ACE Aviation reports 2007 net income of $1.4 billion



    
    2007 FULL YEAR OVERVIEW

    - Net income of $1,398 million.
    - Operating income of $453 million.
    - EBITDAR of $1,373 million (excluding special charges) including
      EBITDAR of $1,263 million at Air Canada.
    - Gains on sale of assets (including ACTS, Aeroplan and Jazz) of
      $1,366 million.
    - Distributions of Aeroplan and Jazz units to ACE shareholders totaling
      $2 billion.
    - Acquisition of 80 per cent interest in Aeroman completed in
      February 2007.
    - ACTS sale transaction completed in October 2007 with net cash proceeds
      to ACE on closing of $723 million with a further $40 million in
      January 2008.
    - Secondary offerings of Aeroplan and Jazz completed on October 22, 2007
      for net cash proceeds of $726 million.
    - ACE cash of $1.9 billion on December 31, 2007.
    - Substantial issuer bid of $1.5 billion launched in December 2007 and
      completed in January 2008.

    FOURTH QUARTER OVERVIEW

    - Net income of $1,128 million.
    - Operating income of $46 million.
    - EBITDAR of $248 million including EBITDAR of $274 million at
      Air Canada.
    - Gains on sale of assets (including ACTS, Aeroplan and Jazz) of
      $1,339 million.
    

    MONTREAL, Feb. 8 /CNW Telbec/ - ACE Aviation Holdings Inc. (ACE) today
reported net income of $1,398 million for the full year 2007.
    Net income included $1,366 million pre-tax gains mainly from the sale of
ACTS and from the secondary offerings of Aeroplan and Jazz.
    Operating income amounted to $453 million including operating income of
$433 million at Air Canada.
    EBITDAR(1) for ACE amounted to $1,373 million (excluding special charges
of $15 million).
    Air Canada reported EBITDAR of $1,263 million.
    For the fourth quarter of 2007, ACE reported operating income of
$46 million. EBITDAR for ACE in the fourth quarter amounted to $248 million.
Air Canada reported operating income of $72 million and EBITDAR of
$274 million, increases of $85 million and $69 million respectively over
fourth quarter 2006 (excluding special charges).
    "I am pleased with our strong progress during 2007 with the
implementation of ACE's business strategy," said Robert Milton, Chairman,
President and Chief Executive Officer, ACE Aviation Holdings Inc. "We have
delivered strong financial results for the year and we've also made excellent
progress in delivering shareholder value.
    "In the first six months of 2007, we returned $2 billion of capital,
under a Plan of Arrangement approved in 2006, to our shareholders through
distributions of units in Aeroplan and Jazz.
    "We completed the monetization of ACTS during the fourth quarter with net
cash proceeds to ACE on closing of $723 million, and received the remaining
proceeds of $40 million in January 2008 which had been held in escrow. ACE
also retains a 23 per cent holding in ACTS post-monetization.
    "In the fourth quarter, we also raised $726 million through secondary
offerings of Aeroplan and Jazz, reducing our shareholdings in both to
20.1 per cent. In January 2008, ACE further reduced its holding in Jazz to
9.5 per cent by way of an exempt trade.
    "In December 2007, we launched a $1.5 billion substantial issuer bid
which was completed in January 2008.
    "I am particularly pleased with the performance of Air Canada during 2007
and in the fourth quarter. In spite of a challenging fuel price environment
throughout the year, Air Canada delivered on the performance expectations set
for the business at the time of its IPO in November 2006.
    "In 2008, ACE will continue, market conditions permitting, to execute its
business strategy to maximize shareholder value," concluded Mr. Milton.

