Air Canada · TSX:AC

Air Canada — ACE Aviation Holdings — Q1 2006 Earnings Presentation

25 slides from Air Canada's earnings presentation, May 11, 2006

  1. Slide 1: First Quarter 2006

    First Quarter 2006 May 11, 2006

  2. Slide 2: Table of Contents

    Table of Contents • Highlights • Operating Statistics • Revenue Highlights • Expense Highlights • Balance Sheet

  3. Slide 3: ACE Operating Results Deteriorate By $19 mln

    ACE Operating Results* Deteriorate By $19 mln – Unable to Offset All $122 mln Fuel Price Incr. Consolidated Change (millions) Q1 2006 Q1 2005 Fav./(Unfav.) Oper. Revenue $ 2,484 $ 2,177 $ 307 Oper. Expense 2,513 2,187 (326) Oper. Income* (29) (10) (19) Special Labour Charge (33) – (33) Non-oper. Inc

  4. Slide 4: Q1 Non-Op Favourable $232 mln Primarily Due Dilution Gain on Jazz IPO

    Q1 Non-Op Favourable $232 mln Primarily Due Dilution Gain on Jazz IPO Change (millions) Q1 2006 Fav./(Unfav.) Net Interest Inc. (Exp.) $ (57) $ 3 Gain (Loss) on Sale 3 3 Dilution Gain on Jazz 220 220 Other Non-Operating Inc. 3 6 Total Non-Operating Inc. $ 169 $ 232

  5. Slide 5: Q1 is a Seasonally Weak Quarter for ACE

    Q1 is a Seasonally Weak Quarter for ACE % Operating Margin 12 9 6 3 0 -3 -6 an et* st* n * e * eri c i ted sk a Tra A ir stJ we Blu * nt. E AC Am We Al a Sth US Un J et Co Ai r * Adjusted for non recurring & special items

  6. Slide 6: Industry Q1 EBITDAR Margins

    Industry Q1 EBITDAR Margins % EBITDAR Margin 25 20 15 10 5 0 an et* st* n * e * eri c Tra sk a i ted A ir stJ we Blu * nt. E Am We Al a Sth US J et AC Co Un Ai r * Adjusted for non recurring & special items

  7. Slide 7: Q1 2006 Actual vs Prior Year

    Q1 2006 Actual vs Prior Year Consolidated ASMs RPMs PLF Yield RASM Rev Canada Ï 4.6% Ï 5.1% Ï 0.3 PP Ï 10.4% Ï 10.9% Ï 16.1% US Transborder Ï 7.8% Ï 12.7% Ï 3.4 PP Ï 10.9% Ï 16.0% Ï 25.0% Atlantic Ï 12.5% Ï 11.2% Ð 0.9 PP Ï 3.9% Ï 2.7% Ï 15.5% Pacific Ð 0.3% Ï 0.6% Ï 0.7 PP Ï 4.0% Ï 4.9% Ï 4.6% Lati

  8. Slide 8: Steady Capacity Growth in All Markets

    Steady Capacity Growth in All Markets (Y-O-Y Changes in Consolidated Capacity) % Change in ASMs 10% 5% 0% -5% -10% -15% Canada U.S. Oth. Int'l Total Q1 2005/2004 Q2 2005/2004 Q3 2005/2004 Q4 2005/2004 Q1 2006/2005

  9. Slide 9: U.S. Transborder Traffic Up Sharply While Dom. and Int'l in Line With Capacity Growth

    U.S. Transborder Traffic Up Sharply While Dom. and Int'l in Line With Capacity Growth (Y-O-Y Changes in Consolidated Traffic) % Change in RPMs 15% 10% 5% 0% -5% Canada U.S. Oth. Int'l Total Q1 2005/2004 Q2 2005/2004 Q3 2005/2004 Q4 2005/2004 Q1 2006/2005

  10. Slide 10: Very Strong Yields in All Markets Drive 9.3% System Growth

    Very Strong Yields in All Markets Drive 9.3% System Growth (Y-O-Y Changes in Consolidated Passenger Yield) % Change in Yield 15% 10% 5% 0% -5% -10% -15% Canada U.S. Oth. Int'l Total Q1 2005/2004 Q2 2005/2004 Q3 2005/2004 Q4 2005/2004 Q1 2006/2005

  11. Slide 11: North America RASMs Up Sharply Due Much Higher Yields

    North America RASMs Up Sharply Due Much Higher Yields But Also Improved US LF (Y-O-Y Changes in Consolidated Revenue per ASM) % Change in RASM 20% 15% 10% 5% 0% -5% Canada U.S. Oth. Int'l Total Q1 2005/2004 Q2 2005/2004 Q3 2005/2004 Q4 2005/2004 Q1 2006/2005

  12. Slide 12: North America Revenue Growth Accounts For Almost ¾ of Quarterly Revenue Increase

    North America Revenue Growth Accounts For Almost ¾ of Quarterly Revenue Increase (Y-O-Y Changes in Consolidated Passenger Revenue) % Change in Revenue 30% 20% 10% 0% -10% -20% Canada U.S. Oth. Int'l Total Q1 2005/2004 Q2 2005/2004 Q3 2005/2004 Q4 2005/2004 Q1 2006/2005

