ACE Aviation Reports 2008 Full Year and Fourth Quarter Results



    
    2008 FULL YEAR OVERVIEW

    - EBITDAR of $891 million (before provision for cargo investigations),
      including EBITDAR of $934 million at Air Canada.
    - Operating loss (before provision for cargo investigations) of
      $74 million.
    - Gains on assets (primarily relating to the sale of units of Aeroplan
      and Jazz) of $946 million.
    - Net loss of $120 million.
    - Substantial issuer bid for common shares of $1.5 billion completed
      in January 2008.
    - Sale of Jazz units in January 2008 for net cash proceeds of
      $97 million.
    - Secondary offering of Aeroplan units in April 2008 for net cash
      proceeds of $343 million.
    - Sale of remaining stakes in Aeroplan and Jazz in June 2008 for net
      cash proceeds of $349 million and $85 million, respectively.
    - Substantial issuer bid for common shares of $0.5 billion completed
      in June 2008.

    FOURTH QUARTER OVERVIEW

    - EBITDAR of $102 million including EBITDAR of $108 million at
      Air Canada.
    - Operating loss of $150 million.
    - Net loss of $633 million (including net foreign exchange losses of
      $527 million).
    - Substantial issuer bids for preferred shares and convertible senior
      notes launched in December 2008 and completed in January 2009.
    - Announced intention to seek court and shareholder approvals for a
      plan of arrangement to liquidate and distribute net assets, including
      ACE's shares in Air Canada, to ACE's shareholders.
    - ACE cash of $408 million on January 31, 2009.
    

    MONTREAL, Feb. 13 /CNW Telbec/ - ACE Aviation Holdings Inc. (ACE) today
reported 2008 full year and fourth quarter results.
    In 2008, EBITDAR for ACE amounted to $891 million (before the provision
for cargo investigations of $125 million) including EBITDAR at Air Canada of
$934 million.
    ACE recorded a 2008 operating loss (before the provision) of $74 million
including an operating loss of $39 million at Air Canada.
    In the fourth quarter of 2008, ACE recorded EBITDAR of $102 million and
an operating loss of $150 million.
    Air Canada reported EBITDAR of $108 million and an operating loss of $146
million, decreases of $166 million and $218 million, respectively, over fourth
quarter 2007.
    In accordance with the applicable accounting standards, effective
December 31, 2008, ACE changed the basis of preparing its financial statements
from going concern to liquidation. If ACE subsequently does not proceed with
the liquidation of its net assets, ACE will revert to a going concern basis of
presentation.
    At January 31, 2009, ACE's principal assets are cash and cash equivalents
of $408 million and its 75 million shares in Air Canada which had a market
value of $173 million on that date. ACE's investment in ACTS Aero has been
written down to nil. ACE's obligations include convertible senior notes with a
principal amount outstanding of $64 million and accounts payable and accrued
liabilities up to and during liquidation of $30 million. ACE also has 4.2
million preferred shares outstanding with a fully accreted value of $104
million at January 31, 2009, together with 34.9 million common shares.
    "During 2008, we made good progress with the implementation of ACE's
business strategy," said Robert Milton, Chairman, President and Chief
Executive Officer, ACE Aviation Holdings Inc.
    "On December 10, 2008, we launched substantial issuer bids for all of our
outstanding preferred shares and convertible senior notes which were completed
on January 19, 2009. ACE purchased for cancellation 66% of the preferred
shares outstanding for an aggregate purchase price of $166 million and 80% of
the convertible senior notes outstanding for an aggregate purchase price of
$233 million.
    "On December 10, 2008, we also announced ACE's intention to seek court
and shareholder approvals for a plan of arrangement to liquidate and
distribute its net assets. The plan will provide for the distribution of ACE's
shares in Air Canada to ACE's shareholders.
    "In advance of the plan of arrangement, ACE will continue to explore
opportunities, including possible further substantial issuer bids. In this
regard, on February 10, 2009, ACE announced a substantial issuer bid to
purchase for cancellation its remaining 4.2 million convertible preferred
shares at a purchase price of $20.00 in cash per preferred share. ACE has
signed a lock up agreement with GLG Market Neutral Fund, which holds 1.0
million preferred shares, to tender into the offering.
    "In addition, in light of the publicly stated opposition of certain
shareholders with respect to the plan of arrangement, ACE will continue its
ongoing dialogue with shareholders and consider other alternatives available
to it with a view to arriving at an optimal outcome," concluded Mr. Milton.

