Air Canada · TSX:AC
Air Canada — Shareholder Meeting (May 2019)
53 slides from Air Canada's shareholder meeting presentation, May 6, 2019
Slide 1: Caution Regarding Forward-Looking Information
CAUTION REGARDING FORWARD-LOOKING INFORMATION This presentation includes forward-looking statements within the meaning of applicable securities laws. Forward -looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet de
Slide 2: 2019 Annual and Special Meeting of Shareholders
2019 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS A A STAR ALLIANCE MEMBER 4F
Slide 3: 2019 Annual and Special Meeting of Shareholders
2019 Annual and Special Meeting of Shareholders Calin Rovinescu President and Chief Executive Officer May 6, 2019 Toronto
Slide 4: Celebrating our 82nd year
Celebrating our 82nd year
Slide 5: Long term sustainable profitability
Long term sustainable profitability Strong performance despite adversity • Fuel price volatility • Economic uncertainty • Trade wars • Competition • “Black swan” events – Including the Boeing 737 MAX grounding 28
Slide 6: Sustainable profitability
Sustainable profitability ✓ Record financial results ✓ Significant free cash flow ✓ Stronger balance sheet ✓ Pension plan surplus ✓ Expanded global network ✓ Stable long-term labour agreements ✓ Resilient cost structure ✓ Better debt rating 29
Slide 7: Record operating revenue
Record operating revenue CAGR (in millions $) 18,065 +7.8% 16,252 +46% 14,667 13,868 13,272 12,382 2013 2014 2015 2016 2017 2018 30
Slide 8: Passenger revenue growth, capacity growth, load factor
Passenger revenue growth 11.2% Capacity growth 7.1% Load factor up from 2017 83.3% 31
Slide 9: Continued profitability
Continued profitability EBITDAR and EBITDAR Margin EBITDAR Margin % $ Millions 20 4,000 18.3 18.9 18.0 18 15.8 3,500 16 12.6 3,000 14 12 11.6 2,500 10 2,000 8 2,768 2,928 2,851 1,500 6 2,542 1,000 4 1,671 1,433 500 2 0 0 2013 2014 2015 2016 2017 2018 EBITDAR (excluding special items) EBITDAR Margin
Slide 10: 2018 results
2018 results Free cash flow of $791M • Exceeded $500-$600M projection Net income of $167M Adjusted pre-tax income of $952M 33
Slide 11: Strong cost performance
Strong cost performance Adjusted CASM increased 0.3% in 2018 CASM increased 6.0% • Largely attributed to fuel price • Outperformed nearly all major North American carriers Adjusted CASM decreased 9.8% over 2012-2018 period 34
Slide 12: Cost Transformation Program
Cost Transformation Program $250M savings intended by end of 2019 • Identified or realized $242M (97% of goal) 35
Slide 13: Record liquidity
Record liquidity Over $5.7B in unrestricted liquidity at end of 2018 • Up from $4.2B at the end of 2017 36
Slide 14: Effectively restructured pension plans
Effectively restructured pension plans Pension Plan Surplus (Deficit) $20B in assets $ Billions against future 2 2.5 fluctuations 1 0 -1 -2 -3 -4 -5 (4.2) Jan 1, 2012 Jan 1, 2019 37
Slide 15: Q1 2019 Results
Q1 2019 Results | Ze 2 u ic PCOe itriteceece @ ¢ fon c-FoKD — HSBC? — : ; —_ eS CUCCCOcoe ane
Slide 16: Q1 2019 – Positive trends continue
Q1 2019 – Positive trends continue Record operating revenues of $4.45B Net income $345M • Compared to net loss of $203M in Q1-2018 EBITDA of $583M • Compared to a net loss of $504M in Q1-2018 Leverage ratio of 1.2 Record unrestricted liquidity of $6.9B 39
Slide 17: Air Canada's credit rating strengthened
Air Canada’s credit rating strengthened advancing us to our goal of investment grade status S&P 5 notch improvement to B++ (stable) Moody’s 5 notch improvement to Ba2 (stable) 40
Slide 18: Reduced risk profile through lower leverage ratio
Reduced risk profile through lower leverage ratio 41
Slide 19: Strategy increases value
Strategy increases value Share price up over 1,400% since 2013 and over 4,000% since April 1, 2009 Over $9 billion in Historical Share Price* shareholder value May 3, 2019 $ 33.62 Jan. 8, 2018 $ 23.88 (+41%) created since June 1, 2015 $ 14.19 (+137%) June 7, 2013 $ 2.27 (+1,480%) Apr. 1, 2009 April
Slide 20: 2009 The ok,
240 2009 The ok, Mt Nl Ontoa/tuebe ty NORMAY ROTH Oo, cn Se Gina Re Gabe ond Hats star syetam ‘A0KS the largest fms ig amt 8 tat seracmerce %3 potential value, ‘mormentun investmenes Welds and retey lee oF tne "© OVEr the pase Ren continue to perorm ™aG2zINe, Or hong its I scludas tne On Gack of the
Slide 21: Going forward
Going forward 44
Slide 22: Four corporate priorities
