* Will maintain C$0.60 annual distribution
* Units climb 8.1 pct to C$5.04 on the TSX
OTTAWA Oct 8 Jazz Air Income Fund JAZ_u.TO
JAZdb.TO shares rose 8.1 percent on Friday after Air Canada's
ACa.TO regional carrier said it planned to maintain its
dividend payout after converting to a corporation.
Like many Canadian-based income funds, Jazz is converting
to a corporate structure because changes to Canadian tax laws
will eliminate tax advantages for funds starting in 2011.
Halifax, Nova Scotia-based Jazz said it expects to complete
its conversion to a new public company called Chorus Aviation
Inc on Dec. 31 and maintain its annual dividend of 60 Canadian
That distribution is sustainable because the aviation
industry is "experiencing a moderate rebound in travel demand,"
and the carrier's "core operations" are strong, said Chief
Executive Joseph Randell.
Tax-sheltered income trusts were once popular investment
vehicles, designed to maximize payouts to investors, but Jazz
said investors will keep more of their dividend in a corporate
Under a corporate structure, investors will get 43 Canadian
cents of after-tax income from the 60 Canadian cent dividend,
Jazz said. That tops the 32 Canadian cent after-tax income
under an income trust structure.
The company expects to issue its first dividend, of 15
Canadian cents per Chorus share, for the quarter ending March
The conversion must be approved by two-thirds of
unitholders at a meeting scheduled Nov. 9.
Jazz Air sells the bulk of its capacity to Air Canada, but
recently sealed a five-year flight services deal with tour
operator Thomas Cook Canada Inc. It is expected to generate
about C$100 million ($99 million) in additional annual revenue.
The airline also said last week that it expects to fly
between 400,000 and 410,000 hours in 2011.
(Reporting by Susan Taylor)