Air Canada Reaches Agreement

Air Canada announced today that it has
reached a modified contract with Cara Operations Inc. for the airline`s
catering and commissary services. Effective immediately, the contract
reinstates a modified version of Cara`s previous contract with significant
cost savings for the airline. It includes a joint `best practice` review of
the catering business to achieve increased efficiencies, financial savings and
service quality improvements.
“This contract with Cara marks the renewal of a valued and longstanding
partnership. In keeping with the new industry realities, we have agreed to
more favourable rates with a joint review and a rigorous focus on maximizing
operational efficiency and customer service using best industry practices,”
said Brad Moore, Vice President, Customer Service. “We have clearly
demonstrated with initiatives such as buy on board meals and simple, online
fares at that we are committed to new ways of service delivery
where it makes good sense for our customers and our bottom line. The evolving
catering industry provides another opportunity for us to make industry leading
changes that respond to customer tastes and market trends while supporting our
goal of gaining greater costs efficiencies.”

Air Canada and Cara have enjoyed a mutually beneficial business
relationship for 67 years. Cara provides Air Canada with full service    
in-flight catering for both complimentary meals and the airline`s new buy on
board meal service. As part of the process of restructuring under the
Companies` Creditor Arrangement Act (CCAA), on November 7, Air Canada
repudiated its previous contract with Cara and entered into final negotiations
on a contract at more favorable rates and terms consistent with the airline`s
business and customer service plans.
Air Canada has taken several significant initiatives in the past two
years to evolve and enhance its in-flight catering service. In 2002 Air Canada
introduced new restaurant-style meal choices in Executive First and has
recently introduced an enhanced Hospitality food service on international
routes. On August 1, 2003 Air Canada launched an innovative buy on board meal
service in Hospitality Class on medium haul flights. The new service has
proven to be highly popular with customers and type trials offering light meal
and snack service for purchase on select short haul domestic flights commenced
last week. The buy on board restaurant service will eventually be expanded to
flights throughout North America.