air canada data monitor

Air Canada Inc

Company Profile

Publication Date: 9 Jul 2010

www.datamonitor.com

Asia PacificAmericasEurope, Middle East & AfricaLevel 46245 5th Avenue119 Farringdon Road2 Park Street4th FloorLondonSydney, NSW 2000New York, NY 10016EC1R 3DAAustraliaUSAUnited Kingdom

t: +61 2 8705 6900t: +1 212 686 7400t: +44 20 7551 9000f: +61 2 8088 7405f: +1 212 686 2626f: +44 20 7551 9090e: [email protected]: [email protected]: [email protected]

ABOUT DATAMONITOR

Datamonitor is a leading business information company specializing in industry analysis.

Through its proprietary databases and wealth of expertise, Datamonitor provides clients with unbiasedexpert analysis and in depth forecasts for six industry sectors: Healthcare, Technology, Automotive,Energy, Consumer Markets, and Financial Services.

The company also advises clients on the impact that new technology and eCommerce will have ontheir businesses. Datamonitor maintains its headquarters in London, and regional offices in NewYork, Frankfurt, and Hong Kong. The company serves the world's largest 5000 companies.

Datamonitor's premium reports are based on primary research with industry panels and consumers.We gather information on market segmentation, market growth and pricing, competitors and products.Our experts then interpret this data to produce detailed forecasts and actionable recommendations,helping you create new business opportunities and ideas.

Our series of company, industry and country profiles complements our premium products, providingtop-level information on 10,000 companies, 2,500 industries and 50 countries. While they do notcontain the highly detailed breakdowns found in premium reports, profiles give you the most importantqualitative and quantitative summary information you need - including predictions and forecasts.

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic,mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc.

The facts of this profile are believed to be correct at the time of publication but cannot be guaranteed. Please note that thefindings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faithfrom both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitorcan accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.

Air Canada Inc © Datamonitor

Air Canada Inc

TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts...............................................................................................................4

Business Description...........................................................................................5

History...................................................................................................................6

Key Employees.....................................................................................................8

Key Employee Biographies..................................................................................9

Major Products and Services............................................................................16

Revenue Analysis...............................................................................................17

SWOT Analysis...................................................................................................19

Top Competitors.................................................................................................25

Company View.....................................................................................................26

Locations and Subsidiaries...............................................................................29


Air Canada IncTABLE OF CONTENTS

COMPANY OVERVIEW

Air Canada is an airline company that provides scheduled passenger services in the Canadian, theCanada-US transborder and in the international markets, to and from Canada. It also provides touroperator services, leisure vacation packages and cargo services. The company primarily operatesin Canada. It is headquartered in Montreal, Canada and employs about 22,500 people.

The company recorded revenues of C$9,739 million ($8,573.1 million) during the financial yearended December 2009 (FY2009), a decrease of 12.1% compared to FY2008. The decrease inrevenues was due to lower yield and traffic. The operating loss of the company was C$316 million($278.2 million) during FY2009, when compared to operating loss of C$164 million ($154.8 million).The net loss was C$24 million ($21.1 million) in FY2009, when compared to net loss of C$1,025million ($967.7 million) in FY2008.

KEY FACTS

Air Canada IncHead OfficeAir Canada Centre7373 Cote-Vertu Boulevard WestSaint-LaurentQuebec H4S 1Z3CAN

1 514 422 7849Phone

1 514 422 7877Fax

http://www.aircanada.comWeb Address

9,739.0Revenue / turnover(CAD Mn)

DecemberFinancial Year End

22,500Employees

AC.BTSX VentureExchange Ticker


Air Canada IncCompany Overview

BUSINESS DESCRIPTION

Air Canada is one of the largest domestic and international airlines in Canada. It is one of the largestproviders of scheduled passenger services in the Canadian, the Canada-US transborder, and in theinternational markets to and from Canada. The company conducts its business operations throughthree business divisions, passenger, cargo and other.

Air Canada enhances its network through a capacity purchase agreement with Jazz Air (Jazz). In2009, Air Canada, together with Jazz, operated an average of 1,331 scheduled flights daily andcarried almost 31 million passengers. The company provided direct passenger service to 156destinations. In addition, it also provided direct passenger service to an additional 11 destinationsthrough commercial agreements with other unaffiliated regional airlines.

The company offers a wide range of cargo services through its cargo services division (doing businessas ‘Air Canada Cargo’). It also offers tour operator services provided by its wholly-owned subsidiary,Touram (doing business as ‘Air Canada Vacations’).

Air Canada Cargo provides direct cargo services to over 150 Canadian and international destinationsand has sales representation in over 50 countries. Air Canada Cargo is Canada’s largest providerof air cargo services as measured by cargo capacity. Air cargo services are provided on domesticand the US transborder flights. These services are also provided on international cargo services onroutes between Canada and major markets in Europe, Asia, South America and Australia.

Air Canada Vacations is one of Canada’s leading tour operators. Based in Montreal and Toronto,Air Canada Vacations operates its business in the outbound leisure travel market (Caribbean, Mexico,the US, Europe, South America, and Asia). Air Canada Vacations also offers cruise packages in theCaribbean, North America and Europe. Air Canada Vacations markets its products through itswebsite, www.aircanadavacations.com and through a network of independent travel agencies acrossCanada.

The company also offers passenger handling services, including passenger check-in, gatemanagement, baggage and cargo handling and processing, cabin cleaning, de-icing as well asaircraft ramp services.


Air Canada IncBusiness Description

HISTORY

Air Canada was established in 1936 as Trans-Canada Air. The company expanded rapidly offeringflights to the US, Europe and Asia.The company changed its name to Air Canada in 1965. It expandedby acquiring its main domestic rival Canadian Airlines.

In 2001, Air Canada combined its regional airlines, Air Nova, Air Ontario, AirBC, and CanadianRegional Airlines, to form regional carrier Air Canada Jazz. In the same year, the company alsointroduced a low-fare carrier, Tango, to serve domestic routes.

In 2002, Thai Airways International and Air Canada expanded their networks between Canada andThailand. During 2003, the company introduced new services to southern Italy and additional flightsto Venice. In the same year, Air Canada filed for bankruptcy protection after being battered by theSars epidemic and the North American economic downturn.