  13. Slide 13: Canada – Q1 RASM Up 10.9% on 10.4% Increase in Yield

    Canada* – Q1 RASM Up 10.9% on 10.4% Increase in Yield Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 10 10 5 5 0 0 -5 -5 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006 % Change Yield P-RASM % Change 15 15 10 10 5 5 0 0 -5 -5 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006 *Consolida

  14. Slide 14: US Transborder – RASM Up Sharply on Very Strong Yield

    US Transborder* – RASM Up Sharply on Very Strong Yield and Improved Load Factor Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 10 10 5 5 0 -5 0 -10 -15 -5 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006 % Change Yield % Change P-RASM 15 20 10 15 5 10 0 5 -5 -10 0 -15 -5 Q1 Q2 Q3 Q4 Q1

  15. Slide 15: Atlantic – Stronger Yield lifts RASM

    Atlantic – Stronger Yield lifts RASM Y-O-Y Change Capacity (ASM) % Change PP Change Load Factor 15 6 10 4 5 2 0 0 -5 -10 -2 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006 Yield P-RASM % Change % Change 10 15 10 5 5 0 0 -5 -5 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006

  16. Slide 16: Pacific – Stronger Yield Lifts RASM

    Pacific – Stronger Yield Lifts RASM Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 30 4 20 2 0 10 -2 0 -4 -10 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006 % Change Yield % Change P-RASM 15 10 10 5 5 0 0 -5 -5 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006

  17. Slide 17: Caribbean, Latin America & Australia – 10.5% RASM Growth All Due Yield

    Caribbean, Latin America & Australia – 10.5% RASM Growth All Due Yield Y-O-Y Change Capacity (ASM) Load Factor % Change PP Change 20 4 10 2 0 0 -10 -2 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006 Yield P-RASM % Change % Change 15 15 10 10 5 5 0 0 -5 -5 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 20

  18. Slide 18: Total – System RASM Up on Strong Yield

    Total* – System RASM Up on Strong Yield Y-O-Y Change % Change Capacity (ASM) PP Change Load Factor 10 6 4 5 2 0 0 -5 -2 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2005 2006 2005 2006 Yield P-RASM % Change % Change CASM RASM 10 15 5 10 5 0 0 -5 -5 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1** 2005 2006 2005 2006 * Consolidated

  19. Slide 19: Average Salary Down 1.3%, Employee Levels Up 4.2%

    Average Salary Down 1.3%, Employee Levels Up 1343 or 4.2% Mostly at Jazz & ACTS (Y-O-Y Change – Average Salaries* & Employees*) % Change Y-O-Y 6% 4% 2% 0% -2% -4% -6% Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Average Salaries Employees *Q3 and Q4'05 consolidated - prior quarters, mainline (excluding Jazz)

  20. Slide 20: Cost/Litre Up 28.3% While Fuel Productivity Declined 0.9%

    Cost/Litre Up 28.3% While Fuel Prod. Decl. 0.9%. Embraer & CRJ Expansion + Two Add. Freighters (Fuel Productivity* & Unit Cost*) % Change Y-O-Y 60% 40% 20% 0% -20% Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Fuel Productivity (ASMs/Lt) Fuel Cost (Cdn cts/Lt) *Q3 and Q4'05 consolidated - prior quarters, mainline (

  21. Slide 21: Higher Costs Push Up Other Category

    Higher Cust. Mtce. Mats., Incr. Fees & Services, Terminal Hndlg. Chrgs., Cr. Card Fees, Advert., & Crew Cycle Push Up "Other" Cat. % Change Y-O-Y 40% 35% 30% 25% 20% 15% 10% 5% 0% r es . Ba t. IT i ss t el Ma en fits Fe . c Fu m& mm W / pre Ms Ms R er ne od e er O th A/C A/C Mtc S& RP AS Co De Co Us

  22. Slide 22: Unit Cost Excl. Fuel & Spec. Labour Chrg., Up 3.8%

    Unit Cost Excl. Fuel & Spec. Labour Chrg., Up 3.8% Due Higher Ownshp. Chrgs., Incr. Mtce., Cust Materials. (Cost Per ASM*) % Change Y-O-Y 5% 0% -5% -10% Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 *Consolidated

  23. Slide 23: Balance Sheet – Good Liquidity, Good Working Capital

    Balance Sheet – Good Liquidity, Good Working Capital (ACE Aviation Holdings - Consolidated) Mar 31/06 Dec 31/05 % $ mlns $ mlns Change Cash + S. Term Invst. $ 2,629 $ 2,181 21% Current Assets $ 3,753 $ 3,354 12% Property & Equip. $ 5,660 $ 5,494 3% Current Liabilities $ 3,279 $ 3,011 9% Long Term De

  24. Slide 24: Caution Concerning Forward-looking Information

    Caution Concerning Forward-looking Information: Certain statements made in this presentation may be of a forward-looking nature and subject to important risks and uncertainties. The results indicated in these statements could differ materially from actual results for a number of reasons, including w

  25. Slide 25: ACE Aviation

    ACE AVIATION @)

ACE Aviation Holdings — Q1 2006 Earnings Presentation on 6ix