Air Canada Adopts New Relationship With Air Canada Jazz

1st Jul 2002

MONTREAL, July /CNW/ - Air Canada today announced a restructuring of
its commercial relationship with Air Canada Jazz that will result in improved
efficiencies, cost reductions and greater value for the Corporation. Under the
new agreement, planned to take effect August 1, 2002, Air Canada will adopt a
capacity purchase model, replacing its existing revenue sharing arrangement.

Under a new capacity purchase model, successfully adopted by most major
U.S. airlines and their regional carriers, Air Canada Jazz will be paid on a
per flight basis to operate on behalf of Air Canada. This replaces the current
revenue sharing arrangement, whereby a percentage of ticket revenues from
passengers travelling on both Air Canada and Air Canada Jazz is allocated to
each of the operating carriers. Air Canada will assume responsibility for all
passenger and cargo commercial activities including scheduling, pricing and
network planning. Air Canada Jazz will continue to be responsible for
operations and customer service including onboard product and service based on
specifications established in co-operation with Air Canada.

“Air Canada is assuming overall commercial responsibility in order to
bring greater discipline to capacity planning, streamline scheduling
activities and improve productivity while maximizing fleet resources. The new
agreement will also ensure that Air Canada Jazz`s main focus will be on its
operations including on-time performance and flight completion rates, cost
effective maintenance and employee training with a view to improving customer
satisfaction and reducing its overall cost structure,” said Calin Rovinescu,
Executive Vice President, Corporate Development and Strategy.

“This decision is consistent with Air Canada`s strategic business plan to
maximize the efficiency and illuminate the value of its business units, in
line with similar initiatives underway at Aeroplan and Air Canada Technical
Services. We will continue to adapt to our changing environment in a timely
and cost effective manner while constantly seeking ways to build shareholder
value,” concluded Rovinescu.

Added Joseph Randell, President and Chief Executive Officer, Air Canada
Jazz, “U.S.-based regional carriers that have adopted the capacity purchase
model are able to respond better to changes in the marketplace such as
escalating operating costs within the short haul sector and greater demand for
connecting services via major hubs - issues that we are experiencing in Canada
as well. Air Canada Jazz has rationalized its network, removed excess capacity
and will continue to move towards a simplified fleet. Now we will have the
opportunity to focus on improving operational performance, reducing costs and
delivering competitive standards of customer service thereby positioning Jazz
as a leader among the world`s largest regional carriers.”


Air Canada Jazz, one of the world`s largest regional airlines, plays an
important role in providing connecting traffic to the Air Canada network as
well as meeting the needs of local customers. The airline provides scheduled
service to over 75 destinations in Canada and the United States with a fleet
of British Aerospace 146s, Fokker F28s, Dash 8-300/100s, Beech 1900Ds and
Canadair Regional Jets. Air Canada Jazz operates 900 flights per day and
serves approximately eight million customers annually.



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