In 2003, a new holding company was created for the Air Canada family of companies, ACE AviationHoldings. Later in the year, as part of its recovery, Air Canada reached an agreement with TrinityTime Investments, a company owned by the Hong-Kong based businessman Victor TK Li. Mr. Liagreed to pay C$650 million ($491 million) for a 31% stake in the airline's common equity.

Air Canada announced continued expansion of its services to Latin America, with the introductionof non-stop flights from Toronto to Caracas, Venezuela, Bogota, Colombia, and Lima, Peru in 2004.Air Canada expanded its Asian network in 2005, with the addition of flights to Ho Chi Minh City,Vietnam. In the same year, Air Canada cancelled an order worth $6 billion for 32 wide-body jetsfrom Boeing.

In 2007, Air Canada introduced non-stop service on three new routes for Atlantic Canada, connectingHalifax and New York City, Deer Lake, Toronto, and Halifax and Edmonton. In the same year, thecompany expanded its service to China with second daily Vancouver-Beijing flight. Later in the year,Air Canada and Air Canada Vacations launched seasonal non-stop flights from Edmonton to MontegoBay, Jamaica, and from Halifax to Holguin, Cuba.

Air Canada operated its first new Boeing 777 aircraft on key routes serving Europe, Asia and theSouth Pacific in 2007. During the same year, the company introduced unlimited air travel withsubscription flight passes to Canada and also introduced new services to the US and northern BritishColumbia from Calgary and Vancouver. Later in that year, it launched the only daily non-stop servicebetween Gander and Halifax.

In 2007, Air Canada Jazz, a subsidiary of the company launched two new routes from Calgary andinaugurated non-stop services to Prince George and Seattle, the US and also between Vancouverto Sacramento, the US.


Air Canada IncHistory

The company expanded its service to India in cooperation with Indian carrier Jet Airways in 2008.In the same year, Air Canada entered into an agreement with Continental Airlines, the carrier in theUS, to provide broader network and frequent flyer benefits and lounge access.

Air Canada completed its sale and leaseback transaction of one Boeing 777-300ER aircraft with GECommercial Aviation Services (GECAS), a division of General Electric Capital Corporation (GECC),in March 2009. The company launched a non-stop regional jet summer service between Sydneyand Toronto in May 2009. In November 2009, Air Canada launched daily non-stop service betweenMontreal and Houston, further enhancing connection and routing possibilities for customers throughboth Montreal and the Texas hub of its new Star Alliance partner, Continental Airlines.

In March 2010, Air Canada inaugurated its first non-stop flight between Calgary and Tokyo, the onlydirect link between Alberta and Asia. During the same month, Air Canada entered into Memorandumof Understanding with Korea's Asiana Airlines, to build on its existing codeshare agreement andprovide customers on both sides of the Pacific with more choice and streamlined services.

Air Canada launched new twice-daily, year-round service to four American cities in May 2010, furtherfortifying its Toronto hub and strengthening its position as one of the leading transborder carrierswith the most daily flights between Canada and the US. In the same month, the company launchednon-stop daily flights linking the country's capital, Ottawa with Regina, Saskatchewan's capital city.Later in June 2010, Air Canada inaugurated non-stop seasonal flights to Barcelona and Athens fromToronto and Montreal.

Also during June 2010, Air Canada received a commitment from GE Japan for a senior securedterm loan facility in the amount of up to $170.5 million to finance a portion of the purchase price for16 aircraft currently leased and operated by the company. Later in the month, Air Canada launcheddaily year-round non-stop flights between Montreal and Brussels, with same-plane service fromToronto. Subsequently, the company launched daily, non-stop flights to San Diego, California andto Portland, Oregon.

Air Canada launched non-stop service between Toronto and Copenhagen in June 2010. It is thefourth new European city to be served from Air Canada's Toronto hub in 2010.


Air Canada IncHistory

KEY EMPLOYEES

BoardJob TitleName

Executive BoardPresident and Chief Executive OfficerCalin Rovinescu

Executive BoardChairmanDavid I. Richardson

Non Executive BoardDirectorBernard Attali

Non Executive BoardDirectorMichael M. Green

Non Executive BoardDirectorJean Marc Huot

Non Executive BoardDirectorPierre Marc Johnson

Non Executive BoardDirectorJoseph B. Leonard

Non Executive BoardDirectorArthur T. Porter

Non Executive BoardDirectorRoy J. Romanow

Non Executive BoardDirectorVagn Sorensen

Senior ManagementExecutive Vice President and Chief OperatingOfficer

Duncan Dee

Senior ManagementExecutive Vice President and Chief FinancialOfficer

Michael Rousseau

Senior ManagementExecutive Vice President and Chief CommercialOfficer

Benjamin Smith

Senior ManagementSenior Vice President, E-Commerce and ChiefInformation Officer

Lise Fournel

Senior ManagementSenior Vice President, Employee RelationsKevin C. Howlett

Senior ManagementSenior Vice President, OperationsDavid Legge

Senior ManagementSenior Vice President, Customer ServiceSusan Welscheid

Senior ManagementVice President, Air Canada Maintenance andEngineering

Alan D. Butterfield

Senior ManagementVice President, AirportsNick Careen

Senior ManagementVice President, Alliances, InternationalOperations and Regulatory Affairs

Yves Dufresne


Air Canada IncKey Employees

KEY EMPLOYEE BIOGRAPHIES

Calin Rovinescu

Board: Executive BoardJob Title: President and Chief Executive OfficerSince: 2009

Mr. Rovinescu has been the President and Chief Executive Officer at Air Canada since 2009. From2004 until his re-joining Air Canada, he was Co-founder and senior Principal of Genuity CapitalMarkets. Mr. Rovinescu first joined the company in 2000 as Executive Vice President of CorporateDevelopment and Strategy. He received his LL.B from the University of Ottawa in 1980; LL.L fromthe University of Montreal in 1978; and D.E.C. from McGIll University in 1974. Mr. Rovinescu is amember of the Quebec Bar Association and the Canadian Bar Association.

