ACE Reports

[Rockyc]

CNW Group Portfolio E-Mail

ACE AVIATION HOLDINGS INC.

Transmitted by CNW Group on : August 11, 2006 06:00

Ace Aviation Holdings Inc. reports second quarter net income of $236 million and

operating income of $181 million; announces plans to surface shareholder value

Second quarter overview

- Net income of $236 million compared to net income of $169 million in

the second quarter 2005.

- Operating income of $181 million compared to operating income in the

2005 quarter of $178 million.

- EBITDAR for the quarter of $434 million, an improvement of $39 million

from the 2005 quarter.

- Passenger revenues up $188 million or 9 per cent, driven by a 3 per

cent yield improvement and 5 per cent growth in traffic.

- Fuel expense increase of $101 million or 19 per cent over the prior

year's quarter.

MONTREAL, Aug. 11 /CNW Telbec/ - ACE Aviation Holdings Inc. (ACE) today

reported net income of $236 million for the second quarter 2006 compared to

net income of $169 million in the 2005 quarter. ACE reported operating income

of $181 million for the quarter, despite a fuel expense increase of

$101 million or 19 per cent over the second quarter of 2005. Operating income

increased by $3 million compared to the second quarter of 2005. Net income

includes foreign exchange gains of $107 million (2005 losses of $53 million).

The 2006 quarter also includes a pre-tax gain of $100 million

($83 million after tax) on the sale of 3.25 million shares of US Airways. The

non-recurring items in the 2005 quarter, principally related to the initial

public offering of Aeroplan, amounted to $161 million ($143 million after

tax).

Passenger revenues were up $188 million or 9 per cent reflecting

increases in all markets due to a 3 per cent improvement in passenger revenue

per revenue passenger mile (yield) and a 5 per cent growth in passenger

traffic, as measured by revenue passenger miles (RPMs), on a capacity growth

of 3 percent. Unit cost, as measured by operating expense per available seat

mile (ASM), rose 6 per cent from the same period in 2005. Excluding fuel

expense, unit cost was up 4 per cent and included the effect of growth in non-

ASM producing businesses.

EBITDAR(1) for ACE amounted to $434 million, an improvement of

$39 million from the second quarter 2005, reflecting improvements in all

segments with the exception of ACTS. EBITDAR for Transportation Services,

Aeroplan and Jazz were up $22 million, $8 million and $29 million,

respectively, while ACTS showed a decrease of $20 million.

"I am pleased to report a strong second quarter from both an operating

and financial perspective," said Robert Milton, Chairman, President and Chief

Executive Officer, ACE Aviation Holdings Inc. "Air Canada's revenue

performance remains positive with the airline reporting a $188 million or

9 per cent increase in revenues over the previous year. This growth was

achieved without the benefit of domestic traffic and yield gains derived from

Jetsgo's demise in March 2005, and despite the negative impact of a strong

Canadian dollar on revenues in international and transborder markets.

"Record fuel costs continued to impact the airline's cost performance

with oil prices now hovering around US$75 a barrel on the WTI index.

"Both Aeroplan and Jazz provided value to their investors during the

quarter. Aeroplan reported another strong performance in the quarter with

record gross billings as well as a 23 per cent increase in operating income

over the previous year. ACE's loyalty marketing company recorded $44 million

in distributable cash. The increase in distributions announced in May will

become effective in the third quarter.

"I am also pleased at the strong results achieved by Jazz since it became

a publicly traded company in February. Our regional carrier reported a profit

of $35.6 million for the quarter and recorded over $33 million in

distributable cash to its investors. This solid performance clearly reflects

the stability inherent in its Capacity Purchase Agreement with Air Canada.

"ACE's wholly-owned Maintenance, Repair and Overhaul (MRO) business,

ACTS, reported a modest operating income in the quarter and I am encouraged by

the progress being made by the new leadership team. The changes being fast

tracked by the new team are starting to pay off and I remain positive on the

prospects and value of this business.

"ACE's investment in US Airways has proved to be highly successful and

our original investment of US$75 million has tripled, yielding over

US$206 million in net proceeds to date and a remaining stake valued at

US$20 million," said Mr. Milton.

