#1217 RAGS 49025 182 5839 67435 2453 825 6358 28280 217 836 AIR CANADA 4.25% 375.69 9.56 2435 Fed Feb 25 5364 37569 356 2435 4523 825 635% 8963 763 4445 255 635 835% 28280 217 8368 +8025 1321 120% 565 37569 368 2435 45.23 825 835 896.33 763 4445 45.23 825 6.35% 375.69 9 2017 159 65.36 83698026 1321 1.20 896.33 763 4445 255 6.36 -95.36 282.80 217 8368 +80.25 1321 2453 933% 89833 763 4445 255 825 6.35% 256.36 278 56:39 +74.36 245.3 80 217 8368 +8025 1321 335% 37569 956 2435 -4523 825 67 425375.63 356 24.35 45.25 6.35 Investor Day 35 702-533 335 536 37569 956 2435-4523 825 6.35% 89833 Universal Eventspace, Toronto September 19, 2017 734445 255 635 835% 282.80 217 8368 C-GJWI 1321 120% 89633 AIRBUS A321-200#2Caution Regarding Forward-Looking Information / Non-GAAP Measures Outlook provided in today's presentations constitutes forward-looking information within the meaning of applicable securities laws, is based on a number of assumptions, including those discussed during today's presentations, and is subject to a number of risks and uncertainties. Today's presentations also includes references to non-GAAP measures, such as EBITDAR margins, Returns on Invested Capital, Free Cash Flow and Leverage Ratio. Please refer to this morning's press release for additional information on non-GAAP measures and cautionary statements relating to forward-looking information, as well as major assumptions relating to our financial targets. 2#32017 Investor Day CALIN ROVINESCU PRESIDENT & CHIEF EXECUTIVE OFFICER September 19, 2017 AIR CANADA A STAR ALLIANCE MEMBER MEMBRE DU RÉSEAU STAR ALLIANCE#4We Have An Experienced and Results-Driven Executive Team President Passenger Airlines Benjamin Smith Air Canada Rouge Call Centres Executive Vice President and Chief Commercial Officer Lucie Guillemette Crew Planning and Scheduling Customer Experience Customer Relations -Marketing Senior Vice President, Operations Richard Steer Senior Vice President, Revenue Optimization Craig Landry President and Chief Executive Officer Calin Rovinescu Executive Vice President and Chief Financial Officer Michael Rousseau -Air Canada Pension Investments Aircraft Programs Audit, Risk and Compliance westor Relations and Corporate Reporting Treasury Senior Vice President, Regional Markets and Government Relations Kevin Howlett Senior Vice President, People and Culture Arielle Meloul-Wechsler Senior Vice President, Financial Planning and Analysis Amos Kazzaz Senior Vice President, International and Regulatory Affairs and Chief Legal Officer David Shapiro Vice President Flight Operations Eddy Doyle Vice President, Airports - North America Mark Southern Vice President, Global Sales Duncan Bureau Vice President, Network Planning Mark Galardo Vice President, and Controller Chris Isford Chief information Officer Catherine Dyer Vice President, Loyalty and eCommerce Mark Nasr Vice President In-Flight Service Renee Smith-Valade Vice President, Commercial Strategy John MacLeod Vice President, Cargo Tim Strauss Vice President, Safety Samuel Elfassy Corporate Secretary Carolyn Hadrovic 4#5Global Champion Strategy • Significant progress made towards goal of becoming a sustainably profitable global industry leader A number of transformational changes made including: restoring liquidity levels, strengthening the balance sheet, securing long-term labour agreements Reported record financial results Restructured pension plans 5#6Our Path to Global Champion Financial Stability Pension and liquidity risks addressed Record financial results CTP CASM reduction Lower debt Labour Stability Long-term agreements with all major unions Increased flexibility and cost certainty Fleet Modern WB fleet Seat densification Swing capacity NB fleet replacement Award winning product Network & Hubs Extensive & expanding global network Geographically well-positioned hubs Air Canada Rouge Competitive cost structure in leisure markets Provides new growth opportunities Regional Feed Diversification More competitive cost structure at Jazz Loyalty Improved customer experience Significant financial value to Air Canada Credit card RFP Solid foundation allows Air Canada to leverage its unique competitive advantages 6#7Air Canada's Growth Strategy We've Taken the Airline to New Heights Available Seat Miles Millions of ASM 95,000 90,000 85,000 80,000 75,000 70,000 65,000 60,000 55,000 52,553 50,000 +12.9% +56.3% 73,889 68,573 66,460 67,269 62,814 63,496 60,637 60,169 61,083 62,074 58,822 59,343 56,536 54,160 80,871 92,726 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 7#8Record Profitability Record Levels of EBITDAR and EBITDAR Margin EBITDAR (excluding special items) EBITDAR Margin (excluding special items) EBITDAR Margin % 20 18 16 14 12.8 11.6 12 7.0 10.9 10.7 10 8 $ Millions 4,000 18.9 18.3 17.6 12.5 3,500 3,000 - 2,500 2,000 1,500 2,768 2,715 9 2,542 1,000 4 1,660 1,386 1,242 1,320 1,433 500 2 679 0 0 2009 2010 2011 2012 2013 2014 2015 2016 TTM-June-2017 8#9Growth Directed to International Markets Over 90% of growth in last several years has been directed at U.S. and international markets Launched close to 50 U.S. and international routes since 2016 International and U.S. routes now. represent 67% of total passenger revenue Network diversification strategy lowers overall risk Increased international connecting traffic by over 20% in 2016 versus 2015 9#10Broadening International Footprint Developed additional commercial alliances with major international carriers, including Air China, Cathay Pacific and Virgin Australia Xan Chengdu w Hanganou Guangzhou Continued to leverage expansion through revenue sharing joint venture with United Airlines and Lufthansa Bej Seb Noya Tokyo-Narita Osaka Tokyo-Haneda Talpel می Vancouver Calgary 2 Montréal John's Toronto Stockhol Copenhagen Mande Celvisc Wars Geneva Zurich Budape Barcelona Liberia Cartagena San José Panama City Lisbonlarid "Caleblanc Rome A Algiers Georgetown Bogot Uma São Paulo Virgin Accra Lagos 10#11Strengthened Balance Sheet and Lowered Risk Profile Adjusted net debt Leverage ratio $ Millions Pension Plan Surplus (Deficit) 8,000 8.3 7,000 9.0 $ Billions 7,090 1.9 8.0 2 6,291, 6,393 1 7.0 5,000 6,000 5,628 5,132/ 4,874 4,576 4,351 4,137 0 -1 6.0 -2 5.0 -3 (2.8) 4,000 -4 4.0 (4.2) -5 3,000 3.7 3.5 Jan 1, 2009 Jan 1, 2012 Jan 1, 2017 3.1 3.0 3.0 3.1 2.4 2,000 2.5 2.6 2.0 1,000 1.0 0.0 0 2009 2010 2011 2012 2013 2014 2015 2016 June-17 Effectively restructured pension plans, and now in a significant surplus position 11#12Investments Driving Higher Return ROIC % 20 15 10 4.7 5 4.2 0 -1.5 6.7 12.1 10.5 18.3 14.7 (5) 2009 2010 2011 2012 2013 2014 2015 2016 - Boeing 777/787 aircraft - Aircraft reconfigurations - Creation of Air Canada Rouge - - - - New Revenue Management system Introduction of on-board WiFi New website New Maple Leaf Lounges 12#13Share Price Up 3,000% - Over $6.5 Over $6.5 Billion of Value Created Indexed Price Performance 3,500 3,000 2,500 2,000 1,500 1,000 500 June 10/13 AC hosts Investor Day June 2/15 