August 09, 2007 03:30 ET

Aeroplan reports 2007 second quarter results

    MONTREAL, Aug. 9  - Aeroplan Income Fund (TSX: AER.UN) today
reported the second quarter results of Aeroplan Limited Partnership
("Aeroplan"), in which the Fund has a 100% ownership interest.Second Quarter 2007 Aeroplan Limited Partnership Financial Highlights

    - Gross billings $238.9 million, up 12.5% from the second quarter of 2006
    - Operating income $47.2 million, an increase of 51.2% over the second
      quarter of 2006
    - Adjusted EBITDA $65.2 million, compared to $51.5 million for the second
      quarter of 2006
    - Distributable cash $64.9 million, compared to $47.1 million for the
      second quarter of 2006

    "In the second quarter of 2007, Aeroplan reinforced its commitment to best
serving the needs of our members and partners with key executive appointments
in finance, marketing and member products and services, as well as those made
to our Board just after the second quarter ended. These appointments are of
strategic importance as Aeroplan moves forward with its independent growth
plans," said Rupert Duchesne, President and CEO, Aeroplan. "Also in this
quarter, we celebrated the first anniversary of Beyond Miles. We are grateful
to those who donated, in this quarter alone, more than 41 million miles to the
program. It is very gratifying for all involved to anticipate all of the good
work that our Beyond Miles partners will be able to accomplish using those

    Aeroplan Limited Partnership Financial Performance

    Gross billings from the sale of Aeroplan Miles for the three months ended
June 30, 2007 amounted to $238.9 million compared to $212.4 million for the
three months ended June 30, 2006, representing an increase of $26.5 million or
12.5%. This increase reflects growth in consumer spending and credit and
charge card usage, which translates into increased volume from the credit and
charge card accumulation partners; as well as the positive momentum
experienced by the travel industry in general.
    Total revenue for the quarter ended June 30, 2007 was $220.3 million, up
20.7% from $182.5 million for the same quarter of 2006. This increase was
mainly driven by increased redemption activity during the quarter and higher
breakage revenue.
    Cost of rewards amounted to $128.5 million for the second quarter of 2007,
compared to $112.5 million for the corresponding quarter of 2006, an increase
of 14.3%, primarily attributable to a higher volume of miles redeemed.
    As provided for in the existing commercial agreement between the parties,
Aeroplan and Air Canada have reached agreement relating to fixed capacity
redemption rates, to be paid by Aeroplan, for the period beginning January 1,
2008 through to December 31, 2010. The outcome falls within the
pre-established contractual parameters and is in line with Aeroplan's business
    Operating income amounted to $47.2 million for the quarter ended June 30,
2007, compared to $31.2 million for the corresponding quarter of 2006, a 51.2%
increase mainly attributable to higher gross margin, partially offset by
increased operating expenses.
    At the end of the second quarter, Aeroplan had $669.8 million of cash,
cash equivalents and short-term investments, including the Aeroplan redemption
reserve of $400 million.
    Adjusted EBITDA and distributable cash amounted to $65.2 million and $64.9
million, respectively, compared to $51.5 million and $47.1 million for the
second quarter of 2006.
    By comparison, standardized distributable cash, a new non-GAAP measure
recommended by the CICA in July 2007, amounted to $68.2 million for the
quarter, and to $63.4 million for the same quarter of 2006.

    Aeroplan Income Fund's non-cash charge for future income taxes

    During the quarter, as a result of the enactment of Bill C-52, the Fund
recorded a non-cash charge to earnings and future income tax liability in the
amount of $167 million representing the change in tax rate from 0% to 31.5% on
temporary differences that are expected to reverse after 2010.

    Recent Corporate Developments

    ACE Distribution of Units

    On May 24, 2007, ACE Aviation Holdings Inc. (ACE) distributed of
18 million units of Aeroplan Income Fund to its shareholders of record. As a
result of the distribution, ACE now holds 62,285,585 units of Aeroplan Income
Fund, representing 31.1% of the 200 million units issued, with the public
holding the balance.

