About Air Canada

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Air Canada reports improved fourth quarter 2006 and full year 2006 results
    In accordance with Canadian GAAP Accounting Guideline No. 15 Air Canada
    is required to consolidate the financial statements of Jazz and certain
    leasing entities and fuel facility corporations into its financial
    statements. Air Canada does not have any ownership in Jazz. The
    financial statements of Air Canada, the mainline airline, are termed Air
    Canada Services. With a view to ensure greater clarity, this press
    release highlights the performance of Air Canada Services and Jazz
    separately.

    Air Canada Services
    -------------------

    2006 FOURTH QUARTER OVERVIEW

    - EBITDAR (excluding special charges)(1) of $197 million, an increase of
      $92 million on the fourth quarter of 2005.
    - Operating loss of $5 million, an improvement of $86 million on 2005.
    - Passenger revenues up $122 million or 6 per cent, driven by a
      5 per cent growth in traffic on a capacity growth of 4 per cent and a
      1 per cent yield improvement.
    - Passenger load factor at 77.8 per cent, a record load factor for the
      fourth quarter.
    - Loss before non-controlling interest, foreign exchange and income taxes
      of $57 million compared to a loss of $177 million in 2005.

    2006 FULL YEAR OVERVIEW

    - EBITDAR (excluding special charges)(1) of $1,043 million compared to
      $936 million in 2005.
    - Operating income of $114 million, or $236 million excluding special
      charges, compared to $191 million in 2005.
    - Special charges of $122 million - $102 million ($70 million after tax)
      in connection with Air Canada's obligations for redemption of Aeroplan
      miles issued before 2002 and special charge for labour restructuring of
      $20 million ($13 million after tax).
    - Fuel expense increase of $347 million or 16 per cent over 2005.
    - Passenger revenues up $690 million or 8 per cent, driven by a
      5 per cent growth in traffic on a capacity growth of 4 per cent and a
      3 per cent yield improvement.
    - Passenger load factor at 80.2 per cent marked a new record load factor
      for the year.
    - Loss before non-controlling interest, foreign exchange and income taxes
      of $77 million compared to a loss of $33 million in 2005.
    - Net proceeds of $187 million from the initial public offering of Air
      Canada shares.
    - Cash, cash equivalents and short-term investments of $2.1 billion at
      December 31, 2006.

    MONTREAL, Feb. 9 /CNW Telbec/ - Air Canada today reported fourth quarter
Air Canada Services EBITDAR (excluding special charges)(1) of $197 million, an
increase of $92 million on the 2005 quarter. The operating loss of $5 million
recorded in the quarter represented an improvement of $86 million on 2005.
    Passenger revenues increased $122 million or 6 per cent due to traffic
growth of 5 per cent reflecting stronger market demand and a yield improvement
of 1 per cent. Passenger revenue improvements were reflected in all markets.
Unit cost, as measured by operating expense per ASM, decreased 1 per cent from
the fourth quarter of 2005.
    For 2006, Air Canada Services reported operating income (excluding special
charges)(1) of $236 million, despite an increase in fuel expense of $347
million or 16 per cent. EBITDAR (excluding special charges)(1) amounted to
$1,043 million in the year compared to $936 million in 2005, an improvement of
$107 million. Operating income amounted to $114 million.
    Passenger revenues were up $690 million or 8 per cent due to a 3 per cent
yield improvement and a 5 per cent growth in traffic on a capacity increase of
4 per cent. Unit cost, as measured by operating expense per available seat
mile (ASM), rose 4 per cent from 2005. Excluding fuel expense and the special
charge for labour restructuring of $20 million, unit cost was up 1 per cent.
    The deficit, on an accounting basis, at December 31, 2006 for pension
benefits was $1.4 billion compared to $2.5 billion at December 31, 2005. The
decrease in the accounting deficit was mainly the result of a strong return on
plan assets and funding of past service contributions in 2006. The solvency
deficit on the registered pension plans at January 1, 2007 is also expected to
decrease significantly compared to January 1, 2006 and, as a result, employer
contributions determined in accordance with regulations, are expected to
decline by approximately $90 million in 2007 and $120 million each year
thereafter.
    "I am very pleased to report one of the strongest fourth quarters in Air
Canada's history, capping a year of numerous accomplishments that included the
initial public offering of Air Canada creating an independently traded company
from ACE Aviation," said Montie Brewer, President and Chief Executive Officer.
"Through the hard work and dedication of our employees, we took significant
steps in moving our business plan forward. Our results are on track following
our third consecutive year of record load factors, as we continue to renew our
fleet and ramp up the introduction of a market leading onboard product in the
months to come. Consumers are responding favourably to our value-based fare
products that are successfully differentiating Air Canada from the
competition, and at the same time our distribution costs have been
significantly reduced in line with leading low cost carriers.
    "In the months ahead, we expect to see continued positive returns from our
investments in Air Canada's new business model. With the recent consolidation
of all Air Canada flights under one roof at our main Toronto hub, the customer
experience has improved and we will be able to continue leveraging our global
network via one of North America's premier gateway cities. In March, we will
begin taking delivery of new, fuel efficient Boeing 777 widebody aircraft for
our international fleet. Looking forward, revenue and cost performance are on
track aided by continued strong future bookings."

