Air Canada Comments on Financial Impact of September 11 Events, Cuts Transborder Capacity 20 Per Cent

 Air Canada today announced changes in its business plan due to the unprecedented impact on the entire airline industry of the tragic events of September 11, 2001.

The carrier will reduce its transborder flight schedule by 20 per cent, in keeping with capacity reductions of the large American carriers. It will continue to monitor demand on domestic and international routes before deciding on any further capacity or employee reductions.

Prior to September 11, Air Canada's July and August pretax unconsolidated operating income was $81 million and its net pretax income was $28.6 million, putting the airline on track to meet its previously announced position of a break-even third quarter. Moreover, due to actions initiated in the first quarter, the airline experienced significant improvement in unconsolidated unit cost per ASM, which decreased 5 per cent in July-August 2001 from the same period the previous year. However, due to the current and expected dramatic fall off in revenues in September, the airline will now experience a loss for the third quarter.

Due to the unprecedented climate in the airline sector, previous forecasts for 2001 and 2002 are no longer valid.

"Like people in every corner of the world, we have spent recent days reeling from the horrible destruction and loss of life wreaked on September 11," said Air Canada CEO Robert Milton. "At the same time, our entire team has been working flat out to assist the hundreds of international flights diverted to Canada and to get our own network up and running. In addition, as safety is our number one priority, we have implemented enhanced security measures throughout the network and are working closely with Transport Canada to ensure full compliance.

"I am extremely proud of our people who once again proved themselves to be true industry leaders in the face of tremendous challenge," said Milton.

"The praise I have received on their behalf in recent days from the line employees to the CEOs of the world's leading carriers is truly gratifying. Now we must deal with the crisis in which these terrible events have plunged the entire industry. Like other full service airlines, Air Canada was already adapting to a very difficult economic climate. In fact, we had begun to put into place an aggressive Air Canada Action Plan to deal with that reality.

Now, the unspeakable tragedy of last week has made a bad economic situation much, much worse for every airline - Air Canada included, particularly with our large share of the transborder market."

IATA has initially estimated the economic cost of the current crisis to the airline industry at CAD $15 billion.