As with its US peers and mainline carriers, Chorus (dba Jazz) reported rising revenues of CAD443 million, up 24.7% from 1Q2010, resulting in net income of CAD14.7 million, down 10.6%. Also, as its peers did, the rising revenues came on falling profits since net income was CAD1.7 million lower than that posted in 1Q2010. Operating income rose 36.2% in the quarter to CAD21.6 million and the company also reported free cash flow rose 35.1% to CAD25.4 million.
During yesterday’s earnings call analysts expressed concern about the impact of Air Canada’s proposed low-cost carrier on Jazz. However, CEO Joseph Randell, noted since little is known about the proposed carrier, could not shed much light on Air Canada’s plans. He also indicated the new carrier could have an impact on charter operators including Thomas Cook.
“The impact depends on whether it will be on the leisure or regional side,” he said. “It will increase the competitive environment in the leisure market but it could provide a new feed opportunity on the regional side.
Having finished its first season as a charter operator for Thomas Cook, the company, said Mr Randell, is debriefing employees, including flight attendants, to gain insight into how it can streamline processes for better operations next winter. It is continuing to discuss expanding its relationship with Thomas Cook but no decisions have been made.
"We continue to build our reputation for consistently delivering strong quarterly results and, once again, I'm pleased with our performance in the first quarter of this year. Our team continues to deliver amongst the strongest quarterly results in the North American airline industry, and has done so since 2006," said Chief Executive Officer Joseph Randell. "We believe that our overall strategy and continued focus on cost management will serve us well and contribute to our long-term success. Earlier this month we took delivery of our first Q400 NextGen aircraft. I'm confident this milestone will create more value for our stakeholders as a result of its enviable fuel burn efficiency and operating economics."
Rising fuel has cost it the operation of a swing CRJ100 aircraft that was an Air Canada option in the 2009 CPA. The aircraft was to be operated at Air Canada’s discretion but the company does not expect a material impact.
Operating revenue increased 24.7% to CAD443.0 million owing to a 50.1% increase in pass-through costs from to CAD190.3 million, which included CAD45.1 million related to fuel. The company said passenger revenue jumped CAD23.7 million up 10.5% on a 16.2% increase in billable block hours, 6.3% increase in departures as well as the new revenue derived from its Thomas Cook charter service. It said the increases were offset by a lower US exchange rate and a CAD2.4 million reduction in incentives earned under its Air Canada CPA.
Total operating expenses increased 24.1% to CAD421.4 million, an increase of CAD81.9 million. However, controllable costs increased by only 8.6% or CAD18.4 million on the new Thomas Cook business. Increased expenses included higher salaries under new collective bargaining agreements that amounted to CAD12.3 million. It also cited increased pension expense as well as an increase in full-time employees.
Non-operating expenses amounted to CAD2.2 million, representing an increase of CAD2.6 million. This change was mainly attributable to the absence in this quarter of any gain on derivative liabilities; offset by lower net interest expense.
EBITDA was CAD31.3 million compared with CAD26.9 million in 2010, an increase of CAD4.4 million or 16.4%. Free Cash Flow was CAD25.4 million, up CAD6.6 million or 35.1% from CAD18.8 million.
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