    Jazz
    ----

    As reported by Jazz on February 8, 2007, for the full year 2006 the Jazz
segment recorded operating income of $144 million, an improvement of
$15 million from the operating income of $129 million recorded in 2005.

    Air Canada Consolidated (including Jazz)
    ----------------------------------------

    On a consolidated basis, Air Canada reported operating income of
$29 million in the fourth quarter compared to an operating loss of $57 million
in the fourth quarter of 2005. Loss before non-controlling interest, foreign
exchange and income taxes for the quarter amounted to $25 million compared to
a loss of $145 million in the fourth quarter of 2005.
    For 2006, Air Canada recorded consolidated operating income of
$259 million for the full year 2006, despite a fuel expense increase of
$348 million or 16 per cent, compared to operating income of $318 million in
2005. Excluding special charges of $122 million, operating income(1) of
$381 million represented an increase of $63 million over 2005. Income before
non-controlling interest, foreign exchange and income taxes for the year
amounted to $63 million compared to income of $85 million in 2005.

    2006 Air Canada Services Accomplishments
    ----------------------------------------

    - Successfully completed its initial public offering, trading on the TSX
      independently from its parent company, ACE Aviation Holdings.
    - Recorded a full year load factor of 80.2 per cent, the third
      consecutive year the airline achieved a full-year record load factor.
    - Eighty per cent on-time arrivals performance ranked as second best in
      North America, as measured by U.S. carriers for the 12 month period
      October 2005-September 2006.
    - Launched 22 new non-stop services including Calgary-New York City,
      Edmonton-London Heathrow, Montreal-Denver, Montreal-Mexico City,
      Toronto-San Diego and Toronto-Shanghai.
    - Began a major refurbishment of its Boeing 767-300 and Airbus narrowbody
      fleets installing new seats, seatback personal entertainment systems
      and in-seat power throughout both cabins.
    - Introduced 15 Embraer E190 aircraft, of a total of 45 on order, joining
      3 E190 and 15 E175 aircraft already in service in its North American
      fleet.
    - Introduced unique "à la carte" pricing, an industry first, enabling
      customers to choose the features and services they wish to include in
      their fare.
    - Forty-six per cent of domestic consumers chose a branded fare higher
      than the everyday low Tango fare available.
    - Continued to expand its line of multi-flight pass products and grew
      pass sales revenue by 148 per cent in 2006; first time pass purchasers
      increased by 228 per cent from previous year.
    - Introduced the first flat fee subscription Flight Pass, allowing for
      unlimited flights within a choice of geographical zones and periods of
      time.
    - Web penetration for domestic Canada sales in the fourth quarter was
      57 per cent, and reached 61 per cent for the month of December.
    - Sixty-nine per cent of domestic Canada sales for the fourth quarter
      were made directly with Air Canada, either online or through call
      centres.
    - Eighteen per cent of customers checked in online at aircanada.com,
      a threefold increase from the previous year.
    - Selected by the editors of Air Transport World to receive the
      magazine's Airline Industry Achievement Award for Market Leadership.
    - Voted 'Best Airline in North America' and 'Best Airline in Canada' by
      the readers of U.S. frequent flyer magazine, Global Traveler, and 'Best
      Business Class to Canada' by the readers of Business Traveler magazine.
    - Concluded an agreement with ITA Software to develop Air Canada's new
      reservation management system, Polaris.
    - Successfully completed wage reviews with all major employee groups
      except CUPE (for which an arbitration decision is pending), resulting
      in average awards of approximately 5 per cent over three years.
    - Contributed $477 million to funding its employees' defined benefit
      pension plans in 2006, in accordance with the OSFI agreement, of which
      $224 million represented funding of past service costs.
    - Paid out $25.5 million to Air Canada employees under its 'Sharing Our
      Success' monthly incentive program.

