AIR CANADA ADJUSTS CAPACITY OUTLOOK IN RESPONSE TO HIGH FUEL COSTS

MONTREAL, March 16 /CNW Telbec/ – Air Canada today announced a reduction in its previously communicated plans for 2011 system capacity growth in light of sustained high fuel costs.

On February 10, 2011 Air Canada provided guidance that its 2011 system wide capacity growth would be in the 5.5% to 6.5% range versus 2010.  In response to higher fuel prices, Air Canada now expects 2011 system wide capacity growth of 4.5% to 5.5% versus 2010. Air Canada’s expectations for its 2011 first quarter system wide capacity growth are revised to 7.5% to 8.0% versus 2010, a slight decrease from the 7.5% to 8.5% range projected in its February 10, 2011 news release. As projected in its February 10, 2011 news release, Air Canada continues to expect to increase its full year 2011 domestic capacity by up to 1.5% from the full year 2010 levels.

The reduction in system wide capacity will mostly impact the remaining quarters in the year and will be achieved with minimal impact on customers through reductions in frequency, down gauge of aircraft and suspension of the following routes no longer profitable in the current high fuel price environment, effective May 1, 2011: Ottawa-Thunder Bay, Ottawa-Washington Dulles, Montreal-Washington Dulles, Calgary-Chicago, Calgary-San Francisco and Calgary-London, Ontario.  Customers will be offered alternate flights or routings as options.

As projected in its February 10, 2011 news release, Air Canada continues to expect its CASM, excluding fuel, for 2011 to decline by up to 2.0% as compared to 2010, as the reduced rate of capacity growth is expected to be offset mainly by a Canadian dollar stronger than originally assumed.  Air Canada continues to expect that CASM, excluding fuel, for the first quarter of 2011 will decline by between 4.0% to 5.0%.

Air Canada has been introducing base fare increases and fuel surcharges on a market by market basis.  The airline will continue to adjust fares and fuel surcharges in response to market conditions, including fuel prices, and make adjustments to capacity as required.

Air Canada’s outlook assumes that the North American economy will continue to recover in 2011.  In addition, Air Canada expects that the Canadian dollar will trade, on average, at C$1.00 per U.S. dollar in the first quarter of 2011 and for the full year 2011 and that the price of fuel will average 76 cents per litre for the first quarter of 2011 and 87 cents per litre for the full year 2011.