Chorus Aviation (formerly Jazz Air Income Fund) net jumps 35.8%
For the fourth quarter, Chorus posted adjusted net income of CAD19 million ex special items on operating revenue of CAD392.7 million.
"In 2010 we made significant progress as we moved forward on a number of strategic initiatives to grow and diversify our revenue base," said President and Chief Executive Officer Joseph Randell. “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.”
Mr Randell reported the company was pleased with the progress of its investment in Uraguayan carrier Pluna. He said Chorus expects to gain a return on its investment with either a sale or an initial public offering but gave no timetable for either.
Part of those strategies include the arrival in May of Bombardier Q400s NextGen aircraft which Mr Randell indicated will not impact the planned investor dividends this year. The company expects to maintain the 60-cents-per-share dividend, according to Randell.
Vice President Finance Rick Flynn said the company had just entered arbitration with Air Canada on the markup it can charge to its major-carrier counterpart which resulted from the new CPA cut a couple of years ago. However, unless it increased 422 basis points it would have no material impact on the company’s financials.
In response to analysts questions, executives said it may not be accurate to call it a dispute with Air Canada but more a hammering out of the details on the markup and to develop a solid process for establishing the markup which will be used again in 2015. The two companies have yet to do what the executives called their first benchmarking exercise. The methods and models of benchmarking, then, remain unresolved, thus the need for arbitration. They called the process highly complex and something that has impacted US regionals as well.
Chorus cited a CAD30.7 million increase pass-through costs for the increase in operating revenue which rose 11.7% to CAD392.7 million. The pass through increase included CAD19.6 million related to fuel.
Meanwhile, passenger revenue, excluding pass-through costs, increased 4.7% to CAD1.4 million on a 7.7% increase in billable block hours, a 4.8% departure increase and the new revenue brought in by the 757 Thomas Cook charter operations which runs through April. These were offset by a lower US dollar exchange rate, and a CAD1.9 million reduction in incentives earned under the CPA.
Total operating expenses increased 14.3% to CAD372.4 million. The increase in pass-through costs represented CAD30.8 million or 66.2% of this quarter-over-quarter increase. Controllable costs represented CAD15.7 million or 33.8%, of the increase, which included CAD10.0 million in other expenses such as professional fees related to the corporate conversion of CAD1.5 million and other costs related to the Thomas Cook start-up operation of CAD4.0 million.
For the year operating revenue rose 0.8% to CAD1,486.2 million. Here, again, the company cited increased pass-through costs of CAD53.5 million, CAD43.6 million of which was for fuel. Passenger revenue, excluding pass-through costs, declined 4.2% on 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.
Chorus also cited a reduction in the number of covered aircraft, a 1.2% drop in billable block hours, a 0.1% decline in departures and a lower USD exchange rate. It also cited a CAD4.1 million reduction in incentives under the CPA with Air Canada. Indeed, it achieved only 60.5% of incentives compared to 84.5% in 2009. The reductions in incentives, however, were offset by the new Thomas Cook revenue.
Mr Randell cited the reduced in block hours and eight fewer aircraft as well as the distraction of both the corporate conversion and the Thomas Cook charter service to missing out on its incentives goals. However, it also indicated that now the two were behind it, it would refocus on operating performance.
Total operating expenses increased 3.7% to CAD1,395.3 million. Controllable costs decreased CAD3.7 million, impacted by the corporate conversion (CAD2.5 million) and the Thomas Cook start-up costs of CAD6 million.