Air Canada Announces Financial Transactions

Air Canada announced today financial
transactions regarding its Yen-denominated perpetual debt and leases on
certain aircraft within its fleet.

Air Canada has signed a binding commitment letter with respect to the
replacement, effective December 31, 2002, of (Yen) 20 billion of its Yen-
denominated perpetual debt with a (Yen) 20 billion of Yen-denominated 25-year
term loan having an effective interest rate of approximately 1% per annum
lower over the life of the loan and permitting principal and interest payments
to be made, at Air Canada`s option, in either cash or Air Canada common
shares, subject to regulatory approval. The transaction is subject to the
completion of legal documentation. Air Canada expects to realize a gain in
excess of Cdn $150 million in respect of this transaction.

The airline also completed today a series of transactions through which
it realized approximately Cdn $150 million of additional cash proceeds from
leases for 16 of its aircraft. The additional liquidity was made possible due
to a decline in interest rates since the implementation of those leases.
“These transactions are clear indications of our intention to continue to
take advantage of prudent opportunities to increase liquidity and improve Air
Canada`s balance sheet,” said Rob Peterson, Executive Vice-President and Chief
Financial Officer.