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Improved Performance. 2002 2001 (millions) Q2 Q2 Change Oper. Revenue $ 2,552 $2,564 $ (12) Oper. Expense 2,490 2,636 (146) Oper. Income (Loss) 62 (72) 134 Non-oper. Expense (46) (71) 25 Income (Loss)

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improved performance
Improved Performance

2002 2001(millions) Q2 Q2 Change

Oper. Revenue $ 2,552 $2,564 $ (12)

Oper. Expense 2,490 2,636 (146)

Oper. Income (Loss) 62 (72) 134

Non-oper. Expense (46) (71) 25

Income (Loss)

Before FX & Tax $ 16 $ (143) $ 159

FX on L/T Monetary Items 19 161 (142)

Income (Loss) Before Tax $ 35 $ 18 $ 17

best operating results of any major international carrier in north america
Best Operating Results* of any Major International Carrier in North America

% OPERATING MARGIN

2001

2002

* Pre-government assistance - US = 6 majors

air canada s 2nd quarter rasm outperforms industry
Air Canada’s 2nd Quarter RASM Outperforms Industry

YEAR/YEAR % CHANGE

2002

2001

* Mainline

** Source ATA

july august traffic stable
July/August Traffic* Stable

YEAR/YEAR % CHANGE

2002

* Mainline

air canada unit cost performance outpaces us industry
Air Canada Unit Cost** Performance Outpaces US Industry

YEAR/YEAR % CHANGE

2002

2001

* Mainline

* * Adjusted for one-timers; US = 6 majors

all expense categories down except ownership user fees mtce and insurance
All Expense Categories Down Except Ownership, User Fees, Mtce. and Insurance

Q2 2002/2001

Mainline

higher fleet productivity y t d aug asm s 2 block hrs 10
Higher Fleet ProductivityY-T-D Aug ASM’s*  2%, Block Hrs*  10%

YEAR/YEAR % CHANGE

2002

ASMs

Block Hours

* Mainline

positioned for the future
Positioned For The Future

1. Multi-brand strategy

2. Increasing employee productivity

3. Falling distribution costs

4. Fleet simplification and commonality

5. Six Sigma

6. Low cap-ex and moderate debt repayment

air canada s products tango
Air Canada’s Products - Tango
  • Low fare/leisure
  • Simplified product
  • Supplemental flying in key markets
  • Medium, long haul
  • Domestic, transcontinental, sun
  • Point to point
  • No interlining
  • Low product cost
  • Mainline labour cost
air canada s products zip
Air Canada’s Products - Zip
  • Low fare/business/ leisure
  • Simplified product
  • Domestic/transborder
  • Point-to-point, short haul
  • Full interlining
  • Low product cost
  • Low labour cost
underlying tango profitability
Underlying Tango Profitability
  • Revenue certainty
    • no overbooking, no denied boardings
  • No refunds
  • Single class seating
  • Low distribution costs
    • 80% to 90% internet bookings
    • Global Distribution Systems (GDS) by-pass
    • all e-ticket
  • “All frills extra” onboard service
  • No interlining, no baggage transfer
  • Fast turnaround, higher aircraft utilization
  • Low overhead
employee productivity continues to improve
Employee Productivity Continues To Improve

ASM per EMPLOYEE**

*

Air Canada Pre-merger

Air Canada + CAIL as of June 30/00

Combined

ASM = Available Seat Mile

* YTD + estimate for balance of year

** Mainline

agency commissions cut by more than half since 1998
Agency Commissions Cut By More Than Half Since 1998

COMMISSIONS AS % OF PASSENGER REVENUE

9.3%

7.6%

6.6%

5.9%

4.4%

*

* YTD + estimate for balance of year

narrow body fleet moving to all airbus
Narrow Body FleetMoving to all Airbus

2000 2002

CRJ

15%

CRJ

16%

DC-9

10%

B-737

17%

Airbus

49%

Airbus

67%

To be replaced with Airbus aircraft when leases expire - some initially going to Zip.

B-737

26%

167 Aircraft 157 Aircraft

implementing six sigma

2002 2003

8 MBB 15 MBB

30 BB 120 BB

320 GB 1,380 GB

Implementing Six Sigma

Trained Personnel

Target Areas

  • Operations
    • Airports, Air Canada Technical Services, System Operations Control, Flight Ops, Inflight Services, Call Centres, Air Canada Jazz, Aeroplan, Air Canada Vacations
  • Staff
    • Marketing, Sales, Network Planning, Human Resources, Law, IT, Purchasing, Destina.ca

MBB = Master Black Belt, BB = Black Belt, GB= Green Belt

low cap ex moderate debt repayment
Low Cap-Ex & Moderate Debt Repayment
  • Cap-Ex
    • Annual steady state cap-ex = $200 million
    • 2003 & 2004 aircraft deliveries fully financed
      • ten A319/320/321s
      • two A340-500s
      • three A340-600s
  • Debt Repayment
    • $375 million second half of 2002 (mostly behind us)
    • $220 million in 2003
good liquidity
Good Liquidity
  • $0.9 billion in cash at June 30, 2002.
  • Generating positive cash flow from operations.
  • Approximately $2.8 billion of unencumbered assets
    • aircraft
    • engines and spares
    • inventory
    • real estate
    • lease deposit receivables
    • accounts receivable
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