Air Canada today provided the following initial
response to a decision rendered by the Canadian Transportation Agency
directing the carrier to lower fares on its service between Prince Rupert and
Vancouver, in relation to a complaint received by the Agency on August 10,
2000.

“The decision rendered by the Agency highlights the challenge currently
faced by Air Canada in complying with the conflicting mandates of the Canadian
Transportation Agency and the Competition Bureau,” said Calin Rovinescu,
Executive Vice President, Corporate Development and Strategy.

“Should Air Canada comply with the pricing directive sought by the Agency
as a remedy to this complaint, we would be significantly undercutting the
fares offered by a competing airline that recently introduced service on this
route. This clearly contradicts the position taken by the Competition Bureau
in an application to the Competition Tribunal on March 5, 2001 in response to
certain complaints by competitors in the marketplace.

“The Agency`s decision points towards re-regulation on selective routes
which is clearly inconsistent with global industry trends and which stifles
true competition beneficial to consumers. The decision clearly does not take
into account the business reality of running an airline in a changing market
and economic environment.

“We take the view that the discounted fare at issue on the Prince Rupert-
Vancouver route in August 2000 was not unreasonable. Since the time of the
complaint, economic conditions in general and market demand on a number of
routes have changed considerably. Consequently, Air Canada had previously
modified its fare structure throughout its network. As a result, fares
currently offered on the Prince Rupert-Vancouver route are now lower than at
the time of the complaint,” he concluded.

Air Canada is currently assessing the substance of the decision and will
respond fully to the decision as requested by the Agency.

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