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Talk about a change of heart.

Shortly after becoming CEO of Air Canada in 1999, Robert Milton wrapped himself in the flag and fought a hostile takeover attempt that was launched by Gerry Schwartz’s Onex Corp. and backed by American Airlines.

Now, eight years later, the American-born Milton says he is considering the sale of Canada’s largest airline to private equity or pension fund investors that, in turn, may want to link up Air Canada with a major U.S. carrier in a deal that could involve a significant degree of foreign ownership.

Further adding to the case of déjà vu is the fact that both Onex and AMR Corp.’s American Airlines could conceivably be on the list of interested parties.

Though it’s only one of several possible options being considered, observers say the reason for the apparent shift in Milton’s thinking is a rapidly consolidating global industry and the need of Air Canada’s parent, ACE Aviation Holdings Inc., to find an attractive way to unload its 75 per cent stake in the airline amid deteriorating market conditions.

"We have now been approached by private equity, by pension funds," Milton revealed yesterday.

The comment – during a conference call to discuss ACE’s fourth quarter profit of $1.13 billion, due mainly to the sale of assets – caused Air Canada’s stock price to soar 11 per cent.

Milton, who is now ACE’s chief executive, added Air Canada could become swept up in merger efforts south of the border, where United Airlines and Continental Airlines are said to be in talks while Delta Air Lines and Northwest Airlines are believed to be nearing a deal.

"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," he 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 no teletrak payday loans. airline to look at Air Canada."

While Canadian laws currently prevent foreigners from owning more than 25 per cent of an airline, Milton said he didn’t believe the restrictions posed an impediment to a sale.

"I think that there is plenty of money in Canada," he said.

One obvious candidate is Toronto-based buyout firm Onex, which manages about $25 billion in assets. In addition to its AMR-backed bid for Air Canada in 1999, Onex has made recent investments in business-jet builder Hawker Beechcraft Corp., wing-supplier Spirit AeroSystems Holdings Inc. and was part of a group of financial investors that tried to purchase Australia’s Qantas Airways last year.

Said one observer: "You’ve got to believe that (Onex CEO Gerry) Schwartz is in there looking around."

Officials from Onex declined to comment yesterday.

With most of its assets spun-off, ACE has decided to unwind itself as a holding company. Its options include selling its remaining Air Canada holdings into an unsettled financial market, buying back the shares it sold barely a year ago or, apparently, selling all of Air Canada to an industry or financial buyer.

"This may seem like it’s come out of left field, but I think they’ll pay serious attention to it," said Robert Kokonis, the president of airline consulting group AirTrav Inc. "The reality is that the airline business is becoming more global and when you’re global, size is everything.

"They need to be more closely affiliated with a U.S. carrier."

Kokonis said he believed US Airways would be a particularly good fit for Air Canada because the two airlines have complementary operations. As well, the two airlines have a history of common ownership after ACE purchased a 7 per cent stake in US Airways two years ago.

Others said foreign airlines would be interested in cozying up to Air Canada because of its extensive international route network.

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