Second Quarter 2002 August 1, 2002 Note to Internet viewers: Please use NOTES PAGES view to access all notes and text.

Second Quarter 2002August 1, 2002

Note to Internet viewers: Please use “NOTES PAGES” view to access all notes and text.

Agenda - 2nd Quarter

• Highlights

• Economic Environment

• Operating Statistics

• Competitive Environment

• Revenue Highlights

• Income Highlights

2nd Quarter Results

• Air Canada records only profit among major international carriers in North America

• Operating results improve by $134 million

• Operations generate $81 million in cash

• Traffic resumes growth over 2001

• Increased productivity and lower unit costs underlie higher profitability

• Aircraft flying hours reduced by 8% while available seat miles remain unchanged

2nd Quarter Results

• System load factor up 1.8 PP in quarter

• Manpower level down 3,338 or 8.7% from 2nd quarter 2001

• Employee productivity up 10%

• Fuel price per litre down 18%

• Net unit cost down 6.9%

• Quarter end cash of $0.9 billion

Q2 Stats At a Glance

ASMs RPMs LF Yield RASM Rev

Domestic 3.1% 0.5% 1.9 PP 4.2% 1.6% 4.7%

Transborder 3.9% 8.4% 3.2 PP 9.7% 13.9% 17.3%

Oth. Int’l. 0.1% 8.0% 6.2 PP 1.8% 10.1% 9.9%

Total 0.1% 2.6% 1.8 PP 2.3% 0.1% 0.2%

Total Expense 4.4%

Total Net CASM 6.9%

Mainline Operations

Loss Before FX & Tax Improves $159 Million

(millions)Consol.Q2 2002

Consol.Q2 2001

ChangeFav./(Unfav.

)Oper. Revenue $2,552 $2,564 $ (12)

Oper. Expense 2,490 2,636 (146)

Oper. Income (Loss) 62 (72) 134

Non-oper. Exp. (46) (71) 25

Income (Loss) Before FX & Tax 16 (143) 159

FX on Long Term Monetary Items 19 161 (142)

Income (Loss) Before Tax $ 35 $ 18 $ 17

Q2 Net Interest Exp. Improves

(millions) Q2 2002Change

Fav./(Unfav.)

Net Interest Inc. (Exp.) $ (54) $ 14

Gain (Loss) on Sale 3 2

Other Non-Operating Inc. (Exp.) 5 9

Total Non-Operating Inc. (Exp.) $ (46) $ 25

2002Q2

2002/2001Q2

2002Y-T-D

Traffic (RPMs) 11.1 bln +2.6% +1.8%

Capacity (ASMs) 14.6 bln +0.1% -2.5%

Load Factor 76.0% +1.8 PP +3.2 PP

Traffic Growth Pushes Load Factor Up

Mainline Operating Statistics

Capacity Reductions Still In Place In Q2 U.S. Market(Y-O-Y Changes in Mainline Capacity)

-20%

-10%

0%

10%

Canada U.S. Oth. Int'l Total

Q2 2001/2000 J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001

% Change in ASMs

Atlantic & Pacific Markets Drive Traffic Growth(Y-O-Y Changes in Mainline Traffic)

-15%

-10%

-5%

0%

5%

10%

Canada U.S. Oth. Int'l Total

Q2 2001/2000 J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001

% Change in RPMs

Strong Domestic & Atlantic Yields - While Improving, U.S. Remains Weak(Y-O-Y Changes in Mainline Passenger Yield)

-20%

-15%

-10%

-5%

0%

5%

Canada U.S. Oth. Int'l Total

Q2 2001/2000 J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001

% Change in Yield

Very Strong Atlantic & Pacific RASM Performance(Y-O-Y Changes in Mainline Revenue per ASM)

-24%

-16%

-8%

0%

8%

16%

Canada U.S. Oth. Int'l Total

Q2 2001/2000 J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001

% Change in RASM

Q2 Revenue growth powered by Canada & Atlantic/Pacific(Y-O-Y Changes in Mainline Passenger Revenue)

-40%

-30%

-20%

-10%

0%

10%

20%

Canada U.S. Oth. Int'l Total

Q2 2001/2000 J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001

% Change in Revenue

Increased Yield Lifts Domestic RASM

-10

-5

0

5

10

-15%

-10%

-5%

0%

5%

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Capacity - Canada(Y-O-Y Changes in Capacity)

% Change in ASMs

-20%

-10%

0%

10%

-20%

-10%

0%

10%

Yield - Canada(Y-O-Y Changes in Passenger Yield)

RASM - Canada(Y-O-Y Changes in Revenue per ASM)

Load Factor- Canada(Y-O-Y Changes in Load Factor)

% Change in RASM

PP Change in Load Factor

% Change in Yield

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02 Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

US RASM Down Primarily On Weak Pricing

-10

-5

0

5

10

-15%

-10%

-5%

0%

5%

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Capacity - Transborder(Y-O-Y Changes in Capacity)

% Change in ASMs

-25%

-15%

-5%

5%

15%

-30%

-20%

-10%

0%

10%

Yield - Transborder(Y-O-Y Changes in Passenger Yield)

RASM - Transborder (Y-O-Y Changes in Revenue per ASM)

Load Factor- Transborder (Y-O-Y Changes in Load Factor)

