Air Canada and Skyservice Announce Strategic Partnership will not Proceed; Air Canada Reaches Agreement with ACPA on Lowfare Carrier Start-Up

Air Canada and Skyservice announced that they would not proceed with plans for a strategic partnership as announced May 3. An agreement reached today between Air Canada and the Air Canada Pilots Association (ACPA) on the start up of a lowfare carrier precludes a partnership with Skyservice as proposed.

"Today's difficult economic climate with the resulting decline in our traditionally strong business travel market makes it more important than ever that we participate in the one growing and vibrant airline segment in North America," said Robert Milton, President and Chief Executive Officer. "Today's agreement with ACPA enables Air Canada to compete in the discount market with the full involvement and cooperation of our pilots. It is because of the vital importance of our relationship with our pilots that we have elected not to proceed with the proposed strategic partnership with Skyservice. While that partnership clearly would have provided us with tremendous business opportunities, the support of our pilots is key to ensuring Air Canada's success."

The agreement between Air Canada and ACPA on the low fare carrier provides for an operation of up to 20 aircraft with more flexible terms and working conditions.

"We will explore with Skyservice opportunities for the provision of third party services such as those currently undertaken for other carriers. Our respect for Russ Payson and his operation has only grown in the three months since we began discussions with them," Mr. Milton added.

"While I am obviously disappointed that we are not proceeding with the strategic partnership as originally planned, I look forward to exploring the business opportunities available to us in working with Air Canada," said Russell Payson, Chairman, CEO and President of Skyservice.

The lowfare carrier will be launched later this year. Further details on timing of the start-up, branding, route network, infrastructure and executive management of the carrier will be announced at a later time.