES FOURTH QUARTER AND YEAR END 2010 FINANCIAL RESULTS16:10 EST Monday, February 07, 2011Strong year end net income of $125.8 million, an increase of 35.8%HALIFAX, Feb. 7 /CNW/ - 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 ------------------ - Operating revenue of $392.7 million - Net income of $84.6 million* - Adjusted net income of $19.0 million(xx) - Free Cash Flow(1) of $22.7 million(xxx) YEAR END 2010 HIGHLIGHTS ------------------------ - Operating revenue of $1.5 billion - Net income of $125.8 million* - Adjusted net income of $82.7 million(xx) - Free Cash Flow(1)of $100.7 million(xxx) * $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 Quarter ---------------------------------------------------------------------- 2009 ---- >>Operating 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(1) 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 2009 --------------------------------------------------------------- >>Operating 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(1) 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. << Investor Conference Call / Audio Webcast ---------------------------------------- >>Chorus will hold an analyst call at 9:30 a.m. ET on Tuesday, February 8, 2011 to discuss the fourth quarter and year end results. The call may be accessed by dialing 1-888-231-8191. The call will be simultaneously audio webcast via: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3372380 or in the Investor Relations section 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 Chorus's Investor Relations website at www.flyjazz.ca. A playback of the call can also be accessed until midnight ET, Tuesday, February 15, 2011, by dialing (416) 849-0833 or toll-free 1- 800-642-1687, and passcode 37886169# (pound key).(1) Non-GAPP Financial MeasuresEBITDAEBITDA (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 expenses. Management believes EBITDA assists investors in comparing Chorus' 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 of cash flows which form part of the financial statements.FREE CASH FLOWPre-conversion distributable cash was a key performance indicator as it represented the funds available to Unitholders of an income fund and was used by management to evaluate the ongoing performance of Jazz Air Income Fund. Distributable cash is not a measure which is commonly utilized in respect of a public corporation. Management believes, however, that it is a term with which its equity holders are familiar and has provided Free Cash Flow as a proxy for previously reported distributable income. Free Cash Flow is calculated in the same manner as distributable cash.Caution regarding forward-looking informationThis news release should be read in conjunction with Chorus' audited consolidated financial statements for the years ended December 31, 2010 and December 31, 2009 and MD&A dated February 7, 2011, 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, risks relating to Jazz's relationship with Air Canada or Thomas Cook Canada Inc., risks relating to the airline industry, 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, leverage and restructure covenants in future indebtedness, dilution of Chorus Shareholders, uncertainty of dividend payments, managing growth, changes in laws, adverse regulatory developments or proceedings, pending and future litigation and actions by third parties, as well as the factors identified throughout this MD&A. The forward-looking statements contained in this discussion represent Chorus' expectations as of February 7, 2011, and are subject to change after such date. However, Chorus 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 Chorus Aviation Inc. -------------------------- >>Chorus Aviation Inc. ("Chorus") was incorporated on September 27, 2010 and is a dividend-paying holding company which owns Jazz Aviation LP, and 7503695 Canada Inc. which holds the investment in Latin American Regional Aviation Holdings Corp., which in turn holds a 75% indirect equity interest in South American regional carrier, Pluna.Chorus is traded on the Toronto Stock Exchange under the trading symbols of CHR.A, CHR.B and CHR.DB. << About Jazz Aviation LP ---------------------- >>Jazz Aviation LP ("Jazz") is wholly owned by Chorus Aviation Inc., and has a strong history in Canadian aviation with its roots going back to the 1930s. Since Jazz Air Income Fund became publicly traded in February 2006, Jazz's predecessors have generated some of the strongest operational and financial results in the North American aviation industry.Under a capacity purchase agreement with 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. Jazz currently operates scheduled passenger service on behalf of Air Canada with over 800 departures per weekday to 85 destinations in Canada and in the United States with a fleet of Canadian-made Bombardier aircraft.Jazz also operates Boeing 757-200 aircraft on behalf of Thomas Cook Canada in the winter season to various destinations in the Caribbean, Mexico and Central America from four Canadian gateways - Toronto, Ottawa, Montreal and Halifax.For further information: Media Contacts: Teri Lake, (902) 873-5047, Halifax, teri.lake@flyjazz.ca; Debra Williams, (519) 457-8071, London, debra.williams@flyjazz.ca; www.flyjazz.ca