2017 Annual Information Form March 19, 2018 - 0 - TABLE OF CONTENTS EXPLANATORY NOTES ................................................................................................... - 1 - CORPORATE STRUCTURE .............................................................................................. - 2 - INTERCORPORATE RELATIONSHIP ............................................................................... - 3 - THE BUSINESS .............................................................................................................. - 3 - STRATEGY ..................................................................................................................... - 5 - ROUTES AND SCHEDULES ............................................................................................. - 5 - AIR CANADA VACATIONS AND AIR CANADA ROUGE .................................................... - 7 - CONTRACTED CARRIERS ............................................................................................... - 8 - STAR ALLIANCE® ........................................................................................................... - 9 - CODESHARE PARTNERSHIPS ........................................................................................ - 9 - CARGO ........................................................................................................................ - 10 - AIR CANADA’S ENVIRONMENTAL OBJECTIVES ........................................................... - 10 - FINANCIAL OVERVIEW ............................................................................................... - 11 - SIGNIFICANT FINANCING TRANSACTIONS ................................................................ - 12 - RATINGS ..................................................................................................................... - 13 - PENSION PLAN ARRANGEMENTS ................................................................................ - 16 - FOREIGN EXCHANGE ................................................................................................... - 17 - AIRCRAFT FUEL ........................................................................................................... - 17 - AIRCRAFT FLEET ......................................................................................................... - 17 - EMPLOYEES AND ARRANGEMENTS WITH UNIONS ..................................................... - 17 - FACILITIES ................................................................................................................. - 19 - TRADEMARKS .............................................................................................................. - 20 - REGULATORY ENVIRONMENT ..................................................................................... - 20 - INDUSTRY OVERVIEW AND COMPETITIVE ENVIRONMENT ........................................ - 25 - RISK FACTORS ............................................................................................................ - 30 - MARKET FOR SECURITIES ........................................................................................... - 30 - TRANSFER AGENT AND REGISTRAR ............................................................................ - 30 - DIVIDEND RECORD ..................................................................................................... - 30 - DESCRIPTION OF CAPITAL STRUCTURE ..................................................................... - 31 - DIRECTORS AND OFFICERS ........................................................................................ - 35 - AUDIT, FINANCE AND RISK COMMITTEE .................................................................... - 40 - INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ................ - 42 - LEGAL PROCEEDINGS ................................................................................................. - 43 - MATERIAL CONTRACTS ............................................................................................... - 43 - EXPERTS ..................................................................................................................... - 43 - ADDITIONAL INFORMATION ...................................................................................... - 43 - GLOSSARY OF TERMS .................................................................................................. - 44 - SCHEDULE A: CHARTER OF THE AUDIT, FINANCE AND RISK COMMITTEE .................. - 47 - EXPLANATORY NOTES Except as otherwise noted or where the context may otherwise require, the information in this Annual Information Form (“AIF”) is current as at December 31, 2017. Air Canada and the Corporation - References in this AIF to Air Canada and 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 in this AIF 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 defined terms, capitalized terms and expressions used in this AIF, refer to the section entitled “Glossary of Terms” at the end of this AIF. Currency - All currency amounts used in this AIF are stated in Canadian dollars, unless otherwise indicated. Industry and Market Data - 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 at the relevant time, 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 or completeness of such information. Any estimates and forecasts involve risks and uncertainties and are subject to change based on various factors, including those discussed below under “Caution Regarding Forward-Looking Statements”. Caution regarding forward-looking statements - Air Canada’s public communications may include forward-looking statements within the meaning of applicable securities laws. Such statements are 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 using 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, our ability to successfully achieve or sustain positive net profitability or to realize our initiatives and objectives, industry, market, credit, economic and geopolitical conditions, energy prices, currency exchange, competition, our dependence on technology, cybersecurity risks, our ability to pay our indebtedness and secure financing, our ability to successfully implement appropriate strategic initiatives or reduce operating costs, war, terrorist acts, epidemic diseases, airport user and related fees, high levels of fixed costs, liquidity, our dependence on key suppliers including regional carriers and Aimia Canada Inc., our success in transitioning from the Aeroplan program and launching our new loyalty program, casualty losses, employee and labour relations and costs, our ability to preserve and grow our brand, pension - 1 - issues, environmental factors (including weather systems and other natural phenomena and factors arising from man-made sources), limitations due to restrictive covenants, insurance issues and costs, our dependence on Star Alliance, interruptions of service, changes in laws, regulatory developments or proceedings, pending and future litigation and actions by third parties and our ability to attract and retain required personnel, as well as the factors identified in Air Canada's public disclosure file available at www.sedar.com and, in particular, those identified in section 18 “Risk Factors” of Air Canada’s 2017 Management’s Discussion and Analysis of Results of Operations and Financial Condition dated February 16, 2018 (“Air Canada’s 2017 MD&A”). The forward-looking statements contained or incorporated by reference 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