Court Approves Canadian Airlines Debt Restructuring Plan

Canadian Airlines Corporation announced today that the Alberta Court of Queen's Bench has approved the Corporation's Plan of Compromise and Arrangement under the Companies' Creditors Arrangement Act (CCAA). Madame Justice Marina Paperny delivered her decision in court earlier in the day, declaring the plan fair and reasonable.

``Today's Court decision brings closure to the process of financial restructuring Canadian Airlines and re-establishing the airline on a sound footing ,'' said Paul Brotto, President and Chief Executive Officer. ``We have accomplished this during a period of remarkable change through the unfailing dedication from our employees. The plan had wide support from many creditors and represents the only concrete opportunity to preserve Canadian Airlines, it's employees, and service to customers and communities.''

Canadian Airlines Corporation will now complete the process of closing the Plan of Arrangement. Once all eligible creditors have been paid, Canadian Airlines International will become a subsidiary of Air Canada. Canadian continues to fly a full schedule of domestic, transborder and international flights.

``Now we can look forward to truly realizing the benefits to Canadian -- our customers and our employees - that come with full integration with Air Canada,'' Mr. Brotto concluded.

Canadian filed for CCAA protection on March 24, 2000, in order to provide an orderly process for approval of its debt-restructuring plan. Creditors overwhelmingly approved the plan on May 26. On June 05, the Court of Queen's Bench commenced hearings in Calgary to rule on the fairness of the Plan. Since the beginning of February 2000 Canadian Airlines has concluded agreements with certain secured creditors representing over 97% of the airline's ongoing fleet.

The Toronto Stock Exchange has indicated that, upon implementation of the Plan, the Common Shares and Non-Voting Common Shares of Canadian Airlines Corporation will be delisted.

A legal disclosure document pertaining to today's announcement follows.

Financial Disclosure

Canadian Airlines Corporation (the ``Corporation'') announced today that the Court of Queen's Bench of Alberta (the ``Court'') has approved the Plan of Compromise and Arrangement (the ``Plan'') of the Corporation and Canadian Airlines International Ltd. (``Canadian Airlines'') under the Companies' Creditors Arrangement Act. The Court has also approved the reorganization of the share capital of Canadian Airlines pursuant to the Business Corporations Act (Alberta) in the manner contemplated by the Plan. The Corporation intends to implement the Plan and the reorganization of Canadian Airlines as soon as possible.

The purpose of the Plan is to provide a fair recovery to certain affected creditors of the Corporation and Canadian Airlines and to provide Canadian Airlines with the financial stability necessary to continue its business operations in conjunction with Air Canada.

The Plan

The Plan contemplates the completion of a series of transactions affecting certain creditors of the Corporation and Canadian Airlines as well as a reorganization of the capital of Canadian Airlines.

Creditor Compromise

The Plan will compromise the indebtedness of two classes of creditors of the Corporation and Canadian Airlines: (i) secured noteholders and (ii) affected unsecured creditors. Holders of the U.S.$175,000,000 senior secured notes issued by the Corporation will receive, in full satisfaction, settlement and release of such notes, U.S.$171,447,500, all accrued and unpaid interest on the notes and all the costs of the trustee and collateral agent for the notes up to the effective date of the Plan. Affected unsecured creditors will receive a payment equal to 14% of the value of their affected unsecured claims in full satisfaction, settlement and release of such unsecured claims. Canadian Airlines Reorganization

The Plan will also result in the reorganization of the share capital of Canadian Airlines by:

1. the conversion of all common shares of Canadian Airlines held by the Corporation into one retractable share of Canadian Airlines which will all be immediately redeemed for the total sum of $1.00; and

2. the conversion of all preferred shares of Canadian Airlines held by 853350 Alberta Ltd. (``AlbertaCo'') (a corporation owned in part and financed by Air Canada) into common shares of Canadian Airlines. As a result of this reorganization, the Corporation will relinquish all of its shareholdings in Canadian Airlines for a total of $1.00 and Canadian Airlines will become a wholly owned subsidiary of AlbertaCo. The Plan does not provide shareholders of the Corporation with any consideration. The Corporation will, following the implementation of the Plan, become a public shell without any significant assets.

Cease Trading of Shares

The Corporation also announced today that The Toronto Stock Exchange (the ``Exchange'') has stopped all trading of the Corporation's Common Shares and Non-Voting Common Shares. The Corporation has been advised by the Exchange that it is the present intention of the Exchange to delist the Corporation's Common Shares and Non-Voting Common Shares upon the implementation of the Plan by the Corporation and Canadian Airlines.