YOUR GLOBAL CHAMPION. Fitti Lourenco. Director, Federal Government Affairs and Ontario. January 2017

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1 YOUR GLOBAL CHAMPION Fitti Lourenco Director, Federal Government Affairs and Ontario January 2017 Presentation is not in accessible format, if you require an accessible version please contact

2 YOUR GLOBAL CHAMPION We offer Ontario unparalled access to global markets Business are not isolated by geography rather connected to other economic zones Human resources can travel to and from centres of excellence Your centres of excellence can attract people and export goods and services around the world agriculture centre to agriculture centre, business relationships, and expertise 2

3 OUR NETWORK IN ONTARIO Beginning in Ontario, 10 Ontario cities are linked to our Global Hub at Toronto Pearson Thunder Bay To Winnipeg Timmins Sault-Ste-Marie Sudbury North Bay Ottawa Montreal Kingston Sarnia Windsor London Toronto City Centre 3

4 TORONTO PEARSON: AIR CANADA IS BUILDING ITS GLOBAL HUB IN ONTARIO Today Air Canada Flies over 42 million passengers annually to over 200 destinations Approx. 200 of these destinations are directly linked to Toronto Pearson This means that Ontario has access like no one else in Canada and many other parts of the world 4

5 OUR NETWORK IN NORTH AMERICA Among the 15 largest airlines in the world An average of 120, 000 flying per people per day ~42M passengers 5

6 THE ONGOING TRANSFORMATION TO BECOMING A GLOBAL CHAMPION Nearly six years ago, Air Canada was coming off of the two worst years in global aviation: Fuel was spike at $140/barrel and maintained around $100/barrel Air Canada had lost over $1 billion net Our pension plan deficit exceeded $4 billion and our stock was less than $1 dollar Many Canadians had already written off Air Canada, and other major Canadian companies following the Great Recession that began with the 2008 Wall Street collapse Air Canada took this as an opportunity to transform 6

7 THE PLAN To transform Air Canada we needed to focus on: Cost/Sustainability International Growth Customer Engagement Internal Culture Change 7

8 TODAY COST AND SUSTAINABILITY 2015 revenue of $14 billion a growth of 40% from earnings of $2.5 billion - a growth of 270% from 2009 when we earned $679 million Our pension now has a surplus of $1.3 billion versus a deficit of $2.7 billion from the end of was our most profitable with a adjusted net income of $1.2 billion Today shares are 800% higher than in 2009 And according to Statistics Canada, all this was done while keeping domestic airfares at a six year low 1 On average, international fares increased by only 60 cents

9 WE MUST BE SUSTAINABLE IT IS GOOD BUSINESS Air Canada has to be sustainable to provide quality service to customers and value to shareholders If fares are increasing, it is because taxes and fees collected by us for the government and third parties. The OECD ranks Canada as having the fifth highest cost structure in air transportation in the world Recent fuel tax increase in Ontario is one example Local officials, businesses and travelers must register these concerns with Federal and Provincial officials 9

10 AN UNCOMPETITIVE TAXATION REGIME From BUFFALO To ORLANDO From BUFFALO To ORLANDO 10

11 INTERNATIONAL GROWTH Newly launched routes include: Athens, Amsterdam, Barcelona, Copenhagen, Delhi, Dubai, Edinburgh, Tokyo/Hanaeda, Istanbul, Manchester, Rio De Janeiro and Venice New Summer 2016 routes include: Glasgow, Budapest, Warsaw and Prague 11

12 INTERNATIONAL GROWTH We are focused on growing our Global Hubs across Canada, particularly in Toronto The International Air Transport Association projects an annual 3.8% increase in air transport demand until it reaches 7 billion passengers by 2034 This is DOUBLE the amount from 2015 We need to capture a portion of this growing market This year a total of 90% of our growth will be in international markets Even capturing 1.5% of US traffic and transiting through our Canadian hubs would add 1.68 million passengers per year to our network This would translate into $605 million in incremental value 12

13 CUSTOMER ENGAGEMENT Air Canada was chosen Best North American Airline for International Travel, Best Flight Attendants in North America, Best North American Airline for Business-Class Service and Best Airline Website by frequent travelers surveyed by Premier Traveler Magazine Air Canada was the only network airline in North American to be given a Four-Star ranking by the independent research firm Skytrax and five years running Air Canada was named Canada's Preferred Airline by frequent business travellers in an Ipsos Reid survey, confirming Air Canada was preferred by 86 per cent of Canadian frequent business travellers surveyed 13

14 INTERNAL CULTURE CHANGE - LABOUR Air Canada employ nearly 30,000 employees in 26 different countries We have engaged our employees in all aspects of the business and introduced new training across departments By working with our employees and having them buy into the longterm success of the company we have unprecedented 10-year deals with most of our major unions and long-term agreements with all others. Air Canada was recognized as one of the best places to work in Canada at the eighth annual Glassdoor Employees' Choice Awards in 2015 Air Canada was also recognized as one of Canada s top 100 employers in

15 INCREASING COMPETITIVENESS: NEW CPA WITH JAZZ Extension of the term by five years to 2025 Fleet simplification and modernization - greater efficiency through the addition of 23 Bombardier Q400 aircraft. New CPA enables a stronger relationship for the long term and is key to the success of our global expansion strategy 15

16 AIR CANADA ROUGE POSITION AIR CANADA PROFITABLY IN THE LEISURE MARKET Air Canada rouge to pursue opportunities, and subject to market conditions, will expand to other destinations as Air Canada takes delivery of new Boeing 787 aircraft. Air Canada rouge may operate up to 50 aircraft mix of Boeing ER and Airbus A319/A321 aircraft. 16

17 INCREASING COMPETITIVENESS: INVESTING IN A NEW FLEET 17

18 INCREASING COMPETITIVENESS: INVESTING IN A NEW FLEET $9 billion capital expenditure program One of the youngest fleets in the world Boeing 787 Boeing 737 MAX Bombardier Q400 Bombardier C Series ($3.8 billion) The fuel efficiency and range of these aircrafts allows us to enter more markets and increase our competitiveness in existing markets, in addition to offering customers a great experience We are also refurbishing a number our Boeing 777 fleet Installing Wi-Fi in all domestic and international mainline aircraft This investment in capital means hundreds of jobs for Canadian manufacturers and suppliers 18

19 CORPORATE REWARDS 19

20 THE AIR CANADA FOUNDATION The Air Canada Foundation carries out its charitable activities through a number of programs and initiatives, which have been developed and expanded over the course of many years fitti.lourenco@aircanada.ca 20

21 THANK YOU ROMA 21