Air Canada Eyeing On-Board Entertainment

Nov. 1, 2006
The on-board entertainment would complement Air Canada's current strategy of allowing passengers to select and pay for the services they want.

Air Canada wants to offer seat-bound travellers the diversion of cutting edge in-flight entertainment and services, such as video games and the Internet, as part of a strategy to broaden its revenue base as it becomes a publicly traded company again.

The on-board entertainment would complement Air Canada's current strategy of allowing passengers to select and pay for the services they want, which allows Canada's biggest air carrier to compete with both no-frills and full-service carriers.

"Management believes it can generate additional revenue by offering buy-on-board, in-flight entertainment content, Maple Leaf Lounge access as well as a host of other products and services at the initial point of purchase," Air Canada said in an initial prospectus filed with regulators on its recently announced public offering of shares to investors.

"While the concept is new to the airline industry, it has been successful in other industries such as the computer and automotive industries," the prospectus said.

Final details on the price and number of Air Canada shares to be issued to the public is expected before January.

Owned by parent company ACE Aviation Holdings Inc., Air Canada emerged from bankruptcy-court protection in 2004 and it hasn't been publicly traded since. The plan to wind up ACE and spin Air Canada out into its own company was announced in August, following similar spinoffs of ACE's minority stakes in Aeroplan and Jazz subsidiaries.

The offering of Air Canada Class A variable voting shares and Class B voting shares would initially raise $200 million, with a second offering to follow. But the prospectus did not disclose what percentage the minority stake will represent or estimate an initial value for Air Canada shares.

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