    (1) Non-GAAP Measures

    The special charges refer to expenses recorded in 2007 related to
restructuring at ACTS and expenses recorded in 2006 related to labour
restructuring. EBITDAR is a non-GAAP financial measure commonly used in the
airline industry to assess earnings before interest, taxes, depreciation and
aircraft rent. EBITDAR is used to view operating results before aircraft rent
and depreciation, amortization and obsolescence as these costs can vary
significantly among airlines due to differences in the way airlines finance
their aircraft and other assets. EBITDAR is not a recognized measure for
financial statement presentation under GAAP and does not have standardized
meaning and is therefore not likely to be comparable to similar measures
presented by other public companies. Readers should refer to ACE's 2007
Management's Discussion and Analysis (MD&A) for a reconciliation of EBITDAR to
operating income.
    For further information on ACE's public disclosure file, including ACE's
Annual Information Form, please consult SEDAR at www.sedar.com and EDGAR at
www.sec.gov/edgar.shtml

    CAUTION REGARDING FORWARD-LOOKING INFORMATION
    ---------------------------------------------

    Certain statements in this news release may contain forward-looking
statements. These forward-looking statements are identified by the use of
terms and phrases such as "anticipate", "believe", "could", "estimate",
"expect", "intend", "may", "plan", "predict", "project", "will", "would", and
similar terms and phrases, including references to assumptions. Such
statements may involve but are not limited to comments with respect to
strategies, expectations, planned operations or future actions.
Forward-looking statements, by their nature, are based on assumptions and are
subject to important risks and uncertainties. Any forecasts or forward-looking
predictions or statements cannot be relied upon due to, amongst other things,
changing external events and general uncertainties of the business. Such
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements to differ
materially from those expressed in the forward-looking statements. Results
indicated in forward-looking statements may differ materially from actual
results for a number of reasons, including without limitation, energy prices,
general industry, market and economic conditions, war, terrorist attacks,
changes in demand due to the seasonal nature of the business, the ability to
reduce operating costs and employee counts, employee relations, labour
negotiations or disputes, pension issues, currency exchange and interest
rates, changes in laws, adverse regulatory developments or proceedings,
pending and future litigation and actions by third parties as well as the
factors identified throughout ACE's filings with securities regulators in
Canada and the United States and, in particular, those identified in the Risk
Factors section to ACE's 2007 MD&A dated February 8, 2008. The forward-looking
statements contained herein represent ACE's expectations as of the date they
are made and are subject to change after such date. However, ACE disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise, except as
required under applicable securities regulations.


    
                     Consolidated Statement of Operations
    -------------------------------------------------------------------------
    For the year ended December 31
    (Canadian dollars in millions
     except per share figures)                                2007(*)   2006
    -------------------------------------------------------------------------

    Operating revenues
      Passenger                                           $  9,344  $  8,969
      Cargo                                                    548       625
      Other                                                    934     1,063
    -------------------------------------------------------------------------
                                                            10,826    10,657
    -------------------------------------------------------------------------
      Special charge for Aeroplan Miles                          -      (102)
    -------------------------------------------------------------------------
                                                            10,826    10,555
    -------------------------------------------------------------------------

    Operating expenses
      Wages, salaries and benefits                           2,383     2,553
      Aircraft fuel                                          2,553     2,546
      Aircraft rent                                            323       441
      Airport and navigation fees                            1,021       983
      Aircraft maintenance, materials and supplies             515       471
      Communications and information technology                281       289
      Food, beverages and supplies                             318       335
      Depreciation, amortization and obsolescence              582       576
      Commissions                                              201       236
      Capacity purchase with Jazz                              537         -
      Special charge for labour restructuring                   15        25
      Other                                                  1,644     1,705
    -------------------------------------------------------------------------
                                                            10,373    10,160
    -------------------------------------------------------------------------

    Operating income                                           453       395

    Non-operating income (expense)
      Interest income                                          126       120
      Interest expense                                        (420)     (378)
      Interest capitalized                                     108        61
      Gain on disposal of assets                             1,366       393
      Gain (loss) on financial instruments recorded
       at fair value                                            26       (18)
      Equity investment income                                  71         -
      Other                                                    (12)        4
    -------------------------------------------------------------------------
                                                             1,265       182
    -------------------------------------------------------------------------

