Improved Performance (millions) Q2Q2 Change Oper. Revenue$2,552 $2,564 $ (12) Oper. Expense2,4902,636 (146) Oper. Income (Loss) 62 (72) 134 Non-oper. Expense (46) (71) 25 Income (Loss) Before FX & Tax $ 16 $ (143) $ 159 FX on L/T Monetary Items (142) Income (Loss) Before Tax $ 35 $ 18 $ 17

Best Operating Results* of any Major International Carrier in North America * Pre-government assistance - US = 6 majors % OPERATING MARGIN

Air Canada Revenue Recovering Faster Q2 2002/2001 % CHANGE

Air Canada’s 2nd Quarter RASM Outperforms Industry *Mainline **Source ATA YEAR/YEAR % CHANGE

July/August Traffic* Stable 2002 * Mainline YEAR/YEAR % CHANGE

Air Canada Unit Cost** Performance Outpaces US Industry YEAR/YEAR % CHANGE * Mainline * * Adjusted for one-timers; US = 6 majors

All Expense Categories Down Except Ownership, User Fees, Mtce. and Insurance Q2 2002/2001 Mainline

Higher Fleet Productivity Y-T-D Aug ASM’s*  2%, Block Hrs*  10% 2002 * Mainline YEAR/YEAR % CHANGE ASMs Block Hours

Positioned For The Future 1.Multi-brand strategy 2.Increasing employee productivity 3.Falling distribution costs 4.Fleet simplification and commonality 5.Six Sigma 6.Low cap-ex and moderate debt repayment

Air Canada’s Products

Air Canada’s Products - Tango Low fare/leisure Simplified product Supplemental flying in key markets Medium, long haul Domestic, transcontinental, sun Point to point No interlining Low product cost Mainline labour cost

Low fare/business/ leisure Simplified product Domestic/ transborder Point-to-point, short haul Full interlining Low product cost Low labour cost Air Canada’s Products - Zip

Underlying Tango Profitability Revenue certainty –no overbooking, no denied boardings No refunds Single class seating Low distribution costs –80% to 90% internet bookings –Global Distribution Systems (GDS) by-pass –all e-ticket “All frills extra” onboard service No interlining, no baggage transfer Fast turnaround, higher aircraft utilization Low overhead

Employee Productivity Continues To Improve Air Canada Pre-merger Air Canada + CAIL as of June 30/00 ASM = Available Seat Mile * YTD + estimate for balance of year ** Mainline * Combined ASM per EMPLOYEE**

Agency Commissions Cut By More Than Half Since % 7.6% 6.6% 5.9% 4.4% COMMISSIONS AS % OF PASSENGER REVENUE * YTD + estimate for balance of year *

Narrow Body Fleet Moving to all Airbus Aircraft 157 Aircraft DC-9 10% Airbus 49% B % Airbus 67% B % CRJ 15% CRJ 16% To be replaced with Airbus aircraft when leases expire - some initially going to Zip.

Implementing Six Sigma MBB = Master Black Belt, BB = Black Belt, GB= Green Belt Trained Personnel Target Areas Operations –Airports, Air Canada Technical Services, System Operations Control, Flight Ops, Inflight Services, Call Centres, Air Canada Jazz, Aeroplan, Air Canada Vacations Staff –Marketing, Sales, Network Planning, Human Resources, Law, IT, Purchasing, Destina.ca MBB15 MBB 30 BB120 BB 320 GB1,380 GB

Low Cap-Ex & Moderate Debt Repayment Cap-Ex –Annual steady state cap-ex = $200 million –2003 & 2004 aircraft deliveries fully financed ten A319/320/321s two A s three A s Debt Repayment –$375 million second half of 2002 (mostly behind us) –$220 million in 2003

Good Liquidity $0.9 billion in cash at June 30, Generating positive cash flow from operations. Approximately $2.8 billion of unencumbered assets –aircraft –engines and spares –inventory –real estate –lease deposit receivables –accounts receivable

Significant Value In Air Canada’s Business Units