Investor Presentaiton

- 39 - existing indemnity to cover this exclusion. Unless and until the Government of Canada does so, the loss of coverage exposes the Corporation to this new uninsured risk and may result in the Corporation being in breach of certain regulatory requirements or contractual arrangements, which may have a material adverse effect on the Corporation's business, results from operations and financial condition. Risks Related to the Corporation's Relationship with ACE Control of the Corporation and Related Party Relationship ACE owns shares of Air Canada representing 75% of the voting interests in Air Canada. Voting control will enable ACE to determine substantially all matters requiring security holder approval as a result of its voting interest in Air Canada. ACE will exercise control over corporate transactions submitted to Air Canada's board of directors and/or Air Canada's security holders for approval. ACE will effectively have sufficient voting power to prevent a change in control of Air Canada. This voting control may discourage transactions involving a change of control of Air Canada, including as a result, transactions in which the public shareholders of Air Canada might otherwise receive a premium for their shares over the then-current market price. The interests of ACE may conflict with those of other shareholders of Air Canada. Future Sales of Shares by or for ACE Sales of substantial amounts of Air Canada's shares by ACE, or the possibility of those sales by ACE, could adversely affect the market price of the shares and impede Air Canada's ability to raise capital through the issuance of equity securities. ACE has no contractual obligation to retain any of its Air Canada shares. The registration rights agreement that Air Canada entered into with ACE grants ACE the right to require Air Canada to file a prospectus and otherwise assist with a public offering of shares that ACE holds in specified circumstances. In addition, Air Canada can issue and sell additional shares. Any sale by ACE or Air Canada of shares in the public market, or the perception that sales could occur could adversely affect prevailing market prices of the shares. RELATIONSHIPS AND RELATED PARTY TRANSACTIONS BETWEEN AIR CANADA AND JAZZ, AEROPLAN AND ACTS Relationship Between Air Canada and Jazz Jazz is an affiliate of Air Canada. On February 2, 2006, Jazz Air Income Fund completed its initial public offering and listed its units on the TSX under the symbol JAZ.UN. Jazz Air Income Fund currently has 75,638,223 units issued and outstanding and holds a 61.6% interest in Jazz LP. ACE currently holds a 38.4% direct interest in Jazz LP and holds 25,000,000 units of Jazz Air Income Fund, representing 33.1% of units issued and outstanding. In total, ACE currently holds a 58.8% interest in Jazz. Air Canada does not own any equity interest in Jazz. Air Canada and Jazz have entered into the Jazz CPA which is substantially similar to capacity purchase agreements entered into by a number of North American regional carriers. Jazz provided Air Canada with substantially all of its regional airline capacity based on ASMS for the period from January to December 2006. Jazz and Air Canada have linked their regional and mainline networks in order to serve connecting passengers more efficiently and to provide valuable traffic feed to Air Canada's mainline routes. Jazz's operations also complement Air Canada's operations by allowing more frequent service in lower density markets and higher density markets at off-peak times throughout Canada and to and from certain destinations in the United States than could be economically provided with conventional large jet aircraft. Air Canada is a party to the following four major agreements with Jazz: (i) the Jazz CPA; (ii) a master services agreement dated September 24, 2004 (the "Jazz MSA"); (iii) a trademark license agreement dated September 30, 2004 (the "Jazz Trademark License Agreement"); and (iv) a special trademark agreement dated September 30, 2004 (the "Jazz Special Trademark Agreement"). A brief description of these agreements is provided below.

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