Third Quarter 2002October 25, 2002

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Agenda - 3rd Quarter

• Highlights

• Economic Environment

• Operating Statistics

• Competitive Environment

• Revenue Highlights

• Income Highlights

3rd Quarter Results

• Air Canada records only profit among major international carriers in North America

• Operating results improve by $226 million or $63 million excluding the estimated impact of Sept. 11 on Q3 2001 results

• Operations generate $89 million in cash• Yield posts growth after six consecutive quarters of

declines• Increased productivity and lower unit costs continue to

underlie higher profitability - Q3 2001 also severely affected by Sept. 11

• Aircraft flying hours reduced by 3.5% while available seat miles rose 2.5%

3rd Quarter Results

• Mainline scheduled load factor up 1.0 PP over adjusted Q3 2001

• Manpower level down 2,218 or 5.9% from Q3 2001

• Employee productivity up 4% over adjusted Q3 2001

• Fuel price per litre down 11%

• Net unit cost down 3.2% over adjusted Q3 2001

3rd Quarter Results

• Quarter end cash of $0.7 billion

• Cash and committed financing total $0.9 billion

• $346 million in long-term debt repaid

• Additionally, $142 million of Air Canada’s yen

perpetual debt purchased for $50 million and gain of

$92 million

• $143 million in sale/leaseback proceeds primarily

from two CRJs and 11 engines

Q3 Stats At a Glance (Unadjusted Q3’01)

Mainline Operations (Scheduled)

ASMs RPMs LF Yield RASM Rev

Domestic 4.4% 2.8% 1.1 PP 5.8% 4.3% 8.8%

Transborder 3.0% 1.1% 1.3 PP 3.5% 1.6% 4.5%

Oth. Int’l. 3.3% 8.0% 3.6 PP 6.4% 11.3% 14.9%

Total 2.5% 4.9% 1.8 PP 3.2% 5.6% 8.2%

Total Expense (1.9)%

Total Net CASM (6.1)%

Q3 Stats At a Glance (Q3’01, adjusted for Sept. 11 impact)

Mainline Operations (Scheduled)

ASMs RPMs LF Yield RASM Rev

Domestic (1.0)% (2.8)% (1.4) PP 4.8% 2.9% 1.9%

Transborder (10.6)% (10.9)% (0.2) PP (6.8)% (7.1)% (17.0)%

Oth. Int’l. 0.4% 3.6% 2.6 PP 3.3% 6.6% 7.0%

Total (2.1)% (0.8)% 1.0 PP 0.2% 1.5% (0.7)%

Total Expense (3.6)%

Total Net CASM (3.2)%

Operating Income Improves By $226 Million

(millions)Consol.Q3 2002

Consol.Q3 2001

ChangeFav./(Unfav.)

Oper. Revenue $2,745 $2,586 $ 159

Oper. Expense 2,577 2,644 67

Oper. Income (Loss) 168 (58) 226

Non-oper. Exp. 37 (111) 148

Income (Loss) Before FX & Tax 205 (169) 374

FX on Long Term Monetary Items (86) (253) 167

Income (Loss) Before Tax $ 119 $ (422) $ 541

(millions)Consol.Q3 2002

Consol.Q3 2001

ChangeFav./(Unfav.)

Oper. Revenue $2,745 $ 2,794 $ (49)

Oper. Expense 2,577 2,689 112

Oper. Income (Loss) $ 168 $ 105 $ 63

Operating Income Improves By $63 Million Over Q3 2001 Results (Adjusted for impact of Sept. 11)

(millions) Q3 2002Change

Fav./(Unfav.)

Net Interest Inc. (Exp.) $ (58) $ 14

Gain (Loss) on Sale (12) 109Q3’01 acrft.retirementprovision $135million

Other Non-Operating Inc. (Exp.) 107 25

Total Non-Operating Inc. (Exp.) $ 37 $ 148

Q3’02 gain onrepurchase ofyen perpetuals$92 million.

