Investor Presentaiton

-7- circumstances where the bilateral agreement limits designation and the carrier is not operating its own aircraft or code- share services. On November 27, 2006, the Minister of Transport released a new international air transportation policy called Blue Sky that includes a more liberalized approach to Canada's bilateral air transportation negotiations. Under the new policy, Canada will proactively pursue opportunities to negotiate more liberalized agreements for international scheduled air transportation that will provide maximum opportunity for passenger and all-cargo services to be added according to market conditions. Air Canada provided its views on the new policy expressing, among other things, that it fully supports a liberalization based on the principle of balanced economic opportunities which yield mutually beneficial commercial opportunities for carriers of both contracting states. Transport Canada has also engaged stakeholders on key longer-term issues that are not part of the new policy such as the exploration of a comprehensive Canada-European Union air transport agreement, a review of ownership and control regimes of foreign air carriers, the movement towards the creation of a North American aviation market and the adoption of a multilateral approach to some negotiations. Air Canada provided its views on such longer-term issues during the consultation period following the release of the consultation document introducing the Blue Sky international air transportation policy. Charter Services Charter operations are generally not covered by bilateral agreements, although charter services are covered under the 1995 Canada-U.S. Air Services Agreement. Canadian government policy permits any Canadian carrier to operate charter services between Canada and any point in the world subject to prior approval of the Canadian and other appropriate regulatory authorities. Charter services are operated by Air Canada to provide service to foreign points where it is not the designated airline or to generate additional revenues from aircraft that would otherwise be idle. In April 2000, the Minister of Transport announced a new policy governing international passenger charter air services. This policy removed restrictions such as advance booking, minimum stay requirements and prohibitions on one way travel. To preserve a distinction between charter and scheduled international services, this policy retains the requirements that the entire seating capacity of an aircraft be chartered and that charter carriers be prohibited from selling seats directly to the public. Official Languages Act Air Canada is subject to the Official Languages Act (Canada) (the "OLA"). The OLA compels Air Canada to, among other things, ensure that any member of the traveling public can communicate with and obtain services in either official language, French and English, where there is significant demand for those services in that language (Part IV of the OLA) and to allow employees to work in either official language (Part V of the OLA). In 2000, Parliament passed amendments to the Air Canada Public Participation Act to impose on Air Canada the obligation to ensure any of its subsidiaries' customers can communicate with the subsidiary in respect of air services and incidental services, and obtain those services, in either official language, where the number of customers warrants such services. In September 2004, as a result of the emergence of Air Canada from protection under the Companies' Creditors Arrangement Act ("CCAA"), several internal divisions and former subsidiaries of Air Canada were spun off into limited partnerships under the direct or indirect control of ACE. While the linguistic obligations stated above continue to apply to Air Canada itself, ACE and the successor entities it owns are not currently subject to official language obligations, except that pursuant to the OLA, where services are performed on behalf of Air Canada by another party, Air Canada has the duty to ensure that any member of the public can communicate with and obtain those services in either official language in any case where those services, if provided by Air Canada, would be required under the OLA to be provided in either official language. On May 2, 2005, Bill C-47, An Act to amend the Air Canada Public Participation Act (Canada) (the "Bill C-47"), was tabled in the House of Commons. On November 3, 2005, Bill C-47 passed second reading and was referred to the Standing Committee on Transport. Bill C-47 sought to amend existing legislation to ensure that Air Canada's successor entities are subject to official language requirements. However, on November 29, 2005, the 38th Parliament of Canada was dissolved. As a result, the legislative process relating to the adoption of Bill C-47 was terminated. On October 18, 2006, Bill C-29, An Act to amend the Air Canada Public Participation Act (Canada) (the "Bill C-29") was tabled in the House of Commons. Bill C-29 proposes provisions on official languages similar to those contained in Bill C-47. Management cannot predict if or when such proposed legislation will enter into force.

View entire presentation