AC COMMENTS ON JAZZ ARBITRATION RULING

Air Canada has provided the following statement in regards to yesterday’s decision in the arbitration relating to the benchmarking provisions of its Capacity Purchase Agreement (CPA) with Jazz Aviation LP (Jazz), a wholly owned subsidiary of Chorus Aviation Inc. The arbitration relates to the method and calculations Air Canada and Jazz are to use to compare the rate of growth of Jazz’s controllable unit costs to those of a group of comparable operators.

The arbitration panel ruled that although Jazz’s unit costs increased faster than the comparable operators, the result of the 2009 Benchmark exercise was to maintain the current 12.5% controllable mark-up as per the Aug. 1, 2009 amendment to the CPA. As provided for in the CPA, the parties will commence negotiations in 2014 to set the CPA rates for the next three-year period 2015-2017. The term of the CPA expires on Dec. 31, 2020. In line with Air Canada’s priority for cost reduction and sustainable profitability, Air Canada will both work with Jazz to explore cost reduction initiatives and continue to pursue its regional airline diversification strategy that includes the Request for Proposal (RFP) process underway for certain existing US regional transborder routes. (http://www.aircanada.com)