David I. Richardson

Board: Executive BoardJob Title: ChairmanSince: 2008

Mr. Richardson has been the Chairman at Air Canada since 2008. He is a Director and the Chair ofthe Audit, Finance and Risk Committee at ACE Aviation Holdings. Mr. Richardson is the formerChairman at Ernst & Young (Canada) and a former Executive Partner at Ernst & Young LLP. Hejoined its predecessor, Clarkson, Gordon & Co in 1963 and was appointed President at The Clarksonin 1982. Mr. Richardson holds a Bachelor of Commerce degree from the University of Toronto andis a member and a Fellow of the Institute of Chartered Accountants of Ontario. He is also a Governorof Upper Canada College.

Bernard Attali

Board: Non Executive BoardJob Title: DirectorSince: 2006

Mr. Attali has been a Director at Air Canada since 2006. He is the Honorary Chairman at Air FranceGroup and Senior Advisor at TPG Capital. Mr. Attali is also a Director at ACE Aviation Holdings. Hewas the Vice Chairman at Deutsche Bank Europe Investment Banking from 1999 to 2000. Mr. Attalihas served as the Chairman and Chief Executive Officer at Air France. He also served as theChairman at the International Air Transport Association, Excom and the Association of EuropeanAirlines (AEA). Mr. Attali holds diplomas from the Institut dEtudes Politiques of Paris and from theÉcole Nationale d’Administration.


Air Canada IncKey Employee Biographies

Michael M. Green


Mr. Green has been a Director at Air Canada since 2009. He is the General Partner of Tenex CapitalManagement. He is also a Director at ACE Aviation. Mr. Green has a multi-industry operationsbackground in aerospace, transportation, telecommunications and software systems. He wasManaging Director at Cerberus Capital Management from 2003 to 2009. Previously, he was theChief Executive Officer of several privately held companies, Trispan Solutions and NaviantTechnology. Mr. Green began his career at General Electric where he worked in several operatingdepartments and held positions in engineering, manufacturing, sales, marketing and generalmanagement. Mr. Green holds a dual BS in Electrical Engineering and Physics from State Universityof New York, Buffalo and an MS in Electrical Engineering from Villanova University.

Jean Marc Huot


Mr. Huot has been a Director at Air Canada since 2009. He is a partner with the Canadian law firmStikeman Elliott and is co-chairperson of the firm's national Securities Law Group. Mr. Huot's practiceis focused primarily in the areas of corporate finance and mergers and acquisitions. He is a memberof the Advisory Committee to the Chair of the Autorite des Marches Financiers. Mr. Huot holds aBachelor of Arts degree and a Bachelor of Law degree from Laval University.

Pierre Marc Johnson


Mr. Johnson has been a Director at Air Canada since 2006. He is Counsel to the offices of theCanadian law firm Heenan Blaikie. Mr. Johnson also advises, mediates, and negotiates for or with,various governments, United Nations related organizations and other international institutions. Heis a Director at ACE Aviation Holdings, Noveko International, Holcim Canada, Medicago, GroupeJuste Pour Rire, Muse Entertainment and the Veolia Institute for the Environment (Paris). Duringhis career in Public Office, Mr. Johnson became Quebec's Premier in 1985 and then Leader of theOpposition. He had previously been Minister of Labour and Manpower, Financial Institutions, SocialAffairs, Intergovernmental Affairs, Attorney General and Minister of Justice.

Joseph B. Leonard




Mr. Leonard has been a Director at Air Canada since 2008. He is a Director and Interim ChiefExecutive Officer at Walter Energy serves. Mr. Leonard is also a Director at Mueller Water Products.He served as the Chairman at AirTran Airways from 1999 to 2008 and as the Chief Executive Officerfrom 1997 to 2007. Mr. Leonard also served as the President and Chief Executive Officer atAlliedSignal's Aerospace. Previously, he held various senior management positions with NorthwestAirlines, Eastern Airlines and American Airlines. Mr. Leonard holds a Bachelor of Science degreein Aerospace Engineering from Auburn University Montgomery-AUM.

Arthur T. Porter


Mr. Porter has been a Director at Air Canada since 2006. He is the Director General and ChiefExecutive Officer at the McGill University Health Center. Mr. Porter was the President and ChiefExecutive Officer at the Detroit Medical Center from 1999 to 2003. He has extensive clinical, researchand administrative experience in a university teaching hospital environment. Mr. Porter also actedas Consultant for several major companies in the airline and energy sectors with respect to humanresources and logistical challenges. He holds a Medical Degree from the Cambridge School ofClinical Medicine, a Master of Business Administration from the University of Tennessee, andCertificates in Medical Management from Harvard University and the University of Toronto.

Roy J. Romanow


Mr. Romanow has been a Director at Air Canada since February 2010. He is a Senior Fellow inPublic Policy at the University of Saskatchewan. Mr. Romanow is also a Director at Torstar. Duringhis career in public office, he served as Premier of Saskatchewan from 1991 until 2001. Mr. Romanowpreviously served as Deputy Premier, Attorney General and Minister of Intergovernmental Affairs.From 2001 to 2002, he led the Royal Commission on the Future of Health Care in Canada, and from2003 to 2008, he served on Canada's Security Intelligence Review Committee. Mr. Romanow is aMember of the Queen's Privy Council for Canada and an Officer of the Order of Canada. He holdsa Bachelor of Arts degree and a Bachelor of Law degree from the University of Saskatchewan. Mr.Romanow is also the recipient of several honorary degrees.

Vagn Sorensen




Mr. Sorensen has been a Director at Air Canada since 2006. He is the Senior Industrial Advisor withEQT Partners. Mr. Sorensen is the Chairman at KMD, Select Service Partner, Scandic Hotels andTDC. He is also the Vice Chairman at DFDS and ST Global. Mr. Sorensen is also a Director atBraganza, Cimber Sterling Group, F L Smidth and the Scandinavian International ManagementInstitute. He also served as the President and Chief Executive Officer at Austrian Airlines Groupfrom 2001 to 2006 and held various senior commercial positions with SAS Scandinavian AirlinesSystem. Mr. Sorensen served as the Chairman of the Association of European Airlines; member ofthe Board of Governors at the International Air Transport Association; and member of the Board ofVienna Stock Exchange.

