Slides
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Air Canada Third Quarter 2026 Update October 29, 2026
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Caution Regarding Forward-Looking Information This presentation includes forward -looking statements within the meaning of applicable securities laws. Forward- looking statemen ts 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 t o strategies, expectations, ratings, planned operations or future actions or to Air Canada's full -year 2026 guidance, 2028 financial targets and 2030 aspirations. Forward -looking statements are identified using t erms and phrases such as "preliminary"; "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 import ant risks and uncertainties. Forward -looking statements cannot be relied upon due to, among other things, changing external events and general uncertainties of the business of Air Canada. Actual results may differ materially from results indicated in forward- looking statements due to a number of factors, including those discussed below. Factors that may cause results to differ materially from results indicated in forward -looking statements include economic condit ions, including high or volatile fuel prices or significant disruptions in the supply of aircraft fuel, including as a result of the military conflict in the Middle East, statements or actions by governments and un certainty relating to the imposition of (or threats to impose) tariffs on Canadian exports or imports and their resulting impacts on the Canadian, North American and global economies and travel demand, geopolitical and sec urity conditions including in relation to the military conflicts in the Middle East and between Russia and Ukraine, Air Canada’s ability to successfully achieve or sustain positive net profitability, industry and market conditions and the demand environment, competition, Air Canada’s dependence on technology, cybersecurity risks, interruptions of service, climate change and environmental factors (including weather system s a nd other natural phenomena and factors arising from anthropogenic sources), Air Canada’s dependence on key suppliers (including government agencies and other stakeholders supporting airport and airline operat ions), employee and labour relations and costs, Air Canada’s ability to successfully implement appropriate strategic and other important initiatives (including Air Canada’s ability to manage operat ing costs), energy prices, Air Canada’s ability to pay its indebtedness and maintain or increase liquidity, Air Canada’s dependence on regional and other carriers, Air Canada’s ability to attract and retain requir ed personnel, epidemic diseases, changes in laws, regulatory developments or proceedings, terrorist acts, war, Air Canada’s ability to successfully operate its loyalty program, casualty losses, Air Canada’ s dependence on Star Alliance® and joint ventures, Air Canada’s ability to preserve and grow its brand, pending and future litigation and actions by third parties, currency exchange fluctuations, limitations due t o r estrictive covenants, insurance issues and costs and pension plan obligations as well as the factors identified in Air Canada’s public disclosure file available at www.sedarplus.ca and, in particular, those identif ied in section 14 “Risk Factors” of Air Canada’s Third Quarter 2026 MD&A and section 18 “Risk Factors” of Air Canada’s 2025 MD&A. Air Canada has and continues to establish targets, make commitments and assess the impact regarding climate change, and relat ed initiatives, plans and proposals that Air Canada and other stakeholders (including government, regulatory and other bodies) are pursuing in relation to climate change and carbon emissions. The achi evement of our commitments and targets depends on many factors, including the combined actions of governments, industry, suppliers and other stakeholders and actors, as well as the development and implem entation of new technologies. In particular, our 2030 carbon emission -related targets and our related 2050 aspiration are ambitious and heavily dependent on new technologies, renewable energies and the availabil ity of a sufficient supply of sustainable aviation fuels (SAF), which continues to present serious challenges. In addition, Air Canada has incurred, and expects to continue to incur, costs to achieve its aspi rational goal of net -zero carbon emissions and to comply with environmental sustainability legislation and regulation and other standards and accords. The precise nature of future binding or non -binding legislation, regulation, standards and accords, on which local and international stakeholders are increasingly focusing, cannot be predicted with any degree of certainty, nor can their financial, operational or other impact . T here can be no assurance of the extent to which any of our climate goals will be achieved or that any future investments that we make in furtherance of achieving our climate goals will produce the expected results or m eet increasing stakeholder environmental, social and governance expectations. Moreover, future events could lead Air Canada to prioritize other nearer -term interests over progressing toward our current clim ate goals based on business strategy, economic, regulatory and social factors, and potential pressure from investors, activist groups or other stakeholders. If we are unable to meet or properly report on our progress toward achieving our climate change goals and commitments, we could face adverse publicity and reactions from investors, customers, advocacy groups or other stakeholders, which could result in reput ational harm or other adverse effects to Air Canada. The forward -looking statements contained or incorporated by reference in this presentation represent Air Canada's expectations a s of the date of this presentation (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 revis e a ny forward -looking statements whether because of new information, future events or otherwise, except as required under applicable securities regulations.
