Air Canada owner approached on U.S. mergers: CEO

By Jeffrey Jones

CALGARY, Alberta (Reuters) - ACE Aviation Holdings (ACEa.TO: Quote, Profile, Research) is looking at several ways to wring the most value from its Air Canada (ACa.TO: Quote, Profile, Research) stake, including sales to private equity players and even a linkup with a U.S. airline, ACE's chief executive said on Friday.

ACE CEO Robert Milton said he still prefers the original plan of distributing the 75 percent interest in Canada's dominant carrier to shareholders before winding up the holding company structure, rather than buying back the minority.

But weakness in Air Canada's stock price has prompted ACE to keep all its options on the table, he said after the shrinking holding company reported a fourth-quarter net income of C$1.13 billion ($1.13 billion).

Milton told analysts on a conference call that he has been approached by private equity players and pension funds on ways that Air Canada could join the U.S. airline consolidation.

"In my view, as I watch the U.S. airlines scurrying around to merge, anybody that actually ties up with Air Canada gets a unique piece of geography relative to the way the U.S. guys would split it up," Milton said.

"So there has been dialogue with the U.S. 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 U.S. airline to look at Air Canada."

Shares in ACE rose C$1.29, or nearly 6 percent, to C$23.55 on the Toronto Stock Exchange. In a second day of big gains, Air Canada jumped C$1.07, or 11 percent, to C$10.73.

In recent days, it has been reported that Delta Air Lines (DAL.N: Quote, Profile, Research) and Northwest Airlines Corp (NWA.N: Quote, Profile, Research) could announce a merger as early as next week and that United Airlines (UAUA.O: Quote, Profile, Research) and Continental Airlines Corp (CAL.N: Quote, Profile, Research) are in talks.