Duncan Dee

Board: Senior ManagementJob Title: Executive Vice President and Chief Operating OfficerSince: 2009

Mr. Dee has been the Executive Vice President and Chief Operating Officer at Air Canada since2009. In 2007, he was appointed Executive Vice President of Customer Experience and ChiefAdministrative Officer. Mr. Dee previously held executive positions as Senior Vice President ofCorporate Affairs and Chief Administrative Officer at ACE Aviation Holdings and Senior Vice Presidentof Corporate Affairs at Air Canada. He joined Air Canada in 1997 and has held various positions inthe Corporate Affairs and Government Relations branch and in the Office of the President and ChiefExecutive Officer. Prior to joining Air Canada, Mr. Dee held senior positions in the Government ofCanada including Press Secretary and Legislative Assistant to a federal Cabinet Minister. He is agraduate of the University of British Columbia in Vancouver.

Michael Rousseau

Board: Senior ManagementJob Title: Executive Vice President and Chief Financial OfficerSince: 2007

Mr. Rousseau has been the Executive Vice President and Chief Financial Officer at Air Canadasince 2007. He served as the President at Hudson's Bay (HBC). Mr. Rousseau joined Air Canadaas Executive Vice President and Chief Financial Officer. He joined HBC as Executive Vice Presidentand Chief Financial Officer in 2001, a position he retained until his appointment as President uponthe change of control of the company in 2006. Mr. Rousseau has extensive Senior Executiveexperience in the consumer business sector. Prior to joining HBC, he served as the Senior VicePresident and Chief Financial Officer at the Moore in Chicago and before that held the same position



at Silcorp. Mr. Rousseau is a Chartered Accountant and holds a Bachelor of Business administrationdegree from York University.

Benjamin Smith

Board: Senior ManagementJob Title: Executive Vice President and Chief Commercial OfficerSince: 2007

Mr. Smith has been the Executive Vice President and Chief Commercial Officer at Air Canada since2007. He joined Air Ontario, a predecessor company to Air Canada Jazz as a Customer Sales andService agent in 1990. Mr. Smith left Air Ontario in 1993 to open a retail corporate travel agencywhich he owned and operated for eight years. In 2001, while working as an independent Consultant,Mr. Smith led the team that launched Tango, and in 2002, he joined Air Canada full time as ManagingDirector at Tango. Mr. Smith subsequently held various other positions including Vice President,Network Planning at Air Canada, and President and Chief Executive Officer, Air Canada Vacations.He holds a BA in Economics from the University of Western Ontario.

Lise Fournel

Board: Senior ManagementJob Title: Senior Vice President, E-Commerce and Chief Information Officer

Ms. Fournel serves as the Senior Vice President of E-Commerce and Chief Information Officer atAir Canada. She has been an Air Canada employee for more than 25 years. Ms. Fournel joined theairline in 1979 in the Operational Research department. She became Manager, Customer Relations,Computer and Systems Services Branch in 1983 and over the next 10 years, held several positionsas Director and Senior Director in areas such as Strategic and Tactical Planning, and Pricing andYield Management. Ms. Fournel was appointed Vice President, Information Technology and ChiefInformation Officer, then Senior Vice-President Commercial in 1999. In 2000, Ms. Fournel wasappointed Executive Vice President, Commercial, and in 2001 she was named to the position ofPresident, Destina, an Air Canada subsidiary. She is a Member of various Boards of Directors suchas Tourisme Montreal, CIREM, and Musee Pointe-a-Calliere. Ms. Fournel also acts as a Mentor forthe Jeune Chambre de commerce de Montreal.

Kevin C. Howlett

Board: Senior ManagementJob Title: Senior Vice President, Employee RelationsSince: 2006

Mr. Howlett has been the Senior Vice President of Employee Relations at Air Canada since 2006.Prior to this appointment, he held the positions of Vice President of Employee Relations and VicePresident of Labor Relations. Mr. Howlett has over 25 years of related experience in the airline



industry. Previously, he held the positions of Vice President of Labor Relations at Air Canada Jazz,and Vice President of Labor Relations and Human Resources at Canadian Airlines International.Mr. Howlett is a member of the Conference Board of Canada, the Council of Industrial RelationsExecutives and Federally Regulated Employers - Transportation & Communications (FETCO).

David Legge

Board: Senior ManagementJob Title: Senior Vice President, OperationsSince: 2009

Mr. Legge has been the Senior Vice President of Operations at Air Canada since 2009. Previously,he served Vice President of Flight Operations at the company, from 2006 to 2009. Mr. Legge joinedAir Canada in 1986. Since then, he has flown a variety of aircraft types and has held numerousmanagement positions in Flight Operations. Mr. Legge holds a Bachelor of Science degree inMathematics from Wilfrid Laurier University and a Masters Degree in Business Administration fromQueen's University.

Susan Welscheid

Board: Senior ManagementJob Title: Senior Vice President, Customer ServiceSince: 2009

Ms. Welscheid has been the Senior Vice President of Customer Service at Air Canada since 2009.Previously, she was appointed as the Vice President of In-Flight Service in 2004 and assumedresponsibility for Call Centers and Customer Relations in 2007. In 1999, Ms.Welscheid was appointedas the Vice President of People, responsible for overseeing the human resource functions of theairline. An Air Canada employee for 30 years, she has held various positions in many differentbranches of the airline including Marketing, Corporate Communications, Office of the President,Customer Service Support and Airports. Ms. Welscheid also led a number of special projects in theareas of customer service, corporate image and employee involvement. Prior to joining Air Canada,she worked in London, Johannesburg, Paris, Munich and Geneva.

Alan D. Butterfield

Board: Senior ManagementJob Title: Vice President, Air Canada Maintenance and EngineeringSince: 2007

Mr. Butterfield has been the Vice President of Air Canada Maintenance and Engineering since 2007.Previously, he served as the Vice President of Airframe and Line Maintenance at United Airlines,from 2004 to 2007. Prior to that, Mr. Butterfield held a number of senior positions at United, responsible



for the airline's heavy airframe maintenance and line maintenance at various US bases. He holdsa bachelor's degree in aviation maintenance management from Embry Riddle University.

Nick Careen

Board: Senior ManagementJob Title: Vice President, AirportsSince: 2009

Mr. Careen has been the Vice President of Airports at Air Canada, since 2009. Previously, he servedas the Senior Vice President of Operations at Air Canada Jazz (Jazz). His career in the airlineindustry began with a Jazz predecessor, Air Nova in Halifax in 1994. Since then, he has held anumber of management positions within Systems Operation Control and Airports with Jazz and itspredecessor airlines with various and increasing responsibilities throughout the airline’s operationsand airports branches. Mr. Careen was also the Director of Six Sigma (a process improvementmethodology and measurement strategy) at Jazz. He holds a Bachelor of Arts in Political Sciencefrom Memorial University of Newfoundland.

