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Presented to
Scotia Capitalat theCanadian Transportation Conference
Toronto - May 9, 2002
Substantially Improved Performance
2002 2001 (millions) Q1 Q1 Change
Oper. Revenue $ 2,286 $ 2,344 $ (58)
Oper. Expense 2,446 2,637 (191)
Oper. Loss (160) (293) 133
Non-oper. Expense (65) (1) (64)
Loss Before Tax $ (225) $ (294) $ 69
Non-recurring Items (36) 89 (125)
Loss Before TaxExcl. Non-recur. Items $ (189) $ (383) $ 194
• Strengthening demand
• Unit revenue performance beats all U.S. Majors
– market share up in all services
– disciplined capacity
– highest load factors in North America
– yield recovering
Key Performance Factors
• Fleet renewed and reconfigured
– hours flown cut……………………... 13%
– seat mile capacity down only……... 7%
• Labour productivity increases
– capacity per employee up…………. 11%
– traffic per employee up……………. 19%
– employee numbers down 6,400 or.. 14%
Key Performance Factors
• Costs cut
– commissions
– maintenance
– fuel price down
– fuel productivity up due to new aircraft & more seats
– fleet more efficient
– over 170 ongoing projects
• Unit cost performance beats U.S. industry
Key Performance Factors
* Pre-government assistance - US = 6 majors
% Operating Margin
Best Operating Results* Of Any Major International Carrier In North America
ACUS0
-5
-10
-15
-20
-25
-30Q1 Q2 Q3 Q4 Q1
2001 2002
Air Canada Revenue Recovering Faster
Q1 2002/2001% change
United US Delta Cont. NW AMR AC
5
0
-5
-10
-15
-20
-25
-30
Air Canada’s 1st Quarter RASM Outperforms Industry
* Mainline* *Source ATA
Year/Year% Change AC*
US**5
0
-5
-10
-15
-20
-25Q1 Q2 Q3 Q4 Q1
2001 2002
Unit Cost** Performance Outpaces Industry
* Mainline* * Adjusted for one-timers; US = 6 majors
AC*US
10
8
6
4
2
0
-2
-4
Year/Year% Change
Q1 Q2 Q3 Q4 Q1 2001 2002
-30%
-20%
-10%
0%
10%
20%
30%
All Expense Categories Down Except Aircraft Rent And User Fees
Q1 2002/2001
RPMs ASMs Comm. Food& Bar
A/CMtce
UserFees
A/CRent
OtherDep.
Year/Year% Change
Air Canada’s Products
Jazz Zip AC JetzMainline Tango
Air Canada’s Products
• “Air Canada”
• Hub – network
• Transborder and Domestic network
• Rapidair
• International
• Two-class
• Air Canada brand
• Air Canada code
Jazz Zip AC JetzMainline Tango
• Key feed to mainline
• Regional markets
• Good frequency coverage
• Distinct brand
• Unique code*
* Air Canada codeshare
Air Canada’s Products
Jazz Zip AC JetzMainline Tango
Air Canada’s Products
• Low fare
• Lower cost
• Supplemental flying in key markets
• Sun, long haul domestic, transcontinental routes
• Distinct brand
• Air Canada code
Jazz Zip AC JetzMainline Tango
Air Canada’s Products
• Leisure, low yield
• Low cost
• Point-to-point, short haul
• Domestic/Transborder
• Distinct brand
• Unique code*
* Air Canada codeshare
Jazz Zip AC JetzMainline Tango
Air Canada’s Products
• Specialty charter
• Executive First configuration of surplus B-737
• Focus on specialty charters (i.e. sports teams, etc.)
• Concierge service
Jazz Zip AC JetzMainline Tango
Why Tango and Zip?
• Full fare business segment has shrunk
• Will return but not at same level
• Leisure and price sensitive business market growing
• Full service costs too high for that market
• Low fare segment strong in good times and bad
• Full service remains critical for long-haul international and high volume/frequency North American markets
Goal: Higher margins in low fare markets
Seating Mixed All economy All economy
Network Worldwide Mostly long haul, Short haul point to point N.A. N.A.