    (1) Non-GAAP Measures

    EBITDAR is a non-GAAP financial measure commonly used in the airline
industry to assess earnings before interest, taxes, depreciation and aircraft
rent. EBITDAR is used to view operating results before aircraft rent and
depreciation, amortization and obsolescence as these costs can vary
significantly among airlines due to differences in the way airlines finance
their aircraft and other assets. EBITDAR is not a recognized measure for
financial statement presentation under GAAP and does not have a standardized
meaning and is therefore not comparable to similar measures presented by other
public companies.
    Operating income excluding the special charges for Aeroplan miles and
labour restructuring is a non-GAAP financial measure. Air Canada Services uses
operating income excluding the special charges for Aeroplan miles and labour
restructuring to assess the operating performance of its ongoing business
without the effects of these special charges. These special charges are
excluded from Air Canada Services' results as they could potentially distort
the analysis of trends in business performance.
    Readers should refer to Air Canada's 2006 Management's Discussion and
Analysis (MD&A) which will be filed on SEDAR for a reconciliation of EBITDAR
to operating income (loss) and for a reconciliation of operating income (loss)
excluding the special charge for Aeroplan miles and the special charge for
labour restructuring to operating income (loss).
    For further information on Air Canada's public disclosure file, including
Air Canada's Annual Information Form, please consult SEDAR at www.sedar.com

    CAUTION REGARDING FORWARD-LOOKING INFORMATION

    Certain statements in this news release may contain forward-looking
statements. These forward-looking statements are identified by the use of
terms and phrases such as "anticipate", "believe", "could", "estimate",
"expect", "intend", "may", "plan", "predict", "project", "will", "would", and
similar terms and phrases, including references to assumptions. Such
statements may involve but are not limited to comments with respect to
strategies, expectations, planned operations or future actions.
Forward-looking statements, by their nature, are based on assumptions and are
subject to important risks and uncertainties. Any forecasts or forward-looking
predictions or statements cannot be relied upon due to, amongst other things,
changing external events and general uncertainties of the business. Such
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements to differ
materially from those expressed in the forward-looking statements. Results
indicated in forward-looking statements may differ materially from actual
results for a number of reasons, including without limitation, energy prices,
general industry, market and economic conditions, war, terrorist attacks,
changes in demand due to the seasonal nature of the business, the ability to
reduce operating costs and employee counts, employee relations, labour
negotiations or disputes, pension issues, currency exchange and interest
rates, changes in laws, adverse regulatory developments or proceedings,
pending and future litigation and actions by third parties as well as the
factors identified throughout Air Canada's filings with securities regulators
in Canada and, in particular, those identified in the Risk Factors section to
Air Canada's 2006 MD&A, which will be filed on SEDAR. . The forward-looking
statements contained herein represent Air Canada's expectations as of the date
they are made and are subject to change after such date. However, Air Canada
disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise,
except as required under applicable securities regulations.

    AIR CANADA
                                             Selected Financial Information

    Quarter 4 2006 versus Quarter 4 2005

    The following table reflects the income / loss before non-controlling
interest, foreign exchange, and income taxes of Air Canada and its reportable
segments and earnings before interest, taxes, depreciation, amortization and
obsolescence, and aircraft rent (EBITDAR), which is a non-GAAP measure, for
quarter 4 2006 and quarter 4 2005.

    -------------------------------------------------------------------------
    UNAUDITED                                                 Quarter 4 2006
                                                           Inter-    Consoli-
    (in millions -            Air Canada                 segment       dated
      Canadian dollars)         Services        Jazz elimination       total
    -------------------------------------------------------------------------
    Operating revenues
    Passenger                   $  2,071           -           -    $  2,071
    Cargo                            166           -           -         166
    Other                            178         352        (372)        158
    -------------------------------------------------------------------------
                                   2,415         352        (372)      2,395
    -------------------------------------------------------------------------