Yves Dufresne

Board: Senior ManagementJob Title: Vice President, Alliances, International Operations and Regulatory AffairsSince: 2004

Mr. Dufresne has been the Vice President of Alliances, International Operations and RegulatoryAffairs at Air Canada, since 2004. He began working for Air Canada in 1985 in the Government andIndustry Affairs Branch as International Affairs Manager. Prior to joining Air Canada, Mr. Dufresnepracticed law in Montreal. He graduated from Laval University (Quebec City), where he received aBachelor of Laws degree (LL.B.) in 1980, and obtained a Master of Laws (LL.M.) from McGill Universityin 1985.



MAJOR PRODUCTS AND SERVICES

Air Canada is a Canada based company engaged in providing scheduled passenger services. The company's key services include the following:

Passenger transport servicesCargo transportTour operator servicesLeisure vacation packagesInternational cargo services

Passenger handling services:

Passenger check-inGate management servicesBaggage and cargo handling and processing servicesCabin cleaning De-icing Aircraft ramp services


Air Canada IncMajor Products and Services

REVENUE ANALYSIS

Overview

Air Canada recorded revenues of C$9,739 million ($8,573.1 million) during the financial year endedDecember 2009 (FY2009), a decrease of 12.1% compared to FY2008. For FY2009, Canada, thecompany's largest geographic market, accounted for 41.3% of the total revenues.

Air Canada generates revenues through three business divisions: passenger (87.3% of the totalrevenues during FY2009), cargo (3.7%) and other (9.1%).

Revenue by division

During FY2009, the passenger division recorded revenues of C$8,499 million ($7,481.6 million), adecrease of 12.5% compared to FY2008.

The cargo division recorded revenues of C$358 million ($315.1 million) in FY2009, a decrease of30.5% compared to FY2008.

The other division recorded revenues of C$882 million ($776.4 million) in FY2009, an increase of3.3% over FY2008.

Revenue by geography

Canada, Air Canada's largest geographical market, accounted for 41.3% of the total revenues inFY2009. Revenues from Canada reached C$3,654 million ($3,216.6 million) in FY2009, a decreaseof 13.1% compared to FY2008.

Atlantic accounted for 20.9% of the total revenues in FY2009. Revenues from Atlantic reachedC$1,848 million ($1,626.8 million) in FY2009, a decrease of 11.8% compared to FY2008.

The US Transborder accounted for 18.7% of the total revenues in FY2009. Revenues from the USTransborder reached C$1,655 million ($1,456.9 million) in FY2009, a decrease of 12.6% comparedto FY2008.

Pacific accounted for 10.6% of the total revenues in FY2009. Revenues from Pacific reached C$941million ($828.4 million) in FY2009, a decrease of 17.2% compared to FY2008.

Other accounted for 8.6% of the total revenues in FY2009. Revenues from other regions reachedC$759 million ($668.1 million) in FY2009, a decrease of 15.4% compared to FY2008.


Air Canada IncRevenue Analysis

Note: The revenue by geographic segments mentioned above includes revenues derived frompassenger and cargo divisions. It does not include revenues from other division. Passenger andcargo revenues are based on the actual flown revenue for flights with an origin and destination in aspecific country or region. Atlantic refers to flights that cross the Atlantic Ocean with origins anddestinations principally in Europe. Pacific refers to flights that cross the Pacific Ocean with originsand destinations principally in Asia. Other passenger and cargo revenues refer to flights with originsand destinations principally in South America, South Pacific, and the Caribbean.


Air Canada IncRevenue Analysis

SWOT ANALYSIS

Air Canada is an airline company that provides scheduled passenger services in the Canadian, theCanada-US transborder and in the international markets, to and from Canada.The company's robustnetwork infrastructure enables it to gain access to key markets as well as enhance the quality of itsdelivery services. However, increase in fuel costs could have a material adverse effect on Air Canada,its business, results from operations and financial condition.

WeaknessesStrengths

Sluggish performance of key businessdivisions

Robust route networkStrong fleet operations

Declining operating profits and marginsFocus on achieving significant cost savingsWeak performance of Air Canada ingeographic segments

ThreatsOpportunities

Volatile fuel costsGrowing global airline industryH1N1 2009 influenza pandemicGlobal tourism to rebound strongly in 2010Iceland volcano ash upends air travelModerate growth in airfreight industry

Strengths

Robust route network

Air Canada has a robust route network. During FY2009, Air Canada operated approximately 1,331scheduled flights daily and carried almost 31 million passengers. In the same period, the companyprovided direct passenger air transportation to 167 destinations on five continents. Air Canada’sprimary hubs are located in Toronto, Montreal, Vancouver and Calgary. In addition, Air Canada alsooperates an extensive global network in conjunction with its international partners. Air Canada is afounding member of the Star Alliance Network, the world’s largest airline alliance group, whichincludes 26 member airlines.

Through its arrangements with Star Alliance members, Air Canada is able to offer access to itscustomers to approximately 1,077 destinations in 175 countries. Air Canada recently expanded itsservice to seven additional cities in US, fortifying its Toronto hub and strengthening the airline’sposition as one of the leading transborder carriers with the most daily flights between Canada andthe US. In 2009, Air Canada provided scheduled service directly to 54 destinations in Europe, theMiddle East, Asia, Australia, the Caribbean, Central America and South America. Air Canada planson expanding its international network in 2010. This expansion will be fuelled by the addition of


Air Canada IncSWOT Analysis

routes to Europe and Asia, including Toronto–Montreal–Brussels; Toronto–Barcelona;Montreal–Barcelona;Toronto–Copenhagen;Toronto–Athens; Montreal–Athens; and Calgary–Tokyo.Air Canada also plans to improve its capacity to China through increased frequencies and the useof larger aircraft. Air Canada's robust network infrastructure enables it to gain access to key marketsas well as enhance the quality of its delivery services.