    Non-GAAP Measures

    The provision for cargo investigations recorded in 2008 by Air Canada
amounted to $125 million. 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
2008 Management's Discussion and Analysis (MD&A) for a reconciliation of
EBITDAR to operating income (loss).
    For further information on ACE's public disclosure file, including ACE's
Annual Information Form, please consult SEDAR at www.sedar.com.

    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. Actual
results may differ materially from results indicated in forward-looking
statements due to a number of factors, including without limitation, industry,
market, credit and economic conditions, the ability to reduce operating costs
and secure financing, pension issues, energy prices, currency exchange and
interest rates, employee and labour relations, competition, war, terrorist
acts, epidemic diseases, insurance issues and costs, changes in demand due to
the seasonal nature of the business, supply issues, changes in laws,
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, in particular, those
identified in the Risk Factors section to ACE's 2008 MD&A dated February 13,
2009. The plan of arrangement is subject to the approval by the shareholders
and the court, and the final completion of ACE's liquidation is subject to the
obtention of any required tax clearance certificates and any tax or other
regulatory approvals. If ACE does not proceed with the liquidation of its
assets, or to do so in a timely manner, ACE will continue to incur operating
costs and fees. The forward-looking statements contained herein represent
ACE's expectations as of the date of 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.

    
                   Statement of Net Assets in Liquidation

                                                                 ------------
    As at December 31
    (Canadian dollars in millions
     except per share figures)                                        2008(*)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ASSETS
      Cash and cash equivalents                                     $    808
      Investment in Air Canada                                           133
      Investment in ACTS Aero                                              -
      Future income taxes                                                  -
    -------------------------------------------------------------------------
                                                                    $    941
    -------------------------------------------------------------------------

    LIABILITIES
      Convertible senior notes                                      $    298
      Convertible preferred shares                                       272
      Accounts payable and accrued liabilities                            27
      Accrued future costs to be incurred up to and
       during liquidation                                                  5
    -------------------------------------------------------------------------
                                                                    $    602
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    NET ASSETS IN LIQUIDATION                                       $    339
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET ASSETS IN LIQUIDATION PER SHARE
      Basic                                                         $   9.71
      Diluted                                                       $   9.71
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Effective December 31, 2008, the Corporation changed the basis of
        presenting its financial statements from going concern to
        liquidation. The notes are an integral part of the interim
        consolidated financial statements and are available on SEDAR at
        www.sedar.com.


              Statement of Changes in Net Assets in Liquidation

    For the period ended December 31, 2008
    (Canadian dollars in millions)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Shareholders' Equity at December 31, 2008 on a
     Going Concern Basis                                            $    464

    Effects of adopting a liquidation basis of presentation:
      Adjustment of investment in Air Canada to estimated net
       realizable value                                                  (46)
      Adjustment of convertible senior notes to present value
       of estimated amounts to be paid                                    (9)
      Adjustment of convertible preferred shares to present
        value of estimated amounts to be paid                            (66)
      Accrual of future costs to be incurred up to and during
       liquidation                                                        (5)
      Reversal of accrued interest on convertible
       senior notes                                                        1
    -------------------------------------------------------------------------
    Net effect of adopting a liquidation basis of presentation          (125)
    -------------------------------------------------------------------------
    Net assets in liquidation at December 31, 2008                  $    339
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Effective December 31, 2008, the Corporation changed the basis of
        presenting its financial statements from going concern to
        liquidation. The notes are an integral part of the interim
        consolidated financial statements and are available on SEDAR at
        www.sedar.com.


