9,000 Job Reductions at Air Canada and its Regional Carrier; System-wide Flight Schedule to be Reduced by 20 per cent; 84 Aircraft to be Removed from Combined Fleet

Airline is forced to take drastic and unprecedented action in face of catastrophic impact of September 11, 2001 on global airline industry.

Air Canada and Air Canada Regional today advised employees that they are now compelled to lay off a total of 9,000 employees subject to ongoing mitigation discussions with the unions and the government. The job reduction program announced in August, accounting for 4,000 of the 9,000 total, is being accelerated as a result of the impact of the September 11 attack on the U.S. The carrier also announced an overall network schedule reduction, including that of its regional airline, of 20 per cent including the previously announced 20 per cent cut to transborder services. Flight schedule reductions are currently being finalized. As part of this action a total of 84 aircraft will be removed from the combined fleet.

4,000 JOB REDUCTIONS AT MAINLINE CARRIER IN ADDITION TO 4,000 PREVIOUSLY ANNOUNCED; 1,000 AT REGIONAL CARRIER

All 8,000 job reductions at the mainline carrier as well as the 1,000 at the regional carrier will be implemented as soon as practicable.

"Layoffs are not the first choice - they are a last resort," said Robert Milton, President and Chief Executive Officer of Air Canada. "This is a very difficult announcement to make to the dedicated team of women and men who make this airline work. But the catastrophic events of September 11 and their unprecedented impact on the airline industry have left Air Canada, like every other large global carrier, with little choice. In the U.S. alone, industry job losses are already in excess of 100,000. It is our hope that with the temporary nature of these job reductions, we will be able to recall laid-off employees when business improves again. In the meantime, we will continue to work with the unions and the government to find every possible way to reduce the number of layoffs through various mitigation programs. In fact, we had meetings with all our unions yesterday and we are scheduled to meet with the CAW and other unions on the subject later this week.

"The severity of the impact on Air Canada of this act of war on the U.S. must be placed in the context of the importance of the transborder and other international markets to Air Canada's revenue base. With more than 50 per cent of our revenues dependent on the Canada-U.S. transborder and international markets, Air Canada is very significantly exposed to the unprecedented and catastrophic downturn in the global airline industry.

"Bill C26, the legislation adopted following Air Canada's acquisition of Canadian Airlines, does not apply to these layoffs. Needless to say, these layoffs are not related to our acquisition of Canadian Airlines but rather are a result of the unforeseen and horrific events of September 11 and their subsequent impact on the industry. For Air Canada, as for every airline on the globe, the world changed on September 11. Unfortunately, we cannot be certain that even these job and capacity reductions will be sufficient to weather the storm. We will reassess the need for further capacity and employee reductions as the worldwide airline industry crisis unfolds," said Mr. Milton.

The job reductions will be implemented within all work groups both at the mainline carrier and regional level - management, support staff as well as the unionized workforce.

84 AIRCRAFT AND THREE AIRCRAFT TYPES TO BE REMOVED FROM FLEETS: 55 AT MAINLINE CARRIER AND 29 AT REGIONAL CARRIER

The airline announced that it would remove a total of 84 aircraft from the fleet - 55 from the mainline fleet and 29 from the regional carrier fleet. The mainline carrier's entire DC-9 fleet of 17 aircraft as well as its 38 B737- 200s will be removed from the fleet. It is expected that 20 B737-200 aircraft will be transferred to the low fare carrier when it starts up. In addition, Air Canada Regional's entire F28 fleet (19 currently operating) will be grounded on an accelerated basis while its fleet of 10 BAE146s will be grounded as soon as possible based on training and operational requirements.

Further fleet reductions may follow.

It is expected that the launch of the low fare carrier will mitigate job losses at both the mainline and regional carrier, as qualified surplus staff will be hired on a preferential basis by the low fare carrier.

"The past weeks have been extremely stressful and difficult for the people of Air Canada. Their professionalism, dedication and hard work during this exceptional period makes today's announcement all the more painful," he said. "The past weeks have also been stressful and difficult for our customers who have endured everything from a complete system shutdown and diversions to delays and long waits. I thank them for their patience and understanding and I want to reassure them that they have every reason to be confident in the safety and security of Canada's air transportation system. Safety has always been Air Canada's first priority. We will continue to take every necessary step to ensure the safety and security of our customers and we will take the lead in proposing the highest security standards to our regulators so that Canada will be seen by the international community as the model for security both on-board and on the ground," concluded Mr. Milton.