    Income before the following items                        1,718       577

      Non-controlling interest                                (157)      (72)
      Foreign exchange gain                                    313        12
      Provision for income taxes
        Current                                                (15)       (7)
        Future                                                (461)     (102)

    -------------------------------------------------------------------------
    Income for the year                                   $  1,398  $    408
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
      Basic                                               $  13.51  $   4.01
    -------------------------------------------------------------------------
      Diluted                                             $  11.44  $   3.80
    -------------------------------------------------------------------------

    (*)Effective March 14, 2007, the results and financial position of
       Aeroplan LP and effective May 24, 2007, the results and financial
       position of Jazz LP are not consolidated with ACE. Effective
       October 16, 2007, the results and financial position of ACTS LP are
       not consolidated with ACE.

       The notes are an integral part of the consolidated financial
       statements and are available on SEDAR at www.sedar.com and EDGAR at
       www.sec.gov/edgar.shtml.


                 Consolidated Statement of Financial Position
    -------------------------------------------------------------------------
    As at December 31
    (Canadian dollars in millions)                            2007(*)   2006
    -------------------------------------------------------------------------

    ASSETS
    Current
      Cash and cash equivalents                           $  2,300  $  1,854
      Short-term investments                                   839     1,324
    -------------------------------------------------------------------------
                                                             3,139     3,178
    -------------------------------------------------------------------------

      Restricted cash                                          124       109
      Accounts receivable                                      793       729
      Spare parts, materials and supplies                      112       307
      Prepaid expenses and other current assets                253       127
      Future income taxes                                      200       584
    -------------------------------------------------------------------------
                                                             4,621     5,034
    -------------------------------------------------------------------------

    Property and equipment                                   7,925     5,989
    Deferred charges                                            51       116
    Intangible assets                                          647     1,643
    Deposits and other assets                                  527       323
    Future income taxes                                          -       336
    -------------------------------------------------------------------------
                                                          $ 13,771  $ 13,441
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued liabilities            $  1,266  $  1,547
      Advance ticket sales                                   1,245       832
      Current portion of Aeroplan Miles obligation              55        58
      Current portion of Aeroplan deferred revenues              -       799
      Current portion of long-term debt and capital leases     686       367
      Current taxes payable                                      -       345
    -------------------------------------------------------------------------
                                                             3,252     3,948
    -------------------------------------------------------------------------

    Long-term debt and capital leases                        4,006     3,759
    Convertible preferred shares                               182       166
    Future income taxes                                         50       136
    Pension and other benefit liabilities                    1,824     1,876
    Aeroplan deferred revenues                                   -       801
    Other long-term liabilities                                483       483
    -------------------------------------------------------------------------
                                                             9,797    11,169
    -------------------------------------------------------------------------

    Non-controlling interest                                   757       695

    SHAREHOLDERS' EQUITY
      Share capital and other equity                           450       742
      Contributed surplus                                      504        25
      Retained earnings                                      2,209       810
      Accumulated other comprehensive income                    54         -
    -------------------------------------------------------------------------
                                                             3,217     1,577
    -------------------------------------------------------------------------
                                                          $ 13,771  $ 13,441
    -------------------------------------------------------------------------

    (*)Effective March 14, 2007, the results and financial position of
       Aeroplan LP and effective May 24, 2007, the results and financial
       position of Jazz LP are not consolidated with ACE. Effective
       October 16, 2007, the results and financial position of ACTS LP are
       not consolidated with ACE.

       The notes are an integral part of the consolidated financial
       statements and are available on SEDAR at www.sedar.com and EDGAR at
       www.sec.gov/edgar.shtml.