AC hosts Investor Day Aug 1/16 AC reports record Q2 2017 May 11/16 AC announced its intention to launch its own loyalty program in 2020 Nov 7/16 AC reports record Q3 2016 results Sept 26/16 AC announced a debt refinancing transaction of C$1.25B results Share Price: April 1, 2009 $ 0.78 June 7, 2013 $ 2.27 June 1, 2015 $ 14.19 0 '09 '10 '11 '12 '13 '14 "15 "16 Air Canada NYSE Arca Airline S&P TSX "17 Source: FactSet Prices 13#14Many Opportunities Ahead Continue to leverage unique competitive advantages (geography, hubs, brand, competitive fleet and products and services) Lower-cost Rouge growth made possible with ACPA deal 14#15Moderate Capacity Growth Going Forward Expect rate of capacity growth to steadily decline as focus shifts from wide-body growth to mainline narrow- body fleet replacement programs AIR CANADA 000 0000000000000 0000 15#16Launch of Own Loyalty Program Expect to unlock significant value through the launch of loyalty program - Net present value of $2.0 billion to $2.5 billion* (on a pre-tax basis) over a 15-year period Initiating RFP for credit card partnership * Assumes the current regulatory environment and a discount rate in line with Air Canada's WACC 16#17Data and Digital are Fuel for Air Canada's Future Growth • Data can drive a virtuous cycle of growth • Airlines already have access to significant amounts of data Better Data Analytics одо Personalized Offers & Loyalty; Better Digital Products • • Users now engage across loyalty programs, partners, devices, and digital platforms, leading to explosive growth of data collection Data is transforming Air Canada by enabling the transition from a channel- and product-based approach to a customer-based approach Even Richer Data Strong Sustained Growth More Customers & Users 2.5 quintillion bytes of data are created daily (Source: International Personal Data Trade Association) 17#18Leveraging Strengths of Our People Continue to promote improved collaboration amongst all employees in a supportive and enriching environment Canada's Top 100 Employers 2017 ® AIRBUS A321-200 6650 18#19Key Three-Year Financial Targets - 2018-2020 2015-2018 Targets (2) 2018-2020 Targets (3) Annual EBITDAR Margin (1) 15% - 18% 17% - 20% Annual ROIC (1) 13% 16% 13% -16% Free Cash Flow (1) (Cumulative over the period) $2.0 $3.0 billion Leverage Ratio (1) (4) 2.2 by end of 2018 1.2 by end of 2020 (1) For additional information on non-GAAP financial measures, refer to the Appendix of this presentation (2) As reported at Air Canada's 2015 Investor Day on June 2, 2015 (3) The impact of accounting standard changes discussed under "Accounting Standard Changes" of this presentation are not factored into Air Canada's 2017 Investor Day projections (4) The 2020 leverage ratio target is based on a foreign exchange rate of US$1 = C$1.32 19#20Thank you aircanada.com#212017 Investor Day BEN SMITH PRESIDENT, PASSENGER AIRLINES September 19, 2017 AIR CANADA A STAR ALLIANCE MEMBER MEMBRE DU RÉSEAU STAR ALLIANCE#22Agenda 1 Commitment to Customers 2 Network and Fleet 3 Competitive Strengths 4 Revenue, Sales, and Ancillaries 5 ACV & Cargo 6 Digital / eCommerce 7) Loyalty 9.56 2435 23 825 6.35% 8963 20 Feb 217 8368 +8025 1321 120% 37.63 4445 45.23 825 6.35% 375.69 9 45 255 8.35 -95.36 282.80 217 83.68 +80.25 1321 4445 255 825 6.36% 256.36 2.78 56.39 +74.36 245.3 +8025 1321 335% 375 89 956 2435 -45.23 82.5 67 56 2435 46.25 635 3 825 635% 90, 33 17 83.68 458 65.36 22#23Commitment to Customers 23#24Exceptional Customer Experience • Our greatest asset, an engaged Air Canada Team • Safety First, Always • Be a Top 10 Airline in Everything We Do Share the Best of Canada Around the World 24#25HITH Investing in Our People Improve customer service through increased engagement 111 Canada's Top 100☑ Employers 2017 Recognize the strong relationship between employee engagement & customer experience 25#26Labour Relations: Long-Term Collective Agreements with Unions Vital competitive tools to success ACPA Long-term collective bargaining agreements provide: 1. Cost certainty 2. Significantly enhanced efficiency 3. Team engagement 4. Additional flexibility to respond to competitive threats and internal business challenges 5. Solid platform from which to invest in increased team engagement initiatives APAC CUPE Canadian Union of Public Employees U UNIFOR theUnion lesyndicat MACHINISTS www ASSOCIATION OF ww ERNATIONA AND O AEROSP 26#27Operational Safety and Reliability Focus Builds the foundation to attract different customer segments ง national Koresis Safety and reliability attracts customers. Regular customers drive long term profitability 27#28Network and Fleet 28#29Air Canada has Unique Competitive Advantages These advantages set Air Canada apart from the competition Dual Brand AIR CANADA AIR CANADA rouge Star Alliance Geographic Advantage STAR ALLIANCE Three Powerful Hubs (YYZ/YVR/YUL) Vancouver Montréal Toronto Competitive Fleet & Product AIR CANADA A++ Joint Venture + SEABAL Air Canada's advantages are unique - supporting a long-term market position 29#30Air Canada Mainline Wide-body (Long-Haul): Fleet and Network Fleet renewal focused on 777 and 787 is maximizing efficiency Long Haul Fleet Snapshot (September 2017) New Network Destination Snapshot Current 2014 Toronto → Haneda, Milan On Order Phasing Out Boeing 777 2015 25 AIR CANADA Toronto Montréal → Amsterdam, Delhi, Dubai → Paris #2 2016 Boeing 787 Toronto 29 + (8) Montréal AIR CANADA Airbus A330 AIR CANADA. Boeing 767 AIR CANADA 80 -5 10 Vancouver 2017 Toronto → Seoul → Lyon Brisbane, Delhi → Mumbai Montréal → Shanghai, Tel Aviv Vancouver Melbourne (Seasonal), Taipei 2018 Vancouver Montréal Paris, Zurich → Tokyo Narita Boeing 777 and 787 will form the backbone of the Air Canada fleet for the next 20 years 30#31Air Canada Mainline Wide-body (Long-Haul): Summary Leverage our geography to serve North America Destinations: 46 Founded: 1937 Vancouver Calgary Sout Tokyo-Narita Tokyo-Haneda Mexico City Meboume Sydwy Fleet: 72 Hubs: Toronto, Montreal and Vancouver Montréal jo Toronto San Jose Panama City Lim London Apterdam Wankhart Marid Barcelone AIR CANADA Advantages: Utilization, Fleet, LOPA, Pilot deal Rome Mex Air Canada has created a global network to rival and exceed that of the three U.S. majors 31#32Air Canada Mainline Narrow-body: Fleet and Network Fleet focus will switch from A320 family to 737-8MAX and CS300 Short Haul Fleet Snapshot (September 2017) New Network Destination Snapshot 2013 Current Toronto → Vail, CO On Order Airbus A319/A320/A321 Halifax Montréal → San Francisco → Fort Lauderdale 75 AIR CANADA 2014 Ottawa → Tampa Embraer E190 www Boeing 737MAX 25 (61) AIR CANADA Bombardier CS300 AIRLANABA (45) 2016 Toronto → Portland Vancouver → Chicago 2017 Vancouver Boston 2018 Toronto → Shannon Montréal → Dublin Boeing 737-8MAX and Bombardier CS300 will form the future fleet with lower CASM 32 2#33Air Canada Mainline Narrow-body: Summary Targets point to point traffic and connections to the global network