    Operating expenses
    Salaries, wages and
     benefits                        443          82           -         525
    Aircraft fuel                    583          69         (69)        583
    Aircraft rent                     75          34          (2)        107
    Airport and navigation
     fees                            232          46         (46)        232
    Aircraft maintenance,
     materials and supplies          205          27          (4)        228
    Communications and
     information technology           68           2          (1)         69
    Food, beverages and
     supplies                         76           4           -          80
    Depreciation, amortization
     and obsolescence                135           5           -         140
    Commissions                       49           -           -          49
    Capacity purchase fees
     paid to Jazz                    224           -        (224)          -
    Special charge for labour
     restructuring                    (8)          -           -          (8)
    Other                            338          50         (27)        361
    -------------------------------------------------------------------------
                                   2,420         319        (373)      2,366
    -------------------------------------------------------------------------

    Operating income (loss)           (5)         33           1          29

    Non-operating income
     (expense)
    Interest income                   24           2          (1)         25
    Interest expense                 (88)         (2)         (1)        (91)
    Interest capitalized              22           -           -          22
    Gain (loss) on sale of and
     provisions on assets            (10)          -           -         (10)
    Other                              -          (1)          1           -
    -------------------------------------------------------------------------
                                     (52)         (1)         (1)        (54)
    -------------------------------------------------------------------------

    Income (loss) before
     non-controlling interest,
     foreign exchange and
     income taxes               $    (57)   $     32           -    $    (25)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDAR                          205          72          (1)        276
    EBITDAR excluding
     special charges                 197          72          (1)        268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    UNAUDITED                                                 Quarter 4 2005
                                                           Inter-    Consoli-
    (in millions -            Air Canada                 segment       dated
      Canadian dollars)         Services        Jazz elimination       total
    -------------------------------------------------------------------------
    Operating revenues
    Passenger                   $  1,949    $      1           -    $  1,950
    Cargo                            177           -           -         177
    Other                            145         303        (319)        129
    -------------------------------------------------------------------------
                                   2,271         304        (319)      2,256
    -------------------------------------------------------------------------

    Operating expenses
    Salaries, wages and
     benefits                        463          75           -         538
    Aircraft fuel                    577          62         (62)        577
    Aircraft rent                     90          28          (1)        117
    Airport and navigation
     fees                            222          37         (37)        222
    Aircraft maintenance,
     materials and supplies          180          18          (4)        194
    Communications and
     information technology           72           2          (1)         73
    Food, beverages and
     supplies                         78           3           -          81
    Depreciation, amortization
     and obsolescence                106           4           -         110
    Commissions                       47           -           -          47
    Capacity purchase fees
     paid to Jazz                    194           -        (194)          -
    Special charge for labour
     restructuring                     -           -           -           -
    Other                            333          41         (20)        354
    -------------------------------------------------------------------------
                                   2,362         270        (319)      2,313
    -------------------------------------------------------------------------

    Operating income (loss)          (91)         34           -         (57)

    Non-operating income
     (expense)
    Interest income                   14           -           1          15
    Interest expense                 (74)         (3)         (1)        (78)
    Interest capitalized               6           -           -           6
    Gain (loss) on sale of and
     provisions on assets            (30)          1           -         (29)
    Other                             (2)          -           -          (2)
    -------------------------------------------------------------------------
                                     (86)         (2)          -         (88)
    -------------------------------------------------------------------------

    Income (loss) before
     non-controlling interest,
     foreign exchange and
     income taxes               $   (177)   $     32           -    $   (145)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDAR                          105          66          (1)        170
    EBITDAR excluding
     special charges                 105          66          (1)        170
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    For the year ended December 31                     Unaudited   Unaudited
    (in millions - Canadian dollars)                        2006        2005
    -------------------------------------------------------------------------

    Operating revenues
      Passenger                                         $  8,887    $  8,199
      Cargo                                                  629         625
      Other                                                  651         634
    -------------------------------------------------------------------------
                                                          10,167       9,458
    -------------------------------------------------------------------------
     Special charge for Aeroplan Miles                      (102)          -
    -------------------------------------------------------------------------
                                                          10,065       9,458
    -------------------------------------------------------------------------

    Operating expenses
      Salaries, wages and benefits                         2,127       2,122
      Aircraft fuel                                        2,545       2,197
      Aircraft rent                                          441         417
      Airport and navigation fees                            982         924
      Aircraft maintenance, materials and supplies           855         751
      Communications and information technology              278         297
      Food, beverages and supplies                           335         334
      Depreciation, amortization and obsolescence            514         422
      Commissions                                            237         253
      Special charge for labour restructuring                 20           -
      Other                                                1,472       1,423
    -------------------------------------------------------------------------
                                                           9,806       9,140
    -------------------------------------------------------------------------

