Cargojet buys the rest of prince edward

[CaptainHaddock]

http://cargojet.com/financials/quarterly/q4_2008.htm



THE CANADIAN PRESS

Cargojet Income Fund, an overnight air cargo carrier, is sharply cutting distributions in a tough market while it has agreed to acquire the remaining 49 per cent interest in Prince Edward Air Ltd., the fund's regional carrier in Eastern Canada.

The Toronto company said Thursday it will cut its payment to unitholders to 2.7 cents for April and going forward from the current 6.75 cents a unit, a drop of 60 per cent.

`As we consider the challenges that lay ahead with rapidly deteriorating global economies and the continuing uncertainty in financial markets, Cargojet has taken the difficult decision to reduce distributions to pay down debt, preserve cash and maintain liquidity during this uncertain period," said Ajay Virmani, president and CEO of the fund.

The acquisition of all of Prince Edward Air is slated to close at the end of March, the company said. Financial terms were not revealed.

Cargojet acquired 51 per cent of the PEI company in 2008.

In another development, Cargojet also reported revenues rose 11 per cent to $53.7 million from $48.4 million in the fourth quarter. Meanwhile, earnings before interest, taxes, depreciation and amortization jumped 20.3 per cent to $8.3 million from $6.9 million.

The fund did not provide any net profit figures for the quarter or full year in its earnings release.

`The strong financial results for the fourth quarter demonstrate Cargojet's successful completion of our fleet renewal program as well as a significant cost containment program,"said Virmani.

The CEO said the fund plans to use money saved by cutting distributions to buy outstanding convertible debentures and maintain cash for the future.

"As demonstrated by our recent results, the fundamentals of our business remain strong however we have experienced a softening in volumes and have reduced our network capacity to match customer demands and implemented strict cost reduction and cost control initiatives, to maintain our margins.

"Given the uncertainty that exists in the general economy, we believe that our strategy of strengthening our balance sheet will serve the best interest of our unitholders, our customers and our employees over the longer term."

Prince Edward Air and Cargojet's own regional unit combined operate 21 aircraft in Ontario, Quebec and Eastern Canada and employ about 130 employees.

Annual combined revenues of the regional business are about $21 million.

[Tim]

i suspect that this should be good news for all the employees. i did stint as a ramprat for CJ in yhz, and found they were a fantastic company to work for.

[Justjohn]

Sure wasn't good news for the PEAir guys who got layoff notices this AM

[Dim]

Lay offs WTF Really?

[Tim]

yikes, bad news...hopefully a temp situation. i dont think peair has a ton of crews out here though, can they afford to lose anyone? a few weeks ago they were dying for some ho drivers AFAIK

[Tim]

just spoke with a buddy in yhz whos flying for them, and he hasnt heard anything about lay offs

[hazatude]

Are the YHM guys ok?

[Justjohn]

YQM - 3 pilots

[Tim]

sad to hear. hopefully theyll land on their feet.

pilots or dispatchers? and what a/c if pilots?

[ScudRunner]

You have to understand that CargoJet is not an Airline business it's an Income Fund, Just making a profit is not the goal. Income funds have to offer a steady and "predictable" flow of cash to investors at a better rate of return than other investments. So they have to keep this source of Cash going to investors above the average or investors will pull park their money elsewhere. Cutting jobs and I would guess that 49% more of PE Air's cash made sense to keep this cash flow going for the investors.

That's just my opinion I could be wrong.

[727driver]

Wrong.

[Charles the Equestrian]

When you gets a turd stuck in teh toilet, the unwise things to do is send another turd after it. that never works.

Cargojet needs to rethink this.

[ScudRunner]

Wrong.

Care to elaborate? Are you disputing that Cargojet is not an income fund?

[Tim]

When you gets a turd stuck in teh toilet, the unwise things to do is send another turd after it. that never works.

Cargojet needs to rethink this.

well i imagine they thought it through...and even if they didnt its not like they can call bateman and get their money back

care to make a little more sense of your turd statement?


cargojet has been doing quite well for themselves. theve expandend continously since their inception. i think ajay has proven he has a clue as to how to run the business.

[boeingboy]

i think ajay has proven he has a clue as to how to run the business.

HA!

Your basing this on what? AJ has done some things well, and has made some majorly dumb moves as well. The only thing keeping him going is the fact he is his own best customer - and that will ensure CJ stays around.

Winds of change are abound gentlemen.

[PITA]

When a company states that they have "good revenues" but this is "before costs" ie taxes loan repayments etc. its really a kaka statement.

Sure nice to say we have revenues of 100 dollars but fail to mention we had costs of 99.99$

Income trusts are really a thing of the past after the gov"t changed the rules a couple years ago and made the dividend earnings taxable.

So instead of the usual dividend payment of around $6.00 it is reduced to near $2.00 to pay for the remainder of PEI Air.

[Tim]

as long as bills are paid, investors are paid and most importantly employees are paid, there really isnt much to be said. of course aquiring a new airline (or 49% of it in this case) is going to cost money. but it isn't like this money disappears. its invested now in the capitol of PEAir and in turn the profits that PEAir generates. you gotta spend money to make money right?

727driver, do you work for CJ? whats your take on it all.

the guys with PEAir that ive spoken too think this is going to be great. (minus the 3 apparent layoffs)

[...]

Cargojet IS fiscally responsible to it's investors. Period.

Challenging times bring strategic maneuvers.

Wait....there's more to come.

[ScudRunner]