ACE Aviation reports second quarter 2008 results



    
    SECOND QUARTER OVERVIEW

    - Net income of $830 million.
    - Operating loss of $2 million.
    - EBITDAR of $238 million including EBITDAR of $249 million at Air
      Canada.
    - Secondary offering of Aeroplan units in April 2008 for net cash
      proceeds of $343 million.
    - Sale of remaining stakes in Aeroplan and Jazz in early June 2008 for
      net cash proceeds of $349 million and $85 million respectively.
    - Substantial issuer bid of $500 million completed in June 2008.
    - ACTS Aero stake increased to 27.8% in June 2008 following exercise of
      put option by Grupo TACA related entity for US$18.4 million.
    - ACE cash of $828 million at June 30, 2008.
    

    MONTREAL, Aug. 8 /CNW Telbec/ - ACE Aviation Holdings Inc. (ACE) today
reported net income of $830 million for the second quarter of 2008. This
included pre-tax gains of $908 million from the sale of Aeroplan and Jazz
units in the quarter.
    ACE recorded an operating loss of $2 million for the quarter. Air Canada
reported operating income of $7 million, a decrease of $81 million from the
second quarter 2007, on a comparative basis.
    EBITDAR(1) for ACE amounted to $238 million. Air Canada reported EBITDAR
of $249 million for the quarter, a decrease of $50 million over second quarter
2007.
    "I am pleased with ACE's continued progress on the execution of its
strategy," said Robert Milton, Chairman, President and Chief Executive
Officer, ACE Aviation Holdings Inc.
    "In April 2008, we raised a further $343 million in cash through a
secondary offering of Aeroplan units. In June, we also raised a total of
$434 million by way of the sale of our remaining holdings in Aeroplan and
Jazz, and we completed a $500 million substantial issuer bid.
    "We are now actively exploring options for our 75 per cent interest in
Air Canada to maximize value for our shareholders," concluded Mr. Milton.

    (1) Non-GAAP Measures

    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 Second
Quarter 2008 Management's Discussion and Analysis (MD&A) for a reconciliation
of EBITDAR and EBITDAR (before the provision for cargo investigations) 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 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 acts, 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
of ACE's 2007 MD&A dated February 7,2008 and in Section 11 of ACE's Second
Quarter 2008 MD&A dated August 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

                              -----------------------------------------------
    Unaudited
    (Canadian dollars             Three Months Ended      Six Months Ended
     in millions except                June 30                 June 30
     per share figures)           2008        2007(*)     2008        2007(*)
    -------------------------------------------------------------------------

    Operating revenues
      Passenger               $  2,454    $  2,336    $  4,765    $  4,488
      Cargo                        139         135         263         275
      Other                        190         188         481         521
    -------------------------------------------------------------------------
                                 2,783       2,659       5,509       5,284
    -------------------------------------------------------------------------

    Operating expenses
      Wages, salaries
       and benefits                487         626         983       1,324
      Aircraft fuel                848         637       1,563       1,222
      Aircraft rent                 69          91         132         195
      Airport and
       navigation fees             255         256         496         499
      Aircraft maintenance,
       materials and supplies      172         121         375         263
      Communications and
       information technology       72          69         145         145
      Food, beverages and
       supplies                     81          81         158         164
      Depreciation,
       amortization and
       obsolesence                 171         149         340         295
      Commissions                   47          51         100         110
      Capacity purchase
       with Jazz                   233          76         468          76
      Special charge
       for labour
       restructuring                 -           6           -          15
      Other                        350         400         778         909
    -------------------------------------------------------------------------
                                 2,785       2,563       5,538       5,217
    -------------------------------------------------------------------------

    Operating income (loss)
     before under-noted item        (2)         96         (29)         67

    Provision for cargo
     investigations                  -           -        (125)          -
    -------------------------------------------------------------------------

    Operating income (loss)         (2)         96        (154)         67
    -------------------------------------------------------------------------

    Non-operating
     income (expense)
      Interest income               23          28          48          61
      Interest expense             (87)        (96)       (183)       (219)
      Interest capitalized           8          28          25          64
      Gain on disposal
       of assets                   915          18         961          25
      Gain (loss) on
       financial instruments
       recorded at fair value      176          (6)        153          28
      Equity and other
       investment income             5          24          17          27
      Other                          -          (1)         (1)         (1)
    -------------------------------------------------------------------------
                                 1,040          (5)      1,020         (15)
    -------------------------------------------------------------------------

    Income before the
     following items             1,038          91         866          52

      Non-controlling
       interest                    (32)        (56)         32         (79)
      Foreign exchange
       gain (loss)                  48         158         (41)        191
      Provision for
       income taxes
        Current                     (1)          -          (1)         (6)
        Future                    (223)        (75)       (208)       (112)
    -------------------------------------------------------------------------