         Consolidated Statement of Operations (Going Concern Basis)

                                                        ---------------------
    For the year ended December 31
    (Canadian dollars in millions except
     per share figures)                                   2008(*)     2007(*)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating revenues
      Passenger                                         $  9,713    $  9,344
      Cargo                                                  515         548
      Other                                                  852         934
    -------------------------------------------------------------------------
                                                          11,080      10,826
    -------------------------------------------------------------------------

    Operating expenses
      Aircraft fuel                                        3,419       2,553
      Wages, salaries and benefits                         1,908       2,383
      Airport and navigation fees                          1,001       1,021
      Capacity purchase with Jazz                            948         537
      Depreciation, amortization and obsolescence            686         582
      Aircraft maintenance                                   659         515
      Food, beverages and supplies                           314         318
      Communications and information technology              286         281
      Aircraft rent                                          279         323
      Commissions                                            194         201
      Special charge for labour restructuring                  -          15
      Other                                                1,460       1,644
    -------------------------------------------------------------------------
                                                          11,154      10,373
    -------------------------------------------------------------------------

    Operating income (loss) before under-noted item          (74)        453

    Provision for cargo investigations                      (125)          -

    -------------------------------------------------------------------------
    Operating income (loss)                                 (199)        453
    -------------------------------------------------------------------------

    Non-operating income (expense)
      Interest income                                         84         126
      Interest expense                                      (373)       (420)
      Interest capitalized                                    37         108
      Gain on assets                                         946       1,366
      Gain on financial instruments recorded
       at fair value                                          92          26
      Equity and other investment income (loss)              (64)         71
      Other                                                   (2)        (12)
    -------------------------------------------------------------------------
                                                             720       1,265
    -------------------------------------------------------------------------

    Income before the following items                        521       1,718

      Non-controlling interest                               238        (157)
      Foreign exchange gain (loss)                          (655)        313
      Provision for income taxes
        Current                                               (3)        (15)
        Future                                              (221)       (461)
    -------------------------------------------------------------------------
    Income (loss) for the year                          $   (120)   $  1,398
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Income (loss) per share
      Basic                                             $  (2.59)   $  13.51
      Diluted                                           $  (2.59)   $  11.44
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS Aero,
        respectively, are not consolidated with ACE. Effective December
        31, 2008, the Corporation changed the basis of presenting its
        financial statements from going concern to liquidation. The notes
        are an integral part of the interim consolidated financial statements
        and are available on SEDAR at www.sedar.com.


     Consolidated Statement of Financial Position (Going Concern Basis)

                                                                    ---------
    As at December 31
    (Canadian dollars in millions)                                    2007(*)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

      Restricted cash                                                    124
      Accounts receivable                                                793
      Aircraft fuel inventory                                             98
      Fuel derivatives                                                    68
      Prepaid expenses and other current assets                          182
      Future income taxes                                                200
    -------------------------------------------------------------------------
                                                                       4,604
    -------------------------------------------------------------------------

    Property and equipment                                             7,925
    Intangible assets                                                    647
    Deposits and other assets                                            578
    -------------------------------------------------------------------------

                                                                    $ 13,754
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued liabilities                      $  1,249
      Advance ticket sales                                             1,300
      Current portion of long-term debt and capital leases               686
    -------------------------------------------------------------------------
                                                                       3,235
    -------------------------------------------------------------------------

    Long-term debt and capital leases                                  4,006
    Convertible preferred shares                                         182
    Future income taxes                                                   50
    Pension and other benefit liabilities                              1,824
    Other long-term liabilities                                          483
    -------------------------------------------------------------------------
                                                                       9,780
    -------------------------------------------------------------------------

    Non-controlling interest                                             757

    SHAREHOLDERS' EQUITY
      Share capital and other equity                                     450
      Contributed surplus                                                504
      Retained earnings                                                2,209
      Accumulated other comprehensive income                              54
    -------------------------------------------------------------------------
                                                                       3,217
    -------------------------------------------------------------------------

                                                                    $ 13,754
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS Aero,
        respectively, are not consolidated with ACE. Effective December
        31, 2008, the Corporation changed the basis of presenting its
        financial statements from going concern to liquidation; accordingly,
        a Consolidated Statement of Financial Position on a going concern
        basis is not presented. The notes are an integral part of the interim
        consolidated financial statements and are available on SEDAR at
        www.sedar.com.