Destinations: 24 (Mainline) Founded: 1937 For My Sankatoon Calgary Vancouver Vict San Francisco Denver Fleet: 100 Aircraft Montréal Onta Half Toronto gton You CA) Sesin Hubs: Toronto, Montreal and Vancouver AIR CANADA Advantages: Low CASM Aircraft, LOPA, Pilot Deal, Utilisation Primarily focused on Toronto, Montreal and Vancouver North American trunk routes Significant CASM reduction with 737-8MAX & CS-300 aircraft 33#34Air Canada Rouge: Fleet and Network Fleet focus will stay on 767-300ER and A320 family aircraft Short Haul Fleet Snapshot (September 2017) New Network Destination Snapshot Current 2015 Toronto To be Introduced Boeing 767 Montréal Vancouver → Calgary → → Abbotsford, Sarasota Mexico City, Venice Osaka Halifax 24 + (1) rouge - 2016 Toronto →> Budapest, Glasgow, London (Gatwick), Airbus A319/A321 25 rouge Montréal →> Vancouver → Palm Springs, Port of Spain, Prague, Warsaw Casablanca, Puerto Vallarta, San Jose Dublin 2017 2013 Network Destination Snapshot Toronto → Edinburgh, Venice Toronto Montréal Vancouver → → → Belize City, Berlin, Cartagena, Reykjavik, St. Vincent Algiers, Lima, Marseille, Reykjavik London (Gatwick), Nagoya, Orlando 2014 Toronto → Lisbon, Manchester, Panama City Montréal → Barcelona, Nice A significant growth story associated with Air Canada earning its fair market share 34#35Air Canada Rouge: Summary Air Canada leisure oriented product has proven its success Founded: July 2013 Destinations: 49 (Asia, Caribbean, Europe, USA) Vanco Summer '17 Finama Oty Lin Fleet: 49 Aircraft Vince Hubs: Toronto, Montreal and Vancouver Calpay Winter '18 San Jose name Cty rouge Advantages: Very Low CASM Aircraft LOPA, Low Ownership - and Labour Costs Alternating between Atlantic (summer) and Sun (winter) is a major competitive advantage 35#36Regionals: Fleet and Network Growth Fleet focus on CRJ-900, E175 and Q400 Regional Fleet Snapshot (September 2017) Current CRJ900 AIR CANADA Embraer E175 On Order 21 New Network Destination Snapshot 2013 Toronto Calgary → Sydney, NS → Red Deer 2014 Toronto → Mont Tremblant 2015 ****CANADA CRJ-100/200 25 Vancouver Calgary 2016 24 Toronto Montréal Comox → Nanaimo, Terrace Vancouver Calgary → Jacksonville, Washington (Dulles) → Denver, Hamilton, Houston, Philadelphia, San Diego, San Jose → San Francisco Dash 8-Q400 44 Dash 8-100/300 42 2017 Toronto Montréal Vancouver → Memphis, San Antonio, Savannah → Dallas, Washington (Dulles) Dallas, Denver Dash 8-100 and CRJ-100/200 to be retired, with the Dash 8-300 fleet to be refurbished 36#37Regional Airlines: Summary Regional airlines provide both local services and feed traffic Founded: Carriers: Jazz, Sky Regional, Air Georgian, EVAS Total Routes: 182 Diego whhone fon sty Prince Sandp Fot Mommy S S Calgary Vancouver V Medicine Hat Forging San Antoni Fleet: 171 Aircraft* Kas y Mo Odon Ch Townes Mont wro Toronto jacksonville AZTA barbing Montreal AIR CANADA Hubs: Toronto, Montreal, Vancouver and Calgary Advantages: Sky Regional, Air Georgian cost base Cander John's Cost structures of Sky Regional and Air Georgian are competitive We are working with Jazz to continue to lower its cost structure *Including all regional aircraft 37#38Growth of Traffic Transiting Canada to/from the U.S. (6th Freedom) AC 6th Freedom Passengers Carried to/from U.S. +103% 2012 2013 2014 2015 2016 U.S.-ATL U.S.-PAC 12.9% 11.3% Market Share of International Traffic to/from U.S. 7.3% 6.7% Growing Air Canada Market Share of International traffic to/from U.S. to 2% represents approx. $1.2B of incremental annual revenue 5.0% 3.5% 3.1% 2.8% 2.1% 2.0% 1.9% 0.9% Connections Correspondances 40.5% UA DL AA BA LH AF VS KE KL CX JL AC Other 2016 Increasing U.S. revenues provides more U.S. net coverage and reduces net U.S. FX exposure 38#39Competitive Strengths 39#40Geography Enables our hub strategy Vancouver International Closest NA Hub to Asia Toronto Pearson International Premier Global Hub Montréal - Pierre Elliott Trudeau International Key francophone markets All three of our hubs play a significant role in our growth strategy 40#41Fleet Renewal and Reconfiguration Fleet renewal will drive a step-change in hard product AIR CANADA AIR CANADA AIR CANADA AIRLANABA Boeing 777 (Up to 25 Aircraft) Boeing 787 (Up to 37 Aircraft) Rockwell Collins Super Diamond Business Premium Economy Cabin AVOD IFE in every seat WiFi (by 2019) New Look Interiors STANDARDIZED PRODUCT 777 / 787 Boeing 737MAX (Up to 61 Aircraft) Bombardier CS300 (Up to 45 Aircraft) Longer range provides expanded deployment opportunities New Business seat Larger Preferred Seat section AVOD IFE in every seat WiFi (at EIS) New Look Interiors STANDARDIZED PRODUCT 737 MAX / CS300 Over 80% of Air Canada's mainline fleet will have industry-leading products by 2020 41#42Flex-Capacity Strategy Older, less capital intensive aircraft are ideal for flex capacity Boeing 777 Airbus A330 AIR CANADA AIR CANADA Boeing 767 ANADA 10 leased 777s expire 2019 to 2021 (8x 77W, 2x 77L) 8 Owned 8 Owned, 2 Leased Airbus A319/320/321 AIR CANADA 5x A321 owned, 41x A320 lease expiries 2018 to 2020, 15x A319 lease expiries 2018 to 2020 Airbus A319 •rouge 14 of 25 are owned. Average age of over 20 years Significant flex capacity provides buffer in case of an economic downturn 42#43Focus on Premium Increasing margins through our premium products · • International growth strategy is fueled by premium traffic Premium products (Maple Leaf Lounges, Priority check-in areas, concierge, priority boarding, quality in-flight cuisine) enhance the experience • Extremely competitive International Business Class product AIR CANADA Concierge Premium products enable revenue growth to keep pace with capacity growth 43#44Product: Check-In Competitors are investing in premium facilities for corporate fliers British Airways "First Wing" London - LHR T5 Delta Air Lines "Delta One at LAX" Los Angeles Lufthansa "First Class Terminal" Frankfurt American Airlines "Flagship" Check-in New York - JFK DELTA OMBIA I I Air Canada "Premium Check-in" Toronto - YYZ Toronto Pearson "Premium Check-in" + SE100k counter is a solid foundation 44#45Product: Maple Leaf Lounges Raising the bar across our network Exploring Premium Lounge Opportunities Expansion of International Maple Leaf Lounge at YVR (Vancouver) New Maple Leaf Lounge at LGA (New York) International Maple Leaf Lounges in FRA and LHR Other Initiatives Expansion of BMW Service Enhanced Food & Beverages Upgraded WiFi Digital Newspapers & Magazines We are exploring a Transcontinental Premium Product where wide-body aircraft fly 45#46Product: In-flight and Catering Product Lift ambitions to become a top 10 global airline for in-flight service International Business and Premium Transcontinental products to be consistent, competitive 46#47737-8MAX Interiors 737-8MAX will introduce the Boeing "Sky Interior" ST Recline AIRCARICA Adjustable Headrest Cocktail Tables (Fixed and Movable) Stowage Compartment (Pad Charging Cables) Upper Literature Pocket Coat Hook (Not