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ACE Aviation Holdings Inc. has become a “motivated seller” of its stake in Air Canada (AIDIF.PK) with the airline’s current labor pacts set to expire in 2009, according to Tom Varesh, Canaccord Adams analyst.

In a note to clients on Thursday he said:

Selling Aeroplan, Jazz, etc. and winding up ACE prior to these labor negotiations could make those negotiations more successful for the company by forcing the unions to focus on just Air Canada and not on the health of the other parts of ACE.

As reported in last Saturday’s Financial Post, Air Canada’s unions will be looking to regain the C$1.1-billion in wage and benefit concessions they made during the airline’s bankruptcy restructuring in 2004 in the next round of negotiations. Mr. Varesh said there is a “high probability” the wind up ACE will be completed by June, and it’s a “near certainty” that the wind up will be completed by the end of 2008 in order to “avoid what could be tougher than need be labor negotiations.”

In addition, Mr. Varesh responded to a report Thursday in the Financial Post that Ottawa was looking at raising the foreign ownership limits on Canadian airlines from 25% of voting shares to 49%, but would wait until June when the current review of foreign ownership and competition laws in the country was completed before making a decision. He said with an election looming, investors should not “hold their breath” that the limits would be raised, but should the Conservatives win the election they may revisit the file.

Even if another minority government prevails, any such changes could still be pushed through and we believe that if it was the government’s intention to do so, that it would be done in the early days of a new minority government.

Source: Canaccord: ACE Aviation Motivated to Sell Stake in Air Canada