Milton in London: Airlines are fun, but not to own

Robert Milton is nothing if not frank about the business he loves so much. “Airlines are the most fun to talk about even though they are the worst business we have,” he told the audience at London’s Royal Aeronautical Society on Tuesday evening.


Milton gave a lecture on “The ACE Equation: The sum of parts is greater than the whole.” The story is how the Air Canada group – the airline, maintenance arm, frequent flyer plan and regional carrier – has gradually been split up and spun off. He discussed the concept in depth with Airline Business in a cover interview in 2006.

Since 2006, when holding company ACE Aviation began selling off parts of these four companies it has returned over $3.7 billion to shareholders, said Milton.

Frequent flyer programme Aeroplan alone is worth as much as Air Canada has been at any point in its history, said Milton. “The parts are worth a lot more than the whole,” he said, adding that it is the “airline that sucks cash out of the machine”.

Not that Milton is totally adverse to occasionally investing in airlines, but as an investment not as a strategic play. “About a year ago we really took a look around at what airlines we could acquire,” he said. That process saw ACE take a 5% stake in US Airways during its Chapter 11 restructuring.

“Despite always being a dire business, [airlines] can be a good investment,” he said, adding “it’s a question of timing”.


In the US Airways case, ACE hit the sweetspot. It bought US Airways shares at $15 each and sold them nine months later for between $50 and $60 each – a nice piece of business thank you very much, especially as US Airways shares have now dipped below $10 each, noted Mr Milton.

So what next for ACE? Well Milton says the original timetable of selling all the remaining shares in the four businesses, including its 70% stake in Air Canada, by June remains the target.

That will put him out of a job, which Milton seems very happy about. He’s almost done what he set out to do at Air Canada, a business he has loved running.

So what next for Robert? He won’t be running airlines that’s for sure, he told me. He’s done that.

My prediction is that he could be the next David Bonderman, a new-age industry investment guru.

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