ACE launches C$500 mln buyback as net income falls

By Jeffrey Jones

CALGARY, Alberta (Reuters) - ACE Aviation Holdings Inc (ACEa.TO: Quote, Profile, Research), parent of Air Canada (ACa.TO: Quote, Profile, Research), took another step toward winding up operations on Friday, announcing it will buy back about 42 percent of its stock as it posted a first-quarter net loss due to one-time charges.

ACE also said that surging jet fuel prices and weak North American airline industry conditions are complicating matters as it weighs its options for its 75 percent stake in Air Canada, the country's dominant carrier.

The holding firm plans to buy C$500 million ($495 million) of its shares from stockholders for between C$21 and C$24 each, depending on the number and price at which they are tendered.

The offer for about 23.8 million shares will lift ACE's total buybacks this year to C$2 billion, after it completed a C$1.5 billion bid in January.

As part of the windup, Chief Executive Robert Milton is studying whether to buy back Air Canada's minority stake or float its shares in a secondary offering.

In February, Milton said he had been fielding calls from private equity firms interested in launching a buyout of Air Canada or linking it up with a U.S. carrier.

Market conditions have now hampered that option, he said.

"Given, in particular, fuel prices, the likelihood of something happening imminently with Air Canada vis a vis a sale is low," Milton told analysts. "But we're going to continue to monitor the situation and keep all our options open."