Q3’01anticipatedGov. assist.$105 million

Q3 Net Interest Exp. Improves $14 Million

2002

Q3

2002/2001*

Q3

2002/2001*

Y-T-D

Traffic (RPMs) 12.9 bln -0.8% +0.8%

Capacity (ASMs) 16.6 bln -2.1% -2.4%

Load Factor 77.6% +1.0 PP +2.4 PP

Disciplined Capacity Pushes Load Factor Up

Mainline Operating Statistics (Scheduled)

*Adjusted for Sept. 11

Disciplined Capacity Throughout but U.S. Reductions Accelerate(Y-O-Y Changes in Mainline Capacity)

-20%

-10%

0%

10%

Canada U.S. Oth. Int'l Total

J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001 Q3 02/Adj Q3 01

% Change in ASMs

Atlantic & Pacific Markets Maintain Strong Traffic Growth(Y-O-Y Changes in Mainline Traffic)

-15%

-10%

-5%

0%

5%

10%

Canada U.S. Oth. Int'l Total

J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001 Q3 02/Adj Q3 01

% Change in RPMs

System Yield Stabilizes After Six Quarters Of Decline(Y-O-Y Changes in Mainline Passenger Yield)

-20%

-15%

-10%

-5%

0%

5%

Canada U.S. Oth. Int'l Total

J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001 Q3 02/Adj Q3 01

% Change in Yield

RASM Lifts On Very Strong Atlantic & Pacific

Performance(Y-O-Y Changes in Mainline Revenue per ASM)

-24%

-16%

-8%

0%

8%

16%

Canada U.S. Oth. Int'l Total

J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001 Q3 02/Adj Q3 01

% Change in RASM

Q3 Revenue Marginally Down As Weak U.S. Offsets Domestic & International Strength(Y-O-Y Changes in Mainline Passenger Revenue)

-40%

-30%

-20%

-10%

0%

10%

20%

Canada U.S. Oth. Int'l Total

J&A 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001 Q3 02/Adj Q3 01

% Change in Revenue

Increased Yield Lifts Domestic RASM (Adj. Q3’01)

-10

-5

0

5

10

-15%

-10%

-5%

0%

5%

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

Capacity - Canada(Y-O-Y Changes in Capacity)

% Change in ASMs

-20%

-10%

0%

10%

-20%

-10%

0%

10%

Yield - Canada(Y-O-Y Changes in Passenger Yield)

RASM - Canada(Y-O-Y Changes in Revenue per ASM)

Load Factor- Canada(Y-O-Y Changes in Load Factor)

% Change in RASM

PP Change in Load Factor

% Change in Yield

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02 J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

U.S. RASM Down On Weak Pricing (Adj. Q3’01)

-10

-5

0

5

10

-15%

-10%

-5%

0%

5%

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

Capacity - Transborder(Y-O-Y Changes in Capacity)

% Change in ASMs

-25%

-15%

-5%

5%

15%

-30%

-20%

-10%

0%

10%

Yield - Transborder(Y-O-Y Changes in Passenger Yield)

RASM - Transborder (Y-O-Y Changes in Revenue per ASM)

Load Factor- Transborder (Y-O-Y Changes in Load Factor)

% Change in RASM

PP Change in Load Factor

% Change in Yield

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02 J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

Other Int’l RASM Up On Higher Load Factor And Yield (Adj. Q3’01)

-10

-5

0

5

10

-20%

-15%

-10%

-5%

0%

5%

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

Capacity - Other Int’l(Y-O-Y Changes in Capacity)

% Change in ASMs

-10%

-5%

0%

5%

10%

15%

-10%

-5%

0%

5%

Yield - Other Int’l(Y-O-Y Changes in Passenger Yield)

RASM - Other Int’l (Y-O-Y Changes in Revenue per ASM)

Load Factor- Other Int’l (Y-O-Y Changes in Load Factor)

% Change in RASM

PP Change in Load Factor

% Change in Yield

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02 J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

System RASM Up On Higher Load Factor And Stable Yield (Adj. Q3’01)

-10

-5

0

5

10

-15%

-10%

-5%

0%

5%

10%

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

Capacity - Total(Y-O-Y Changes in Capacity)

% Change in ASMs

-15%

-10%

-5%

0%

5%

-15%

-10%

-5%

0%

5%

Yield - Total(Y-O-Y Changes in Passenger Yield)

RASM - Total (Y-O-Y Changes in Revenue per ASM)

Load Factor- Total (Y-O-Y Changes in Load Factor)