    Operating income                                         259         318

    Non-operating income (expense)
      Interest income                                         87          48
      Interest expense                                      (321)       (284)
      Interest capitalized                                    61          14
      Loss on sale of and provisions on assets                (6)        (27)
      Other                                                  (17)         16
    -------------------------------------------------------------------------
                                                            (196)       (233)
    -------------------------------------------------------------------------

    Income before non-controlling interest, foreign
     exchange and income taxes                          $     63    $     85
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    2006 versus 2005

    The following table reflects the income / loss before non-controlling
interest, foreign exchange, and income taxes of Air Canada and its reportable
segments and earnings before interest, taxes, depreciation, amortization and
obsolescence, and aircraft rent (EBITDAR), which is a non-GAAP measure, for
2006 and 2005.

    -------------------------------------------------------------------------
    UNAUDITED                                   Year ended December 31, 2006
                                                           Inter-    Consoli-
    (in millions -            Air Canada                 segment       dated
      Canadian dollars)         Services        Jazz  elimination      total
    -------------------------------------------------------------------------
    Operating revenues
    Passenger                   $  8,887           -            -   $  8,887
    Cargo                            629           -            -        629
    Other                            723       1,381       (1,453)       651
    -------------------------------------------------------------------------
                                  10,239       1,381       (1,453)    10,167
    Special charge for
     Aeroplan miles                 (102)          -            -       (102)
    -------------------------------------------------------------------------
                                  10,137       1,381       (1,453)    10,065
    -------------------------------------------------------------------------
    Operating expenses
    Salaries, wages and
     benefits                      1,816         311            -      2,127
    Aircraft fuel                  2,544         285         (284)     2,545
    Aircraft rent                    314         134           (7)       441
    Airport and navigation
     fees                            982         178         (178)       982
    Aircraft maintenance,
     materials and supplies          768          98          (11)       855
    Communications and
     information technology          273           8           (3)       278
    Food, beverages and
     supplies                        322          15           (2)       335
    Depreciation, amortization
     and obsolescence                493          21            -        514
    Commissions                      237           -            -        237
    Capacity purchase fees
     paid to Jazz                    871           -         (871)         -
    Special charge for labour
     restructuring                    20           -            -         20
    Other                          1,383         187          (98)     1,472
    -------------------------------------------------------------------------
                                  10,023       1,237       (1,454)     9,806
    -------------------------------------------------------------------------
    Operating income                 114         144            1        259

    Non-operating income
     (expense)
    Interest income                   82           6           (1)        87
    Interest expense                (313)         (8)                   (321)
    Interest capitalized              62          (1)           -         61
    Gain (loss) on sale of and
     provisions on assets             (6)          -            -         (6)
    Other                            (16)         (1)                    (17)
    -------------------------------------------------------------------------
                                    (191)         (4)          (1)      (196)
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest,
     foreign exchange and
     income taxes               $    (77)    $   140            -   $     63
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDAR                          921         299           (6)     1,214
    EBITDAR excluding special
     charges                       1,043         299           (6)     1,336
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    UNAUDITED                                   Year ended December 31, 2005
                                                           Inter-    Consoli-
    (in millions -            Air Canada                 segment       dated
      Canadian dollars)         Services        Jazz  elimination      total
    -------------------------------------------------------------------------
    Operating revenues
    Passenger                    $ 8,197           2            -    $ 8,199
    Cargo                            625           -            -        625
    Other                            687       1,021       (1,074)       634
    -------------------------------------------------------------------------
                                   9,509       1,023       (1,074)     9,458
    Special charge for
     Aeroplan miles                    -           -            -          -
    -------------------------------------------------------------------------
                                   9,509       1,023       (1,074)     9,458
    -------------------------------------------------------------------------
    Operating expenses
    Salaries, wages and
     benefits                      1,857         265            -      2,122
    Aircraft fuel                  2,197         177         (177)     2,197
    Aircraft rent                    341          80           (4)       417
    Airport and navigation
     fees                            924         124         (124)       924
    Aircraft maintenance,
     materials and supplies          693          68          (10)       751
    Communications and
     information technology          294           5           (2)       297
    Food, beverages and
     supplies                        326           8            -        334
    Depreciation, amortization
     and obsolescence                404          18            -        422
    Commissions                      253           -            -        253
    Capacity purchase fees
     paid to Jazz                    693           -         (693)         -
    Special charge for labour
     restructuring                     -           -            -          -
    Other                          1,336         149          (62)     1,423
    -------------------------------------------------------------------------
                                   9,318         894       (1,072)     9,140
    -------------------------------------------------------------------------
    Operating income                 191         129           (2)       318

