ACE Aviation Holdings says no Air Canada cash buyout despite losses

ACE Aviation Holdings Incorporated, the parent company of Air Canada, has announced that it is “still looking for ways to wind itself down” but that it is unlikely to do so by making a cash offer for the public minority stake in Air Canada.

Air Canada, founded in 1937, is Canada’s largest airline and also the nation’s flag carrier. With its corporate headquarters in Montreal, Quebec, Canada, Air Canada provides scheduled and charter flights for passengers and cargo to about 170 destinations. Air Canada’s largest hub is at Toronto Pearson International Airport.

ACE Aviation Holdings said in a statement that it suffered a loss of Canadian $135 million in the third quarter of 2008, or Canadian $3.86 a share, after posting a profit of Canadian $224 million a year earlier. “Uncertain capital markets and a weak outlook for the airline industry are slowing the process of winding itself down,” the statement explained.

The loss was mainly because of the $93 million in charges from fuel hedging contracts and the $87 million in foreign exchange.

In the quarter, ACE Aviation’s revenue rose by 1.8% to Canadian $3.08 billion.

A week ago, Air Canada itself posted a loss of Canadian $132 million in the third quarter of 2008, or Canadian $1.32 a share, compared with a profit of Canadian $273 million a year earlier, or Canadian $2.73 a share.

ACE Aviation Holdings said it has no plans to sells its 27.8% stake in the maintenance and overhaul company Aveos (formerly Air Canada Technical Services).

The privately held Aveos has been going through a tough operating quarter as airlines deferred maintenance expenditures in view of a slowing economy and higher cost s of fuel, the ACE statement said.

ACE Aviation has already divested its stake in Air Canada’s frequent-flyer program and also in the regional carrier Jazz Air.

In May 2008, Robert Milton, chief executive of ACE Aviation Holdings, had said that the company “continues to be on track to wind up its operations as a holding company in the three to six months.”

However, the website ottawabusinessjournal.com quoted Brian Dunne, chief financial of ACE Aviation Holdings, as saying on November 11, 2008: “Obviously, in the past we have put a timeline on the windup and I think that, given where the capital markets are at, we would be reluctant to put a new timeline on it. ACE it is in discussions with a number of stakeholders about the 75% of Air Canada shares owned by the holding company. We have come to the view at this point in time that a share exchange might be more appropriate, and probably results in ultimately more cash being available to Air Canada in the longer term.”

According to aviation analysts, quoted by the website, “the depressed state of the financial markets as well as of the airline industry is making the choices for a wind-up more difficult for ACE.”