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Air Canada and Jazz agree to amend agreement

July 28, 2009, Montreal - Air Canada has concluded an MOU with Jazz to modify the terms and conditions of their Capacity Purchase Agreement, effective Aug. 1, 2009.


July 29, 2009
By Carey Fredericks

July 28, 2009, Montreal – Air Canada has concluded a Memorandum of Understanding (MOU) with Jazz Air LP (Jazz) to modify the terms and conditions of their Capacity Purchase Agreement (CPA), effective August 1, 2009. The CPA Amendments are subject to Air Canada securing new financing in a minimum amount of $600 million and certain other conditions.

"The participation of important suppliers and partners such as Jazz is key to the successful execution of the significant cost reduction program needed for Air Canada to achieve sustainable profitability," said Calin Rovinescu, President and CEO of Air Canada. "The CPA Amendments will provide us with reduced capacity purchase costs that are more consistent with market realities and will allow us to enjoy greater flexibility in our fleet deployment. This mutually beneficial agreement with Jazz is an important step in the restructuring of our business to reflect the new revenue and yield environment."

Highlights of the revised agreement include:

    – A reduction in the mark-up rate paid to Jazz on the first 375,000 block
      hours of flying from 16.7 per cent to 12.5 per cent and to 5 per cent
      on block hours above 375,000.
    – A reduction in Air Canada's commitment to Jazz's minimum fleet from 133
      to 125 aircraft.
    – A contract term extension of five years (Jan 1, 2016 – Dec 31, 2020),
      during which the rates will be subject to a benchmarking review.
    – A commitment to work together on Jazz's turboprop fleet renewal
      strategy over the term of the contract.

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Accordingly, the amendments are expected to provide Air Canada with significantly reduced capacity purchase costs for the Jazz network feed over the term of the contract, as extended.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

Air Canada's public communications may include written or oral forward-looking statements within the meaning of applicable securities laws. 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. Actual results may differ materially from results indicated in forward-looking statements due to a number of factors, including without limitation, industry, market, credit and economic conditions, the ability to reduce operating costs and secure financing, pension issues, energy prices, currency exchange and interest rates, employee and labour relations, competition, war, terrorist acts, epidemic diseases, insurance issues and costs, changes in demand due to the seasonal nature of the business, supply issues, changes in laws, regulatory developments or proceedings, pending and future litigation and actions by third parties as well as the factors identified throughout Air Canada's public disclosure file available at www.sedar.com. The forward-looking statements contained in this news release represent Air Canada's expectations as of the date of this news release 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 regulation