    Income for the period     $    830    $    118    $    648    $     46
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Income per share
      Basic                   $  15.46   $    1.14    $  11.24    $   0.45
    -------------------------------------------------------------------------
      Diluted                 $  10.76   $    0.98    $   8.18    $   0.44
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS,
        respectively, are not consolidated with ACE. The notes are an
        integral part of the interim 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

                                                 ----------------------------
    Unaudited                                        June 30   December 31
    (Canadian dollars in millions)                      2008          2007(*)
    -------------------------------------------------------------------------

    ASSETS
    Current
      Cash and cash equivalents                     $  1,481      $  2,300
      Short-term investments                             844           839
    -------------------------------------------------------------------------
                                                       2,325         3,139
    -------------------------------------------------------------------------

      Restricted cash                                     42           124
      Accounts receivable                                943           793
      Aircraft fuel inventory                            117            98
      Fuel derivatives                                   382            68
      Prepaid expenses and other current assets          131           182
      Future income taxes                                  -           200
    -------------------------------------------------------------------------
                                                       3,940         4,604
    -------------------------------------------------------------------------

    Property and equipment                             7,502         7,925
    Deferred charges                                      49            51
    Intangible assets                                    660           647
    Deposits and other assets                            650           527
    -------------------------------------------------------------------------
                                                    $ 12,801      $ 13,754
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued liabilities      $  1,183      $  1,249
      Advance ticket sales                             1,722         1,245
      Current portion of Aeroplan Miles obligation        55            55
      Current portion of long-term debt and
       capital leases                                    396           686
    -------------------------------------------------------------------------
                                                       3,356         3,235
    -------------------------------------------------------------------------

    Long-term debt and capital leases                  4,141         4,006
    Convertible preferred shares                         194           182
    Future income taxes                                   50            50
    Pension and other benefit liabilities              1,738         1,824
    Other long-term liabilities                          511           483
    -------------------------------------------------------------------------
                                                       9,990         9,780
    -------------------------------------------------------------------------

    Non-controlling interest                             724           757

    SHAREHOLDERS' EQUITY
      Share capital and other equity                     307           450
      Contributed surplus                                170           504
      Retained earnings                                1,368         2,209
      Accumulated other comprehensive income             242            54
    -------------------------------------------------------------------------
                                                       2,087         3,217
    -------------------------------------------------------------------------

                                                    $ 12,801      $ 13,754
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS,
        respectively, are not consolidated with ACE. The notes are an
        integral part of the interim 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 Shareholders' Equity

                                    -----------------------------------------
                                    Six Months          Year    Six Months
                                         Ended         Ended         Ended
    Unaudited                          June 30   December 31       June 30
    (Canadian dollars in millions)        2008          2007(*)       2007(*)
    -------------------------------------------------------------------------
    Share capital
      Common shares,
       beginning of period            $    243      $    533      $    533
        Repurchase and cancellation
         of common shares                 (180)            -             -
        Distributions of Aeroplan
         units                               -          (306)         (354)
        Distributions of Jazz units          -           (70)          (72)
        Issue of shares through
         stock options exercised            37            86            20
    -------------------------------------------------------------------------
    Total share capital                    100           243           127
    Other equity
      Convertible preferred shares         117           117           117
      Convertible senior notes              90            90            92
    -------------------------------------------------------------------------
    Total share capital and
     other equity                          307           450           336
    -------------------------------------------------------------------------
    Contributed surplus
      Balance, beginning of period         504            25            25
      Repurchase and cancellation
       of common shares                   (329)            -             -
      Fair value of stock
       options issued to
       Corporation employees
       recognized as
       compensation expense                  2            25             8
      Fair value of exercised stock
       options to share capital             (7)          (29)            -
      Aeroplan negative investment           -           483           483
    -------------------------------------------------------------------------
    Total contributed surplus              170           504           516
    -------------------------------------------------------------------------
    Retained earnings
      Balance, beginning of period       2,209           810           810
      Repurchase and cancellation of
       common shares                    (1,489)            -             -
      Cumulative effect of adopting
       new accounting policies               -             5             8
      Repair schemes and Non-compete
       agreement                             -            (4)            -
    -------------------------------------------------------------------------
                                           720           811           818
      Net income for the period            648         1,398            46
    -------------------------------------------------------------------------
    Total retained earnings              1,368         2,209           864
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     income
      Balance, beginning of period          54             -             -
      Cumulative effect of adopting
       new accounting policies               -            (7)           (7)
      Other comprehensive income           188            61             2
    -------------------------------------------------------------------------
    Total accumulated other
     comprehensive income                  242            54            (5)
    -------------------------------------------------------------------------
    Total retained earnings and
     accumulated other
     comprehensive income                1,610         2,263           859
    -------------------------------------------------------------------------
    Total shareholders' equity        $  2,087      $  3,217      $  1,711
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS,
        respectively, are not consolidated with ACE. The notes are an
        integral part of the interim 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

                              -----------------------------------------------
    Unaudited                     Three Months Ended      Six Months Ended
    (Canadian dollars                  June 30                 June 30
     in millions                  2008        2007(*)     2008        2007(*)
    -------------------------------------------------------------------------