    Non-operating income
     (expense)
    Interest income                   48           1           (1)        48
    Interest expense                (270)        (16)           2       (284)
    Interest capitalized              14           -            -         14
    Gain (loss) on sale of and
     provisions on assets            (31)          4            -        (27)
    Other                             15           -            1         16
    -------------------------------------------------------------------------
                                    (224)        (11)           2       (233)
    -------------------------------------------------------------------------
    Income (loss) before
     non-controlling interest,
     foreign exchange and
     income taxes                $   (33)    $   118            -         85
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDAR                          936         227           (6)     1,157
    EBITDAR excluding special
     charges                         936         227           (6)     1,157
    -------------------------------------------------------------------------

    Passenger Revenue Analysis

    The following table describes quarter-over quarter percentage changes in
passenger revenues, capacity, traffic, passenger load factor, yield per
revenue passenger mile (yield) and passenger revenue per available seat mile
(RASM) for quarter 4 2006 to quarter 4 2005.

    -------------------------------------------------------------------------
    UNAUDITED
    Quarter 4     Passen-  Capacity   Traffic    Passen-
    2006              ger                       ger Load
    versus        Revenue    (ASMs)    (RPMs)     Factor     Yield      RASM
    Quarter 4    % Change  % Change  % Change  pp Change  % Change  % Change
    2005
    -------------------------------------------------------------------------
    Canada              6         4         6        1.7         -        2
    US transborder     10        11        15        2.0        (4)      (1)
    Atlantic            4         2         2          -         2        2
    Pacific             1         -         -        0.1         1        1
    Other               6         1         5        3.0         1        5
    System              6         4         5        1.1         1        2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table describes year-over year percentage changes in
passenger revenues, capacity, traffic, passenger load factor, yield and RASM
for 2006 to 2005.

    -------------------------------------------------------------------------
    UNAUDITED
                  Passen-  Capacity   Traffic    Passen-
      2006            ger                       ger Load
    versus        Revenue    (ASMs)    (RPMs)     Factor     Yield      RASM
      2005       % Change  % Change  % Change  pp Change  % Change  % Change
    -------------------------------------------------------------------------
    Canada              8         4         4       (0.5)        4         3
    US transborder     17        12        16        2.5         1         4
    Atlantic            5         2         2        0.5         2         3
    Pacific             2         -         1        1.4         1         3
    Other               9         1         3        1.8         6         8
    System              8         4         5        0.7         3         4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Unit Cost Analysis

    The following table compares the Air Canada Services segment's operating
expenses per available seat mile (ASM) for quarter 4 2006 to the Air Canada
Services segment's operating expenses per ASM for quarter 4 2005.

    -------------------------------------------------------------------------
    UNAUDITED                              Quarter 4                  Change
    ($ cents per ASM)               2006        2005            $          %
    -------------------------------------------------------------------------
    Salary and wages                2.60        2.63        (0.03)        (1)
    Benefits                        0.49        0.72        (0.23)       (32)
    Ownership (DAR) (1)             1.46        1.42         0.04          3
    Airport and navigation fees     1.62        1.61         0.01          1
    Aircraft maintenance,
     materials and supplies         1.43        1.31         0.12          9
    Food, beverages and supplies    0.53        0.56        (0.03)        (5)
    Commissions                     0.34        0.34            -          -
    Capacity purchase fees paid
     to Jazz                        1.56        1.40         0.16         11
    Other                           2.83        2.94        (0.11)        (4)
    -------------------------------------------------------------------------
    Operating expense, excluding
     fuel expense
     and the special charge for
     labour restructuring          12.86       12.93        (0.07)        (1)
    Aircraft fuel                   4.06        4.18        (0.12)        (3)
    Special charge for labour
     restructuring                 (0.05)          -        (0.05)       n/a
    -------------------------------------------------------------------------
    Total operating expense        16.87       17.11        (0.24)        (1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table compares the Air Canada Services segment's operating
expenses per ASM for the year ended 2006 to the corresponding period in 2005.

