Andrew Yiu

Thanks to everyone for the comments that have been posted here the last few days, and especially those who took the time to post some very valuable, constructive feedback. While it's not our intent to address every issue raised on this forum on the changes to the 2011 Top Tier program, some very valid points were raised which we agree should be addressed to the best of our ability. These modifications are our attempt to do just that. As I've explained here previously, the eUpgrades program is designed to give our customers more flexibility in terms of what types of fares and flights they would like to use their upgrades on. All credits can now be used to upgrade from Tango Plus and Latitude fares, instead of a system where fixed types of certificates were being offered, which resulted in some customers not being able to fully utilize their upgrade benefit. eUpgrades will allow a customer to choose between using more credits to upgrade lower fares, or less for higher fares. The zone system was developed to take into account the fact that all credits will be valid on all Tango Plus and Latitude fares. We need a simple system to reflect the value of an Executive Class/Executive First seat in a particular market; hence the 1500 miles cutoff within NA and 5000 miles cutoff for International.

Having said that, our Marketing and Revenue Management teams sat down today and reviewed all the constructive feedback we've received. Following that, we have decided to make the following adjustments to the 2011 eUpgrade Program:

All Tango Plus Flight Passes will be booked in M class
(Edit to add: North America + Sun Passes only.)

This one has actually been in the works as the Flight Pass program is independent of both the eUpgrade and Top Tier programs. All Tango Plus Flight Passes that are currently booked in U will be rebooked into M effective Jan 1, 2011 (Passes for flights to our Sun markets are the only ones that are currently outstanding). Existing Flight Pass bookings that are booked in U will be rebooked in M. You will be able to upgrade using your eUpgrade Credits based on the requirement for M class for travel effective March 1, 2011.

Adjustment of credits required for Tango Plus (M class) on International flights

The credits required for Tango Plus (M class) on an international flight will be modified as follows:

• For flights that are < 5000 miles: 8 credits (instead of 10)
• For flights that are 5001 miles or longer: 12 credits (instead of 15)

There is no change to booking windows, which remains the same versus 2010.

This change will become effective on the eUpgrades system later this week.

The rationale behind the change is that we took another look at all the current M fares across our markets and as some of you have pointed out, the differential between Y/B and M is not always the same. The new revised requirement better reflects the average of the fare differential between M fares and the rest of the Tango Plus fares on our International markets.

Adjustment of credits required for Tango Plus (U,H,Q,V,W,S,K,L,T class) on International flights

The credits required for Tango Plus (U,H,Q,V,W,S,K,L,T class) on international flights will be modified as follows:

• For flights that are < 5000 miles: 14 credits (no change)
• For flights that are 5001 miles or longer: 17 credits (instead of 20)

There is no change to booking windows, which remains the same versus 2010.

This change will become effective on the eUpgrades system later this week.

The rationale behind this change is to better reflect the Executive First fares that are currently out in the market (factoring in discounted Executive First fares that we currently have in many markets). More importantly, we understand that it’s essential for Elites the ability to upgrade on a return trip on any international market at the beginning of the benefit year, realizing that many of you qualified for Elite with this expectation in mind. Although this is a very costly move, we've decided to go ahead for 2011 given that our current system doesn't have the ability to recognize our members by revenue so it's well noted that there are Elites who have spent a very large amount of money on Air Canada and were expecting this benefit. We will continue to work towards a system that would give us the ability to recognize our members by revenue generated.

One further point which is key when reviewing the new eUpgrades program: Unlike the paper certificate program of previous years, all eUpgrade credits can be used on Tango Plus and Latitude fares. Therefore, it's not a 1:1 comparison when you compare an eUpgrade Credit versus a paper certificate.

We trust that the above changes will give you the opportunity to make better use of the new eUpgrade program during your upcoming benefit year. While we have a very tight budget to work with, we still want to give our Top Tier members the ability to make full use of this benefit without diluting the revenue generated by the premium cabin. These changes were introduced to give Top Tier members more opportunity to fully utilize their upgrade benefit and we remain the only carrier in North America to give our mid tier members the complimentary System-wide upgrades as one of their top tier benefits.

Furthermore, keep in mind that this is the first year that we've introduced the eUpgrade program; we’ll closely monitor the performance of the program after its implementation on March 1st although there will not be any additional structural changes to the program for 2011. You've all told us that you would like to see us continue to invest in our products and services and we intend to continue with your continued support and constructive feedback.

We recognize that you have a choice of carriers for your travels but trust that many of you understand that the business environment that we're in require us to make some tough business decisions. We will always do our best to give you the most generous benefits that our business can afford.

Thanks again for your continued support and feedback.

Andrew

PS - Please note that the above changes are still being communicated internally; it'll take a few days before our staff are up to date on the changes.