Investor Presentaiton

- 30 - agreements, mediations or arbitrations under the collective agreements with all its union groups. It is still awaiting the arbitrator's decision in respect of its flight attendants, who are represented by CUPE. The CUPE arbitration award decision is expected during the second quarter of 2007. The wage increases awarded or agreed upon range up to 2.6% per year until 2009. Jazz has completed negotiation, mediation and arbitration with all of its unions with the exception of the CALDA, the union representing Jazz's dispatchers. The wage increases awarded range from 1% to 1.75% per year until 2009. The wage re-opener negotiations with CALDA are continuing. In 2006, Air Canada continued to reduce its workforce of non-unionized employees. As part of a decision to proceed with the reduction of non-unionized staffing levels by 20% in order to further enhance efficiencies and in view of the difficult fuel cost environment, Air Canada has implemented a workforce reduction program for this employee group. As of March 27, 2007, approximately 78% of the planned non-unionized workforce reductions had been completed. RISK FACTORS The risks described herein may not be the only risks faced by the Corporation. Other risks of which the Corporation is not aware or which the Corporation currently deems to be immaterial may surface and have a material adverse impact on the Corporation's business, results from operations and financial condition. Risks Relating to the Corporation Financial Results In the recent past, the Corporation has sustained significant operating losses and may sustain significant losses in the future. On September 30, 2004, the Corporation and certain of its subsidiaries emerged from protection under the CCAA and implemented a plan of arrangement. For the years ended December 31, 2003, 2002 and 2001, Air Canada incurred operating losses before reorganization and restructuring items and non-recurring labour expenses of $684 million, $192 million and $731 million, respectively, and incurred net losses of $1,867 million, $828 million and $1,315 million, respectively. For the nine-month period ended September 30, 2004, Air Canada realized operating income before reorganization and restructuring items of $120 million and, for the three-month period ended December 31, 2004, the Corporation incurred an operating loss of $59 million. For the years ended December 31, 2006 and 2005, the Corporation realized operating income of $259 million and $318 million, respectively, and incurred net losses of $74 million and $20 million, respectively. Prior to September 30, 2004, the operations or Air Canada included the operations of various entities included in the Air Canada Services segment, as well as those of Jazz, Aeroplan and ACTS and, as such, those prior results may not be comparable. Despite Air Canada's emergence from creditor protection under the CCAA, the resulting and ongoing business initiatives and efforts at cost reductions and its recent results, the Corporation may not be able to successfully achieve planned business initiatives and cost reductions, including those which seek to offset significant fuel and other expenses or restore positive net profitability and may sustain significant losses in the future. Leverage and Liquidity The Corporation has, and is expected to continue to have, a significant amount of indebtedness, including substantial fixed obligations under aircraft leases and financings. The Corporation may incur additional debt, including secured debt, in the future. The amount of indebtedness that the Corporation currently has and which it may incur in the future could have a material adverse effect on the Corporation, for example, by (i) limiting the Corporation's ability to obtain additional financing, (ii) requiring the Corporation to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness and fixed cost obligations, thereby reducing the funds available for other purposes, (iii) making the Corporation more vulnerable to economic downturns, and (iv) limiting the Corporation's flexibility in planning for, or reacting to, competitive pressures or changes in its business environment. The ability of the Corporation to make scheduled payments under its indebtedness will depend on, among other things, its future operating performance and its ability to refinance its indebtedness, if necessary. Each of these factors is to a large extent subject to economic, financial, competitive, regulatory, operational and other factors, many of which are beyond the Corporation's control. In addition, as the Corporation incurs indebtedness which bears interest at fluctuating interest rates, to the extent these interest rates increase, its interest expense will increase. There can be no

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