Air Canada announced today that it will
further reduce its costs and expand the range of choices for low fare, high
value air service with the launch this summer of its wholly owned,
independently operated subsidiary low fare carrier based in Western Canada.
The new carrier will operate primarily short haul routes with connections to
and from Air Canada`s worldwide network, with a start-up fleet of six Boeing
737-200 aircraft. The fleet will eventually grow to twenty 737-200s, all
transferred from the existing Air Canada mainline fleet.

“In preparation for this launch, over the past months, Air Canada has met
with stakeholders across the country to discuss the benefits to communities
and consumers of our participation in this important and rapidly growing
sector of the market,” said Robert Milton, President and Chief Executive
Officer. “The low fare carrier is a critical component of Air Canada`s
response to growing consumer demand for low fare travel that will also allow
us to reduce our costs dramatically. I am confident that the low fare carrier
will further build on Tango`s success. Not only has consumer response to Tango
exceeded expectations but Tango is also contributing significantly to our
overall cost reduction program.

“Canadians tell us that they want Air Canada to continue serving their
communities, but our mainline operations in certain short haul markets may no
longer be financially sustainable as yields have been driven down by low fare
competition. We understand that consumers want low fares on a year-round
basis. The new carrier will provide an attractive and affordable option with
convenient connections to Air Canada`s worldwide network.

“As we have said previously, our focus and strategy for 2002 is to
transform the airline and reduce costs in a material fashion by, among other
things, utilizing existing aircraft more effectively to participate in the
various niche markets that are evolving in the airline industry. We will
continue to deliver both choice and value to our customers, which in turn will
ensure Air Canada`s viability,” Mr. Milton concluded.

Air Canada and its subsidiaries will offer five distinct air passenger
services.

- AIR CANADA is the airline`s full service mainline operations and flagship brand and operates a comprehensive domestic, transborder and international network of flights with a range of fares and three classes of service: Hospitality, Executive and Executive First. The mainline service continues to offer a wide range of product features including Maple Leaf lounge access and Concierge service. Air Canada`s global network, schedules and customer services are enhanced through its membership in the Star Alliance network, which serves some 730 airports in 124 countries with 11,000 daily flights.

AIR CANADA JAZZ is Air Canada`s regional carrier that operates an extensive, high frequency regional network with connections to the airline`s global network. A wholly owned subsidiary of Air Canada, Air Canada Jazz has a separate fleet, headquarters and management team. Air Canada Jazz offers largely Hospitality class service, with Executive Class service available on certain aircraft.

TANGO BY AIR CANADA is Air Canada`s low fare, no-frills service that replaces former Air Canada mainline or regional service on certain domestic routes and sun/leisure travel destinations. Tango operates point to point flights that are not designed for connection to the Air Canada network. Tango product features include an all-Hospitality, unique “all extras are optional” inflight service, efficient aircraft seating configuration, web booking tools, call centre distribution system and exclusive use of electronic tickets - all contribute to cost savings which are passed on to consumers.

- THE NEW LOW FARE CARRIER is a separate airline operating flights with all-Hospitality service between short haul markets. A wholly owned subsidiary of Air Canada, the low fare carrier will operate with its own management, fleet, headquarters and with worldwide network connections with Air Canada and Air Canada Jazz.

- AIR CANADA JETZ is Air Canada`s specialized charter jet service designed to meet the travel needs of corporate clients and sports teams using customized Boeing 737-200 aircraft in an all-Executive Class configuration.

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