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*Adjusted EBITDA, adjusted CASM, adjusted EBITDA margin and free cash flow are non-GAAP measures or ratios, have no standardized meanings under GAAP and may not be comparable to similar measures of other entities. See Non-GAAP Financial Measures for definitions and reconciliations. Forward-looking statements are subject to the Caution Regarding Forward-Looking Information. **International comprises Atlantic, Pacific and Other. Revenues $7.0B Record Q3 operating revenues Up 21% YoY on 6% ASM growth TRASM up 14% YoY Cargo revenues up 33% YoY Profitability $936M Adjusted EBITDA* $261M Cash generation $266M Operating cash flow ($440M) Business highlights Operating income 13.4% adjusted EBITDA margin* Free cash flow* Network development Sixth Freedom revenues up 16% YoY International** passenger revenues, $3.4B, up 18% YoY Capital allocation $1.7B debt repayment Completed $800M substantial issuer bid Fleet renewal Airbus A321XLR delivering positive initial results 3.7% operating margin Q3 2026 Highlights: Strong commercial performance amid fuel pressure Costs $6.7B Operating costs Up 22% YoY Adjusted CASM* up 3.3% YoY
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$8.9B at June 30, 2026 TOTAL LIQUIDITY*** $651M in Q2 2026 ($244M) YoY CASH FROM OPERATIONS * Net debt is a capital management measure and a key component of the capital managed by Air Canada and provides management w ith a measure of its net indebtedness. This measure is not recognized for financial statement presentation under GAAP, does not hav e a standardized meaning, may not be comparable to similar measures presented by other entities and should not be considered a substitute for, or super ior to, GAAP results. Please refer the Non-GAAP Financial Measures section of this presentation for further information and for a r econciliation to the most comparable GAAP measure. ** Total debt represents total long-term debt and lease liabilities, including current portion. ***Total liquidity refers to the sum of cash, cash equivalents, short and long- term investments, and the amounts available under Ai r Canada’s credit facilities. Total liquidity, as at September 30, 2026, of $8,018 million, consisted of $6,634 million in cash, cash equivalents, and short- and long-term investments, and $1,384 million available under undrawn credit facilities. This amount also included $333 million in funds held in trust by Air Canada Vacations in accordance with regulatory requirements governing advance sales for tour operators. $5.4 $4.2 $11.6 $10.9 $0 $10 $20 $30 0.0 0.1 0.2 1.1 1.2 1.3 1.4 1.5 1.6 1.7 Net Debt Leverage ratio 1.7X Dec 31, 2025 1.3X Sep. 30, 2026 Leverage ratio Net Debt* ($B) Total Debt** ($B) $174M in Q2 2026 ($9M) YoY FCF Strong liquidity and financial flexibility | $8.0B in liquidity supports fleet renewal through a period of higher fuel costs $8.0B at Sep 30, 2026 $266M in Q3 2026 ($547M) YoY ($440M) in Q3 2026 ($651M) YoY
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Fleet | 2026 fleet entries partially offset by retirements, long-haul capacity entering in 2H 2026 and 2027 5 8 3 2 6 7 6 9 9 787- 10 A321XLR A321XLR787- 102026 A320A320 -4 A319 -11 256 265 A220 286 2025 737 MAX 2027A220 A321XLR A319 -2 A320 -3 -5 Q3 2026 YTD A220 265 Net 9 additions in 2026 Net 21 additions in 2027 6
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0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 2026* 2027 2028 2029 2030 Thereafter** Spent YTD (Jan–Sep 2026) Committed Planned, uncommitted Capitalized maintenance Capital Commitments: CAD i n billions 7 $21.1B Total capital outlook at September 30, 2026 Compared to $20.8B at June 30, 2026 *2026 includes $1,878M in additions to property, equipment and intangible assets for the first nine months of 2026, plus total p rojected expenditures for the remainder of 2026. **Thereafter reflects committed capital expenditures only; planned but uncommitted expenditures and capitalized maintenance beyond 2030 are not available. Capit alized maintenance for 2029 and 2030 are estimates. U.S. dollar amounts converted at the September 30, 2026 closing rate of US$1=C$1.42. Excludes sale and leaseback transactions. Spend peaks in 2027 and moderates thereafter 1.9 1.2 0.3 3.6 3.1 0.6 0.8 4.5 1.7 0.9 0.9 3.6 1.5 0.8 0.9 3.2 1.4 0.8 0.8 3.0 3.2 $12.1B Committed at September 30, 2026
