Air Canada Gets Costs Out With Tango; Reassigns Existing Capacity to Offer Unique, No-Frills, Value-Focussed Alternative to Full Service Mainline Network

 In the first of several initiatives to stimulate traffic in the post-September 11 environment, Air Canada today announced the launch of Tango by Air Canada, a separately branded service that will offer price-conscious consumers a no-frills alternative complementing the airline's full service operations. Tango will be operated using a fleet of 13 Airbus A320 aircraft on existing, high traffic mainline routes. These aircraft will be reassigned from Air Canada's mainline fleet in response to the changing marketplace and increased demand for no-frills/low fare travel. Tickets will be available for sale beginning October 11, 2001, with the first flight scheduled for November 1st.

The reassignment of existing capacity and resources to launch Tango falls within the airline's plan to achieve a dramatic seat cost reduction while reducing overall system capacity in the aftermath of September 11. Air Canada expects the new travel product, operated in parallel with existing operations, to attract both leisure and business travellers seeking an alternative choice for exceptional Air Canada value. Tango's basic service, pared-down from Air Canada's mainline full service offerings, will feature a unique "all extras are optional" pricing policy, including a menu selection of in-flight snacks and refreshments at reasonable prices. The all-economy cabin of 159 seats will provide a comfortable seat pitch of 32 inches matching Air Canada's industry- leading levels of comfort - up to three inches more than other domestic carriers.

"Prior to September 11, Air Canada had stated its intention, as part of the Air Canada Action Plan announced August 1, to move towards providing more low fare capacity in response to clearly changing consumer preferences and a rapidly slowing level of business travel," said Robert Milton, President and Chief Executive Officer. "In the post-September 11 world of depressed demand, a move in this direction is all the more necessary, as we need to aggressively promote all consumer incentives that encourage and stimulate travel.

"As a result, we are introducing Tango by Air Canada to stimulate the market, reduce costs and above all, to enable customers to tailor their ticket price to their own pocket book and tastes. Tango is targeted at those customers who, instead of a full service, mainline product, would like to buy simply a seat, and then add on, on a fee-basis, the extras that appeal to them, such as seat assignment, food and beverages, and audio-visual entertainment.

"This product will be particularly attractive to those consumers who not only place high value in paying only for what they wish to receive but also value Air Canada's brand reputation and high operational standards. Air Canada has had great success with the Rapidair branding experience, which clearly meets the needs of a targeted customer group with a differentiated product within the Air Canada main brand," added Mr. Milton.

"Tango is one of many initiatives that Air Canada has in the pipeline. We continue to plan for the launch of a Western Canada-based, short haul, low- fare airline that will be operated as a wholly-owned subsidiary and that will provide employment opportunities for some of our surplus staff at the mainline and regional carrier," concluded Mr. Milton.

All Tango tickets will be electronic; sales through travel agents will be commissionable. Cost savings, achieved through streamlined operations and simplified service offerings, will be passed on to customers in the form of a simplified fare structure featuring everyday low prices with minimum restrictions, a fee-based no refund policy and itineraries ticketed exclusively for Tango services - without the possibility of combining itineraries or tickets with Air Canada mainline flights. Tango customers will be eligible for Aeroplan benefits including accumulation and redemption of reward miles.

Tango will operate between eight of Canada's largest cities from coast to coast and three destinations in Florida. All domestic Canada routes will operate through Toronto, offering non-stop service to and from: Vancouver, Calgary, Edmonton, Winnipeg, Ottawa, Montreal and Halifax. In addition, Tango will offer non-stop service between Toronto and Fort Lauderdale, Orlando and Tampa; as well as non-stop service between Montreal and Fort Lauderdale and Orlando.