    Organizational changes

    On June 29, 2007, Aeroplan announced a set of organizational changes,
including the hiring of David L. Adams as Executive Vice President and Chief
Financial Officer, effective July 16, 2007; as well as the appointments of
Sylvie Bourget as Vice President, Marketing, Craig Landry as Vice President,
Member Products & Services and Liz Graham as Aeroplan's Chief Operations
    After the quarter ended, on July 17, 2007, the appointments of
John M. Forzani, Douglas D. Port and Alan P. Rossy as Directors of the Board
of Aeroplan Holding GP Inc. were announced. In conjunction with these
appointments, it was also announced that W. Brett Ingersoll and Robert Warden,
both of Cerberus Capital Management L.P., have resigned as Directors. These
changes bring the total number of Directors of the Board of Aeroplan Holding
GP Inc. to ten members.

    Beyond Miles First Anniversary / Mileage Multiplying Day

    In May 2007, Aeroplan celebrated the first anniversary of Beyond Miles,
Aeroplan's online member donation program. As part of the celebration, more
than 28 million miles were raised on Mileage Multiplying Day, May 17, 2007.
    Aeroplan members donated more than five million Aeroplan Miles. This
generosity was increased by five Aeroplan commercial partners - Aeromove, Air
Canada, Avis Car Rental, Fairmont Hotels & Resorts and National Car Rental;
and by Aeroplan matching donations on a two-for-one basis. Miles raised also
include the renewal of Aeroplan's 7 million Aeroplan Mile annual donation and
the renewal of Beyond Miles' founding sponsors' - American Express and CIBC -
commitment of 2.1 million Aeroplan Miles each.
    Donated miles support the hard work of the seven Beyond Miles partners,
for which travel is fundamental to these organizations' operations and one of
the most significant costs of their work.

    Non-GAAP Measures

    In order to provide a better understanding of the results, Aeroplan uses
the following terms:

    Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
    ("Adjusted EBITDA")

    EBITDA adjusted for certain factors particular to Aeroplan's business,
such as changes in deferred revenue and future redemption costs ("Adjusted
EBITDA") is used by management to evaluate performance, and is used in
measuring compliance with debt covenants and in making decisions relating to
distributions to unitholders. Management believes Adjusted EBITDA assists
investors in comparing a company's performance on a consistent basis without
regard to depreciation and amortization, which are non-cash in nature and can
vary significantly depending on accounting methods and non-operating factors
such as historical cost.
    Adjusted EBITDA is a non-GAAP measurement and may not be comparable with
similar measures reported by other entities, and is not considered an
alternative to operating income or net income in measuring performance. For a
reconciliation with GAAP, please refer to the Summary of Operating results and
reconciliation of Adjusted EBITDA and Distributable Cash. Adjusted EBITDA
should not be used as an exclusive measure of cash flow because it does not
account for the impact of working capital growth, capital expenditures, debt
repayment and other sources and uses of cash, which are disclosed in the
statements of cash flows.
    Refer to the attached schedule for a summary of operating results and
reconciliation of Adjusted EBITDA and Distributable Cash.

    Standardized Distributable Cash

    Standardized Distributable cash is a non-GAAP measure recommended by the
CICA in order to provide a consistent and comparable measurement of
distributable cash across entities.
    Standardized distributable cash is defined as cash flows from operating
activities, as reported in accordance with GAAP, less adjustments for:

      (a) total capital expenditures as reported in accordance with GAAP; and
      (b) restrictions on distributions arising from compliance with
          financial covenants restrictive at the date of the calculation of
          standardized distributable cash.

    For a reconciliation to cash from operating activities to Standardized
distributable cash and Distributable cash, refer to the attached schedule.

    Distributable Cash

    Distributable cash is a non-GAAP measure generally used by Canadian
open-ended trusts as an indicator of financial performance, and it should not
be seen as a measurement of liquidity or a substitute for comparable metrics
prepared in accordance with GAAP. Distributable cash may differ from similar
calculations as reported by other entities and, accordingly, may not be
comparable to distributable cash as reported by such entities.
    Aeroplan intends to make equal monthly distributions to its partners of
record on the last business day of each month. The board of directors will
periodically review cash distributions in order to take into account
Aeroplan's current and prospective performance.
    Refer to the attached schedule for a reconciliation of Distributable cash 
and Standardized distributable cash to cash flows from operations.
    The unaudited interim financial statements and the Investor Presentation,
will be accessible on Aeroplan's investor relations website at

    Quarterly Investor Conference Call / Audio Webcast

    Aeroplan will hold an analyst call at 10 a.m. (Eastern Time) on Thursday,
August 9, 2007 to discuss its second quarter results. The call may be accessed
by dialling 416-695-7806, pass code 9647314# within the Toronto area, or
1-888-789-9572 (toll free) outside of Toronto. The call will be simultaneously
audio webcast at
    The conference call webcast and the Investor Presentation will be archived
on Aeroplan's investor relations website at A playback of the
call can also be accessed until midnight ET, September 9, 2007 by dialling
416-695-5275, pass code 647314# from within the Toronto area, or
1-888-509-0081, pass code 647314# outside of Toronto.