PLANS TO SURFACE SHAREHOLDER VALUE

----------------------------------

ACE also said today that its Board of Directors has completed a review of

progress on the implementation of its strategic plan. A key feature of the

review is the adoption of plans to surface value for ACE shareholders over the

medium and longer term by further illuminating the value of its subsidiaries.

The Board has identified the following initiatives, market conditions

permitting, to create further value:

- Launching of an initial public offering (IPO) of a minority stake in

Air Canada in late 2006;

- Commencing a process in late 2006 to monetize ACTS;

- Pursuing opportunities that realize the value of its investment in

Aeroplan and Jazz.

In connection with these plans, ACE intends, subject to shareholder and

Court approval under the Canada Business Corporations Act, to enter into a

plan of arrangement. The plan would provide the Board of ACE with the

authority to reduce the capital of the Corporation up to an aggregate amount

of approximately $2 billion over time, but without any maximum time limit. A

special meeting of shareholders will be convened in October 2006 to review the

proposed plan of arrangement.

"The Board has reaffirmed its strategy to maximize shareholder value by

surfacing the underlying value of the subsidiaries.

"The IPOs of Aeroplan and Jazz in June 2005 and February 2006 were very

successful. Since then, both businesses have developed well as stand-alone

businesses with outside investors and have delivered strong financial results.

We expect both Air Canada and ACTS to benefit in a similar way as we move

ahead.

"The execution of the initiatives above should facilitate unlocking the

value of ACE's assets which is not being adequately recognized by the market,"

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 a standardized

meaning and is therefore not comparable to similar measures presented by other

public companies. Readers should refer to Consolidated Highlights or ACE's

Quarter 2 2006 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 and EDGAR at

www.sec.gov/edgar.shtml

[Thebean]

All airlines of significance have reported their 2Q numbers.

Operating Margin (excludes interest expense)

1. Republic 18.5%**

2. Southwest 16.4%

3. WestJet 13.1%

4. Skywest 11.3% **

5. US Airways 10.7%

6. Air Tran 10.3%

7. Alaska 9.2%

8. Northwest 9.0%

9. ExpressJet 8.5% **

10. Mesa 8.1% **

11. Delta 7.9%

12. Industry Weighted Average 7.7%

13. jetBlue 7.7%

14. AMR 7.8%

15. Continental 7.0%

16. ACE Aviation 6.75%

17. United 5.1%

18. Midwest 4.3%

19. Hawaiian 4.1%

20. Frontier 3.5%

**denotes airlines that operate on a fee per departure basis. The majority of their capacity is sold directly to various airlines and not to consumers.

The top 7 lowest break-even loads for the quarter are

1. Southwest 66.3%

2. Republic 68.6%

3. WestJet 70.4%

4. AirTran 71.3%

5. Alaska 73.3%

6. Skywest 73.8%

7. US Airways 74.6%

The bottom 7 are:

7. Delta 78.6%

6. ACE/Continental/American 79.3%

5. Northwest 80.4%

4. Frontier 80.7%

3. jetBlue 81.6%

2. United 83.8%

1. Hawaiian 85.2%

The industry weighted average for break-even is 78.8%.

[CanadaEH]

I noticed ACE's operation margin actually dropped .5% YOY from 2005 (7.2%).

[Rockyc]

I noticed ACE's operation margin actually dropped .5% YOY from 2005 (7.2%).

Yes... Terrible, isn't it.

Only $188 Million operating profit in three months. And that with fuel up another $100 milion from a year ago. What a difference a quarter makes. Q1 results and nothing but doom, gloom, and sarcasm from the usual sources.

Q2, hardly a peep from the chorus and certainly not a kind word of any sort.

I guess things stay pretty constant around here.

[AIP]

Yes... Terrible, isn't it.

Only $188 Million operating profit in three months. And that with fuel up another $100 milion from a year ago. What a difference a quarter makes. Q1 results and nothing but doom, gloom, and sarcasm from the usual sources.

Q2, hardly a peep from the chorus and certainly not a kind word of any sort.

I guess things stay pretty constant around here.

Not to worry;

The market seems to have said all that needs to be said on the subject don't you think ??