% Change in RASM

PP Change in Load Factor

% Change in Yield

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02 J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

-20%

-10%

0%

10%

20%

CASM RASM

Declining Unit Cost Still Drives Increased Profits But Also Aided By Stronger RASM (Adj. Q3’01)

-20%

-15%

-10%

-5%

0%

5%

10%

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

Canada RASM% Change Y-O-Y

-10%

-5%

0%

5%

10%

Other Int’l RASM Total System

USA RASM

% Change Y-O-Y

% Change Y-O-Y

% Change Y-O-Y

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02 J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

J&A’01 Q4’01 Q1’02 Q2’02 Q3’02

Air Canada Continues to Record The Best Traffic Results Of Any Major N.A. Carrier (Unadjusted Q3’01)

(Y-O-Y Traffic Change)

-40%

-20%

0%

20%

AC AMR CONT DEL UAL USAIR

Q3 2001/2000 Q4 2001/2000 Q1 2002/2001 Q2 2002/2001 Q3 2002/2001

% Change in RPMs

2002Q3

2002/2001*Q3

2002/2001*Y-T-D

Salaries, Wages &Benefits

$699 mln +0.7% +0.3%

Excl. $40 million inS&W accrualreversals in Q1, 2001

-1.6%

Salaries & Wages: Manpower level down sharply; average salary & benefits cost up

(Air Canada - Mainline)

*Adjusted

Average Salary Up 6.6%, Employee Levels Down 5.9%(Y-O-Y Change - Total Salaries * & Employees*)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Q3'01 Q4'01 Q1'02 Q2'02 Q3'02

Average Salaries Employees

*Mainline

% Change Y-O-Y

2002Q3

2002/2001*Q3

2002/2001*Y-T-D

Aircraft Fuel $338 mln -16.3% -22.7%

Fuel: Price still sharply down

(Air Canada - Mainline)

*Adjusted

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

J&A'01 Q4'01 Q1'02 Q2'02 Q3'02

Fuel Productivity (ASMs/Lt) Fuel Cost (Cdn cts/Lt)

Mainline Cost Per Litre Down 11% While Productivity Up 4.4%(Fuel Productivity* & Unit Cost*)

*Mainline

% Change Y-O-Y

-30%

-20%

-10%

0%

10%

20%

All Expense Categories Down except Aircraft Rent, User Fees and Other

*Mainline, ‘01 adjusted for Sept. 11

% Change Y-O-Y

Q3 2002/2001

RPMs ASMs COMM. FOOD& BAR

A/CMTCE

USERFEES

A/CRENT

OTHERDEP.

-10%

-5%

0%

5%

J&A'01 Q4'01 Q1'02 Q2'02 Q3'02

Q3 Net Unit Cost Down 3.2%(Cost Per ASM*)

*Mainline, adjusted for non-ASM revenue, ‘01 adjusted for Sept. 11

% Change Y-O-Y

-4%

-2%

0%

2%

Fuel a Major Component Of Net CASM* Improvement Of 3.2%

*Mainline

LabourLabourFuelFuel Unit cost decrease

net of non-ASM revenue

OtherEffect of Effect of non-ASM non-ASM revenuerevenue

9.5 10.19.4 9.8

9.1 9.48.6 8.8

8.28.8

7.4 7.9 7.1 7.3

0

4

8

12

AMR UAL DEL NWEST CONT AC SWEST

Q3'02 Q3'01

Air Canada Has Lowest Net Unit Cost Of N.A. Majors

*Adjusted for non-ASM producing activity.** Not adjusted for Sept. 11

(Unit Cost* per ASM - Q3‘02 & Q3‘01**)

U.S. cents

Sept 30/02$ mlns

Dec 31/01$ mlns

%Change

Cash $ 717 $ 1,067 -32.8% Current Assets $ 2,029 $ 2,235 -9.2% Property & Equip. $ 2,516 $ 2,830 -11.1% Current Liabilities $ 2,807 $ 2,869 -2.2% Long Term Debt $ 4,234 $ 4,580 -7.6% Shareholder’s Equity $ (1,524) $ (1,460)* NM Book Value per share $ (12.68) $(12.15)* NM

Balance Sheet - Liquidity is Good(Air Canada - Consolidated)

NM - not meaningful