shown) Stowage Compartment (Phone, Passport) 13.3" Monitor High Power USB (Integrated in monitor) Raising the bar on in-seat entertainment Movable Armrest In-Arm Table Movable Leg Rest Foot Rest Lower Literature Pocket 15 language support Launched on 737MAX Live Weather / News Seatback Ordering Air Canada aims to have a consistent look and feel across all mainline aircraft 47#48Amended Pilot Contract ACPA APAC Boeing 767 •·rouge Airbus A319 / A321 Incremental Rouge NB Growth subject to Mainline Growth Additional growth over and above current Fleet plan "rouge" Increased Flexibility Additional growth within the current fleet plan Replace Tier 2 WESTJET (To be named ULCC) J jetlines norwegian FLAIR Airlines WOW air Rouge can operate to more destinations Number of aircraft can be expanded AIR CANADA EXPRESS Significant flexibility to respond to changing market conditions and ULCCS 48#49New Passenger Service System (PSS) Replacing Legacy Systems i 7 } Home с ] 4 ! • • • Consistent and improved customer experience Improved integration with Codeshare and Alliance Partners Delivery of new products and enhancements quickly 1 End ? Shift • Reduced compliance costs • Modern, flexible and reliable platform. New PSS will enhance the customer booking experience 49#50Revenue, Sales, and Ancillaries 50#51Strong Revenue Growth Continues Revenue growth keeping pace with capacity expansion CAGR 14,677 +6.0% 13,868 (in millions $) 13,272 12,382 12,114 11,612 10,786 9,739 2009 2010 2011 2012 2013 2014 2015 2016 Unprecedented growth has increased revenue at 6% CAGR and 51% over seven years +51% 51#52Revenue Management: Enhancement Initiatives program of revenue optimization is on-going at Air Canada Optimizing revenue is crucial to ensure our growth is sustainable and profitable Ensuring "quality" revenue Optimizing Trips Based on O&D Innovating tools and processes "Artificial Intelligence" opportunities A number of key initiatives have been completed, with many more in the pipeline 52#53Ancillary Revenue - Year-to-Date June 2017 Ancillaries relating to seating comfort are the key growth driver Key Drivers of Ancillary Revenue Growth (YTD 2017): . Upgrades 39% • Seat Fees 28% Ancillary Revenue (in millions $) +14% Passengers Carried (in millions) +10% YTD JUNE 2016 YTD JUNE 2017 YTD JUNE 2016 YTD JUNE 2017 Revenue growth to passenger growth ratio of 1.5x in 2016 is stable in 2017 at 1.55x 53#54Modernizing Branded Fares Allows Air Canada to compete in more market segments Flexible Suite of Brands Enhanced Flexibility Latitude Comfort Customized Air Canada experience for every customer segment Flex Tango Ability to further drive margin with personalized offerings post-booking via web and mobile ULCC Onboard Bags At The Airport Flexibility FFP Enhanced Experience WiFi Preferred Seat Upgrade Credit Upgrade $ Meal Lounge Priority Check in Priority Boarding Roller Carry On Waived Baggage Fees OMW Standby SDC Cancel Admin Fee Anytime Change Frequent Flyer Points Enhanced branded fares allow Air Canada to cater to both corporate and budget customers 54#55ACV & Cargo 55 55#56Air Canada Vacations (ACV): Growth Plan Strategic initiatives will help make ACV more competitive Today • Primarily Sun Destinations • Rely on 3rd Parties to Sell our Product Focused Strategic Initiatives • Brand has low recognition in B2C market Key Focus Areas • Leverage Air Canada brand globally Capture a share of inbound tourism market New web and mobile platform to enhance digital experience • Reduce reliance on third party resellers • Online dynamic pricing AIR CANADA VACATIONS SUN These initiatives are part of the plan to modernise ACV and make it more competitive 56#57Cargo: Revenue Analysis Cargo has great revenue growth opportunity with long-haul capacity Revenue Growth - Cargo vs Passenger +22.5% 13,200 13,000 12,800 12,600 12,400 Passenger revenue Cargo revenue 12,200 12,000 11,800 11,804 11,600 11,400 11,200 11,000 +4.9% 11,021 10,800 10,737 400 488 200- 12,420 13,148 512 502 506 474 0 2012 2013 2014 2015 Grow revenue by pursuing all available strategic opportunities 2016 NADA NAGA AKH 040 AKE 05026 AC AKE 04882AC AIR CANADA AKE04615 AC AKE04063 AC AKH 16 AKE04359AC AIR CANADA EKE04359AC NADA AKH AKE04276 AC • Available cargo tonnage grew 29.6% (2012 - 2016) Cargo revenue grew 4.9% (2012 - 2016) 57 ADA#58Cargo: Go Forward Plan Action Plan in Place to Grow Cargo Revenues AIR CANADA CARGO Optimization of the Toronto "Cargo Hub" • • Improve efficiencies at primary hub in Toronto Leverage new Air Canada destinations globally Seize increased capacity opportunity with 777 & 787 • Dedicated freighter service through Cargojet partnership Objective: build a competitive and efficient Cargo operation 58#59Digital / eCommerce 59 59#60Strengthening Customer Loyalty Through Digital Experience 1 Create a single view of all customers (current & prospect) 2 Redesign and optimize our digital channels 3 Personalize customer content, offers, and services Grow revenue & customer service through enhanced engagement 60#611 Create a Single View of All Customers Vision Kiosk ☑ Create a holistic view of the customer and their journey covering the online, offline & on-board worlds Enables advanced analytics to support decision-making Future Loyalty program and PSS system data will complete the CRM Text - Our Strategic Data Advertising Offline Media Call Center ☑ Website ☑App F Social CRM Loyalty Reservations Email Operations 61#622 Redesign and Optimize Our Digital Channels... Mobile investments achieving revenue growth & behavior shift Redesign & optimize our digital channels... Mobile investments achieving revenue growth & behaviour shift 3 Personalize customer content, offers & services Connecting data analytics to our channels increases relevance 80% in mobile revenue YOY Jan-July 2017 vs. Jan- July 2016 Standby/Upgrade Orange F 9:58 AM Standby & Upgrade List Standby Upgrade Business Class Capacity 14 booked 14 Checked in ~50% Off-Airport check-in; mobile now largest channel (+~40% YoY) DEV, W VIC. G. 2. JET, M. List only includes upgrade eligible passengers that have checked in for this flight 15 weeks to build Time from start to beta build Concept, design, dev & QA with agile on our newest app Consumer Segment A Segment: Occasions: Leisure Frequency: 2 Customer Value: $ Available Segment A Offer Content Available Segment B Offer Content Available Segment ...Offer Content Consumer Segment B Occasions Business Frequency: 12 Customer Value: $$$$ Monetize customer data by enabling "personalized" offers and services based upon context, customer behavior and commercial value 62#63Loyalty 63#64Loyalty: Comprehensive Premium Product Range A wide range of products and services, aligned with leading brands AMERICAN EXPRESS aeroplan AIR CANADA 3759 8765432100 CF FROST TD 04 CORNESS aeroplan AIR CANADA 1234 5838-9123 09700 VISA INFINITE PRIVILEGE AIR CANADA ALTITUDE SUPER ELITE 100K M. Jean Echantion 2018.02.28 Our Altitude program is competitive and designed