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*Air Canada made assumptions in providing its updated guidance, including modest Canadian GDP growth for 2026 and current dem and trends continuing through the remainder of 2026. Air Canada assumes that the Canadian dollar will trade, on average, at C$1.39 per U.S. dollar for the full year 2026 (previously C$1.41 per U.S. dollar). Air Canada also assumes that the price of jet fuel will average at approximately C$1.72 per litre for the fourt h quarter of 2026 (previously C$1.29 per litre). Our assumptions are based on the forward curve as of October 8, 2026, adjusted to reflect Air Canada's specific supply chain environment, including Air Canada's fuel infrastructure at Canadian hubs, where fuel is typically contracted on a one- to two-month forward basis, as well as pricing exposure at international station locations. Air Canada currently expects approximately half of its fuel requirements for the fourth quarter of 2026 to be exposed to fuel price volatility. These jet fuel estimates reflect Air Canada’s capacity plans and remain subject to ongoing volatility in global energy markets. Air Canada expects it can offset, for the fourth quarter of 2026, approximately 70 per cent (previously 100 per cent) of the estimated incremental jet fuel expense above its assumptions immediately prior to February 12, 2026. Air Canada has entered into agreements for up to $2 billion in sale- and-leaseback transactions, with total proceeds of $501 million from transactions completed in the first nine months of 2026. Definitive agreements have been signed for the remaining tr ansactions, which are scheduled to close in 2026 and 2027, subject to completion of standard conditions precedent, including delivery of the aircraft concerned. As part of the assumptions for 2026 guidance, Air Canada has assumed execution on its sale- and-leaseback transactions for $1 billion in 2026. Air Canada’s guidance constitutes forward-looking information within the meaning of applicable securities laws and is subject to important risks and uncertainties, including in relation to statements or actions by governments and uncertainty relating to th e imposition of (or threats to impose) tariffs on Canadian exports or imports and their resulting impacts on the Canadian, North American and global economies and travel demand. In addition, aircraft fuel p rices have been, and continue to be, subject to high volatility as a result of the ongoing conflicts in the Middle East. Moreover, there has been significant disruption to international shipping trade route s through the Strait of Hormuz, further exacerbating the impact on fuel supply and prices, including for aircraft fuel. A prolonged or escalating conflict could further disrupt global energy markets and cause aircraft fuel prices to remain elevated or ris e even higher. We cannot predict future supply constraints, price volatility or cost of aircraft fuel, or how long current or future conflicts will last or their ultimate impact on global energy markets and across the aviation industry. Please see the discussion below under Caution Regarding Forward- looking Information. **Refer to the “Non-GAAP Financial Measures” section of this presentation for descriptions of these measures, and for a reconcil iation of Air Canada’s non-GAAP measures used in this presentation to the most comparable GAAP financial measure. Adjusted EBITDA** Between $2.9B and $3.2B (Previously $3.35 billion to $3.75 billion) 5.0% to 6.0% increase versus 2025 (Previously 15.05 ¢ to 15.35 ¢) Adjusted CASM** 2.25% to 3.25% increase versus 2025 (Previously 3.5% to 5.5% increase versus 2025) Capacity $200 to $500M ($400 million to $800 million) Free Cash Flow** Guidance: Updated full-year 2026 guidance* Approximately 2.75% increase versus 2025 (Previously 2.25% to 3.25% increase versus 2025) 5.5% to 6.0% increase versus 2025 (Previously 5.0% to 6.0% increase versus 2025) Between $2.4B and $2.7B (Previously $2.9 billion to $3.2 billion) Break-even ± $150M (Previously $200 million to $500 million)
