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Air Canada Adopts New Commercial Relationship With Air Canada Jazz

28 June 2002

Air Canada today announced a restructuring of its commercial relationship with Air Canada Jazz that will result in improved efficiencies, cost reductions and greater value for the Corporation. Under the new agreement, planned to take effect August 1, 2002, Air Canada will adopt a capacity purchase model, replacing its existing revenue sharing arrangement.

Under a new capacity purchase model, successfully adopted by most major U.S. airlines and their regional carriers, Air Canada Jazz will be paid on a per flight basis to operate on behalf of Air Canada. This replaces the current revenue sharing arrangement, whereby a percentage of ticket revenues from passengers travelling on both Air Canada and Air Canada Jazz is allocated to each of the operating carriers. Air Canada will assume responsibility for all passenger and cargo commercial activities including scheduling, pricing and network planning. Air Canada Jazz will continue to be responsible for operations and customer service including onboard product and service based on specifications established in co-operation with Air Canada.

"Air Canada is assuming overall commercial responsibility in order to bring greater discipline to capacity planning, streamline scheduling activities and improve productivity while maximizing fleet resources. The new agreement will also ensure that Air Canada Jazz's main focus will be on its operations including on-time performance and flight completion rates, cost effective maintenance and employee training with a view to improving customer satisfaction and reducing its overall cost structure," said Calin Rovinescu, Executive Vice President, Corporate Development and Strategy.

"This decision is consistent with Air Canada's strategic business plan to maximize the efficiency and illuminate the value of its business units, in line with similar initiatives underway at Aeroplan and Air Canada Technical Services. We will continue to adapt to our changing environment in a timely and cost effective manner while constantly seeking ways to build shareholder value," concluded Rovinescu.

Added Joseph Randell, President and Chief Executive Officer, Air Canada Jazz, "U.S.-based regional carriers that have adopted the capacity purchase model are able to respond better to changes in the marketplace such as escalating operating costs within the short haul sector and greater demand for connecting services via major hubs - issues that we are experiencing in Canada as well. Air Canada Jazz has rationalized its network, removed excess capacity and will continue to move towards a simplified fleet. Now we will have the opportunity to focus on improving operational performance, reducing costs and delivering competitive standards of customer service thereby positioning Jazz as a leader among the world's largest regional carriers." 

Air Canada Jazz, one of the world's largest regional airlines, plays an important role in providing connecting traffic to the Air Canada network as well as meeting the needs of local customers. The airline provides scheduled service to over 75 destinations in Canada and the United States with a fleet of British Aerospace 146s, Fokker F28s, Dash 8-300/100s, Beech 1900Ds and Canadair Regional Jets. Air Canada Jazz operates 900 flights per day and serves approximately eight million customers annually.

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