to attract the most profitable customers 64#65Loyalty Overview AIR CANADA ALTITUDE "Owning" the customer experience New Loyalty Program will enable Air Canada to: Improves engagement with customers, employees and partners Customers to earn and redeem miles with greater flexibility Creates a more cohesive experience by introducing new digital technologies Improve responsiveness through agile decision-making Remove operational inefficiencies Extract significant financial value A new in-house frequent flyer program will generate significant value for customers and Air Canada 65#66Our Path to the New Loyalty Program in 2020 2017 Strategy & Program Design Build Refine Strategic Partnerships, including credit card Technology & Program Build Communications & Launch Preparation 2018 2019 2020 Identify & Establish May 11, 2017 Announcement to launch own loyalty program in 2020 upon expiry of commercial agreement with Aimia Vendor Selection & Build Launch Preparation Launch Communication June 2019 Communication of initial program details June 2020 FFP launch date 66#67Thank You aircanada.com#682017 Investor Day MIKE ROUSSEAU EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER September 19, 2017 AIR CANADA A STAR ALLIANCE MEMBER MEMBRE DU RÉSEAU STAR ALLIANCE#69Agenda 1. Sustainable Business Model 2. New Financial Targets 3. Financial Metrics 4. Taxes 5. Loyalty Program 6. Risk Management 7. Appendix - - - Accounting Standard Changes Annual Assumptions 2018 - 2020 Financial Information Non-GAAP Financial Measures AIR CANADA 69#70Sustainable Business Model AIR CANADA 70 0#71We Have a Sustainable Business Model • Sustainable business model and investments are delivering as planned • Record financial results from Global Champion strategy • Improved financial targets • ASM growth rate steadily declines as wide-body fleet expansion comes to an end • Unit cost benefits from narrow-body fleet replacement programs. • Incremental benefits from extended capacity purchase agreement with Jazz post-2020 · Significant value from launch of the loyalty program in June 2020 71#72New Financial Targets AIR CANADA 72#73We've Set New Targets for the Next Level of Performance Improvement Previous 2015-2018 Targets (2) Annual EBITDAR Margin (1) 15% - 18% Annual ROIC (1) Free Cash Flow (1) 13% -16% 2017 Outlook (3) 2018-2020 Targets (4) 17% 19% in 2017 and 2018 11% - 14% in 2017 and 2018 - $600M $900M in 2017 17% - 20% 13% -16% $2.0-$3.0 billion (Cumulative over the period) Leverage Ratio (1) (5) 2.2 by end of 2018 2.2 by end of 2018 1.2 by end of 2020 (1) For additional information on non-GAAP financial measures, refer to the Appendix of this presentation (2) As reported at Air Canada's 2015 Investor Day on June 2, 2015 (3) As reported on August 1, 2017 (4) The impact of accounting standard changes discussed under "Accounting Standard Changes" of this presentation are not factored into Air Canada's 2017 Investor Day projections (5) The 2020 leverage ratio target is based on a foreign exchange rate of US$1 = C$1.32 73#74Financial Metrics AIR CANADA 74#75We Expect Continued Strong EBITDAR Margins • • . Expect revenue growth to continue - - - - - Leveraging Air Canada's unique competitive advantages and fleet investments Air Canada Rouge Revenue enhancement initiatives Revenue diversification points of sale revenue Ancillary sales Technology - International Continuous focus on cost transformation - - - - - New more-efficient narrow-body aircraft Lowering cost structures of regional partners Cost reduction initiatives Process/productivity improvements Technology Outstanding customer service Project annual EBITDAR margin of 17% to 20% over 2018 to 2020 period 75 55#76Building on Cost Productivity Focus On a cumulative four-year basis, Air Canada's CASM performance was materially better than both WestJet's and the U.S. legacy carriers WestJet 32.8% 6.9% 37.8% Air Canada (7.1%) (12.9%) U.S. Legacy Carriers 6.1% 10.9% ASM % Change (2012-2016) WestJet CASM, excluding fuel and employee profit share % Change (2012-2016) Air Canada Adjusted CASM % Change (2012-2016) Air Canada Adjusted CASM % Change (2012-2016). Normalized for the impact of the USD/CAD exchange rate on operating expenses using 2012 as the base year U.S. Legacy Carriers CASM % Change (2012-2016) . U.S. Legacy Carriers: Includes Delta Airlines, United Airlines and American Airlines. CASM excludes fuel and special items/charges. Excludes third-party business expenses at United Airlines 76#77Select Cost Reduction Initiatives Fuel Wages and Salaries Aircraft Maintenance Sales and Distribution Other M+ DO MC MA CTV2500 438337 77#78Select Cost Reduction Initiatives Fuel • . Decrease aircraft weight Reduce fuel transportation costs Replace legacy fuel inventory and cost management system 78#79Select Cost Reduction Initiatives Fuel Wages and Salaries • • Decrease aircraft weight Reduce fuel transportation costs Replace legacy fuel inventory and cost management system New crew payroll system New employee health and wellness program Automation of passenger ticket changes (Amadeus) New flight attendant crew pairing system (Jeppesen) 79#80Select Cost Reduction Initiatives Fuel Wages and Salaries Aircraft Maintenance ° Decrease aircraft weight Reduce fuel transportation costs Replace legacy fuel inventory and cost management system New crew payroll system New Employee Health and Wellness Program Automation of passenger ticket changes (Amadeus) New flight attendant crew pairing system (Jeppenen) Optimization of workscope related to fleet retirements Vendor consolidation - Expendable parts purchasing ownership transferred to one vendor New software to reduce deicing costs 80#81Select Cost Reduction Initiatives Fuel Wages and Salaries Aircraft Maintenance Sales and Distribution ° 0 0 Decrease aircraft weight Reduce fuel transportation costs Replace legacy fuel inventory and cost management system New crew payroll system New Employee Health and Wellness Program Automation of passenger ticket changes (Amadeus) New flight attendant crew pairing system (Jeppenen) Optimization of workscope related to fleet retirements Vendor consolidation - Expendable parts purchasing ownership transferred to one vendor New software to reduce deicing costs Reduction in payment acceptance costs with the implementation of alternate forms of payment and the introduction of payment wallets on aircanada.com Expect benefits from an enhanced distribution agreement (increased flexibility and better economic terms) 81#82Select Cost Reduction Initiatives Fuel Wages and Salaries Aircraft Maintenance Sales and Distribution Other ° 0 0 Decrease aircraft weight Reduce fuel transportation costs Replace legacy fuel inventory and cost management system New crew payroll system New Employee Health and Wellness Program Automation of passenger ticket changes (Amadeus) New flight attendant crew pairing system (Jeppenen) Optimization of workscope related to fleet retirements Vendor consolidation - Expendable