% Change in RASM

PP Change in Load Factor

% Change in Yield

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02 Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Other Int’l RASM Up On Higher Load Factor

-10

-5

0

5

10

-20%

-15%

-10%

-5%

0%

5%

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Capacity - Other Int’l(Y-O-Y Changes in Capacity)

% Change in ASMs

-10%

-5%

0%

5%

10%

15%

-10%

-5%

0%

5%

Yield - Other Int’l(Y-O-Y Changes in Passenger Yield)

RASM - Other Int’l (Y-O-Y Changes in Revenue per ASM)

Load Factor- Other Int’l (Y-O-Y Changes in Load Factor)

% Change in RASM

PP Change in Load Factor

% Change in Yield

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02 Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

System RASM Unchanged As Higher Load Factor Offsets Soft Yield

-10

-5

0

5

10

-15%

-10%

-5%

0%

5%

10%

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Capacity - Total(Y-O-Y Changes in Capacity)

% Change in ASMs

-15%

-10%

-5%

0%

5%

-15%

-10%

-5%

0%

5%

Yield - Total(Y-O-Y Changes in Passenger Yield)

RASM - Total (Y-O-Y Changes in Revenue per ASM)

Load Factor- Total (Y-O-Y Changes in Load Factor)

% Change in RASM

PP Change in Load Factor

% Change in Yield

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02 Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

-20%

-10%

0%

10%

20%

CASM RASM

Declining Unit Cost Drives Increased Profits

-20%

-15%

-10%

-5%

0%

5%

10%

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Canada RASM% Change Y-O-Y

-10%

-5%

0%

5%

10%

Other Int’l RASM Total System

USA RASM

% Change Y-O-Y

% Change Y-O-Y

% Change Y-O-Y

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02 Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Q2’01 J&A’01 Q4’01 Q1’02 Q2’02

Air Canada Continues to Record The Best Traffic Results Of Any Major N.A. Carrier(Y-O-Y Traffic Change)

-40%

-20%

0%

20%

AC AMR CONT DEL UAL USAIR

Q2 2001/2000 Q3 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001

% Change in RPMs

2002Q2

2002/2001Q2

2002/2001Y-T-D

Salaries, Wages &Benefits

$701 mln -0.8% +0.1%

Excl. $40 million inS&W accrual reversalsin Q1, 2001

-2.7%

Salaries & Wages: Manpower level down sharply; benefits cost up

(Air Canada - Mainline)

Average Salary Up 4.9%, Employee Levels Down 8.7%(Y-O-Y Change - Total Salaries * & Employees*)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Q2'01 Q3'01 Q4'01 Q1'02 Q2'02

Average Salaries Employees

*Mainline

% Change Y-O-Y

2002Q2

2002/2001Q2

2002/2001Y-T-D

Aircraft Fuel $291 mln -22.5% -26.0%

Fuel: Price still sharply down

(Air Canada - Mainline)

-30%

-20%

-10%

0%

10%

20%

Q2'01 J&A'01 Q4'01 Q1'02 Q2'02

Fuel Productivity (ASMs/Lt) Fuel Cost (Cdn cts/Lt)

Mainline Cost Per Litre Down 18% While Productivity Up 5.9%(Fuel Productivity* & Unit Cost*)

*Mainline

% Change Y-O-Y

-30%

-20%

-10%

0%

10%

20%

30%

All Expense Categories Down except Aircraft Rent, User Fees and Mtce.

*Mainline

% Change Y-O-Y

Q2 2002/2001

RPMs ASMs COMM. FOOD& BAR

A/CMTCE

USERFEES

A/CRENT

OTHERDEP.

-10%

-5%

0%

5%

10%

Q2'01 J&A'01 Q4'01 Q1'02 Q2'02

Q2 Net Unit Cost Down 6.9%(Cost Per ASM*)

*Mainline, adjusted for non-ASM revenue

% Change Y-O-Y

-10%

-5%

0%

5%

Fuel a Major Component Of Net CASM* Improvement Of 6.9%

*Mainline

LabourLabourFuelFuel Unit cost decrease

net of non-ASM revenue

OtherEffect of Effect of non-ASM non-ASM revenuerevenue

Air Canada Has Lowest Net Unit Cost Of N.A. Majors

*Adjusted for non-ASM producing activity.

(Unit Cost* per ASM* - Q2‘02 & Q2‘01)

9.9 9.7 9.7 9.89.3 9.4

8.6 8.8 8.5 8.8 8.2 8.87.2 7.4

0

4

8

12

AMR UAL DEL NWEST CONT AC SWEST

Q2'02 Q2'01

U.S. cents

June 30/02$ mlns

Dec 31/01$ mlns

%Change

Cash $ 876 $ 1,067 -17.9%

Current Assets $ 2,197 $ 2,235 -1.7%

Property & Equip. $ 2,687 $ 2,830 -5.1%

Current Liabilities $ 3,088 $ 2,869 +7.6%

Long Term Debt $ 4,437 $ 4,580 -3.1%

Shareholder’s Equity $ (1,649) $ (1,460)* NM

Book Value per share $ (13.72) $ (12.15)* NM

Balance Sheet - Liquidity is Good(Air Canada - Consolidated)

NM - not meaningful