    About Aeroplan Income Fund

    Aeroplan Income Fund is an unincorporated, open-ended trust established
under the laws of the Province of Ontario, that indirectly holds all of the
outstanding limited partnership units of Aeroplan.

    About Aeroplan

    Aeroplan is Canada's premier loyalty marketing company, dedicated to
developing and executing programs designed to engage the loyalty of its
prestigious membership.
    Aeroplan's millions of members earn Aeroplan Miles with its network of
more than 60 world-class partners, representing more than 100 brands in the
financial, retail, and travel sectors. Miles earned may be redeemed for
Aeroplan's industry-leading ClassicFlight Rewards, innovative ClassicPlus
Flight Rewards, and global Star Alliance Flight Rewards, offering travel to
more than 850 destinations worldwide. In 2006 alone, more than 1.4 million
round-trip flight rewards were issued. Aeroplan's roster of non-flight rewards
includes more than 400 exciting specialty, merchandise, and experiential
rewards, as well as hotel and car rental rewards. Members are encouraged to
stay engaged with Aeroplan and avoid mileage expiration due to inactivity by
earning or redeeming Aeroplan Miles at least once in any consecutive
twelve-month period.
    For more information about Aeroplan, please visit

    Caution Concerning Forward-Looking Statements

    This news release should be read in conjunction with Aeroplan Income
Fund's 2007 second quarter MD&A dated August 8, 2007 filed with Canadian
securities regulatory authorities (available at Certain
statements in this news release may contain forward-looking statements. These
forward-looking statements are identified by the use of terms and phrases such
as "anticipate", "believe", "could", "estimate", "expect", "intend", "may",
"plan", "predict", "project", "will", "would", and similar terms and phrases,
including references to assumptions. Such statements may involve but are not
limited to comments with respect to strategies, expectations, planned
operations or future actions.
    Forward-looking statements, by their nature, are based on assumptions and
are subject to important risks and uncertainties. Any forecasts or
forward-looking predictions or statements cannot be relied upon due to,
amongst other things, changing external events and general uncertainties of
the business and its corporate structure. Results indicated in forward-looking
statements may differ materially from actual results for a number of reasons,
including without limitation, dependency on Aeroplan's top three accumulation
partners, Air Canada or travel industry disruptions, reduction in activity,
usage and accumulation of Aeroplan Miles, greater than expected redemptions
for rewards, industry competition, supply and capacity costs, unfunded future
redemption costs, seasonal nature of the business, regulatory matters,
restrictions on certain unitholders and liquidity of units, as well as the
other factors identified in the "Risks and Uncertainties Affecting the
Business" section of the 2006 MD&A (available at The
forward-looking statements contained in this discussion represent Aeroplan's
expectations as of August 8, 2007, and are subject to change after such date.
However, Aeroplan disclaims any intention or obligation to update or revise
any forward-looking statements whether as a result of new information, future
events or otherwise, except as required under applicable securities