parts purchasing ownership transferred to one vendor New software to reduce deicing costs Reduction in payment acceptance costs with the implementation of alternate forms of payment and the introduction of payment wallets on aircanada.com Expect benefits from an enhanced distribution agreement (increased flexibility and better economic terms) Fraud reduction initiatives (3D identification, Hawkeye tools, etc.) • Toronto cargo hub optimization • Repatriation of Jazz STOC activity under Air Canada • Improved oversight of Jazz station management 82#83New Boeing 737-8 MAX Aircraft to Provide 11% CASM Reduction versus A320 Aircraft -11% A320 CASM Fuel Crew Maintenance Airport User Fees & Other Ownership Boeing 737-8 CASM 83#84New C-Series CS300 Aircraft To Provide 12% CASM Reduction versus Embraer 190 Aircraft -12% E190 CASM Fuel Crew Maintenance Airport User Fees & Other Ownership CS300 CASM 84#85Additional Benefits from Amended and Extended Capacity Purchase Agreement with Jazz Amended and extended capacity purchase agreement expected to provide $550 million in financial value from 2015 to 2020 compared to previous agreement - Greater network flexibility - Fleet economics Pilot mobility agreement The Jazz fleet is transitioning to more efficient and larger aircraft with significant fleet simplification - - Mix of larger, newer technology regional jets (CRJ705s) and turboprops (Q400s) Fleet decreases in size over time to accommodate the addition of the Q400s, replacing, older, inefficient Dash 8-100s From 2021-2025, CPA compensation paid to Jazz reduces by approximately $55 million per year, resulting in a more competitive cost structure in the regional sector 85#86We Expect Continued Improvement in ROIC • . Significant increase in invested capital and book value of equity Decision to use a book value-based method of calculating ROIC beginning in Q3 2017 Going forward, invested capital will be calculated based on outstanding average long-term debt plus average shareholder's equity plus capitalized operating leases Forecast annual ROIC of 13% to 16% over 2018 to 2020 period • Expect ROIC to continue to exceed weighted average cost of capital by a wide margin 86#87We Expect Significant Growth in Free Cash Flow • . Plan on using excess cash to purchase new aircraft to effectively reduce gross debt Will continue to leverage Normal Course Issuer Bid (NCIB) opportunities Will consider other uses of cash as plan matures Expect cumulative free cash flow of $2.0 to $3.0 billion over 2018 to 2020 period 87#88Normalization of Capital Expenditures By 2020 $ millions 2015 2016 2017 2018 2019 2020 Aircraft and Aircraft-related $1,415 $2,516 $2,198 $1,895 $1,751 $1,224 Information Technology 38 36 68 125 115 58 Facilities and Ground Equipment 84 77 83 107 84 82 Capitalized Maintenance 208 234 107 95 132 132 Capitalized Interest 70 58 49 48 48 48 Total Capital Expenditures $1,815 $2,921 $2,505 $2,270 $2,130 $1,544 88#89Investments in Technology Driving Future Benefits Passenger Service System Principal IT system supporting reservations and departure control operations Branded Fares Re-introducing branded fares and fixed buy-across Fuel Management System Petroleum administration, inventory control and expenditures system 89#90Investments in Technology Driving Future Benefits Passenger Service System Principal IT system supporting reservations and departure control operations Branded Fares Re-introducing branded fares and fixed buy-across Fuel Management System Petroleum administration, inventory control and expenditures system $100M in Annual Incremental Benefits • • Better partner integration Improved efficiency Improved shopping 90#91Investments in Technology Driving Future Benefits Passenger Service System Principal IT system supporting reservations and departure control operations Branded Fares Re-introducing branded fares and fixed buy-across Fuel Management System Petroleum administration, inventory control and expenditures system $100M in Annual Incremental Benefits 0 Better partner integration Improved efficiency Improved shopping $20M in Annual Incremental Benefits . Increased fare differentiation Improved product recognition Increased customer buy up 91#92Investments in Technology Driving Future Benefits Passenger Service System Principal IT system supporting reservations and departure control operations Branded Fares Re-introducing branded fares and fixed buy-across Fuel Management System Petroleum administration, inventory control and expenditures system $100M in Annual Incremental Benefits 0 Better partner integration Improved efficiency Improved shopping $20M in Annual Incremental Benefits ° Increased fare differentiation Improved product recognition Increased customer buy up $3M in Annual Incremental Benefits . To provide visibility to fuel movements from refinery to wing 92#93Investments in Technology Driving Future Benefits Passenger Service System Principal IT system supporting reservations and departure control operations Branded Fares Re-introducing branded fares and fixed buy-across Fuel Management System Petroleum administration, inventory control and expenditures system $100M in Annual Incremental Benefits 0 Better partner integration Improved efficiency Improved shopping $20M in Annual Incremental Benefits Increased fare differentiation Improved product recognition Increased customer buy up $3M in Annual Incremental Benefits To provide visibility to fuel movements from refinery to wing Mobile 3.0 . AC mobile application upgrade Plusgrade • To allow customers to bid on premium seats OTHER TECHNOLOGY INVESTMENTS SmartSuite . To replace operating system on critical digital devices Customer Relations System To replace customer relations and baggage claims system Workday New HR system Data Roadmap Improved enterprise data capabilities CYBERSECURITY: Increased security and reduced vulnerability 93#94We Expect Continued Strengthening of the Balance Sheet • • • Significantly lowered weighted average cost of capital (WACC) - 7.6% at June 30, 2017 WACC well below ROIC Accessed lower-cost capital Enhanced Equipment Trust Certificates (EETC) • - Japanese Operating Lease with Call Option (JOLCO) Completed a highly successful $1.25 billion dollar refinancing transaction in 2016 • Increased pool of unencumbered assets - total current value of US$1.7 billion 94#95Lower Leverage Supports Investment Grade Credit Ratings • · • Creating shareholder value by lowering. gross debt and leverage remains top priority followed by shareholder distributions via share buybacks Forecast continued improvement in financial leverage as debt is paid off and gross debt is reduced Reduced overall risk profile by aggressively managing our financial leverage, leading to credit rating upgrades. - - Standard & Poor's BB- with stable outlook (from CCC+ in 2010) Moody's Ba3 with stable outlook (from B3 in 2010) Expect projected decline in leverage ratio to 1.2 by the end of 2020 to support drive for investment