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Ace Aviation reports second quarter results

Aug. 12, 2011, Montreal - ACE Aviation Holdings Inc. today reported second quarter results for 2011.


August 12, 2011
By Carey Fredericks

Results

Effective January 1, 2011, ACE began preparing its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"), with retroactive restatement of comparative figures for 2010.

In the second quarter of 2011, ACE recorded a loss of $2 million. This compares with a loss of $64 million in the second quarter of 2010, which includes ACE's proportionate share of Air Canada's losses, after adjustments, of $65 million.

Assets and obligations

On July 31, 2011, ACE's net assets amounted to $425 million or $13.09 per share. ACE's underlying assets are:

cash and cash equivalents of $351 million;
receivables of $7 million from Air Canada relating to commodity taxes;
31 million Class B Voting Shares in Air Canada which had a market value of $66 million based on the July 29 closing price on the TSX; and
2.5 million warrants for the purchase of Air Canada Class B voting shares at exercise prices of $1.44 (1.25 million warrants) and $1.51 (1.25 million warrants) per share which had an estimated fair value of $2 million.
At that date, ACE also had accounts payable and accrued liabilities of $1 million.

Tax audits

ACE has applied for Certificates of Discharge from the Canada Revenue Agency and Revenu Quebec. ACE is continuing to assist them with their audits of ACE's income tax returns for the years 2005 to 2010. In addition to the audits of income tax returns, audits in respect of other taxes  are ongoing.

In late 2010, ACE received notices of reassessment from Revenu Quebec in the amount of $37.7 million. This amount has been paid. The reassessments primarily related to audits of GST and QST with respect to ACTS LP, and its predecessor ACTS Limited Partnership, for periods prior to ACE's monetization of ACTS LP in October 2007. $35.4 million of such reassessments were recoverable from Air Canada and other parties. The total recoverable amount of$35.4 million included $33.4 million recoverable from Air Canada and $1.1 million from Aveos Fleet Performance Inc. following their filings of related Input Tax Credit claims from the Canada Revenue Agency. ACE has agreed to indemnify and hold harmless Air Canada and Aveos from loss should the additional ITC claims be reassessed in the future.

Additional notices of reassessment in respect of GST and QST amounting to $7.4 million were received and paid in Quarter 2, 2011. $6.8 million of such reassessments are recoverable from Air Canada.

In Quarter 2, 2011, ACE also received and paid a notice of reassessment for other taxes from Revenu Quebec in the amount of $2.9 million. The reassessment relates to 2005.

It is possible that the ongoing audits of income tax returns and other taxes may lead to reassessments in the future.

Strategy

Going forward, the Board will actively review alternatives to maximize shareholder value and to return assets to shareholders.