    (in thousands,
     except miles,
     unit and per
     unit         Three months ended         Six months ended      % change
     information)       June 30,                  June 30,
                   2007         2006         2007         2006     Q2    YTD
                   ----         ----         ----         ----     --    ---
                   ----         ----         ----         ----     --    ---
    Number of
     issued (in
     billions)     19.6         17.4         38.0         33.9   12.6   12.1
    Number of
     billions)     16.4         13.7         35.0         29.3   19.7   19.5
    Number of
     billions)     14.4         11.6         30.7         24.6   24.1   24.8
     from the
     sale of
     Miles     $238,931     $212,376     $466,908     $413,878   12.5   12.8
     revenue    207,086      167,964      435,647      351,036   23.3   24.1
     ment and
     from Air
     Canada       1,479        1,800        5,180        4,952  (17.8)   4.6
     revenue     11,719       12,770       24,771       26,604   (8.2)  (6.9)
     revenue    220,284      182,534      465,598      382,592   20.7   21.7
    Cost of
     rewards   (128,541)    (112,470)    (283,675)    (237,353)  14.3   19.5
     margin      91,743       70,064      181,923      145,239   30.9   25.3
     tion and
     zation     (41,707)     (34,948)     (81,110)     (67,491)  19.3   20.2
     tion and
     zation      (2,811)      (3,884)      (5,515)      (7,626) (27.6) (27.7)
     income     $47,225      $31,232      $95,298      $70,122   51.2   35.9
     tion and
     zation       2,811        3,884        5,515        7,626
    Change in
       from the
       sale of
       Miles    238,931      212,376      466,908      413,878
       revenue (207,086)    (167,964)    (435,647)    (351,036)
    Change in
     Costs(1)   (16,710)     (28,058)      (7,788)     (34,823) (40.4) (77.6)
    (Change in
     Net Aero-
     plan Miles
     x Average
     Cost of
     per Mile
     for the
     EBITDA     $65,171      $51,470     $124,286     $105,767   26.6   17.5
     (Expenses)   2,225          992        4,268        1,556  124.3  174.3
     zation of
     on long-
     term debt      469            -          939            -
     tures(2)    (2,979)      (5,389)      (5,352)     (11,864) (44.7) (54.9)
    table Cash  $64,886      $47,073     $124,141      $95,459   37.8   30.0
     Cash       $68,163      $63,441     $139,019     $103,316    7.4   34.6
     units  199,500,582  200,000,001  199,519,955  200,000,001
     Cash per
     unit       $0.3252      $0.2354      $0.6222      $0.4773   38.2   30.4
     Cash per
     unit       $0.3417      $0.3172      $0.6968      $0.5166    7.7   34.9
     in accor-
     with GAAP  $49,450      $31,755      $99,566      $70,740   55.7   40.7
     per unit,
     in accor-
     with GAAP  $0.2479      $0.1588      $0.4990      $0.3537   56.1   41.1
     declared   $42,000      $34,980      $84,000      $69,960   20.1   20.1
     per unit   $0.2105      $0.1749      $0.4210      $0.3498   20.4   20.4

    (1) The per unit cost derived from this calculation is retroactively
        applied to all prior periods with the effect of revaluing the
        liability on the basis of the latest available average unit cost;

    (2) Maintenance capital expenditures in the comparative three month
        period ended June 30, 2006 have been restated to reflect the actual
        amount of maintenance capital expenditures incurred in that period.
        The amount previously reported for that period was based upon a
        pro-ration of the estimated yearly spend.


    (in thousands)                    Three months ended    Six months ended
                                            June 30,             June 30,
                                          2007      2006      2007      2006
                                          ----      ----      ----      ----
                                          ----      ----      ----      ----
    Cash flows from operations         $71,142   $68,830  $144,371  $115,180
    Maintenance Capital
     Expenditures(1)                    (2,979)   (5,389)   (5,352)  (11,864)
    Standardized Distributable Cash     68,163    63,441   139,019   103,316
    Changes in non-cash working
     capital items(2)                   14,146    12,563    (7,089)   28,323
    Stock Based compensation(2)           (713)     (873)   (1,530)   (1,357)
    Funding of stock-based
     compensation plans(2)                   -         -     1,529         -
    Change in future redemption
     costs(3)                          (16,710)  (28,058)   (7,788)  (34,823)
    Distributable Cash                 $64,886   $47,073  $124,141   $95,459
    Distributions declared             $42,000   $34,980   $84,000   $69,960
    Payout ratio - Distributions
     declared / Standardized
     Distributable Cash                     62%       55%       60%       68%
    Payout ratio - Distributions
     declared / Distributable Cash          65%       74%       68%       73%
    Standardized Cumulative
     Distributable Cash since IPO
     (June 29, 2005)                  $615,741
    Cumulative distributions
     declared since IPO               $301,200
    Cumulative payout ratio since
     inception                              49%

    (1) Maintenance capital expenditures in the comparative three month
        period ended June 30, 2006 have been restated to reflect the actual
        amount of maintenance capital expenditures incurred in that period.
        The amount previously reported for that period was based upon a
        pro-ration of the estimated yearly spend;

    (2) The impact of the respective items is not considered in the
        calculation of Standardized Distributable Cash as they are not part
        of the Distributable Cash definition in accordance with the Limited
        Partnership Agreement. This eliminates the potential impact of timing
        distortions relating to the respective items;

    (3) Changes in future redemption costs is included to reflect the
        expected change in the future redemption liability on the basis of
        the most recently experienced redemption costs.

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