Air Canada's Executive Vice President & CFO Michael Rousseau, presents at. Transportation & Logistics Conference

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Transcription:

Air Canada's Executive Vice President & CFO Michael Rousseau, presents at Transportation & Logistics Conference Toronto March 24, 2010 1

Agenda Air Canada leading carrier in all markets Managing through challenging economic conditions Repositioning for success 2

3 Air Canada Leading Carrier in all Markets

Leading Share in all Markets Domestic International Transborder WJA 36% AC 56% Other Airlines 8% KL 4% BA 5% AF 4% LH 4% CX 7% TRZ 8% AC 39% Other Airlines 29% AA 11% Other Airlines 8% WJA 11% NW 5% US 5% AC 36% DL 4% CO 6% UA 14% 42% of passenger revenues 39% of passenger revenues 19% of passenger revenues Source: OAG, based on available seat miles (ASMs) from Jan 09 to Dec 09; AC Revenue Split based on Jan 09 to Dec 09 4

Boeing 777 (18) Airbus A330 (8) Boeing 767 (30) Airbus A321 (10) Airbus A320 (41) Airbus A319 (35) Revenue Opportunities Fleet flexibility to respond to market demand Industry-leading on-board products lie-flat beds, IFE, in-seat power outlets Unused route rights Well positioned to funnel traffic from the US World class global hub at Toronto strong international gateways in Montreal and Vancouver EMBRAER 190 (45) CRJ 705 (16) CRJ 100/200 (57) Benefits from Star Alliance Network EMBRAER 175 (15) 5 Dash 8 100/300 (60)

Diversified Network STAR ALLIANCE Members 6

One of the Youngest (1) Fleets Among the Major North American Legacy Carriers Years 16 14 12 10 9.0 9.7 Average fleet age 11.6 13.0 13.6 15.0 8 6 4 2 0 CAL AC LCC UAL DAL AMR (1) Average fleet age as at December 31, 2009 7

8 New Interiors Fleet-wide Refurbishment Completed in Business & Economy Cabins

Purchase With Ease Enjoy the Rewards aircanada.com FLIGHT PASSES: Commuter Regional Inter-Regional Transcontinental International Sun Destinations 9

Strong Operational Performance (1) Achieved on-time arrivals performance of 79% in 2009 OTP was adversely impacted by additional security measures imposed in December 2009 (1) Based on Air Canada's domestic Canada arrivals as measured by the US Dept of Transportation's standards (2) A higher index level indicates better operational performance 90 80 70 60 50 40 30 20 10 0 On-time Performance (2) (OTP) is a measure of operational performance Q4 Q1 Q2 Q3 Q4 07 08 08 09 08 09 08 09 08 09 10

Improved Customer Service Customer Service Index (1) (CSI) is a measure of customer satisfaction 8 7 6 5 4 3 2 1 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 2009 Business Class "value for money" = +9 pp "overall satisfaction" = +8 pp Economy Class "value for money " = +7 pp "overall satisfaction" = +6 pp (1) A lower index level indicates a higher level of customer satisfaction 11

Awards Global Traveler magazine readers voted Air Canada: Best Airline in Canada Best Airline in North America Business Traveler magazine's 2009 Best in Business Travel Survey voted Air Canada: Best In-Flight Services in North America Best Flight Attendants in North America Best North American Airline for International Travel Best North American Airline for Business Class Service 12

13 Other Leading Services by Air Canada

14 Managing Through Challenging Economic Conditions

Global Economies Forecasted to Slowly Recover Revenue initiatives and right-sizing of operations through capacity changes balance load factor and yield Yields remain under pressure but have shown steady improvements 2009 yield declined 15.1% in premium class and 5.9% in economy class overall, 2009 yield decreased 7.6% versus 2008 Q4 09 yield declined 7.3% from Q4 08, an improvement from the second and third quarters where yield declined 8.9% and 11.2% YOY Outperformed all NA legacy carriers with one of the smallest reductions in 2009 full year unit revenue versus 2008 2009 unit revenue declined 8.4% versus 2008 15

Disciplined Capacity Management Keeps Load Factors Strong 90% 90 Achieved LF of 77.5% in January and 78.4% in February 2010 12% 82.7% 82.5% 83.5% 8% 80% 80 80.0% 4.6% 79.9% 79.5% 80.5% 78.6% 4% 2.4% 2.0% 0% 70% 70-3.5% -3.3% -4% -7.8% -5.4% -8% 60% 60-10.3% Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 PLF (%) ASMs Q/Q Change -12% 16