          Consolidated Statement of Changes in Shareholders' Equity
                            (Going Concern Basis)

                                                        ---------------------
    For the year ended December 31
    (Canadian dollars in millions)                        2008(*)     2007(*)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Share capital
      Common shares, beginning of year                  $    243    $    533
        Repurchase and cancellation of common shares        (180)          -
        Distributions of Aeroplan units                        -        (306)
        Distributions of Jazz units                            -         (70)
        Issue of shares through stock
         options exercised                                    37          86
    -------------------------------------------------------------------------
    Total share capital                                      100         243

    Other equity
      Convertible preferred shares                           117         117
      Convertible senior notes                                90          90
    -------------------------------------------------------------------------
    Total share capital and other equity                     307         450
    -------------------------------------------------------------------------

    Contributed surplus
      Balance, beginning of year                             504          25
      Repurchase and cancellation of common shares          (329)          -
      Fair value of stock options recognized
       as compensation expense (recovery)                     (5)         25
      Fair value of exercised stock options to
       share capital                                          (7)        (29)
      Aeroplan negative investment                             -         483
    -------------------------------------------------------------------------
    Total contributed surplus                                163         504
    -------------------------------------------------------------------------

    Retained earnings
      Balance, beginning of year                           2,209         810
      Repurchase and cancellation of common shares        (1,489)          -
      Cumulative effect of adopting new
       accounting policies                                     -           5
      Repair schemes and Non-compete agreement                 -          (4)
    -------------------------------------------------------------------------
                                                             720         811
      Income (loss) for the year                            (120)      1,398
    -------------------------------------------------------------------------
    Total retained earnings                                  600       2,209
    -------------------------------------------------------------------------
    Accumulated other comprehensive income (loss)
      Balance, beginning of year                              54           -
      Cumulative effect of adopting new
       accounting policies                                     -          (7)
      Other comprehensive income (loss)                     (660)         61
    -------------------------------------------------------------------------
    Total accumulated other comprehensive income (loss)     (606)         54
    -------------------------------------------------------------------------
    Total retained earnings and accumulated other
     comprehensive income (loss)                              (6)      2,263
    -------------------------------------------------------------------------
    Total shareholders' equity before adoption of
     liquidation basis of presentation                  $    464    $  3,217
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS Aero,
        respectively, are not consolidated with ACE. Effective December 31,
        2008, the Corporation changed the basis of presenting its financial
        statements from going concern to liquidation. The notes are an
        integral part of the interim consolidated financial statements and
        are available on SEDAR at www.sedar.com


            Consolidated Statement of Comprehensive Income (Loss)
                            (Going Concern Basis)

                                                        ---------------------
    For the year ended December 31
    (Canadian dollars in millions)                        2008(*)     2007(*)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comprehensive income (loss)
    Income (loss) for the year                          $   (120)   $  1,398
    Other comprehensive income (loss), net of taxes:
      Net change in unrealized loss on US Airways
       securities                                              -         (13)
      Reclassification of realized gain on US Airways
       securities to income                                    -          (6)
      Net change in unrealized gain on
       Jazz Air Income Fund                                   65           -
      Reclassification of net realized gain on
       Jazz Air Income Fund to income                        (65)          -
      Net change in unrealized gain on
       Aeroplan Income Fund                                  331           -
      Reclassification of net realized gain on
       Aeroplan Income Fund to income                       (331)          -
      Net gains (losses) on fuel derivatives under
       hedge accounting (net of taxes of
       2008 - nil and 2007 - ($39))                         (605)        107
      Reclassification of net realized gains on
       fuel derivatives to income (net of taxes of
       2008 - $22 and 2007 - $11)                            (57)        (25)
      Unrealized gain (loss) on translation of
       self-sustaining operation operation
       (net of nil tax)                                        2          (9)
      Proportional reclassification adjustment from
       foreign currency translation to income related
       to disposal of ACTS (net of nil tax)                    -           7
    -------------------------------------------------------------------------
                                                            (660)         61
    -------------------------------------------------------------------------
    Total comprehensive income (loss)                   $   (780)   $  1,459
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS Aero,
        respectively, are not consolidated with ACE. Effective December
        31, 2008, the Corporation changed the basis of presenting its
        financial statements from going concern to liquidation. The notes
        are an integral part of the interim consolidated financial statements
        and are available on SEDAR at www.sedar.com.