Strong fleet operations

Air Canada has a strong fleet base to complement its robust route network. The group continues tosimplify its fleet to enhance competitiveness. In FY2009, Air Canada operated a fleet of 202 aircraftwith an average age of 9.7 years. The company operated 146 narrowbody aircraft during FY2009,of which 45 aircraft are of Embraer 190; 41, Airbus A320; and 35, Airbus A319. Also, Air Canadaoperated 56 widebody aircraft, of which 30 are of Boeing 767-300 and 12 are of Boeing 777-300.In addition, in FY2009, pursuant to the Jazz CPA, Jazz operated an operating fleet of 130 aircraftwith an average age of 14.6 years. During 2009, the company took delivery of its last two plannedBoeing 777 aircraft. Strong fleet operations of Air Canada help the company to attain a competitiveadvantage over its peers.

Focus on achieving significant cost savings

A key objective of Air Canada’s business strategy is to consistently improve unit revenue and costproductivity. Early in 2009, Air Canada launched a major company-wide cost transformation program(CTP) which aims to generate a minimum of $500 million in annualized revenue gains and costsavings by the end of 2011. Through extensive management analysis and benchmarking, over 125initiatives have been identified. Although the vast majority of the initiatives relate to cost savingssuch as contract renegotiation, operational process improvements and productivity gains, severalrelate to target revenue optimization. In 2009, Air Canada surpassed its CTP target by $20 million.

As fuel costs constitute the largest percentage of the total operating costs of the airline, Air Canadacontinues to aggressively focus on managing fuel consumption. Since the implementation of its fuelefficiency program in mid-2006, Air Canada generated cumulative savings of close to $80 million.In 2009, this program generated savings of $12 million and reduced the airline’s fuel consumptionby 18 million liters. It also reduced CO2 emissions by 45,000 tonnes. Fuel efficiency program initiativesrange from simple weight reduction and flight profile optimization to more innovative weight savingsinitiatives. These include potable water management program to reduce the carriage and weight ofunnecessary water and a Zero Fuel Weight (ZFW) accuracy program which enables the calculationof accurate flight plans.

In addition, Air Canada is working together with air traffic control service providers to optimize airspacemanagement and take advantage of new navigation technologies to reduce time and fuel consumptionused to approach airports. Moreover, Air Canada is evaluating several new aerodynamic technologiesto further improve aircraft fuel efficiency. Significant cost savings helps Air Canada to achievepermanent gains though a combination of operational process, productivity improvements andrevenue enhancements without compromising on the passenger experience.



Weaknesses

Sluggish performance of key business divisions

Air Canada has witnessed a decline in its sales in key business divisions. The passenger divisionis the largest business division of the company and it accounted for 87.3% of total sales in FY2009.The sales of this division deteriorated 12.5% in FY2009 compared to FY2008. Similarly, the cargodivision, which is the second largest business division, witnessed 30.5% decline in its sales in FY2009compared to FY2008. The decrease in sales was significantly due to lower yield and traffic. As aresult, the company generated revenues of C$9,739 million ($8,573.1 million) during FY2009, adecrease of 12.1% compared to FY2008.Therefore, sluggish performance of key business divisionsaffected Air Canada’s financial performance.

Declining operating profits and margins

Air Canada has witnessed declining operating profits and margins since FY2007. The operatingprofit of the company declined from C$495 million ($463.1 million) in FY2007 to an operating lossof C$164 million ($154.8 million) in FY2008 and further declined to an operating loss of C$316 million($278.2 million) in FY2009. The decrease in operating profit in FY2009 was due to 3% decline inairport and navigation fees, due to 3% reduction in aircraft frequencies; 15% increase in aircraftmaintenance expense; and 3% increase in communications and information technology expense.Similarly, the operating margins of the company declined from 4.6% in FY2007 to -1.5% in FY2008and -3.2% in FY2009. Declining operating profits and margins indicate that Air Canada has not beenable to manage its cost structure efficiently and would also erode the company’s investors' confidence.

Weak performance of Air Canada in geographic segments

The company’s sales witnessed poor performance in all its geographic segments. Canada, whichis the largest geographic market for the company, accounted for 41.3% of the total revenues inFY2009. Revenues from Canada reached C$3,654 million ($3,216.6 million) in FY2009, a decreaseof 13.1% compared to FY2008. Similarly, other geographic regions witnessed decline in their sales,Atlantic, 11.8%;The US transborder, 12.6%; Pacific, 17.2%; and other regions, 15.4%.The decreasein revenue contribution from all markets affected the overall financial position of the company.

Opportunities

Growing global airline industry

The global airline industry swings back to profitability in 2010 as growth in Asia and North Americaoffsets weaker demand in Europe. According to International Air Transport Association (IATA), profitsare expected to reach $2.5 billion in 2010, a vast improvement from the $2.8 billion total loss itpredicted in the first quarter of 2010. North American carriers, which sharply cut capacity amid the



economic crisis, are expected to earn $1.9 billion in 2010, a turnaround from the previously predictedloss of $1.8 billion, and the $2.7 billion that carriers lost in 2009.The level of first and business-classtravellers is back to pre-recession levels, giving airline profits a boon. The IATA predicted globalairline industry would generate total revenue of $545 billion in 2010. Air Canada offers scheduledpassenger services in the Canadian, the Canada-US transborder, and in the international marketsto and from Canada. Therefore, growth in the global airline industry would boost demand for AirCanada’s services.

Global tourism to rebound strongly in 2010

Emerging countries are leading a return in tourist arrivals following more than a year of decline dueto the global economic downturn. International tourist arrivals are estimated to have increased by7% in the first two months of 2010 to 119 million, according to the April interim update of the UnitedNations World Tourism Organization (UNWTO). The results of recent months suggest that recoveryis underway, and is at a stronger pace than initially expected. UNWTO predicts growth of between3% and 4% in 2010.

By region, Asia is expected to rebound while Europe and the Americas are likely to recover at amore moderate pace. According to UNWTO, Africa will continue its positive trend as they are set tobenefit from the extra boost provided by the 2010 FIFA World Cup held in South Africa in June 2010.With the anticipated growth, business and consumer confidence has picked up.This growth in worldtourism industry will enhance airline business. Air Canada besides providing airline services alsoengaged in travel related businesses. Air Canada is well positioned to benefit from increasing globaltourism industry and it would help the company to generate additional revenues.

