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,

“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.