AERO

Air Canada (TSX: AC.B AC.A) announced today that it has received a conditional exemption which would effectively treat Air Canada’s Class A variable voting and Class B voting shares as a single class for the purposes of applicable take-over bid requirements and early warning reporting requirements contained under Canadian securities laws. The exemption, however, will become effective immediately (but only) upon shareholder approval of proposed related amendments to Air Canada‘s shareholder rights plan agreement, which Air Canada will seek at its annual and special meeting of Air Canada shareholders to be held on June 4, 2012. Additional details of the exemption and the proposed amendments to Air Canada’s shareholder rights plan agreement are provided below.

Exemption from Applicable Take-Over Bid Requirements and Proposed Amendments to Air Canada’s Shareholder Rights Plan

On May 4, 2012, pursuant to an application by Air Canada, the Autorité des marchés financiers, as principal regulator, the Ontario Securities Commission and the securities regulatory authorities in the other provinces of Canada granted exemptive relief (the “Decision”) from (i) applicable formal take-over bid requirements, as contained under Canadian securities laws, such that those requirements would only apply to an offer to acquire 20% or more of the outstanding Class A variable voting shares and Class B voting shares of Air Canada on a combined basis, and (ii) applicable early warning reporting requirements, as contained under Canadian securities laws, such that those requirements would only apply to an acquirer who acquires or holds beneficial ownership of, or control or direction over 10% or more of the outstanding Class A variable voting shares and Class B voting shares of Air Canada on a combined basis (or 5% in the case of acquisitions during a take-over bid). A copy of the Decision is available on SEDAR at www.sedar.com.

The Decision, however, will become effective immediately (but only) upon shareholder approval of the proposed amendments to the shareholder rights plan agreement (the “Rights Plan”) dated as of March 30, 2011 between Air Canada and CIBC Mellon Trust Company described in the management proxy circular. The proposed amendments are subject to approval by a majority of the holders of Class A variable voting shares and Class B voting shares of Air Canada (voting together as a single class), voting in person or by proxy at Air Canada’s June 4, 2012 meeting.  Subject to certain exceptions identified in the Rights Plan, the Rights Plan currently would be triggered in the event of an offer to acquire 20% or more (on a per class basis) of the outstanding Class A variable voting shares or Class B voting shares. The proposed amendments would modify the Rights Plan to be consistent with the Decision so that it would only be triggered by an offer to acquire 20% or more of the outstanding Class A variable voting shares and Class B voting shares of Air Canada on a combined basis. A copy of the management proxy circular is available on Air Canada’s website at aircanada.com or on SEDAR at www.sedar.com.

Objective of the Decision

While having increased its public float significantly over recent years, and having a flexible capital structure that is designed to permit non-Canadian (as defined under the Canada Transportation Act) investors to become shareholders of Air Canada, the relatively small number of outstanding Class A variable voting shares (the share class for non-Canadians) may limit the ability of non-Canadians to acquire shares of Air Canada. In an effort to facilitate the acquisition of Class A variable voting shares, Air Canada applied to the Autorité des marchés financiers, as principal regulator, and the Ontario Securities Commission in order to seek the Decision. Though applicable take-over bid rules and early warning requirements apply to the acquisition of securities of a class, it was acknowledged in the Decision that aggregating Class A variable voting shares and Class B voting shares for the purpose of the take-over bid rules and early warning requirements may facilitate the acquisition of Class A variable voting shares. Because of the relatively small public float of Class A variable voting shares (compared to the public float of Class B voting shares), absent the Decision, it may be more difficult for non-Canadians to acquire shares in the ordinary course without the apprehension of inadvertently triggering the take-over bid rules or early warning requirements. The Decision considered the fact that the Class A variable voting shares and Class B voting shares have identical terms except for the foreign ownership voting limitations applicable in the case of the Class A variable voting shares.

The Decision also takes into account the fact that Air Canada’s dual class shareholding structure was implemented solely to ensure compliance with the requirements of the Air Canada Public Participation Act and the Canada Transportation Act. An investor does not control or choose which class of Air Canada shares it acquires and holds. The class of shares ultimately available to an investor is only a function of the investor’s status as a Canadian (holders of Class B voting shares) or non-Canadian (holders of Class A variable voting shares).

Shareholders of Air Canada will be asked at the meeting to consider and, if thought advisable, adopt a resolution approving the proposed amendments to the Rights Plan.

The Rights Plan, approved at Air Canada’s 2011 annual and special shareholders meeting, is designed to provide the Air Canada’s shareholders and the Board of Directors additional time to assess an unsolicited take-over bid for the company and, where appropriate, to give the Board of Directors additional time to pursue alternatives for maximizing shareholder value. It also encourages fair treatment of all shareholders by providing them with an equal opportunity to participate in a take-over bid.

For more information relating to the proposed amendments to the Rights Plan, including the full text of the proposed amendments, please refer to Air Canada’s management proxy circular which is available on Air Canada’s website at aircanada.com or on SEDAR at www.sedar.com.