Moderate growth in airfreight industry

Air freight, a leading indicator of the health of world trade, is picking up slowly. According to IATA,recovery in the air freight industry worldwide continues at a good pace, with worldwide cargo demandup by 28.1% in March 2010 compared to the same month last year. IATA pointed out that the returnof demand was far better than had been anticipated.The pace of improvement, based on an improvingglobal economic situation is much faster. Global air freight operations are now within 1% point ofrecovering to its previous high point of early 2008, restoring freight volumes which shrank by overone quarter during the second half of 2008.

The strongest recoveries have been seen in Latin America and the Asia-Pacific region, which haverespectively seen increases in demand of 47.9% and 34.1%, respectively. North America has alsoseen a strong improvement in demand, up 32.2%. The global strong air freight upturn has beenlargely driven by the business inventory cycle. It is expected that there would be moderate growthin the future, as air freight will be driven by consumer spending and world trade growth. Theimprovement is largely driven by a much stronger recovery in demand seen by year-end gains thatcontinued into the first months of 2010. Relatively flat capacity translated into some yield improvementand stronger revenues. Air Canada offers a wide range of cargo solutions and is well positioned tocapitalize on the growing global air freight industry.



Threats

Volatile fuel costs

Fuel costs constituted the largest percentage of the total operating costs of Air Canada in 2009. Fuelprices fluctuate widely depending on many factors including international market conditions,geopolitical events and the Canada/US dollar exchange rate. Air Canada cannot accurately predictfuel prices. During 2006, 2007 and 2008, fuel prices increased and fluctuated near or at historicallyhigh levels.

According to IATA, jet fuel price as of June 2010 was $89.7 per barrel, an increase of 15.3% overJune 2009 jet fuel price. It is forecasted that the average jet fuel price in 2010 would be $88.5 perbarrel. Also, the IMF forecasts that the oil price (made up of the average of various different quotations,UK Brent, Dubai and West Texas Intermediate) would be $76 per barrel for 2010 and $82 for 2011.Based on 2009 volumes, Air Canada estimates that a $1 per barrel movement in the average priceof WTI crude oil would have resulted in an approximate $25 million change in 2009 fuel expense forthe company. Due to the competitive nature of the airline industry, Air Canada may not be able topass on increases in fuel prices to its customers by increasing its fares. Therefore, increase in fuelcosts could have a material adverse effect on Air Canada, its business, results from operations andfinancial condition.

H1N1 2009 influenza pandemic

The 2009 flu pandemic is a global outbreak of influenza A virus, subtype H1N1, referred to as the‘swine flu’. In early June 2009, the virus has spread globally. The passenger trips worldwide havebeen affected by the outbreak of swine flu, which in turn affected the sales of airline industry. As ofMarch 2010, almost all countries had reported cases, and more than 17,700 deaths amonglaboratory-confirmed cases had been reported to the World Health Organization (WHO).The numberof laboratory-confirmed cases significantly underestimates the pandemic's impact. In the US, anestimated 59 million illnesses, 265,000 hospitalizations, and 12,000 deaths had been caused by the2009 H1N1 virus as of mid-February 2010.

Although pandemic influenza virus continues to be the predominant circulating influenza virusworldwide, circulation of seasonal influenza B viruses continue to increase and spread across Asia,parts of Eastern Europe, and Eastern Africa. The H1N1 Influenza had a significant adverse effecton passenger demand for air travel in Air Canada’s markets and resulted in a major negative impacton traffic on the entire network. Air Canada is continuing to monitor the H1N1 influenza virus risk.Therefore, a further outbreak of H1N1 influenza virus could have a material adverse effect onpassenger demand for air travel, resulting reduction in traffic in the markets served by Air Canada.This in turn could have a material adverse effect on Air Canada’s business and financial condition.

Iceland volcano ash upends air travel



The 2010 volcanic eruptions at Eyjafjoll in Iceland caused enormous disruption to air travel acrosswestern and northern Europe over an initial period of six days in April 2010. The eruption enteredan explosive phase and ejected ash to heights in excess of 9 km (30,000 ft) causing significantdisruption to air travel. Additional localized disruption continued into May 2010. Volcanic ash is amajor hazard to aircraft. Smoke and ash from eruptions reduce visibility for visual navigation, andmicroscopic debris in the ash can sandblast windscreens and also damage engines. Consequently,a very high proportion of flights within, to, and from Europe were cancelled, creating the highestlevel of air travel disruption since the Second World War.

The International Air Transport Association (IATA) estimated that the airline industry worldwide lost$1.7 billion in revenues. IATA noted that from April 17 to 19, when travel disruptions were greatest,airlines lost $400 million per day. Air Canada also experienced disruptions to its transatlantic flyingschedule following the closure of European airspace from April 15th to 20th due to volcanic ashresulting from the volcanic eruption in Iceland. Although some of the lost passenger revenue maybe recovered, Air Canada estimates the negative impact on its second quarter of 2010 operatingincome to be approximately $20 million. Therefore, such kind of natural disasters in future couldseriously affect the operations and financial position of Air Canada.



TOP COMPETITORS

The following companies are the major competitors of Air Canada Inc

Northwest Airlines CorporationWestJet Airlines Ltd.AMR CorporationHelijet International Inc.Delta Air Lines, Inc.


Air Canada IncTop Competitors

COMPANY VIEW

A statement by Calin Rovinescu, President and Chief Executive Officer of Air Canada is given below.The statement has been taken from the company’s 2009 annual report.

For Air Canada, 2009 was a year of challenges and accomplishments. Along with the rest of theglobal airline industry, the company encountered an extremely difficult revenue environment owingto the very deep recession encountered last year. Moreover, we faced a set of issues unique to thecompany that we have now largely addressed, allowing us to be cautiously optimistic about the yearahead.

While delivering on our 2009 adjusted EBITDAR* target, we nonetheless reported an operating lossof $316 million for the year.This reflects a $1.21 billion or 12 per cent decline in passenger revenue,of which more than 33 per cent was attributable to a drop in all-important premium customer revenue.At the same time, unit costs excluding fuel rose 3.3 per cent due mainly to the effects of a weakerCanadian dollar, increased maintenance costs and a capacity reduction that resulted in feweravailable seat miles over which to allocate costs.

