Air Canada Releases First Quarter Results Reflecting Significant Improvement

MONTREAL, May 1 /CNW/ - For the quarter ended March 31, 2002, Air Canada
reported an operating loss of $160 million, a $133 million improvement from
the 2001 quarter. The pre-tax loss amounted to $225 million. In the 2001
quarter, the Corporation recorded an operating loss of $293 million and a pre-
tax loss of $294 million. Removing non-recurring or other significant items as
described in Attachment One, the adjusted (a) first quarter 2002 pre-tax loss
was $189 million, a $194 million improvement from the adjusted pre-tax loss of
$383 million in 2001.

“Air Canada ended the first quarter of 2002 - traditionally the weakest
quarter of the year - with encouraging results that show that our cost
reduction and productivity improvement strategies are working,” said Robert
Milton, President and Chief Executive Officer. “While we still have work to do
in further reducing costs, I am proud of the efforts of our employees who have
helped us commence our financial turnaround during this very challenging
period for the airline industry worldwide. It is gratifying to have achieved
the only improvement in year-over-year operating income of any major full
service international carrier in North America, before special items.

“Our fleet and schedule adjustments, together with effective capacity
management, have yielded positive results, including a record system load
factor for each month in the quarter, and, in February, the highest reported
system load factor of any major North American carrier.

“We are pleased with the initial success of the Tango product. Strong
customer acceptance is reflected in a load factor of 83.4 per cent in the
quarter and in the steady growth in average daily revenue throughout the
quarter. I`m also encouraged that Tango`s December unit cost reduction of 25
per cent versus mainline on domestic long haul routes continued through the
first quarter.

“The favourable gap between Tango`s unit costs and unit revenues allows
us to participate in the low fare market at overall margins that exceed those
of comparable mainline operations. Tango`s continued strong financial
performance is due to a number of key factors: efficient aircraft utilization,
including seating configurations and ground operations; minimal advertising;
80 per cent online booking; policies that reduce the no-show factor;
electronic ticketing; revenue generating onboard catering and entertainment as
well as other cost reduction features.
“The rationale for both Tango and ZIP, our low fare carrier announced
April 19, is based on a winning formula and we are demonstrating that this
formula can be successfully adopted by a mature, full service carrier. Both
clearly respond to growing consumer demand for low fare service and allow us
to more effectively utilize existing aircraft and reduce costs.

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“With the traditionally busier summer travel season about to begin,
customer service and safety will remain our top priorities. Our customers have
seen positive new dimensions of Air Canada in the last few months with the
introduction of choices for value and affordability, including new looks and
names for certain products and services. However, our commitment to the
highest levels of safety and customer service has not changed and we recognize
that with every flight we have the opportunity to earn our customers` repeat
business.

“While forward bookings are encouraging, it is still difficult to
accurately predict the rate of the economic recovery and the future of oil
prices. By following our disciplined and strategic business plan, we expect to
return to profitability in the seasonally stronger quarters,” he concluded.
Although net losses between the years are not directly comparable due to
differences in tax recoveries, the Corporation reported a net loss of $219
million or $1.83 per share for the quarter ended March 31, 2002, as compared
to a net loss of $179 million or $1.49 per share in the 2001 quarter.
Beginning in July 2001, Air Canada ceased to record income tax recoveries on
losses from operations at the mainline carrier.

Removing non-recurring or other significant items as described in
Attachment One, the adjusted first quarter 2002 net loss was $183 million or
$1.53 per share, with $6 million of net tax recoveries. In the 2001 quarter,
the adjusted net loss amounted to $239 million or $1.99 per share, with $144
million of net tax recoveries.

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