ACE Aviation Profit Jumps; Plans IPO for Air Canada
January 7th, 2009 Filed Under naaktbelgisch.com edit
Aug. 11 (Bloomberg) -- ACE Aviation Holdings Inc., which reported a 40 percent jump in profit today, plans to sell a stake in Air Canada in an initial public offering this year in a bid to boost its stock.
Second-quarter net income rose to C$236 million ($209.5 million), or C$2.05 a share, from C$169 million, or C$1.50, a year ago, Montreal-based ACE said today. Profit rose after the company had an C$83 million gain from the sale of a stake in US Airways Group. Revenue rose 9 percent to C$2.68 billion.
The sale of the stake in Air Canada, the country's biggest airline, would be ACE Aviation's third public offering of a unit since emerging from bankruptcy protection in 2004. Chief Executive Officer Robert Milton, 46, had said in May that he might do an IPO because ACE's stock price doesn't reflect the value of businesses such as Air Canada.
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 2Q industry weighted average for break-even is 78.8%.
An Air Canada initial public offering will include cargo, vacations and ground-handling operations that report to airline chief executive officer Montie Brewer.
In an internal company newsletter to employees, he confirmed that plans are under way for the Air Canada IPO.
Clive Beddoe, prexy of WESTJET, or CoffeeBean, WS defender on this forum who along with Parnel has been on "leave" from FT.
After yesterday's dual announcements about JAZZ and AEROPLAN, one can see why ACE wants to spin AC off and add to its own market valuation, or create enough value in AC to off-set the undervalue perceived in ACE. Obviously, this announcement will make ACE's stock drop in today's market. ;)
Brewer's leadership.
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.
Other than perhaps reminding folks before just posting spreadsheet statistics (particularly %s) that the comparison is somewhat apples to oranges, as ACE includes numerous business operations other than AC.
Wonder what the corporate structure will look like after this is done? Currently, the Airline, Cargo, Vacations and Ground-Handling are all structured in a rather complex web of separate operating companies and limited partnerships, even though they do share common top executive level reporting.
Interestingly, Westjet highlighted the onetime tax gain of $11.2 M but not the onetime lawsuit settlement of $15.6 M (which nets out to an even better operating profit when both are considered). The $15.6 M does show up in the tables as an extraordinary item.
I'll leave it to others to compare the ASM and RPM related figures except that they are much closer to each other than they've been in the past. ACE still appears to need that 5% better load factor to turn the same kind of profits as Westjet since it seems Westjet can still fly empty seats for lower costs than AC even though their cost per filled seat or now very close.
True, but ACE's businesses are all aviation related, the vast majority to their own flight operations, all affected by similar economic factors. So comparing AC and Westjet amongst other airline corp's is not exactly like comparing ACE with TECK-COMINCO. On the other hand, within the Canadian arena it is true that Westjet and AC have different markets, which will show different effects to economic ups and downs. From the investors' perspective ACE and Westjet are considered in relation to very different histories. ACE is proving itself as a viable corporation after exiting bankruptcy protection, so a profit under the current circumstances is seen in a very good light. Westjet has a history of incredible growth over a few years that resulted in multiple stock splits and great returns on shareholder investment. The latest profits are good, but the growth numbers don't match the historical pattern, so investors are not sufficiently impressed to maintain a P/E ratio that is (if I recall correctly) substantially higher than ACE.
#If you have any other info about this subject , Please add it free.# |
Post Linx
Permalink | Trackback |
|
Print This Article |
