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ACE Aviation Reports 2008 Full Year and Fourth Quarter Results

Posted on: Friday, 13 February 2009, 05:15 CST

MONTREAL, Feb. 13 /PRNewswire-FirstCall/ - 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.

SOURCE ACE AVIATION HOLDINGS INC.

Source: PR Newswire

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