    -------------------------------------------------------------------------
    UNAUDITED                                                         Change
    ($ cents per ASM)               2006        2005            $          %
    -------------------------------------------------------------------------
    Salary and wages                2.35        2.45        (0.10)        (4)
    Benefits                        0.62        0.70        (0.08)       (11)
    Ownership (DAR) (1)             1.32        1.27         0.05          4
    Airport and navigation fees     1.61        1.57         0.04          3
    Aircraft maintenance,
     materials and supplies         1.26        1.18         0.08          7
    Food, beverages and supplies    0.53        0.55        (0.02)        (4)
    Commissions                     0.39        0.43        (0.04)        (9)
    Capacity purchase fees paid
     to Jazz                        1.43        1.18         0.25         21
    Other                           2.70        2.78        (0.08)        (3)
    -------------------------------------------------------------------------
    Operating expense, excluding
     fuel expense
     and the special charge for
     labour restructuring          12.21       12.11         0.10          1
    Aircraft fuel                   4.17        3.73         0.44         12
    Special charge for labour
     restructuring                  0.03           -         0.03        n/a
    -------------------------------------------------------------------------
    Total operating expense        16.41       15.84         0.57          4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) DAR refers to the combination of Aircraft rent and Depreciation,
        amortization and obsolescence.


    Cash and Short-term Investments

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    UNAUDITED
                                                                        2006
                             ------------------------------------------------
    (in millions -                                                  Consoli-
    Canadian dollars)         Air Canada                   Elimi-      dated
                                Services        Jazz       nation      Total
    -------------------------------------------------------------------------
    Cash and cash equivalents   $  1,312    $    135     $      -   $  1,447
    Short-term investments           798           -            -        798
    -------------------------------------------------------------------------
                                $  2,110    $    135     $      -   $  2,245
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                                        2005
    -------------------------------------------------------------------------
                                                                    Consoli-
                              Air Canada                   Elimi-      dated
                                Services        Jazz       nation      Total
                             ------------------------------------------------
    Cash and cash equivalents   $  1,000    $     34     $      -   $  1,034
    Short-term investments           302           -            -        302
    -------------------------------------------------------------------------
                                $  1,302    $     34     $      -   $  1,336
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Long-term Debt and Capital Leases

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    UNAUDITED                                 Stated
    (in millions -                 Final    Interest
    Canadian dollars)           Maturity        Rate         2006       2005
    -------------------------------------------------------------------------
    Embraer aircraft
     financing                 2017-2021   6.89-8.49        $ 776      $ 393
    Conditional sales
     agreements                     2019   8.26-8.28          184        193
    Lufthansa cooperation
     agreement                      2009        6.50           44         59
    GE loan                         2015       11.12           48         51
    Revolving credit facility       2010           -            -          -
    Other                      2007-2010   4.32-9.10            5          8
    -------------------------------------------------------------------------
    Direct Corporation debt                                 1,057        704
    -------------------------------------------------------------------------
    Jazz - senior syndicated
     credit facility                2009        7.09          115          -
    Jazz - term loans and credit
     facilities                                                 -         14
    Aircraft and engine leasing
     entities - debt                                        1,051      1,125
    Fuel facility corporations
     - debt                                                    59         53
    -------------------------------------------------------------------------
    Debt consolidated under AcG-15 (1)                      1,225      1,192
    -------------------------------------------------------------------------
    Capital lease obligations                               1,281      1,365
    -------------------------------------------------------------------------

    Total debt and capital leases                           3,563      3,261
    -------------------------------------------------------------------------
    Current portion                                          (367)      (265)
    -------------------------------------------------------------------------
    Long-term debt and capital leases                    $  3,196   $  2,996
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The Stated Interest Rate in the table above is the rate as of
    December 31, 2006.

    (1) CICA HB Accounting Guideline 15, Variable Interest Entities
        ("AcG-15")

    Non-GAAP Financial Measures - EBITDAR

    EBITDAR (earnings before interest, taxes, depreciation, amortization and
obsolescence and aircraft rent) is a non-GAAP financial measure commonly used
in the airline industry to view operating results before aircraft rent and
depreciation, amortization and obsolescence as these costs can vary
significantly among airlines due to differences in the way airlines finance
their aircraft and other assets.
    EBITDAR is not a recognized measure for financial statement presentation
under Canadian GAAP and does not have a standardized meaning and is therefore
not likely to be comparable to similar measures presented by other public
companies.
    EBITDAR is reconciled to operating income (loss) as follows:

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    UNAUDITED                       Quarter 4
    (in millions -
     Canadian                               $                              $
     dollars)        2006      2005    Change       2006      2005    Change
    -------------------------------------------------------------------------
    Air Canada
     Services
    GAAP operating
     income (loss)     (5)      (91)       86        114       191       (77)
    Add back:
    Aircraft rent      75        90       (15)       314       341       (27)
    Depreciation,
     amortization and
     obsolescence     135       106        29        493       404        89
    -------------------------------------------------------------------------
    EBITDAR           205       105       100        921       936       (15)
    Add back:
    Special charge
     for labour
     restructuring     (8)        -        (8)        20         -        20
    Special charge
     for Aeroplan miles -         -         -        102         -       102
    -------------------------------------------------------------------------
    EBITDAR excluding
     special charges  197       105        92      1,043       936       107
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Jazz
    GAAP operating
     income            33        34        (1)       144       129        15
    Add back:
    Aircraft rent      34        28         6        134        80        54
    Depreciation,
     amortization and
     obsolescence       5         4         1         21        18         3
    -------------------------------------------------------------------------
    EBITDAR            72        66         6        299       227        72
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consolidated total
    GAAP operating
     income (loss)     29       (57)       86        259       318       (59)
    Add back:
    Aircraft rent     107       117       (10)       441       417        24
    Depreciation,
     amortization and
     obsolescence     140       110        30        514       422        92
    -------------------------------------------------------------------------
    EBITDAR           276       170       106      1,214     1,157        57
    Add back:
    Special charge
     for labour
     restructuring     (8)        -        (8)         20        -        20
    Special charge for
     Aeroplan miles     -         -         -         102        -       102
    -------------------------------------------------------------------------
    EBITDAR excluding
     special charges  268       170        98       1,336    1,157       179
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating Income excluding the Special Charge for Aeroplan Miles and the
    Special Charge for Labour Restructuring

    The Air Canada Services segment uses operating income excluding the
special charges for Aeroplan miles and labour restructuring to assess the
operating performance of its ongoing business without the effects of these
special charges. These items are excluded from Air Canada Services' segment
results as they could potentially distort the analysis of trends in business
performance. The special charge for Aeroplan miles is the full and final
settlement between the parties in connection with Air Canada's obligations for
the redemption of pre-2002 miles. The special charge for labour restructuring
is the total cost of the 20 percent non-unionized workforce reduction plan
announced in February 2006. The special charges for Aeroplan miles and labour
restructuring are not reflective of the underlying financial performance of
the Air Canada Services segment from ongoing operations.
    The following measure is not a recognized measure for financial statement
presentation under Canadian GAAP and does not have a standardized meaning and
is therefore not likely to be comparable to similar measures presented by
other public companies.
    Operating income excluding the special charge for Aeroplan miles and the
special charge for labour restructuring is reconciled to operating income as
follows:

    -------------------------------------------------------------------------
    UNAUDITED
    (in millions -
     Canadian          Q4        Q4
     dollars)        2006      2005    Change        2006     2005    Change
    -------------------------------------------------------------------------
    Air Canada
     Services
    GAAP operating
     income (loss)     (5)      (91)       86         114      191       (77)
    Add back:
    Special charge for
     Aeroplan miles     -         -         -         102        -       102
    -------------------------------------------------------------------------
    Operating income
     (loss), excluding
     the special charge
     for Aeroplan
     miles             (5)      (91)       86         216      191        25
    Add back:
    Special charge for
     labour
     restructuring     (8)        -        (8)         20        -        20
    -------------------------------------------------------------------------
    Operating income
     (loss), excluding
     the special
     charges for
     Aeroplan miles
     and labour
     restructuring    (13)      (91)       78         236      191        45
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    UNAUDITED
    (in millions -
     Canadian          Q4        Q4
     dollars)        2006      2005    Change        2006     2005    Change
    -------------------------------------------------------------------------
    Consolidated total
    GAAP operating
     income (loss)     29       (57)       86         259      318       (59)
    Add back:
    Special charge for
     Aeroplan miles     -         -         -         102        -       102
    -------------------------------------------------------------------------
    Operating income
     (loss), excluding
     the special charge
     for Aeroplan
     miles             29       (57)       86         361      318        43
    Add back:
    Special charge
     for labour
     restructuring    (8)         -        (8)         20        -        20
    -------------------------------------------------------------------------
    Operating income
     (loss), excluding
     the special
     charges for
     Aeroplan miles
     and labour
     restructuring    21        (57)       78         381      318        63
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    %SEDAR: 00024384EF

For further information: Isabelle Arthur (Montréal), (514) 422-5788; Peter Fitzpatrick (Toronto), (416) 263-5576; Angela Mah (Vancouver), (604) 270-5741; aircanada.com