Hail, farewell and hello? Robert Milton, the American/Canadian who took Air Canada through reorganization, has moved toward making a graceful exit from the airline industry. But Milton, who heads up the airline’s parent company, ACE Holdings, may have one more big deal to do. Milton said that the holding company, created when Air Canada emerged from reorganisation, had been “approached.” Milton said “we have now been approached by private equity, by pension funds.” Although he was not explicit in defining the direction – buying or selling – the prospect of a cross-border investment is important, all the more so as the era of international liberalisation approaches. (That’s the US-Canada border, to the right.) Both the United States and Canada limit investment in airlines by foreign companies and citizens, as the Canadian transport minister was quick to note after Milton spoke, but still any step across borders is significant. Even as he acknowleged that Canadian law limits foreign investment, Milton told analysts “there has been dialogue with the US space looking to change, and I don’t think it’s inconceivable that Air Canada could be part of it and I think it would make a lot of sense for a US airline to look to Air Canada.”
Presumably as a buyer, ACE could join with a fund or funds to help finance a major US transaction. In the past, Air Canada has invested south of the border, holding a significant chunk of Continental in the early 1990s. Milton added in the conference call that “In my view, as I watch the US airlines scurrying around to merge, anybody that actually ties up with Air Canada gets a unique piece of geography.”
Canadian investment firms such as Onex Corp., which once tried to by Air Canada itself and led the buyout of Boeing’s structures unit, now Spirit Aero Systems, or the Ontario teachers pension fund, which financed a buyout of the Worldspan Global Distribution System (GDS) in 2003, could be involved in a cross-border deal. Milton didn’t name names, though he said, “I think there’s plenty of money in Canada.” ACE owns 75% of Air Canada, but is planning to sell its stake as it winds down this year. ACE is expected to sell stakes in its holdings including the airline and affiliates such as its maintenance unit to third parties. When the wind-down is completed, ACE would distribute its remaining interest in the airline to its shareholders and then cease to exist as a holding company. Milton did say that ACE might delay its planned wind-down as a holding company by the middle of the year. He cited sagging share prices on Canadian and US markets.