grade credit ratings 95#96Improved Fundamentals and Launch of Loyalty Program Should Support Drive for Multiple Expansion Despite record financial results and long-term upside potential, Air Canada trades at a discount to U.S. legacy airlines and at a significant discount to industrial companies EV/EBITDAR 4.4 5.2 3.6 5.3 4.8 AC U.S. Legacies Intl Legacies WJA U.S. LCCs Source: 2017E TD Securities (Aug 28, 2017) 96#97Taxes AIR CANADA 97#98Net Tax Loss Carry Forwards Coming to an End Implications . • • • - - Tax At December 31, 2016, Air Canada had total unrecognized temporary differences of $3.4 billion, including unrecognized non-capital loss carryforwards of $1.1 billion We expect to be required to pay Ontario Minimum Tax which is estimated to be less than $20 million per year over 2017 to 2020 period Based on current profitability trends and projections for future financial performance, there may be recognition of deferred income tax assets in 2017, following which Air Canada will record current and deferred income tax expense on the consolidated statement of operations in future periods, as applicable We do not expect to pay any significant federal cash taxes until 2021 (essentially for 2020 fiscal year) 98#99849 Loyalty Program C-FRTG - AIR CANADA DREAMLINER 99#100High-level Financial Breakdown • · Over a 15-year period, net present value of the new loyalty program expected to be in the range of $2.0 billion to $2.5 billion*, on a pre-tax basis NPV includes approximately $85 million of up-front investments and uses a discount rate that approximates Air Canada's weighted average cost of capital * Assumes the current regulatory environment and a discount rate in line with Air Canada's WACC 100#101High-level Financial Breakdown Four main value drivers: - - - - Passenger Revenue: Increased wallet share, yield premium, and the flexibility to allocate redemption capacity differently (versus restrictive 8% across-the-board) Mileage Margin: Uplift from new credit card partnership and margin on mileage sales Data: Ownership of data and associated activation opportunities Distribution: Influence on channel participation and behaviours 101#102Launch of Loyalty Program NPV is between $2.0 billion and $2.5 billion* (on a pre-tax basis) Gross billings, net of seat opportunity cost Other airline Direct seat cost, revenue Star Alliance net cost and merchandise Program operating costs Start-up costs Total NPV * Assumes the current regulatory environment and a discount rate in line with Air Canada's WACC 102#103AIR CANADA 241 Risk Management 103#104Overall Risk Profile is Significantly Reduced Stronger Balance Sheet • Record level of unrestricted liquidity • Lower leverage ratio and improved credit ratings Pension Risk Addressed* ● $1.9 billion pension solvency surplus as at January 1, 2017 • • 75% of pension liabilities are currently matched with fixed income products may increase matched fixed income allocation by 10% Projected to remain in a pension solvency surplus position with no past and current service payments for at least 2018, 2019 and 2020 * For more information, refer to section 6.6 of Air Canada's Second Quarter 2017 MD&A and section 9.7 of Air Canada's 2016 MD&A 104#105Overall Risk Profile is Significantly Reduced Fleet Flexibility • • • • Positioned to adjust to different economic environments By the end of 2017, 50 aircraft or 23% of mainline/Rouge fleet will be fully-owned and unencumbered Staggered Airbus narrow-body aircraft lease expiries give Air Canada the opportunity to manage capacity, either up or down, as it transitions to Boeing 737 MAX aircraft Longer-term flexibility exists in Air Canada's ability to defer a portion of Boeing 737 MAX aircraft deliveries Both Boeing 737 MAX and C-Series orders have a significant number of options to provide flexibility 105#106Fuel Risk is Well Managed Fuel hedging strategy is designed to manage our exposure to fuel price volatility • Use of call options to protect us against short-term price spikes while allowing us to participate 100% in fuel price declines Target hedge ratio of 40% of planned fuel consumption, typically put in place three to nine months in advance of any given quarter 106#107Foreign Exchange Risk is Well Managed Foreign exchange risk strategy is to cover 70% of net U.S. exposure on a rolling 18-month basis • · • • Air Canada's financial results are reported in Canadian dollars while a large portion of its expenses, debt obligations and capital commitments are in foreign currencies, primarily U.S. dollars Air Canada's U.S. dollar exposure is partially hedged by U.S. and foreign-denominated revenues which essentially cover U.S. and foreign-denominated non-fuel operating expense exposure In order to manage our exposure to the U.S. dollar, we hold U.S. dollar cash reserves and enter into currency derivative contracts. Annual U.S. dollar net exposure shortfall will decrease as a result of decline in U.S. denominated capital expenditures and increased U.S. dollar revenue 107#108Thank you aircanada.com#1092017 Investor Day Conclusion CALIN ROVINESCU PRESIDENT & CHIEF EXECUTIVE OFFICER September 19, 2017 AIR CANADA A STAR ALLIANCE MEMBER MEMBRE DU RÉSEAU STAR ALLIANCE#110Air Canada - A Global Champion • Proven strategy • Delivered on financial targets • De-risked the airline • Many opportunities ahead, including: - - - Launch of loyalty program RFP for new credit card partner New Passenger Service System - Digital initiatives Lower-cost Rouge growth 110#111Fostering Positive Culture Change with Engaged Workforce Employee surveys and multiple awards demonstrate marked improvements in employee culture and engagement - - - - - - - Canada's 15 Top Employers for Canadians Over 40 50 Most Engaged Workplaces in North America Canada's Top 100 Employers Montreal's Top Employers Canada's Top Two Most Attractive Employees Canada's Best Diversity Employers Canada's 10 Most Admired Corporate Cultures Canada's Top 100 Employers 2017 0 2017 CANADA'S BEST DIVERSITY EMPLOYERS 111#112Delivering Best Airline in North America Numerous industry awards: - - - Best Airline in North America (Skytrax) Four-Star ranking from Skytrax The Wall Street Journal: "Why Savvy U.S. Fliers Take Air Canada" - August 16, 2017 WORLD AIRLINE SKYTRAX AWARDS 2011 2 4 STAR AIRLINE SKYTRAX Voted Best Airline in North America 112#113We are Confident that our Improved Financial Targets will be Attained Annual EBITDAR Margin of 17%-20% (over 2018-2020) Annual ROIC of 13%-16% (over 2018-2020) Cumulative Free Cash Flow of $2.0B-$3.0B Leverage Ratio of 1.2* (over 2018-2020) (by end of 2020) * The 2020 leverage ratio target is based on a foreign exchange rate of US$1 = C$1.32. 