Air Canada Debt Purchase Transaction

Air Canada announced that it has entered into
binding market commitments to purchase a total of approximately
CAD$142 million equivalent of its Yen denominated perpetual debt, for a total
cost of approximately CAD$50 million, which will be funded from cash on hand.
The purchases are currently scheduled to settle on October 18, 2002.

The company will record a gain of approximately CAD$92 million in respect
of these purchases for the third quarter ending September 30, 2002. In
addition to this exceptional gain, as previously announced, Air Canada expects
to post a profitable third quarter when it releases results on October 25,
2002.

“The purchase of debt securities on the open market is consistent with
our previously stated strategy to improve Air Canada`s balance sheet by
aggressively pursuing options available to reduce debt load and deleverage the
airline,” said Rob Peterson, Executive Vice-President and Chief Financial
Officer. “We will consider additional de-leveraging transactions in the future
depending on market opportunities,” he said.

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