One of the Smallest Reductions in 2009 Yield & Unit Revenue Versus 2008 (Unadjusted for FX) 2009 YIELD 20 17.7 0% Cents 15 10 5 14.9* 13.3 11.3 11.2 13.5 13.1 13.0 12.6 12.5 % variance YOY -5% -10% -15% -3.8-7.4-7.6-10.8* -11.7-11.5-12.7-13.1-14.0-15.7 0 WJA LUV JBLU AAI AC LCC UAL AMR DAL CAL -20% 2009 RASM JBLU LUV WJA AAI AC AMR LCC UAL DAL CAL 16 14.3 0% Cents 14 12 10 8 6 4 2 11.8* 10.1 9.0 9.0 10.9 10.6 10.4 10.3 10.2 % variance YOY -4% -8% -12% -1.2-4.5-8.4-11.5-11.3-12.4* -12.2-12.4 0 WJA LUV AAI JBLU AC LCC UAL AMR DAL CAL -16% -14.3-14.5 LUV JBLU AAI WJA AC AMR UAL LCC DAL CAL 17 *WestJet excludes charter revenues

Managing Fuel and Foreign Exchange (as of February 10, 2010) Objective is to hedge at least 35% of next 12 months' consumption Hedges comprised mainly of crude oil call options also collars and jet fuel swaps Relationship between jet fuel prices and CAD/US exchange rates helps reduce our USD exposure Net USD exposure is covered 15% for 2010 35% 30% 25% 20% 15% 10% 5% 0% Fuel Hedging Positions Average capped price $92/bbl Q1/10 FY 2010 18

19 Repositioning for Success

Success in Achieving Pension and Labour Stability Canadian-based unions' Labour agreements extended 21 months on a cost-neutral basis Adopted new pension funding regulations moratorium on past service payments Apr 1/09 to Dec 31/10 fixed payments of $150, $175 and $225 million in 2011, 2012 and 2013 15% of equity at date of issuance (17,647,059 Class B shares) issued to trust with proceeds contributed to pension plans Provides us with flexibility to manage through our next set of priorities 20

Rebuilt Cash Levels to See Us Through the Economic Downturn $700M secured term credit facility (including $100M finalized in Feb 10) Bought deal offering for net proceeds of $249M Non-refundable proceeds from a supplier of $230M Sale and leaseback of three Boeing 777 aircraft for net cash proceeds of $115M Over $1.3 billion raised since July 2009 Extension to an $82M loan from 2009 to 2013 Amended agreements with our principal credit card processor 21

2010 CTP Target is $270M (as of February 10, 2010) Initiatives relate to: Expected annual savings on a run-rate basis: $270M by end of 2010 $500M by end of 2011 (runrate) Individual benefits range from $100K to $40M $223M already achieved on 2010 expected annual savings $256M already achieved on the full $500M total $170 M $170 $170 M Contract Improvements $215 M Operational process & productivity improvements $115 M Revenue Optimization 22

Finding New Approaches to Generate Revenue DOT approved the formation of a transatlantic alliance (A++) Welcomed Continental Airlines into STAR ALLIANCE on Oct 27, 2009 Actively re-engaged with the travel trade Broadened distribution channels Introduced initiatives to grow ancillary fees including: Preferred Seat option changes to checked bag policy upgrade programs STAR ALLIANCE upgrade awards Creative new ways to grow revenues 23

2010 Priorities Seeking opportunities to expand international presence Improving revenue and unit cost productivity through CTP Re-engaging with customers with added focus on Premium revenue passengers Improving ability to grow business profitability Fostering culture change 24

Caution Regarding Forward-looking Information Air Canada s public communications may include written or oral forward-looking statements within the meaning of applicable securities laws. Such statements are included in this presentation and may be included in other filings with regulatory authorities and securities regulators. Forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may involve, but are not limited to, comments relating to strategies, expectations, planned operations or future actions. These forward-looking statements are identified by the use of terms and phrases such as anticipate", believe", could", estimate", expect", intend", may", plan", predict", project", will", would", and similar terms and phrases, including references to assumptions. Forward-looking statements, by their nature, are based on assumptions, and are subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business. Actual results may differ materially from results indicated in forward-looking statements due to a number of factors, including without limitation, industry, market, credit and economic conditions, the ability to reduce operating costs and secure financing, pension issues, energy prices, currency exchange and interest rates, employee and labour relations, competition, war, terrorist acts, epidemic diseases, insurance issues and costs, changes in demand due to the seasonal nature of the business, supply issues, changes in laws, regulatory developments or proceedings, pending and future litigation and actions by third parties as well as the factors identified throughout this presentation and, in particular, those identified in section 19 Risk Factors" of Air Canada's 2009 MD&A dated February 10, 2010. The forward-looking statements contained in this presentation represent the Corporation s expectations as of the date of this presentation (or as of the date they are indicated as having been made) and are subject to change after such date. However, the Corporation disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations. 25

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