113#114We Will Continue to Focus on Delivering Sustained Profitability and Value for Shareholders . The launch of our own loyalty program, with our own co-branded credit card with a leading financial institution, will further contribute to our margins and free cash flow results NPV of $2.0B-$2.5B* from Loyalty Program * Assumes the current regulatory environment a discount rate in line with Air Canada's WACC and is on a pre-tax basis 114#115Thank you aircanada.com#116Q&A#117APPENDIX 117#118Accounting Standard Changes IFRS-15 Revenues From Contracts With Customers - Effective January 1, 2018 and will be applied retrospectively with adjustment to the opening consolidated statement of financial position as at January 1, 2017 Incremental costs of obtaining passenger revenues (such as credit card fees and global distribution system charges) will be capitalized at the time the flight is sold and expensed at the time of passenger revenue recognition This change is not expected to have a material impact on the consolidated statement of operations The impact of this change is not factored into Air Canada's 2017 Investor Day projections 118#119Accounting Standard Changes IFRS-16 Leases Effective for annual periods beginning on January 1, 2019 Changes will significantly impact Air Canada's consolidated statement of operations and its consolidated statement of financial position It is expected that most leases will be on balance sheet as P&E assets and lease liabilities In particular, depreciation, aircraft rent, interest expense, regional airlines expense and maintenance expense will be impacted The impact of this change is not factored into Air Canada's 2017 Investor Day projections 119#120Annual Assumptions 2018 - 2020 GDP Canada CPI Canada 2018 2019 Moderate Growth Approximately 2% 2020 Average Jet Fuel Price (Canadian cents per litre) 62 65 67 Average Currency (US$ = C$) 1.32 1.32 1.32 Average Annual Wage Rate Increase 2% 2% 2% 120#121Financial Information • • Financial information contained in this presentation has been derived from the historical consolidated financial statements of the Corporation for the applicable periods noted. Air Canada's consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada ("GAAP"), as set out in the CPA Canada Handbook Accounting ("CPA Handbook"), which incorporates International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") - The forward looking financial information in this presentation is based upon the accounting policies and assumptions in effect as of June 30, 2017 and does not reflect the impact of any accounting standard changes that may be applicable to the Corporation's financial statements in the future 121#122Non-GAAP Financial Measures Air Canada uses certain non-GAAP financial measures that are derived from its consolidated financial statements, but that are not recognized financial measures for financial statement presentation under GAAP. Reconciliations of those measures to comparable GAAP measures for the relevant periods can be found in Air Canada's Management's Discussion and Analysis reports, which are available on Air Canada's website at aircanada.com Adjusted Net Income (Loss) . Air Canada uses adjusted net income (loss) to assess the performance of its business without the effects of foreign exchange, net financing income (expense) relating to employee benefits, mark-to- market adjustments on derivatives and other financial instruments recorded at fair value, gain on sale and leaseback of assets, loss on debt settlements and special items 122#123Non-GAAP Financial Measures Adjusted CASM (or Adjusted Cost per Available Seat Mile) • Air Canada uses adjusted CASM to assess the operating performance of its ongoing airline business without the effects of aircraft fuel expense, the cost of ground packages at Air Canada Vacations, and special items as these items may distort the analysis of certain business trends and render comparative analysis to other airlines less meaningful - - Aircraft fuel expense is excluded from operating expense results as it fluctuates widely depending on many factors, including international market conditions, geopolitical events, jet fuel refining costs and Canada/U.S. currency exchange rates Air Canada also incurs expenses related to ground packages at Air Canada Vacations which some airlines, without comparable tour operator businesses, may not incur Excluding aircraft fuel expense, the cost of ground packages at Air Canada Vacations, and special items from operating expenses generally allows for more meaningful analysis of Air Canada's operating expense performance and a more meaningful comparison to those of other airlines 123#124Non-GAAP Financial Measures EBITDAR • • EBITDAR (earnings before interest, taxes, depreciation, amortization, impairment and aircraft rent) is commonly used in the airline industry to view operating results before depreciation, amortization and impairment, and aircraft rent as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other assets EBITDAR excludes special items as such items would distort the analysis of certain business trends and render comparative analysis to other airlines less meaningful ROIC (Adjusted Net Income (Loss) before interest divided by Invested Capital) • . · Air Canada uses return on invested capital ("ROIC") as a means to assess the efficiency with which it allocates its capital to generate returns ROIC is based on adjusted pre-tax income (loss), excluding interest expense and implied interest on operating leases Invested capital includes average year-over-year long-term debt, average year-over-year finance lease obligations, average year-over-year shareholders' equity and the value of capitalized operating leases (calculated by multiplying annualized aircraft rent by 7) 124#125Non-GAAP Financial Measures Leverage Ratio • Leverage ratio is commonly used in the airline industry and is used by Air Canada as a means to measure financial leverage. Leverage ratio is calculated by dividing adjusted net debt by trailing 12-month EBITDAR (excluding special items) Free Cash Flow • Free cash flow is commonly used in the airline industry and is used by Air Canada as an indicator of the financial strength and performance of its business, indicating the amount of cash Air Canada is able to generate from operations and after capital expenditures. Free cash flow is calculated as net cash flows from operating activities minus additions to property, equipment and intangible assets, and is net of proceeds from sale-leaseback transactions 125#126217 RAGS 49025 182 5839 67435 2453 825 6358 28280 217 836 AIR CANADA 4.25% 375.69 9.56 2435 Fed Feb 25 5364 37569 356 2435 4523 825 635% 8963 763 4445 255 635 835% 28280 217 8368 +8025 1321 120% 565 37569 368 2435 45.23 825 835 896.33 763 4445 45.23 825 6.35% 375.69 9 2017 159 65.36 83698026 1321 1.20 896.33 763 4445 255 6.36 -95.36 282.80 217 8368 +80.25 1321 2453 933% 89833 763 4445 255 825 6.35% 256.36 278 56:39 +74.36 245.3 80 217 8368 +8025 1321 335% 37569 956 2435 -4523 825 67 425375.63 356 24.35 45.25 6.35 Investor Day 35 702-533 335 536 37569 956 2435-4523 825 6.35% 89833 Universal Eventspace, Toronto September 19, 2017 734445 255 635 835% 282.80 217 8368 C-GJWI 1321 120% 89633 AIRBUS A321-200