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Q3 2008 ACE Aviation Holdings, Inc. Earnings Conference Call - Final.

Article Excerpt
OPERATOR: Good morning, ladies and gentlemen. Welcome to ACE Aviation's 2008 third-quarter financial results conference call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Brian Dunne, Executive Vice President and CFO of ACE Aviation.

BRIAN DUNNE, EVP, CFO, ACE AVIATION HOLDINGS INC.: I'm here today with Robert Milton, Chairman, President, and CEO. Because some of the discussion in this call may be forward-looking, I'm going to read some standard cautionary language, in that certain statements made in this call may be forward-looking and subject to important risks and uncertainties. The results indicated in these statements may differ materially from actual results for a number of reasons, including risk factors and uncertainties outlined in publicly-filed documents. Any forward-looking statements made in this call represent expectations of ACE Aviation Holdings as of this current date and are subject to change after such date. ACE Aviation Holdings disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

I will start with a brief review of the results, and then we will take questions from the analyst community.

ACE reported EBITDAR of CAD346 million for the third quarter of 2008. This included EBITDAR of CAD355 million at Air Canada, which was a decrease of CAD206 million from the third quarter of 2007. ACE recorded operating income of CAD105 million. Air Canada reported operating income of CAD112 million, a decrease of CAD239 million from the third quarter of 2007. ACE recorded a net loss of CAD135 million, reflecting Air Canada's mark to market losses on financial instruments, principally fuel hedges, of CAD93 million, and net foreign exchange losses of CAD87 million, due to a weaker Canadian dollar versus the US dollar. The loss also included an XE investment loss related to ACTS Aero of CAD19 million in the quarter.

ACE's unconsolidated cash balance amounted to CAD824 million at September 30, 2008. ACE's remaining miscellaneous wind-up and other obligations are approximately CAD35 million at that date.

ACE's other assets are a 75% interest in Air Canada and a 27.8% interest in ACTS Aero. We are actively exploring options for our 75% interest in Air Canada, to maximize value for our shareholders. These options include a share exchange for the minority share holding in Air Canada. Discussions with a number of parties are ongoing. A buyout of the minority share holding for cash is less likely at this time. The ACTS Aero stake amounts to approximately CAD101 million at the original deal equity value. The net book amount of this investment on ACE's balance sheet at September 30, 2008, is CAD64 million.

In addition to 34.9 million share -- common shares, ACE's capital structure includes the 4.25% convertible senior notes with a principal amount outstanding of approximately CAD323 million and 12.5 million convertible preferred shares. ACE can redeem the convertible senior notes at any time post-June 6, 2008. The holders can require ACE to purchase notes on specified dates, the first of which is June 1, 2010. The convertible preferred shares have an accretive value...