2008 Annual Information Form MARCH 28, 2009 TABLE OF CONTENTS EXPLANATORY NOTES............................................................................................................................................2 CORPORATE STRUCTURE .......................................................................................................................................3 REGULATORY ENVIRONMENT..............................................................................................................................5 INDUSTRY OVERVIEW AND COMPETITIVE ENVIRONMENT........................................................................10 OVERVIEW OF THE BUSINESS .............................................................................................................................14 BUSINESS OF AIR CANADA ..................................................................................................................................22 RISK FACTORS .........................................................................................................................................................35 RELATIONSHIPS AND RELATED PARTY TRANSACTIONS ............................................................................44 MARKET FOR SECURITIES....................................................................................................................................44 TRANSFER AGENT AND REGISTRAR..................................................................................................................44 DIVIDEND RECORD ................................................................................................................................................44 DESCRIPTION OF CAPITAL STRUCTURE ...........................................................................................................45 DIRECTORS AND OFFICERS..................................................................................................................................49 AUDIT, FINANCE AND RISK COMMITTEE .........................................................................................................54 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS...........................................56 TRANSFER AGENT AND REGISTRAR..................................................................................................................56 LEGAL PROCEEDINGS............................................................................................................................................56 MATERIAL CONTRACTS........................................................................................................................................56 EXPERTS....................................................................................................................................................................57 ADDITIONAL INFORMATION ...............................................................................................................................57 GLOSSARY OF TERMS............................................................................................................................................58 SCHEDULE A ......................................................................................................................................................... A-1 - 2 - EXPLANATORY NOTES The information in this Annual Information Form (“AIF”) is stated as at December 31, 2008, 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, please refer to the “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 written or oral forward looking statements within the meaning of applicable securities laws. Such statements are included in this AIF and may be included in other filings with regulatory authorities and securities regulators. Forward-looking statements relate to analyses and other information that are 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. These 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, 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 this AIF and, in particular, those identified in the “Risk Factors" section of this AIF. The forward-looking statements contained in this AIF represent the Corporation’s expectations as of the date of this AIF and are subject to change after such date. However, the Corporation 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. - 3 - 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 the consolidated plan of reorganization, compromise and arrangement of Air Canada and certain of its subsidiaries (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 the symbol AC.A for the Variable Voting Shares and the symbol AC.B for the Voting Shares. Through the Initial Public Offering, Air Canada sold an aggregate of 9,523,810 Variable Voting Shares and Voting Shares for gross proceeds of $200 million to be used for general corporate purposes, including the partial funding of its fleet renewal program. In the secondary offering, ACE sold an aggregate of 15,476,190 Variable Voting Shares and Voting Shares for gross proceeds of $325 million. Prior to the closing of the Initial Public Offering, ACE proceeded with a reorganization of its corporate structure. Pursuant to such reorganization, the partnership interests, as well as the interests in the general partners of ACGHS Limited Partnership (“Air Canada Ground Handling Services”) and AC Cargo Limited Partnership (“Air Canada Cargo”) not held by Air Canada, were transferred to Air Canada and ACE transferred a 51% partnership interest, as well as a 51% interest in the general partner of Touram Limited Partnership (“Air Canada Vacations”) to Air Canada. As part of the reorganization, Air Canada completed a corporate