Aircraft utilization Standard Above Above mainline mainline
Labour cost Standard Same as Lower than(incl. work rules) mainline mainline and
Tango
ZipMainline Tango
Goal: Higher margins in low fare markets
Food & bar/ Full service Limited + pay for Limitedentertainment
Internet About 4% 80% Primarily in 2001 internet internet
Ticketing E-ticket – All e-ticket Mostly e-ticketpaper paper
for fee available
Interlining Full None Full
ZipMainline Tango
Goal: Higher margins in low fare markets
Global dist. Yes No Yessystems
Aeroplan Standard Half point TBD award
Refunds Yes No Yes
Planned domestic 60% 20% 20%runrate capacity
ZipMainline Tango
Manpower Levels Coming Down
30,000
32,000
34,000
36,000
38,000
40,000
Q4 2000 Q2 2001 Q4 2001
Full Time Equivalents (mainline)
Q1 2002
Labor Contract Stability
Air Canada Canadian
Maintenance and Ramp June 2005 -
Flight Attendants Oct. 2001 June 2004
Pilots Apr. 2004 -
Customer Sales & Service Mar. 2004 -
Future Labor Cost Much Lower Than U.S. Carriers
2002 2003 2004
Maintenance and Ramp 2.5% 2.5% 2.5%
Flight Attendants - - -
Pilots 2.5% 2.5% -
Customer Sales & Service 2.5% 2.5% -
Air Canada
Smaller / Younger Fleet
Change ChangeDec / 00 Dec / 01 01/00 Dec/02 02/01
747 7 6 - 1 6 -330/340 16 20 + 4 17 - 3767-200/300 51 49 - 2 46 - 3319/320/321 82 90 + 8 105 +15737 43 34 -9 27 - 7DC9 17 4 -13 - - 4CRJ 25 25 - 25 -
Total Mainline 241 228 -13 226 - 2Jazz 134 101 -33 104 + 3
TOTAL 375 329 -46 330 + 1
2002 Aircraft DeliveriesSale/ Operating
Leasebacks LeasesA340-500 2 -A321-200 5 -A319-100 5 3A320-200 - 3CRJ (Jazz) - 10
Total 12 16
Low Cap Ex In 2002($ millions)
Aircraft $ 919Financing ( 918
)
Net $ 1Other 227
Total Mainline $ 228Subs 15
Total $ 243
Good Liquidity
• $924 million in cash at March 31, 2002
• Approximately $2.8 billion of unencumbered assets
– aircraft
– engines and spares
– inventory
– real estate
– lease deposit receivables
– accounts receivable
Significant Value In Air Canada’s Business Units
Leverage Better Than It Looks - One time charges in shareholders’ equity ($millions)
Shareholders’ Equity at March 31/02 $ (1,460)
F.X. Accounting Change $ (522)
Employee Future Benefits $ (218)
Income Taxes $ 36
Loyalty Programs $ (147)
Future Income Tax Valuation Allowance $ (410)
Charge Relating to Share Buy Back Program $ (1,100)
Total 1X Charges to Shareholders’ Equity $ (2,361)
Shareholders’ Equity Excluding 1X Charges $ 901
Leverage Better Than It Looks - Debt and underlying assets
Underlying Assets Total Debt
• Cash generating airline at start of cycle $3.6billion LTD
• $2.8 billion in unencumbered assets 0.5 Current LTD
• Value in business units 0.8 Perpetuals0.1 Convert. debs
5.0
(.9) Cash
$4.1billion Net debt
• $8.2 billion + in leased aircraft……. $8.2 billion Operatingleases
Investment Considerations
• Commanding share of all markets served• Comprehensive low fare market strategy• Solid hub and network strategy• Traffic almost back to normal• Pricing recovering • Industry capacity rationalized• Unit costs coming down• Good liquidity • Low capital expenses going forward• Substantial business unit value
Caution Concerning Forward-looking Information:
Certain statements made in this presentation may be of a forward-looking nature and subject
to important risks and uncertainties. The results indicated in these statements could differ
materially from actual results for a number of reasons, including without limitation, general
industry, market and economic conditions, the ability to reduce operating costs and fully
integrate the operations of Canadian Airlines, employment relations, energy prices, currency
exchange rates, interest rates, changes in laws, adverse regulatory developments or
proceedings and pending litigation. Any forward-looking statements contained in this
presentation represent Air Canada’s expectations as of May 9, 2002 and are subject to
change after such date. However, Air Canada disclaims any intention or obligation to update
or revise any forward-looking statements whether as a result of new information, future
events or otherwise.