    Comprehensive income
    Net income for the
     period                   $    830    $    118    $    648    $     46
    Other comprehensive
     income (loss),
     net of taxes:
      Net change in
       unrealized loss on
       US Airways securities         -          (4)          -          (8)
      Reclassification of
       realized gains on US
       Airways securities
       to income                     -          (7)          -          (7)
      Net change in
       unrealized gain on
       Jazz Air Income Fund         (6)          -          65           -
      Reclassification of
       net realized gains
       on Jazz Air Income
       Fund to income              (65)          -         (65)          -
      Net change in
       unrealized gain on
       Aeroplan Income Fund        331           -         331           -
      Reclassification of
       net realized gains
       on Aeroplan Income
       Fund to income             (331)          -        (331)          -
      Net gains on fuel
       derivatives under
       hedge accounting            173           8         273          14
      Reclassification of
       net realized (gains)
       losses on fuel
       derivatives to income       (62)          2         (85)         10
      Unrealized loss on
       translation of
       self-sustaining
       operation
       (net of nil tax)              -          (7)          -          (7)
    -------------------------------------------------------------------------
                                    40          (8)        188           2
    -------------------------------------------------------------------------
    Total comprehensive
     income                   $    870    $    110    $    836     $    48
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS,
        respectively, are not consolidated with ACE. The notes are an
        integral part of the interim consolidated financial statements and
        are available on SEDAR at www.sedar.com and EDGAR at
        www.sec.gov/edgar.shtml.


                     Consolidated Statement of Cash Flows

                              -----------------------------------------------
    Unaudited                     Three Months Ended      Six Months Ended
    (Canadian dollars                  June 30                 June 30
     in millions                  2008        2007(*)     2008        2007(*)
    -------------------------------------------------------------------------

    Cash flows from (used
     for) Operating
      Net income for the
       period                 $    830    $    118    $    648    $     46
      Adjustments to
       reconcile to net cash
       from operations
        Depreciation,
         amortization and
         obsolescence              171         149         340         295
        Gain on disposal of
         assets                   (915)        (18)       (961)        (25)
        Foreign exchange gain      (64)       (154)          1        (187)
        Future income taxes        223          75         208         112
        Excess of employee
         future benefit
         funding over expense      (31)        (69)        (82)       (138)
        Decrease in Aeroplan
         miles obligation          (13)        (21)        (29)        (49)
        Provision for cargo
         investigation               -           -         125           -
        Non-controlling
         interest                   36          52         (32)         70
        Financial instruments
         and other                (168)         36        (181)          9
        Changes in non-cash
         working capital
         balances                  148         (37)        409         314
    -------------------------------------------------------------------------
                                   217         131         446         447
    -------------------------------------------------------------------------
    Financing
      Issue of common shares        29           -          30          19
      Repurchase and
       cancellation of
        common shares             (500)          -      (1,998)          -
      Aircraft related
       borrowings                  126         532         313         644
      Distributions paid to
       non-controlling
       interest                      -          (8)          -         (61)
      Reduction of long-term
       debt and capital
       lease obligations          (319)        (90)       (642)       (168)
      Other                          -           1           -           -
    -------------------------------------------------------------------------
                                  (664)        435      (2,297)        434
    -------------------------------------------------------------------------
    Investing
      Short-term investments      (165)         16          (4)       (139)
      Proceeds from sale of
       Aeroplan units              692           -         692           -
      Proceeds from sale of
       Jazz units                   85           -         182           -
      Exercise of ACTS Aero
       put option                  (19)          -         (19)          -
      Proceeds from escrow
       related to sale of
       ACTS                          -           -          40           -
      Proceeds from sale of
       other assets                  -           -          27          45
      Proceeds from sale-
       leaseback transactions      297           -         708           -
      Additions to capital
       assets                     (225)       (738)       (628)     (1,175)
      Deconsolidation of
       Aeroplan cash                 -           -           -        (231)
      Deconsolidation of
       Jazz cash                     -        (138)          -        (138)
      Acquisition of Aeroman,
       net of cash                   -           -           -         (53)
      Other                          9         (18)         34          (3)
    -------------------------------------------------------------------------
                                   674        (878)      1,032      (1,694)
    -------------------------------------------------------------------------
    Increase (decrease)
     in cash and cash
     equivalents                   227        (312)       (819)       (813)
    Cash and cash
     equivalents,
     beginning of period         1,254       1,353       2,300       1,854
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period            $  1,481    $  1,041    $  1,481    $  1,041
    -------------------------------------------------------------------------
    Cash payments of
     interest                 $     81    $     71    $    149    $    131
    Cash payments of
     income taxes             $      1    $      3    $      3    $      9
    -------------------------------------------------------------------------
    (*) Effective March 14, 2007, May 24, 2007, and October 16, 2007, the
        results and financial position of Aeroplan, Jazz and ACTS,
        respectively, are not consolidated with ACE. The notes are an
        integral part of the interim 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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