Four corporate priorities COST REDUCTION CULTURE AND REVENUE CHANGE GENERATION INTERNATIONAL CUSTOMER EXPANSION ENGAGEMENT 45
Slide 23: Upcoming initiatives
Upcoming initiatives Will achieve significant cost savings NEW RESERVATION SYSTEM INTRODUCTION OF AIRBUS A220 RESUMPTION OF BOEING 737 MAX SERVICE 46
Slide 24: Air Canada Rouge
Air Canada Rouge Fundamental to our competitive transformation • CASM advantages through upgauging aircraft: A320 A321 • Addition of 11 aircraft in 2019 47
Slide 25: Effective revenue generation
Effective revenue generation Unique competitive advantages 48
Slide 26: Ancillary revenue key to expanding margins
Ancillary revenue key to expanding margins Ancillary revenues grew 13% in 2018 49
Slide 27: Air Canada Vacations and Air Canada Cargo
Air Canada Vacations and Air Canada Cargo Key drivers of revenue growth 50
Slide 28: International capacity growth over 80% since 2009
International capacity growth over 80% since 2009 51
Slide 29: Our competitive hubs
Our competitive hubs Europe Asia South America RANK AIRLINE HUB RANK AIRLINE HUB RANK AIRLINE HUB 1 AC YYZ 1 UA SFO 1 AA MIA 2 UA EWR 2 AC YVR 2 DL ATL 3 DL JFK 3 AC YYZ 3 UA IAH 4 DL ATL 4 UA EWR 4 AA DFW 5 AA PHL 5 AA DFW 5 AC YYZ 6 AC YUL 6 AA LAX 6 UA EWR 7 UA IAD 7 DL DTW 7 AA JFK 8 AA DFW 8 DL
Slide 30: Increased transit traffic through hubs
Increased transit traffic through hubs 132% more passengers carried since 2013 • Growing market share to 2% would represent approximately $675M of annual incremental revenue 53
Slide 31: Narrow-body fleet
Narrow-body fleet Moving away A320 FAMILY from smaller A220 less competitive Vancouver airplanes to Montréal Toronto more efficient and CASM competitive types BOEING 737 MAX 54
Slide 32: Culture change
Culture change WIN AS ONE AIR CANADA
Slide 33: Collaborative and cross functional training
Collaborative and cross functional training 56
Slide 34: Engaged workforce
Engaged workforce U uN, — Ga CANADA'S BEST aa DIVERSITY EMPLOYERS
Slide 35: Diversity and Inclusion
CANADA'S BEST DIVERSITY EMPLOYERS
Slide 36: Talent acquisition and attracting talent
Talent acquisition and attracting talent 5,000 new employees hired in 2018 59
Slide 37: Pulling together through adversity
Pulling together through adversity 24 Boeing 737 MAX grounded • Employees rallied across the company • Textbook display of nimble response • Focused on safety and customer care • Winning as One Air Canada 60
Slide 38: Customer Engagement
Customer Engagement
Slide 39: 62
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Slide 40: Bill C-49
Bill C-49 • Unintended consequences of regulatory burden 63
Slide 41: Air Canada Signature
Air Canada Signature Seamless end-to-end travel experience 64
Slide 42: Improved connection experience for customers transiting our hubs
Improved connection experience for customers transiting our hubs 65
Slide 43: Upping our digital game
Upping our digital game Passenger Service System • Handle all reservations on all platforms • Power departure control processes • Improved customer service and operational efficiencies 66
Slide 44: Upping our digital game
Upping our digital game Developing new means through AI to: • better understand our customers • deliver more relevant content • build new efficiencies in our operations and customer experience • establish powerful loyalty to brand 67
Slide 45: Loyalty
Loyalty Successful acquisition of Aeroplan • NPV in excess of $2.5B • Materially contributes to free cash flow • Improves seasonality 68
Slide 46: Over 200 communities served
Over 200 communities served 69
Slide 47: Helping kids reach new heights
Helping kids reach new heights FOUNDATION
Slide 48: Reducing our footprint
Reducing our footprint 55.00 IMPROVEMENT IN FUEL EFFICIENCY between 1990 and 2018 45.00 Litres for every 100 Revenue Tonne Kilometres
Slide 49: Environmental commitments
Environmental commitments 72
Slide 50: Eco-Airline of the Year
at OF THe iS Lp Eco-Airline of the Year «ih as a
Slide 51: Taking care of our people
Taking care of our people Our transformation saved 26,000 jobs and 32,000 retirees’ pensions! 74
Slide 52: Conclusion
Conclusion Leveraging our natural Continuing to invest in: advantages: ✓ People ✓ Geography ✓ Fleet ✓ Brand ✓ Network ✓ Legacy ✓ Product ✓ Loyalty ✓ Data 75
Slide 53: 2019 Annual and Special Meeting of Shareholders
2019 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS A A STAR ALLIANCE MEMBER 4F