          Consolidated Statement of Changes in Shareholder's Equity
    -------------------------------------------------------------------------
    For the year ended December 31
    (Canadian dollars in millions)                            2007(*)   2006
    -------------------------------------------------------------------------
    Share capital
      Common shares, beginning of year                    $  2,188  $  2,231
        Distributions of Aeroplan units                       (306)      (59)
        Distributions of Jazz units                            (70)        -
        Issue of shares through stock options exercised         86        16
    -------------------------------------------------------------------------
      Common shares, end of year                             1,898     2,188
      Adjustment to shareholders' equity, beginning
       of year                                              (1,655)   (1,655)
    -------------------------------------------------------------------------
    Total share capital                                        243       533
    -------------------------------------------------------------------------
    Other equity
      Convertible preferred shares                             117       117
      Convertible notes                                         90        92
    -------------------------------------------------------------------------
    Total share capital and other equity                       450       742
    -------------------------------------------------------------------------
    Contributed surplus
      Balance, beginning of year                                25        19
      Fair value of stock options issued to Corporation
       employees recognized as compensation expense             25        13
      Fair value of exercised stock options to share
       capital                                                 (29)       (7)
      Aeroplan negative investment                             483         -
    -------------------------------------------------------------------------
    Total contributed surplus                                  504        25
    -------------------------------------------------------------------------
    Retained earnings
      Balance, beginning of year                               810       402
      Cumulative effect of adopting new accounting
       policies                                                  5         -
      Repair Schemes and Non-compete agreement                  (4)        -
    -------------------------------------------------------------------------
                                                               811       402
      Net income for the year                                1,398       408
    -------------------------------------------------------------------------
                                                             2,209       810
    -------------------------------------------------------------------------
    Accumulated other comprehensive income
      Balance, beginning of year                                 -         -
      Cumulative effect of adopting new accounting
       policies                                                 (7)        -
      Other comprehensive income                                61         -
    -------------------------------------------------------------------------
                                                                54         -
    -------------------------------------------------------------------------
    Total retained earnings and accumulated other
     comprehensive income                                    2,263       810
    -------------------------------------------------------------------------
    Total shareholders' equity                            $  3,217  $  1,577
    -------------------------------------------------------------------------

    (*)Effective March 14, 2007, the results and financial position of
       Aeroplan LP and effective May 24, 2007, the results and financial
       position of Jazz LP are not consolidated with ACE. Effective
       October 16, 2007, the results and financial position of ACTS LP are
       not consolidated with ACE.

       The notes are an integral part of the consolidated financial
       statements and are available on SEDAR at www.sedar.com and EDGAR at
       www.sec.gov/edgar.shtml.


               Consolidated Statement of Comprehensive Income
    -------------------------------------------------------------------------
    For the year ended December 31
    (Canadian dollars in millions)                            2007(*)   2006
    -------------------------------------------------------------------------
    Comprehensive income
      Net income for the year                             $  1,398  $    408
      Other comprehensive income, net of taxes:
      Net change in unrealized loss on
       US Airways securities                                   (13)        -
      Reclassification of realized gains on
       US Airways securities to income                          (6)        -
      Net change in unrealized gains on
       fuel derivatives under hedge accounting
       (net of taxes of $29)                                    88         -
      Reclassification of net realized (gains)
       losses on fuel derivatives to income
       (net of tax of $1)                                       (6)        -
      Unrealized loss on translation of
       self-sustaining operation (net of nil tax)               (9)        -
      Proportional reclassification of adjustment
       from foreign currency translation to
       income related to the disposal of ACTS
       (net of nil tax)                                          7         -
    -------------------------------------------------------------------------
                                                                61         -
    -------------------------------------------------------------------------
    Total comprehensive income                            $  1,459  $    408
    -------------------------------------------------------------------------

    (*)Effective March 14, 2007, the results and financial position of
       Aeroplan LP and effective May 24, 2007, the results and financial
       position of Jazz LP are not consolidated with ACE. Effective October
       16, 2007, the results and financial position of ACTS LP are not
       consolidated with ACE.