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2026 Skytrax World Airline Awards Named Best Airline North America for the second year in a row and tenth time overall Ranked #17 globally, up two places year-over-year and the only North American airline in Skytrax's Top 20 Additional Honours: Best Cabin Crew in Canada and North America Best Economy On Board Catering in North America Best Business Class Lounge in North America Best Business Class Lounge Dining (3rd consecutive year) Freddie Awards Earned top honors in three categories in Americas region: Program of the Year Best Redemption Ability Best Promotion for its Accelerate Your Way to Status campaign APEX 2026 Awards Earned Passenger-Rated Five Star Global Airline Award for Sixth Consecutive Year Recognitions: Key industry awards
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Air Canada’s Leadership: Experienced and dedicated to drive long-term value Marc Barbeau EVP, Chief Legal Officer and Corporate Secretary John Di Bert EVP and Chief Financial Officer Mark Galardo EVP, Chief Commercial Officer and President, Cargo Mark Nasr EVP & Chief Operations Officer Craig Landry EVP & Chief Innovation Officer and President of Aeroplan Arielle Meloul-Wechsler EVP, Chief Human Resources Officer and Public Affairs Kevin O’Connor SVP, Global Airports & Operations Control Murray Strom SVP, Flight Operations and Maintenance
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Balance sheet and liquidity management Fleet Global network Brand Leading products and services Air Canada Rouge and Air Canada Vacations Air Canada Cargo Technology People Aeroplan Fundamentals: Air Canada’s robust foundations
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Strong value creation* Shareholder returns. ˂300M fully diluted shares outstanding. Deployed >$2B to shareholder returns. A unique value creation opportunity – 2030 aspiration Air Canada - a growth airline with operating leverage, structural FCF generation and balance sheet strength ~5% FCF margin**. <12% CAPEX investment levels. Structural FCF margin of ~5% 18-20% adj. EBITDA margin**. Margin expansion of 300bps+ returning to pre-pandemic highs. >$30B revenues by 2030, Accelerated revenue growth 7-8% p.a. The 2028 long-term targets and 2030 aspirations provided in this presentation do not constitute guidance or outlook but rather are provided for the purpose of assisting the reader in measuring progress toward Air Canada’s objectives. Readers are cautioned that evolving conditions, particularly those relating to jet fuel prices, may result in changes to these targets and aspirations, and are referred to the assumptions, risks and uncertainties described in the 2024 Investor Day presentations, which are available in the events section at aircanada.com/investors and elsewhere in this presentation, including assumptions relating to demand trends, jet fuel supply, prices and forward curves, the ability to significantly recapture elevated fuel prices, increasing revenues, growing fleet and network capacity and successfully executing on other key investments and initiatives. *As communicated in Air Canada’s December 17, 2024 news release. Please see the discussion above under Caution Regarding For ward-looking Information. **Adjusted EBITDA margin and free cash flow margin are referred to in this presentation. Such measures are non- GAAP financial measures, non-GAAP ratios or supplementary financial measures, are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results. Refer to the "Non-GAAP Financial Measures" section of this presentation for descriptions of these measures and for a reconciliation of Air Canada non- GAAP measures used in this presentation to the most comparable GAAP financial measure.
