Air Canada Adopts Shareholder Rights Plan

Air Canada announced today that its Board of Directors approved a shareholder rights plan for the Company. The Rights Plan is effective immediately.

The purpose of the Rights Plan is to provide the Board with time to review any unsolicited take-over bid that may be made and to take action, if appropriate, to enhance shareholder value. The Plan also protects shareholders of Air Canada against opportunistic and other unfair take-over tactics. Air Canada is not aware of any pending take-over bid.

Under the Rights Plan, one right has been issued for each common share and class A non-voting share outstanding. Among other scenarios, the rights will be triggered when a person or group acquires beneficial ownership of 10% or more of the common shares or class A non-voting shares, in a transaction not approved by the Board of Directors and/or, in certain cases, the shareholders. As is customary, the rights will entitle holders (other than the acquiring person or group) to acquire additional common or class A non-voting shares.

The rights would not be triggered by purchases of shares made pursuant to a ``permitted bid``, which is a take-over bid made to all shareholders on identical terms. A permitted bid must be made by way of a take-over bid circular prepared in compliance with applicable securities laws and must comply with certain other conditions, including that the bid be open for an initial minimum period of 60 days.

The Plan is in conformity, to the Corporation`s knowledge, with the latest generation features of Canadian shareholders rights plans, subject to certain characteristics unique to Air Canada. One difference is that the ``flip in`` threshold is currently set at 10%, but may increase (to not more than 20%) in the event that the constraining provisions of the Air Canada Public Participation act are amended or repealed. The Rights Plan replaces the shareholder rights plan adopted by the Board of Directors on August 30, 1999 and which has since expired.