       The notes are an integral part of the consolidated financial
       statements and are available on SEDAR at www.sedar.com and EDGAR at
       www.sec.gov/edgar.shtml.


                     Consolidated Statement of Cash Flow
    -------------------------------------------------------------------------
    For the year ended December 31
    (Canadian dollars in millions)                            2007(*)   2006
    -------------------------------------------------------------------------

    Cash flows from (used for)
    Operating
      Net income for the year                             $  1,398  $    408
      Adjustments to reconcile to net
       cash from operations
         Depreciation, amortization and obsolescence           582       576
         Gain on disposal of assets                         (1,366)     (393)
         Foreign exchange (gain) loss                         (387)        6
         Future income taxes                                   461       102
         Excess of employee future
          benefit funding over expense                        (205)     (228)
         Increase (decrease) in Aeroplan
          miles obligation                                     (79)       34
         Non-controlling interest                              146        52
         Special charge for Aeroplan miles                       -       102
         Aircraft lease payments less than (in excess of)
          rent expense                                         (14)      (16)
         Capitalized interest                                 (108)      (61)
         Other                                                  29        65
         Changes in non-cash working capital balances           72        85
    -------------------------------------------------------------------------
                                                               529       732
    -------------------------------------------------------------------------
    Financing
      Issue of common shares                                    56         8
      Issue of Air Canada shares                                 -       187
      Issue of Jazz units                                        -       218
      Aircraft and facility related borrowings               1,914       397
      Credit facility borrowings - Jazz                          -       113
      Distributions paid to non-controlling interest           (25)      (51)
      Reduction of long-term debt and capital
       lease obligations                                      (504)     (278)
      Other                                                    (38)       (3)
    -------------------------------------------------------------------------
                                                             1,403       591
    -------------------------------------------------------------------------
    Investing
      Short-term investments                                    83      (708)
      Proceeds from sale of Air Canada shares                    -       304
      Proceeds from sale of Aeroplan units                     463         -
      Proceeds from sale of Jazz units                         263        14
      Proceeds from sale of ACTS to ACE                        723         -
      Proceeds from sale of ACTS to Air Canada                  65         -
      Proceeds from sale of US Airways                          16       232
      Proceeds from sale of other assets                        90        40
      Additions to capital assets                           (2,622)     (920)
      Deconsolidation of Aeroplan cash                        (231)        -
      Deconsolidation of Jazz cash                            (138)        -
      Deconsolidation of ACTS cash                              (7)        -
      Acquisition of Aeroman, net of cash                      (53)        -
      Funding of ACTS Aero letter of credit                   (101)        -
      Other                                                    (37)        4
    -------------------------------------------------------------------------
                                                            (1,486)   (1,034)
    -------------------------------------------------------------------------
    Increase in cash and cash equivalents                      446       289
    Cash and cash equivalents, beginning of year             1,854     1,565
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year                $  2,300  $  1,854
    -------------------------------------------------------------------------
    Cash payments of interest                             $    281  $    272
    Cash payments of income taxes                         $     13  $      1
    -------------------------------------------------------------------------

    (*)Effective March 14, 2007, the results and financial position of
       Aeroplan LP and effective May 24, 2007, the results and financial
       position of Jazz LP are not consolidated with ACE.  Effective October
       16, 2007, the results and financial position of ACTS LP are not
       consolidated with ACE.

       The notes are an integral part of the consolidated financial
       statements and are available on SEDAR at www.sedar.com and EDGAR at
       www.sec.gov/edgar.shtml.
    
    %SEDAR: 00020954EF          %CIK: 0001295721




For further information:

For further information: Isabelle Arthur (Montréal), (514) 422-5788;
Peter Fitzpatrick (Toronto), (416) 263-5576; Angela Mah (Vancouver), (604)
270-5741; Internet: aceaviation.com


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