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aircanada.com Thank you
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aircanada.com Appendix
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Glossary Aeroplan – Refers to Aeroplan Inc. or the Aeroplan program . Available seat miles or ASMs – Refers to a measure of passenger capacity calculated by multiplying the total number of seats available for passengers by the miles flown . CASM – Refers to operating expense per ASM. Passenger load factor – Refers to a measure of passenger capacity utilization derived by expressing Revenue Passenger Miles as a percentage of ASMs. Passenger revenue per available seat mile or PRASM – Refers to average passenger revenue per ASM. Revenue passenger carried – Refers to the International Air Transport Association’s definition of passenger carried whereby passengers are counted on a flight number basis rather than by journey/itinerary or by leg. Revenue passenger miles or RPMs – Refers to a measure of passenger traffic calculated by multiplying the total number of revenue passengers carried by the miles they are carried . Total operating revenues per available seat mile or TRASM – Refers to average total operating revenues per ASM. Yield – Refers to average passenger revenue per RPM.
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Non-GAAP Financial Measures Below is a description of certain non- GAAP financial measures and ratios used by Air Canada to provide readers with additional i nformation on its financial and operating performance. Such measures are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results. The non- GAAP financial measures or ratios described in this section typically have exclusions or adjustments that include one or more of the followi ng characteristics: being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of past or futur e operating results. These items are excluded because Air Canada believes these may distort the analysis of certain business trends and render comparative analysis across periods less meaningful and their exclusion generally allows for a more meaningful analysis of Air Canada’s operating expense performance and may allow for a m ore meaningful comparison to other airlines. In 2026, Air Canada concluded new four -year collective agreements with IAMAW and Unifor. Air Canada recorded pension past servic e cost charges of $131 million related to the IAMAW agreement in the third quarter and $132 million related to the Unifor agreement in the second quarter. S eparately, Air Canada recorded a $6 million charge associated with the share trust in the third quarter and, in the second quarter, a $208 million charge related to pensioner lump- sum payments and voluntary separation packages funded from proceeds of the union pension funding trust, as well as a $20 million benefit -related past service cost and a $28 million provision in respect of a legal matter. These items were excluded in the calculation of adjusted CASM, adjusted EBITDA, adjus ted pre- tax income and adjusted net income. Additionally, a related $41 million interest expense associated with a legal matter was excluded from adjusted pre- tax i ncome and adjusted net income. In 2025, Air Canada recorded a pension past service cost and other labour -related charges of $194 million, including from the pension plan amendments made in conjunction with the collective agreement reached with the Canadian Union of Public Employees (CUPE) and an operating expense related to the streamlining of Air Canada’s management structure. In 2024, following ratification of the collective agreement with the Air Line Pilots Associati on (ALPA), Air Canada recorded a pension past service cost of $490 million in the fourth quarter of 2024. Air Canada has excluded these charges in computing its adjus ted EBITDA, adjusted CASM, adjusted pre- tax income and adjusted net income. A corporate charge of $26 million for the settlement of tax matters related to the 2019 acquisition of Aeroplan was recorded in 2025. As this item is non- recurring and cash- neutral to Air Canada, since a related tax refund was also recorded, Air Canada added back this expense in the calculation of adjusted pre- tax income and adjusted net income – attributable to shareholders of Air Canada. A charge of $34 million was recorded in the third quarter of 2024 in other operating expenses related to estimated costs associa ted with contractual lease obligations. In the third quarter of 2026, Air Canada recorded a $17 million reduction related to the estimated costs recorded in 2024 as previo usly described. Air Canada excluded this expense and the subsequent reduction in computing adjusted CASM, adjusted EBITDA, adjusted pre- tax income and adjusted net incom e. Air Canada excludes the effect of impairment of assets, if any, when calculating adjusted CASM, adjusted EBITDA, adjusted EBI TDA margin, adjusted pre- tax income (loss) and adjusted net income (loss) as it may distort the analysis of certain business trends and render comparative analys is across periods or to other airlines less meaningful. Air Canada did not record charges for impairment of assets in 2026, 2025 or 2024.
