Air Canada Premier Airline in Canada

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(No Transcript)
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Air Canada Premier Airline in Canada
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Air Canada Maintains and Strengthens Position in
all Markets
AC Other
AC Other
78
73
55
47
49
42
40
38
25
16
15
14
12
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2001 results based on start of the year.
Estimated market share.
2002 results based on OAG Q1 2002 scheduled
airline capacity share, published December, 2001
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Q401 Encouraging Performance Despite Loss

• 2001 2000 (millions) Q4 Q4 Change
• Oper. Revenue 2,117 2,590 (473)
• Oper. Expense 2,425 2,985 (560)
• Oper. Income (Loss) (308) (395) 87
• Non-oper. Expense (82) (84) 2
• Income (Loss) Before Tax (390) (479) 89

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Best Operating Results of any Major
International Carrier in North America
AC
Operating Margin
0 -5 -10 -15 -20 -25 -30
US
Q1 Q2 Q3 Q4
Pre-government assistance - US Industry 6
majors
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Air Canadas 4th Quarter RASM Outperforms
Industry
2001/2000 Change
AC
5 0 -5 -10 -15 -20 -25
US
Q1 Q2 Q3 Q4
Source ATA
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Unit Cost Performance Outpaces Industry
Throughout 2001
2001/2000 Change
AC
US
10 8 6 4 2 0 -2 -4
Q1 Q2 Q3 Q4
adjusted for one-timers US industry 6
majors
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More Air Canada Strengths

• Proven track record of superior service
• Top Brand recognition throughout Canada
• Labor contract stability
• Labor rates lower than U.S. carriers

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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 -

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Future Labor Cost Much Lower Than U.S. Carriers
Air Canada

• 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 -

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Favorable Competitive Landscape

• Service Competitor Reductions
• Trans Atlantic Cancellations
• Virgin Toronto-London
• Sabena Montreal-Brussels
• Trans Pacific Reductions
• Numerous carriers reduced
• service via U.S.
• EVA Taiwan-Canada

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Favorable Competitive Landscape

• Service Competitor Reductions
• Domestic Canada 3000 ceases operations Nov/09
• Transborder CancellationsUSA AA
  Boston-Halifax/Montreal/Ottawa UA
  Toronto-Denver USAir Toronto-Indianapolis
• Canada 3000 Toronto-Newark, Los
  Angeles- Vancouver/Edmonton/Calgary/ Toronto
• Reductions
• Chicago, LaGuardia, Denver, San Francisco,
  Seattle, Portland, Los Angeles, Houston,
  Cleveland, Indianapolis, Baltimore

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Air Canadas Action Plan

• Launch new products
• Reduce capacity
• Renew fleet
• Lower unit costs
• Lower manpower levels

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Air Canadas Products
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Air Canadas Products

• Air Canada
• Hub network
• Transborder and Domestic network
• Rapidair

• International
• Two-class
• Air Canada brand
• Air Canada code

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Air Canadas Products

• Key feed to mainline
• Regional markets
• Good frequency coverage

• Distinct brand
• Unique code

Air Canada codeshare
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Air Canadas Products

• Low fare
• Lower cost
• Supplemental flying in key markets

• Sun, long haul domestic, transcontinental routes
• Distinct brand
• Air Canada code

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Air Canadas Products

• Specialty charter
• Executive First configuration of surplus B-737

• Focus on specialty charters (i.e. sports teams,
  etc.)
• Concierge service

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Air Canadas Products

• Leisure, low yield
• Low cost
• Point-to-point, short haul

• Domestic/Transborder
• Distinct brand
• Unique code

Air Canada codeshare
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Capacity Discipline
Change in ASMs
2002
2001
10 5 0 -5 -10 -15 -20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
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Smaller / Younger Fleet

• Change Change
• Dec / 00 Dec / 01 01/00 Dec/02 02/01
• 747 7 5 - 2 5 -
• 330/340 16 20 4 16 - 4
• 767-200/300 51 45 - 6 44 - 1
• 319/320/321 82 85 3 104 19
• 737 43 26 -17 22 - 4
• DC9 17 4 -13 - - 4
• CRJ 25 25 - 25 -
• Total Mainline 241 210 -31 216 6
• Regional 134 114 -20 105 -9
• TOTAL 375 324 -51 321 -3

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Lower Unit Costs

• Fleet reconfiguration
• Lower cost on-board product
• Increased distribution efficiencies
• Increased airport productivity
• Maintenance / fuel / real estate

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Manpower Levels Coming Down

• Full Time Equivalents

40,000
38,000
36,000
34,000
32,000
30,000
Q4 2000
Q2 2001
Q4 2001
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Good Liquidity

• 1.2 billion in year-end 2001 cash
• Approximately 3.0 billion of unencumbered assets
• aircraft
• engines and spares
• inventory
• real estate
• lease deposit receivables
• accounts receivable

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2002 Mainline Aircraft Deliveries

• Sale/ Operating
• Leasebacks Leases
• A340-500 2 -
• A321-200 7 -
• A319-100 5 3
• A320-200 - 3
• Total 14 6

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Low Cap Ex in 2002( millions)

• Aircraft 602
• Financing ( 658 )
• Net ( 56 )
• Other 203
• Total Mainline 147
• Subs 15
• Total 162

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Significant Value in Air Canadas Business Units
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Investment Considerations

• Commanding share of all markets served
• Solid hub and network strategy
• Traffic almost back to normal
• Pricing recovering
• Industry capacity rationalized
• Unit costs coming down
• Adequate liquidity
• Low capital expenses going forward
• Substantial business unit value

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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 Canadas expectations as of
February 11, 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.