Air Industry Outlook An Air Canada Perspective

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Air Industry Outlook(An Air Canada Perspective)
CILTNA Transportation Situation and Outlook
ConferenceApril 24, 2006
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The New Air Canada

• Transformed from legacy carrier to loyalty
  carrier
• Competitive cost structure
• Customer driven revenue model
• Regained customer trust
• New technology aircraft
• Enhanced network and product
• Strong financial position

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New Business Model drives Customer Loyalty

• Best Network
• High frequency service between major cities
• Global reach
• Star and other alliances
• Competitive Fares
• Simplified fare structure
• Tailored to individual choice
• Clear link between price and value
• Ease of Use
• Web or agency bookings through aircanada.com
• Check-in kiosks
• Choice and transparency

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Large Regional Jets Will Change the Industry
Regional Jets a Low-Cost Network Tool
Regional Jets a Low-Cost Network Tool
Embraer
Bombardier
Embraer
Bombardier
Executive Class
Hospitality
Executive Class
Hospitality Class

• Air Canada 4 fleet types

• Jazz 100 Bombardier

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North American Network Model

• Use of smaller aircraft to offer increased
  frequencies
• Mass transit schedule between eight major
  Canadian cities (Vancouver, Calgary, Edmonton,
  Winnipeg, Toronto, Ottawa, Montreal Halifax)
• Expanded network with new destinations (e.g.
  Hamilton, Yellowknife, San Diego, Salt Lake City)
• New routes and expanded frequencies to existing
  destinations (e.g. Calgary-New York, Las Vegas
  expansion)
• Higher load factors
• Reported system load factor for March of 81.4,
  our highest ever for March
• Twenty-four consecutive months of record system
  load factors

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International Fleet Renewal
New and efficient wide body aircraft are being
introduced starting in 2007
B787
B777
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New Technology Aircraft
New generation aircraft are characterized by
efficiency and consumer appeal

• Vastly improved fuel burn through new generation
  engines and lighter materials
• Superior range and speed allowing development of
  new markets
• Extensive use of low-maintenance composite
  materials
• Enhanced consumer features including new
  generation interior designs
• Better cargo revenue potential due to superior
  operational performance and larger cargo holds

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New Technology AircraftInterior Features

• Enhanced personal space
• Biggest windows ever
• Bigger seats
• Wider aisles
• Bigger stow bins
• Improved pressurization
• Passengers will notice and remember

B787
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New Technology AircraftAircraft Range and Speed
New aircraft offer superior range and speed
Cruise Speed (mach) B787 .85
B777 .84 B767 .80
A330-300 .82 A340-300 . 82
B787-8
B787-9
B777-200LR
B777-300ER
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New TechnologyCommonality
Improved commonality makes replacement even more
compelling with regard to pilots, spare parts,
and complexity of operation
TWO GROUPS OF PILOTS, FIVE TYPES/MODELS OF
AIRPLANES
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International Network

• International services are highly profitable
• Increasing competition as carriers increase
  international service
• DL 18 new international routes in 2006
• BA Summer 06 capacity to Canada up 23 vs.
  summer 05
• American and Continental new nonstops to India
• Air China to buy 20 aircraft per year over the
  next few years
• Gateways are well positioned to serve European
  and Asian markets from the U.S.
• Wealth of unused international route rights
• U.S. policy of no transit without visa a
  significant opportunity
• Canadians have preference for national carrier
• Frequency advantage to most destinations (e.g.
  Toronto-London 5 daily flights vs. British
  Airways with 3)
• Aeroplan miles a big positive

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International Network Strategies

• Focus on China Introduced nonstop service from
  Toronto to Beijing in 2005, and will inaugurate
  Toronto-Shanghai in June 2006
• Maintain and expand position as dominant carrier
  between Canada and Europe (re-introduced service
  to Rome in 2005, expanded Zurich from seasonal to
  year-round service)
• Continue strategy of expansion to Latin America
  markets
• Introduced several new destinations over the last
  2-3 years Chile, Argentina, Columbia, Venezuela
  and Costa Rica
• Montreal Mexico City to be inaugurated June 16,
  2006
• Leverage superior range and economics of new
  fleet to capitalize on new route opportunities