Agreement now concluded with all five of the airline's Canadian-based
    unions and Air Canada Pionairs on Pension Funding Moratorium AgreementMONTREAL, June 15 /CNW Telbec/ - Air Canada said today that it has
reached tentative agreements on a 21-month pension funding moratorium with the
Air Canada Pilots Association (ACPA) representing approximately 3,200 pilots
and with CUPE representing approximately 6,700 flight attendants. The airline
has now concluded tentative agreements on a pension funding moratorium with
its entire unionized workforce in Canada, having reached tentative agreement
on June 8, 2009 with the International Association of Machinists and Aerospace
Workers (IAMAW), the Canadian Auto Workers (CAW) Local 2002 and the Canadian
Airlines Dispatchers Association (CALDA).
    In addition the Company has reached a collective agreement extension with
ACPA on a cost neutral basis for a period of 21 months similar to agreements
reached with the IAMAW, the CAW Local 2002 and CALDA. The terms of the labour
contract extension agreements of all four unions specify that there shall be
no changes to wage rates and pension benefit levels during the extension
period. The contract extension agreement and the pension moratorium agreement
are subject to membership ratification. The pension agreements remain
conditional upon Air Canada and CUPE concluding a collective agreement
extension on terms satisfactory to each of them and these discussions are
ongoing. The agreements are subject to approval by the Board of Directors of
Air Canada.
    "The agreements reached on pension deficit funding and labour contract
extensions are critically important steps that will enhance Air Canada's
ability to obtain additional financing to manage through the recession," said
Calin Rovinescu, President and Chief Executive Officer of Air Canada. "In view
of the fact that the payments required to fund the pension solvency deficit
are not sustainable under the current rules, the tentative agreements reached
on pensions provide a reasonable solution to maintaining our employees'
pension plans and benefits. I thank the Honourable James Farley for his
invaluable contribution in facilitating the conclusion of the agreements in a
timely manner. With these milestones achieved, we are now intently focused on
the two major challenges ahead: obtaining the necessary governmental approvals
for the funding arrangement and raising new financing. Discussions are ongoing
with several potential lenders who are assessing our financing needs," said
Mr. Rovinescu.
    The pension agreements call for a moratorium on past service
contributions for a 21-month period and fixed payments of $150 million, $175
million, and $225 million in 2011, 2012 and 2013 respectively. Current service
payments will continue to be made in the normal course and there will be no
change to the defined benefit plans nor a reduction in benefits. The
agreements are subject to a number of conditions including the adoption by the
Federal Government of an Order-in-Council amending Air Canada's pension
funding and Air Canada raising a minimum of $600 million in new financing.
    In addition, the agreements call for 15 per cent equity ownership of the
company to be issued to a trust for the benefit of unionized employees with
proceeds of sale to be contributed to the pension plan deficit. A seat on the
Board of Directors will be allocated for designation by a trustee representing
Air Canada's unions while ownership exceeds two per cent. "With this issuance
of stock, the interests of unionized employees will be better aligned with the
interests of our shareholders and I look forward to their active participation
in building shareholder value," said Mr. Rovinescu.
    A pension funding moratorium agreement has also been signed by the Air
Canada Pionairs, an association that serves, but does not bind, over 15,000
retirees of Air Canada and its predecessor airlines.
    Air Canada and the airline industry in general continue to face a very
difficult economic environment. The Company is focusing on the following
immediate priorities over and above the impact of the recession: obtaining
pension funding relief and labour stability, building liquidity, finding
creative revenue generation while working hard to earn customer loyalty,
reducing unit costs to reach competitive cost levels and, in the longer term,
achieving acceptable margins by creating value for customers and shareholders
through profitable growth.

    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
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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 regulations.