ACE
AVIATION ANNOUNCES PLANNED INVESTMENT IN MERGED US AIRWAYS-AMERICA WEST
CARRIER
•
USD$75
million (CAD$95) investment for up to approximately 7% ownership stake
•
Significant
new maintenance activity at Air Canada Technical Services resulting in
estimated incremental revenue of CAD$1.5 billion over five
years
•
Airport
and network synergies
•
Annual
estimated cash contribution of an estimated CAD$65 million on ACTS and
airport synergies.
MONTRÉAL,
May 19, 2005 - ACE Aviation Holdings today announced its intention to invest
USD$75 million (approximately CAD$95) in the merged US Airways-America West
carrier. Its investment will be made at the time of US Airways’ exit from
bankruptcy and in connection with a broad set of commercial and other
arrangements between ACE and the newly-merged entity. ACE’s investment will
represent approximately 7% of equity, depending on the total amount of new
equity capital raised by the merged entity. The newly-merged entity will be a
well capitalized commercial partner with approximately $1.5 billion in forecast
total liquidity, a competitive low cost structure and a route network that is
highly complementary to Air Canada.
As a
condition of its equity investment, ACE has obtained commitments which will
result in five-year commercial agreements with the newly-merged entity regarding
maintenance services, ground handling, regional jet flying, network, training,
and other areas of cooperation. It is expected that ACTS and airport ground
handling/facilities synergies will result in an estimated annual cash
contributions of CAD $65 million.
ACE,
through Air Canada Technical Services (ACTS), is entitled to provide all
available outsourced maintenance, repair and overhaul services for the merged
entity with a combined fleet of 361 aircraft consisting of the Boeing 737, 757
and 767 and the Airbus A319, A320, A321 and A330 for which ACTS has significant
existing expertise. This agreement will provide ACTS with a large volume of
attractive new MRO work covering component and airframe maintenance. The new
work will result in estimated additional revenues of CAD$1.5 billion for ACTS
over the five-year term of the agreement. ACTS has the ability to undertake this
work with a minimal capital investment of approximately $20 million utilizing
capacity currently available at existing ACTS facilities. The agreement also
includes the possibility of extending the work to cover engine maintenance and
supply chain management.
“Our
participation in the consolidation of the US airline industry through the merged
US Airways - America West carrier is an exciting opportunity for ACE,” said
Robert Milton, Chairman, President and CEO of ACE Aviation Holdings Inc. “Doug
Parker is one of the most capable airline leaders in the industry today and we
look forward to working closely with Doug and his team to build an even stronger
future for the new US Airways.
“Our
investment in US Airways reflects not only our confidence in the viability of
the merged carrier going forward but also represents a milestone in the
implementation of ACE’s business strategy to grow our business units into stand
alone profitable companies,” said Mr. Milton.
ACTS, a
limited partnership of ACE, is a full-service MRO organization that provides
airframe, engine and component maintenance and various ancillary services to a
wide range of more than 100 global customers, including Air Canada, Air Canada
Jazz, JetBlue, United Airlines, ABX, Mexicana, Snecma Services, Chromalloy,
Lufthansa Technik, International Lease Finance Corporation (ILFC) and Canada’s
Department of National Defence. Montreal-based ACTS operates maintenance centers
across Canada with a combined workforce of 3,600 employees and has major bases
in Montreal, Toronto, Winnipeg, Calgary and Vancouver. The maintenance work for
this agreement will be undertaken at ACTS facilities in Montreal, Winnipeg,
Calgary and Vancouver creating an estimated 700 new jobs to be filled
principally through employee recalls.
It is
estimated that this agreement will propel ACTS to a position as one of the top
three aircraft MRO providers worldwide in terms of sales. As a result, it is
anticipated that by 2006, ACTS revenues will exceed $1 billion per annum with
less than half being earned from Air Canada. This investment is consistent with
ACE’s strategic plan to grow its business units with an emphasis on third-party
revenues.
"We
look forward to the important synergy relationships that will benefit both the
merged entity and Air Canada as a result of the ACE investment,” said Doug
Parker, America West Holdings Corporation Chairman, President and CEO. “ACTS is
a world class MRO business, and we are pleased that they will be providing us a
competitive service offering in this regard. Additionally, we are very excited
about the potential traffic benefits pursuant from our enhanced network
strength, and in the synergies that should accrue from ground handling and other
initiatives."
Air
Canada and the newly-merged entity will also implement a broad and cooperative
strategy regarding airport facilities and ground handling which will provide
mutual cost benefits and synergies and, more specifically, provide Air Canada
with improved access to selected gates and facilities at a number of U.S.
airports including New York’s LaGuardia Airport, Boston’s Logan Airport and
Phoenix International Airport among others. ACE’s
regional air carrier, Jazz, will also potentially realize increased
opportunities to partner with the newly-merged entity on transborder flying.
The
agreements will provide both Air Canada and the merged carrier with significant
network and operational benefits, including enhanced network strength and
revenue opportunities in key trans-border markets in the Southwestern U.S.,
Hawaii, Mexico and Florida. In particular, the new entity will provide Air
Canada with enhanced access to key north-south markets where it does not
currently have a significant presence most notably along the North American West
Coast from Calgary, Edmonton and Vancouver to the U.S. Southwest and Mexico via
the America West hubs at Phoenix and Las Vegas in addition to those markets on
the U.S. East Coast served through the U.S. Airways hubs at Philadelphia and
Charlotte. Furthermore, neither U.S. Airways nor America West currently operates
Trans-Pacific flights while U.S. Airways operates a limited Trans-Atlantic
offering. It is anticipated that Air Canada’s Toronto and Vancouver hubs will
benefit from increased traffic from the combined U.S Airways-America West
networks. These network benefits complement the existing Air Canada relationship
with United Airlines which provide Air Canada with a strong east-west presence
through their hubs at Chicago O’Hare and Denver.
“It’s a
win-win all around as the merged airline and Air Canada will create value for
each other through maintenance contracts, airport handling agreements and the
eventual expansion of the Star Alliance agreement, which will include
codesharing between the two carriers,” said Mr. Milton. “The addition of America
West to our current network relationship with USAirways will strengthen Air
Canada’s position as a highly connected global network and provide the
newly-merged carrier with enhanced access to Canada and Air Canada’s
international network via the Toronto and Vancouver hubs. It will also provide
an important benefit to the Star Alliance by significantly increasing its
network penetration in the Western United States.
ACE is
the parent holding company of Air Canada and ACE’s other subsidiaries. Air
Canada is Canada’s largest domestic and international full-service airline and
the largest provider of scheduled passenger services in the domestic market, the
transborder market and each of the Canada-Europe, Canada-Pacific,
Canada-Caribbean/Central America and Canada-South America markets. Air Canada is
a founding member of the Star Alliance network, the world’s largest airline
alliance group.
In
addition, the Corporation owns Jazz Air LP, Aeroplan LP and Destina.ca, which is
an on-line travel site. The Corporation also provides Technical Services through
ACTS LP, Cargo Services through AC Cargo LP and Air Canada, Groundhandling
Services through ACGHS LP and Air Canada and tour operator services and leisure
vacation packages through Touram LP.
This
discussion contains certain forward-looking statements, which involve a number
of risks and uncertainties. As a result of many factors including acts or
potential acts of terrorism, international conflicts, government regulations and
government mandated restrictions on operations and pricing, fuel prices,
industry restructuring, labour negotiations, the economic environment in general
including foreign exchange and interest rates, the airline competitive and
pricing environment, industry capacity decisions and new entrants as well as
external events, actual results could differ from expected results and the
differences could be material.