          Consolidated Statement of Cash Flow (Going Concern Basis)

                                                        ---------------------
    For the year ended December 31
    (Canadian dollars in millions)                        2008(*)     2007(*)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows from (used for)

    Operating
      Income (loss) for the year                        $   (120)   $  1,398
      Adjustments to reconcile to net cash
       from operations
        Depreciation, amortization and obsolescence          686         582
        Gain on assets                                      (946)     (1,366)
        Foreign exchange loss (gain)                         822        (387)
        Future income taxes                                  221         461
        Excess of employee future benefit funding
         over expense                                       (316)       (205)
        Provision for cargo investigations                   125           -
        Non-controlling interest                            (238)        146
        Fuel and other derivative instruments               (208)         (3)
        Fuel hedge collateral deposits, net                 (322)          -
        Equity investment (income) loss                       69         (71)
        Other                                                 (3)        124
        Changes in non-cash working capital balances         120         (42)
    -------------------------------------------------------------------------
                                                            (110)        637
    -------------------------------------------------------------------------

    Financing
      Issue of common shares                                  30          56
      Repurchase and cancellation of common shares        (1,998)          -
      Borrowings                                             871       1,914
      Distributions paid to non-controlling interest           -         (25)
      Reduction of long-term debt and capital lease
       obligations                                          (993)       (504)
      Other                                                   (5)        (38)
    -------------------------------------------------------------------------
                                                          (2,095)      1,403
    -------------------------------------------------------------------------

    Investing
      Short-term investments                                 334          83
      Proceeds from sale of Aeroplan units                   692         463
      Proceeds from sale of Jazz units                       182         263
      Proceeds from sale of ACTS to ACE                        -         723
      Proceeds from sale of ACTS to Air Canada                 -          65
      Exercise of ACTS Aero put option                       (19)          -
      Proceeds from escrow related to sale of ACTS            40           -
      Proceeds from sale of other assets                      38         106
      Proceeds from sale-leaseback transactions              708           -
      Additions to capital assets                           (883)     (2,730)
      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                   59        (101)
      Other                                                   61         (37)
    -------------------------------------------------------------------------
                                                           1,212      (1,594)
    -------------------------------------------------------------------------
    Increase (decrease) in cash and cash equivalents        (993)        446
    Cash and cash equivalents, beginning of year           2,300       1,854
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year before
     adoption of liquidation basis of accounting        $  1,307    $  2,300
    -------------------------------------------------------------------------
    Cash payments of interest                           $    307    $    281
    Cash payments of income taxes                       $      2    $     13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS Aero,
        respectively, are not consolidated with ACE. Effective December
        31, 2008, the Corporation changed the basis of presenting its
        financial statements from going concern to liquidation. Cash and cash
        equivalents before adoption of liquidation basis of presentation
        exclude Short-term investments of $506 as at December 31, 2008
        ($839 as at December 31, 2007). The notes are an integral part of
        the interim consolidated financial statements and are available on
        SEDAR at www.sedar.com.
    
    %SEDAR: 00020954EF




For further information:

For further information: Des Beaumont, (514) 205-7639;
www.aceaviation.com


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