Air Canada announced today that it will
vigorously challenge the Competition Bureau`s application to the Competition
Tribunal for an order prohibiting Air Canada from matching fares or otherwise
being price competitive on certain routes operated by CanJet and WestJet.

“Air Canada fundamentally disagrees with the Competition Bureau`s
findings that it has engaged in anti-competitive practices directed against
CanJet and WestJet and we have strong arguments to present to the Tribunal in
response to the S.79 application filed by the Bureau today,” said Calin
Rovinescu, Executive Vice-President, Corporate Development & Strategy. “Based
on recent announcements of expansion plans and financial strength by both
CanJet and WestJet, the Commissioner`s stated belief as to the impact of Air
Canada`s pricing and capacity management is unfounded,” he added.

In order to resolve these issues on a timely basis, Air Canada has agreed
with the Competition Bureau to have an expedited hearing before the
Competition Tribunal for clarification of certain rules relating to pricing
behaviour in the Canadian airline industry, in particular the application of
the avoidable cost test set out in the Regulations relating to the airline
industry under the Competition Act.

“The Bureau`s interpretation of “avoidable costs” - costs that would have
been avoided if the service was not provided - prevents Air Canada and other
carriers dominant in any one market from competing on price. Competitive
pricing in the marketplace benefits consumers,” said Mr. Rovinescu.

“Air Canada must remain competitive, both internationally and in Canada,
particularly in view of the current economic reality. We have to be capable of
meeting our competitors` pricing initiatives on our key routes in Canada. All
competitors regardless of size should have that right. We are aware of no
precedent in the airline industry of a regulator disallowing price matching.
The Bureau`s current interpretation of the rules on pricing reflects a
tendency towards re-regulation which is clearly inconsistent with global
industry trends and which stifles true competition beneficial to consumers,”
he added.

“We agree with the Commissioner that a quick resolution of this issue
ould provide the guidance and certainty all parties require,” concluded
Mr. Rovinescu.

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