2012 Annual Information Form

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2012 Annual Information Form 2012 Annual Information Form March 22, 2013 TABLE OF CONTENTS EXPLANATORY NOTES ............................................................................................................................................................. - 2 - CORPORATE STRUCTURE ......................................................................................................................................................... - 3 - INTERCORPORATE RELATIONSHIP ....................................................................................................................................... - 4 - REGULATORY ENVIRONMENT ............................................................................................................................................... - 5 - TRADEMARKS ............................................................................................................................................................................. - 11 - INDUSTRY OVERVIEW AND COMPETITIVE ENVIRONMENT ....................................................................................... - 12 - THE BUSINESS ........................................................................................................................................................................... - 17 - RISK FACTORS ........................................................................................................................................................................... - 41 - MARKET FOR SECURITIES ....................................................................................................................................................... - 52 - TRANSFER AGENT AND REGISTRAR ................................................................................................................................... - 52 - DIVIDEND RECORD .................................................................................................................................................................. - 53 - DESCRIPTION OF CAPITAL STRUCTURE ............................................................................................................................ - 53 - DIRECTORS AND OFFICERS ................................................................................................................................................... - 58 - AUDIT, FINANCE AND RISK COMMITTEE .......................................................................................................................... - 63 - INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ......................................................... - 65 - LEGAL PROCEEDINGS .............................................................................................................................................................. - 65 - MATERIAL CONTRACTS .......................................................................................................................................................... - 65 - EXPERTS ....................................................................................................................................................................................... - 66 - ADDITIONAL INFORMATION ................................................................................................................................................ - 66 - GLOSSARY OF TERMS ............................................................................................................................................................. - 67 - SCHEDULE A ............................................................................................................................................................................... - 71 - - 1 - EXPLANATORY NOTES The information in this Annual Information Form (“AIF”) is stated as at December 31, 2012, unless otherwise indicated. Air Canada and the Corporation — References herein to Air Canada and references to the “Corporation” include references, as the context may require, to Air Canada and its subsidiaries collectively, Air Canada and one or more of its subsidiaries, one or more of Air Canada's subsidiaries, or Air Canada itself. Subsidiaries — References herein to the term “subsidiary” or “subsidiaries” refer, in relation to any entity, to any other entity, including a corporation or a limited partnership, which is controlled, directly or indirectly, by that entity. Defined Terms — For an explanation of the capitalized terms and expressions and certain defined terms, refer to the section entitled “Glossary of Terms” at the end of this AIF. Currency — All currency amounts used in this document are stated in Canadian dollars, unless otherwise indicated. Statistical Information — Market data and certain industry forecasts used throughout this AIF were obtained from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Similarly, internal surveys, industry forecasts, market research and other publicly available information, while believed to be reliable, have not been independently verified, and the Corporation does not make any representation as to the accuracy of such information. Forward-looking statements — Air Canada’s public communications may include forward-looking statements within the meaning of applicable securities laws. Such statements may be included in this AIF and may be included in other communications, including filings with regulatory authorities and securities regulators. Forward-looking statements may be based on forecasts of future results and estimates of amounts not yet determinable. These statements may involve, but are not limited to, comments relating to strategies, expectations, planned operations or future actions. Forward-looking statements are identified by the use of terms and phrases such as “anticipate", “believe", “could", “estimate", “expect", “intend", “may", “plan", “predict", “project", “will", “would", and similar terms and phrases, including references to assumptions. Forward-looking statements, by their nature, are based on assumptions, including those described herein and are subject to important risks and uncertainties. Forward-looking 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, employee and labour relations, currency exchange and interest rates, competition, war, terrorist acts, epidemic diseases, environmental factors (including weather systems and other natural phenomena and factors arising from man-made sources), 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 Canada's public disclosure file available at www.sedar.com and the section entitled “Risk Factors” in this AIF. The forward-looking statements contained in this AIF represent Air Canada's expectations as of the date of this AIF (or as of the date they are otherwise stated to be made), 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. Assumptions were made by Air Canada in preparing and making forward-looking statements. As part of these assumptions, Air Canada assumes Canadian GDP growth of 1.5% to 2.0% for 2013. In addition, Air Canada expects that the Canadian dollar will trade, on average, at C$1.01 per U.S. dollar in the first quarter of 2013 and $1.02 for the full year 2013 and that the price of jet fuel will average 91 cents per litre for the first quarter of 2013 and 90 cents per litre for the full year 2013. - 2 - CORPORATE STRUCTURE Name, Address and Incorporation Air Canada was continued under the Canada Business Corporations Act (“CBCA”) on August 25, 1988. Air Canada acquired Canadian Airlines International Ltd. (“Canadian Airlines”) on July 6, 2000 and completed a corporate amalgamation with Canadian Airlines effective January 1, 2001, with the amalgamated entity being known as Air Canada. Pursuant to a consolidated plan of reorganization, compromise and arrangement of Air Canada and certain of its subsidiaries made pursuant to the Companies Creditors Arrangement Act (“CCAA”) (referred to herein as the “Plan”), ACE Aviation Holdings Inc. (“ACE”) became the parent holding company of the reorganized Air Canada on September 30, 2004. On November 24, 2006, ACE and Air Canada completed an initial public offering and secondary offering of an aggregate 25 million Class A variable voting shares of Air Canada (the “Variable Voting Shares”) and Class B voting shares of Air Canada (the “Voting Shares”, together with the Variable Voting Shares, the “Shares”) (the “Initial Public Offering”). The Shares trade on the Toronto Stock Exchange (“TSX”) under
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