However, we performed well in comparison with our peers, demonstrating a disciplined approachto both revenue and capacity management. While Air Canada’s unit revenue fell 8.4 per cent, thiswas less than declines experienced by many of our U.S. peers and we flew with an 80.7 per centload factor versus a global industry average of 75.6 per cent in 2009. We transported almost 31million passengers and, most importantly, we did so safely and with a better overall operationalperformance than the previous year.

Customers truly appreciated our performance. In late 2009 we received meaningful accolades fromtwo influential business travel magazines. Business Traveler, with 500,000 readers and ten editionspublished globally, gave Air Canada more of its Best in Business Travel Awards than any otherairline in the world. These included: Best Flight Attendants in North America; Best In-flight Servicesin North America; Best Business Class among North American carriers; and the Best North AmericanAirline for International Travel. The annual survey of 25,000 readers of the equally respected GlobalTraveler found Air Canada to be the Best Airline in Canada and Best Airline in North America.

During the year, the company also addressed major structural issues. Foremost among these wasthe rebuilding of our cash position amid very difficult capital markets. Air Canada raised $1.3 billionin new liquidity – including approximately $260 million in equity through a public share offering – toend 2009 with $1.4 billion in cash, cash equivalents and short term investments. At the beginningof 2010, we raised an additional $100 million to improve unrestricted cash levels to approximately15 per cent of trailing 12 month revenues, one of our key financial objectives.

Second, Air Canada attained labour stability through agreements with its unionized workforce. Thecompany negotiated cost neutral extensions of its collective agreements lasting until mid-2011 andan accord on a 21-month pension deficit funding moratorium, with capped payments for past service


Air Canada IncCompany View

obligations until 2014. While Air Canada aims to preserve its existing defined benefit pension plansand contributed $389 million toward them in 2009, there remains a need for national pension reformto ensure pension plans can be funded on a sustainable basis.

Third, Air Canada struck new and amended agreements during the course of the year with majorcredit providers, suppliers and vendors to provide greater financial stability. These included arenegotiated Capacity Purchase Agreement with Jazz, amendments to our credit card processingcontracts to revise the required levels of unrestricted cash, and an agreement with a key supplierfor nonrefundable proceeds of $230 million in consideration for various contractual commitments.

Taken together, these and other accomplishments have served to further strengthen the company’sfoundation so that we can build upon it in anticipation of a general industry rebound. To this end,we have identified four main priorities for 2010 that will further secure and extend these gains, withthe objective of transforming Air Canada so that it becomes a profitable company over the long term.

First, Air Canada will expand its international presence by leveraging the geographic advantages ofits major hubs, its array of international route authorities and extensive partnerships formed withother carriers through Star Alliance, the world’s leading airline network with 26 member carriers.Continental Airlines’ entry into Star Alliance in 2009 and the recently-created transatlantic alliancewith Continental, Lufthansa and United Airlines will be central to this strategy. Since the start of2009, Air Canada launched or announced new service to five European gateways – Geneva,Barcelona, Brussels, Copenhagen and Athens – and to 15 U.S. cities. Our renewed and strongerpartnership with major Canadian airports, particularly at our central hub in Toronto, will enhance ourability to grow our international network.

Our second priority is to radically transform our cost structure. We have adopted a three-year CostTransformation Program whose goal is to identify savings and revenue initiatives to generate aminimum of $500 million in annual improvements to our financial results by the end of 2011, on arun-rate basis. In 2009 we exceeded our CTP goal by 40 per cent and are tracking to achieve ouraccelerated 2010 target of $270 million. Our aim is to achieve permanent gains though a combinationof operational process and productivity improvements and revenue enhancements withoutcompromising the passenger experience.

Third, we will re-engage our customers with an added focus on premium revenue passengers. Manyof the required elements are already in place with our Maple Leaf Lounges, Concierge Service andnew and refurbished fleet, including our longhaul Executive First service featuring lie-flat suites. Weintend to drive home these advantages through customer-friendly initiatives such as the introductionof new technologies for added customer convenience and a greater emphasis on service.The awardsfrom Business Traveler and Global Traveler are evidence we are making significant headway in thisarea.

Finally, Air Canada is committed to changing its corporate culture by instilling in employees a morecustomer-centric and entrepreneurial ethic. Given the still difficult economic conditions and unrelentingcompetitive pressures, it is imperative that employees be empowered to respond appropriately to



day-to-day challenges and opportunities so that Air Canada becomes a more nimble, responsivecompany.

In many respects, it is culture change that will harness together the company’s priorities and driveour transformation. While effecting such change is not possible overnight, already there are signsthat employees are embracing this new spirit. They readily advanced ideas that we incorporatedinto our successful winter operations plan. More significantly, they also eagerly joined together toensure one of the smoothest Olympic and Paralympic operations in memory.

In 2009, the global airline industry faced the most severe drop in traffic since the Second World Warand a corresponding decline in revenue. Through operational discipline, focused action on ourpriorities and by vigorously pursuing solutions, we stabilized the company and began rebuilding inanticipation of an eventual return of economic prosperity. By channeling that same level ofdetermination into our four priorities, we are positioning ourselves to generate income in the currenteconomic cycle in order that we can grow the business profitably on a sustainable basis.

Although well-founded, our optimism is guarded. Achieving this ultimate goal is contingent uponseveral factors, including the execution of our business priorities, a sensible approach by governmentsto security, travel infrastructure, and to direct and indirect taxation, the establishment of a rationalpension funding regime and an overall improvement in macroeconomic conditions.

In closing, I wish to thank the 26,000 employees of Air Canada for their dedication to safety andcustomer service and for their unwavering professionalism during a tumultuous year for both ourcompany and our industry. Similarly, I thank all of our stakeholders and customers for their continuedsupport and loyalty. Although the airline industry is highly cyclical and fragile, our company is activelytransforming itself to prepare for an upturn in the sector, to be ready to capitalize on opportunitiesas they emerge.



LOCATIONS AND SUBSIDIARIESHead Office

Air Canada IncAir Canada Centre7373 Cote-Vertu Boulevard WestSaint-LaurentQuebec H4S 1Z3CANP:1 514 422 7849F:1 514 422 7877http://www.aircanada.com

Other Locations and Subsidiaries

Air Canada IncAir Canada Centre7373 Cote-Vertu Boulevard WestSaint-LaurentQuebec H4S 1Z3CAN


Air Canada IncLocations and Subsidiaries

air canada data monitor

Documents