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Non-GAAP Financial Measures (Cont’d) Adjusted Cost per Available Seat Mile Air Canada uses adjusted CASM to assess the operating and cost performance of its ongoing airline business without the effect s o f aircraft fuel expense, the cost of ground packages at Air Canada Vacations, freighter costs and other items discussed above. These items may distort the analysis of certain business trends and render c omparative analysis across periods less meaningful and their exclusion generally allows for a more meaningful analysis of Air Canada’s operating expense performance and may allow for a more meaningful comparis on to that of other airlines. In calculating adjusted CASM, aircraft fuel expense is excluded from operating expense results as it fluctuates widely depending on many factors, including international market conditions, geopolitical events, jet fuel refining costs and Canada/U.S. currency exchange rates. Air Canada also incurs expenses related to ground packages at A ir Canada Vacations which some airlines, without comparable tour operator businesses, may not incur. In addition, these costs do not generate ASMs and therefore excluding these costs from operating expe nse results provides for a more meaningful comparison across periods when such costs may vary. Air Canada also incurs expenses related to the operation of freighter aircraft which some airlines, without comparable cargo businesses, may not incur. Air Canada had six Boeing 767 dedicated freighter aircraft in service as at September 30, 2026, and as at September 30, 2025. These costs do not generate ASMs and therefore ex clu ding these costs from operating expense results provides for a more meaningful comparison of the passenger airline business across periods. Adjusted CASM is reconciled to GAAP operating expense as follows: (Canadian dollars in millions, except where indicated) Third Quarter First Nine Months 2026 2025 Change 2026 2025 Change Operating expense – GAAP $ 6,723 $ 5,490 $ 1,233 $ 18,872 $ 16,008 $ 2,864 Adjusted for: Aircraft fuel (2,118) (1,212) (906) (5,025) (3,546) (1,479) Ground package costs (114) (103) (11) (710) (633) (77) Freighter costs (excluding fuel) (50) (44) (6) (141) (128) (13) Pension plan amendments and other labour- related charges (131) (173) 42 (263) (173) (90) Pension plan share trust (6) - (6) (214) - (214) Benefit-related past service cost - - - (20) - (20) Provision for legal reserve - - - (28) - (28) Provision for contractual lease obligations 17 - 17 17 - 17 Operating expense, adjusted for the above- noted items $ 4,321 $ 3,958 $ 363 $ 12,488 11,528 960 ASMs (millions) 29,893 28,282 5.7% 81,664 79,382 2.9% Adjusted CASM (cents) ¢ 14.45 ¢ 13.99 ¢ 0.46 ¢ 15.29 ¢ 14.52 ¢ 0.77
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Non-GAAP Financial Measures (Cont’d) Adjusted Cost per Available Seat Mile Adjusted CASM is reconciled to GAAP operating expense as follows: (Canadian dollars in millions, except where indicated) Full Year 2025 2024 Operating expense – GAAP $ 21,454 $ 20,992 Adjusted for: Aircraft fuel (4,731) (5,118) Ground package costs (872) (782) Freighter costs (excluding fuel) (173) (163) Provision for contractual lease obligations - (34) Pension plan amendments (194) (490) Operating expense, adjusted for the above- noted items 15,484 14,405 ASMs (millions) 105,174 104,381 Adjusted CASM (cents) ¢ 14.72 ¢ 13.80
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Non-GAAP Financial Measures (Cont’d) Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and impairment) and adjusted EBITDA margin (adjuste d EBITDA as a percentage of operating revenues) are commonly used in the airline industry and are used by Air Canada as a means to view operating results and the related margin before interest, taxes, depreciation, amortization and impairment and other items discussed above. These items can vary significantly among airlines due to differences in the way airlines finance their aircraft and other ass ets . Adjusted EBITDA and adjusted EBITDA margin are reconciled to GAAP operating income as follows: (Canadian dollars in millions, except where