Air Canada Makes Proposal To Canadian Airlines

Air Canada today filed with the Minister of Transport a copy of a proposal made to Canadian Airlines respecting the restructuring of the Canadian airline industry.

The filing, which is required by the terms of the Order-in-Council made on August 13,1999 pursuant to Section 47 of the Canada Transportation Act, covers a proposal made by Air Canada to Canadian Airlines prior to the Section 47 Order, and which continues to be open for acceptance.

Air Canada believes its offer presents solutions to all of the issues raised under the Section 47 Order, and meets the needs of all stakeholders.

The results of a successful transaction would be:
* The purchase of the international routes currently operated by or designated to Canadian Airlines, along with certain associated assets and liabilities;

* Code-sharing opportunities for Canadian Airlines on Air Canada international routes;


* The maintenance of domestic air competition, with the continued participation of Canadian Airlines;

* Continued availability of the Star Alliance and OneWorld networks for Canadian consumers;

* The liquidity that Canadian Airlines is seeking;
* Retention of Canadian Airlines` head office in Calgary;

Substantial retention of employment for Canadian Airlines staff, including the hiring by Air Canada of certain Canadian Airlines employees associated with international operations. The commercial terms of the proposal are confidential.