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CANADA DECIDES TO SELL OFF REMAINDER OF AIRLINE STOCK

The Canadian government is getting out of the airline business.

The government has announced its intention to sell its remaining shares in Air Canada.

Last year it sold 30.8 million shares -- or 43 percent of the company -- gaining gross proceeds of $246 million. The shares were quickly bought up by about 1,300 persons.

Sometime in the next "eight to 10 weeks" the remaining 41.1 million shares will be sold, said John McDermid, Minister of State for Privatization and Regulatory Affairs.

The only remaining question is how the final shares will be sold, whether in a block or in several offerings. The government wants to avoid the mistake from the first offering, which saw supply exceed demand, flooding the market and pushing the initial price of $8 a share down to about $7.

The value recovered in January when Canada's second-largest airline, Canadian Airlines International, offered to buy the third largest, Wardair, touching off speculation that air fares would rise as a result of less competition. Shares are now trading at about $12.

At current prices, proceeds from the final sale could bring the company $485 million.

McDermid said the shares are a good buy at up to $16.

Stock market analysts concur. They said the government's majority ownership has held the stock value back. When potential government interference is completely gone, they said, the stock value should jump.

The drive for selling Air Canada is due to a combination of the company requiring new cash and the government's overall plan to sell Crown-owned corporations. Air Canada wants to replace some of the older aircraft in its 113-plane fleet, but the government is not willing to assist. Cash for the new planes is to come from proceeds of the shares.

Air Canada lost $19.3 million on revenue of $829.1 million in the first three months of this year. In 1988 the company made a profit of $96 million on revenue of $3.45 billion.

Air Canada President Pierre Jeanniot said the first quarter is traditionally a time when airlines lose money.

The Canadian government has been in the airline business since the creation of Air Canada as Trans Canada Airlines in 1937.

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