indicated) Third Quarter First Nine Months 2026 2025 Change 2026 2025 Change Operating income – GAAP $ 261 $ 284 $ (23) $ 163 $ 594 $ (431) Add back: Depreciation, amortization and impairment 555 504 51 1,607 1,490 117 Pension plan amendments and other labour-related charges 131 173 (42) 263 173 90 Pension plan share trust 6 - 6 214 - 214 Benefit-related past service cost - - - 20 - 20 Provision for legal reserve - - - 28 - 28 Provision for contractual lease obligations (17) - (17) (17) - (17) Adjusted EBITDA $ 936 $ 961 $ (25) $ 2,278 $ 2,257 $ 21 Operating revenues $ 6,984 $ 5,774 $ 1,210 $ 19,035 $ 16,602 $ 2,433 Operating margin (%) 3.7 4.9 (1.2) pp 0.9 3.6 (2.7) pp Adjusted EBITDA margin (%) 13.4 16.6 (3.2) pp 12.0 13.6 (1.6) pp
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Non-GAAP Financial Measures (Cont’d) Adjusted EBITDA Adjusted EBITDA is reconciled to GAAP operating income as follows: (Canadian dollars in millions, except where indicated) Twelve-months ended September 30, 2026 December 31, 2025 September 30, 2025 Operating income – GAAP $ 487 $ 918 $ 340 Add back: Depreciation, amortization and impairment 2,129 2,012 1,950 Pension plan amendments and other labour-related charges 284 194 663 Pension plan share trust 214 - - Benefit-related past service cost 20 - - Provision for legal reserve 28 - - Provision for contractual lease obligations (17) - - Adjusted EBITDA $ 3,145 $ 3,124 $ 2,953 Operating revenues $ 24,805 $ 22,372 $ 22,006 Operating margin (%) 2.0 4.1% 1.5% Adjusted EBITDA margin (%) 12.7 14.0% 13.4%
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Non-GAAP Financial Measures (Cont’d) Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share – Diluted – Attributable to Shareholders of Air Canada Air Canada uses adjusted net income (loss) and adjusted earnings (loss) per share – diluted as a means to assess the overall financial performance of its business without the after -tax effects of foreign exchange gains or losses, net financing expense relating to employee benefits, gains or losses on financial instruments recor ded at fair value, gains or losses on sale and leaseback of assets, gains or losses on debt settlements and modifications, gains or losses on disposal of assets and other items discussed above. These items may distort the analysis of certain business trends and render comparative analysis to other airlines less meaningful. Adjusted net income and adjusted earnings per share – diluted are reconciled to GAAP net income as follows: : (Canadian dollars in millions) Third Quarter First Nine Months 2026 2025 Change 2026 2025 Change Net income attributable to shareholders of Air Canada – GAAP $ 139 $ 264 $ (125) $ 9 $ 348 $ (339) Adjusted for: Foreign exchange (gain) loss (43) (343) 300 (142) (142) - Net interest relating to employee benefits (10) (4) (6) (29) (14) (15) Financial instruments recorded at fair value 13 (16) 29 16 (76) 92 Loss on debt settlements and modifications - - - 56 - 56 Gain on sale and leaseback of assets - - - (82) - (82) Other corporate expenses - 8 (8) - 26 (26) Pension plan amendments and other labour-related charges 131 173 (42) 263 173 90 Pension plan share trust 6 - 6 214 - 214 Benefit-related past service cost - - - 20 - 20 Provision for legal reserve, including interest expense - - - 69 - 69 Provision for contractual lease obligations (17) - (17) (17) - (17) Income tax, including for the above reconciling items (5) 141 (146) (65) (35) (30) Adjusted net income attributable to shareholders of Air Canada $ 214 $ 223 $ (9) $ 312 $ 280 $ 32 Weighted average number of outstanding shares used in computing diluted income per share (in millions) 283 297 (14) 287 328 (41) Adjusted earnings per share attributable to shareholders of Air Canada – diluted $ 0.75 $ 0.75 $ - $ 1.08 $ 0.85 $ 0.23
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Non-GAAP Financial Measures (Cont’d) Free Cash Flow Air Canada uses free cash flow as an indicator of the financial strength and performance of its business, indicating the amount of cash Air Canada can generate from operations and after capital expenditures. Free cash flow is calculated as net cash flows from operating activities minus additions to property, equipment, and intangible assets, and is net of proceeds from sale and leaseback transactions. The table below reconciles free cash flow to net cash flows from (used in) operating activities for the periods indicated. . (Canadian dollars in millions) Full Year 2025 2024 Net cash flows from operating activities $ 3,657 $ 3,930 Additions to property, equipment, and intangible assets (2,910) (2,636) Proceeds from sale and leaseback of assets - - Free cash flow $ 747 $ 1,294 (Canadian dollars in millions) Third Quarter First Nine Months 2026 2025 Change 2026 2025 Change Net cash flows from operating activities $ 266 $ 813 $ (547) $ 2,715 $ 3,234 $ (519) Additions to property, equipment, and intangible assets (706) (602) (104) (1,878) (2,009) 131 Proceeds from sale and leaseback of assets - - - 501 - 501 Free cash flow $ (440) $ 211 $ (651) $ 1,338 $ 1,225 $ 113
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Non-GAAP Financial Measures (Cont’d) Net Debt Net debt is a capital management measure and a key component of the capital managed by Air Canada and provides management wit h a measure of its net indebtedness. Net Debt to Trailing 12- Month Adjusted EBITDA (Leverage Ratio) Net debt to trailing 12- month adjusted EBITDA ratio (also referred to as “leverage ratio”) is commonly used in the airline indus try and is used by Air Canada as means to measure financial leverage. Leverage ratio is calculated by dividing net debt by trailing 12- month adjusted EBITDA. The table below reconciles leverage ratio to Air Canada’s net debt balances as at the dates indicated. (Canadian dollars in millions) September 30, 2026 December 31, 2025 Change September 30, 2025 Total long-term debt and lease liabilities $ 9,473 $ 8,609 $ 864 $ 8,699 Current portion of long-term debt and lease liabilities 1,380 2,967 (1,587) 3,070 Total long-term debt and lease liabilities (including current portion) 10,853 11,576 (723) 11,769 Less cash, cash equivalents and short and long-term investments (6,634) (6,165) (469) (6,939) Net debt $ 4,219 $ 5,411 $ (1,192) $ 4,830 Adjusted EBITDA (trailing 12 months) $ 3,145 $ 3,124 $ 21 $ 2,953 Net debt to adjusted EBITDA ratio 1.3 1.7 (0.4) 1.6
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Non-GAAP Financial Measures (Cont’d) Net cash flows from operating activities as a percentage of adjusted EBITDA Air Canada uses net cash flows from operating activities as a percentage of adjusted EBITDA to measure cash conversion from adjusted EBITDA. This measure is defined as the ratio of net cash flows from operating activities to adjusted EBITDA. Additions to property, equipment and intangible assets as a percentage of operating revenues Air Canada uses additions to property, equipment and intangible assets as a percentage of operating revenues to measure the prop ortion of operating revenues that are reinvested as capital expenditures. This measure is defined as the ratio of additions to property, equipment and intangible assets to operating revenues. Free cash flow margin Air Canada uses free cash flow margin to measure the amount its free cash flow represents as a percentage of operating revenues. This measure is defined as the ratio of free cash flow to operating revenues. The table below presents the quantitative reconciliation for adjusted EBITDA, adjusted EBITDA margin, net cash flows from operat ing activities as a percentage of adjusted EBITDA, additions to property, equipment and intangible assets as a percentage of operating revenues, free cash flow and free cash flow margin, in each case for the financial years ended December 31, 2025 and 2024. (Canadian dollars in millions) 2025 2024 Total operating revenues – GAAP $ 22,372 $ 22,255 Adjusted EBITDA $ 3,124 $ 3,586 Net cash flows from operating activities $ 3,657 $ 3,930 Additions to property, equipment and intangible assets (2,910) (2,636) Free cash flow $ 747 $ 1,294 Net cash flows from operating activities as a percentage of adjusted EBITDA 117% 110% Additions to property, equipment and intangible assets as a percentage of operating revenues 13% 12% Free cash flow margin 3% 6%