Air Canada

Kathleen Murphy - Director, IR and Corporate Reporting Calin Rovinescu - President and CEO Mike Rousseau - EVP and CFO Benjamin Smith - President, Passenger Airlines

Walter Spracklin - RBC Andrew Didora - Bank of America Helane Becker - Cowen and Company Cameron Doerksen - National Bank Financial Turan Quettawala - Scotiabank Chris Murray - AltaCorp Capital Tim James - TD Securities Konark Gupta - Macquarie Capital Markets Kevin Chiang - CIBC David Tyerman - Cormark Securities

Thank you, Valerie, and good morning ladies and gentlemen and thank you for joining us on our call today. With me this morning are Calin Rovinescu, our President and Chief Executive Officer; Benjamin Smith, President, Passenger Airlines; and Mike Rousseau, our Chief Financial Officer.

On today’s call, Calin will begin by highlighting our financial performance for the full year and quarter and the progress made on our strategic initiatives. Ben and Mike will then address our fourth quarter financial performance and turn it back to Calin before taking questions from the analyst community.

As usual, I would like to point out that certain statements made on this call, such as those relating to our forecasted costs, financial targets, and strategic plans are forward-looking within the meaning of applicable securities laws. This call also includes references to non-GAAP measures.

Please refer to our fourth quarter press release and MD&A for important assumptions, and cautionary statements relating to forward-looking information and for reconciliations of non-GAAP measures to GAAP results. I am now going to turn it over to Calin Rovinescu, Air Canada’s President and CEO.

Thank you, Cathy. Good morning everyone, and thank you for joining us on our call.

I'm delighted to report that 2017 was a record year for Air Canada, underscoring the effectiveness of our transformation strategy, our global expansion and the power of our comprehensive network. The numerous financial records we set last year following on the previous year's results are further evidence that our strategy is succeeding in transforming Air Canada into a company that can be consistently and sustainably profitable over the long-term.

For the year, we reported record EBITDAR of more than $2.9 billion, $153 million above 2016. This is our fifth consecutive year of record EBITDAR results.

We generated an EBITDAR margin of 18%, and a return on invested capital of 13.9%. On a GAAP basis, we reported operating income of close to $1.4 billion.

We met or exceeded all of our previously communicated Investor Day targets and market guidance for 2017. For the fourth quarter, we delivered record EBITDAR of $521 million, and a record EBITDAR margin of 13.6%.

On a GAAP basis, we reported fourth-quarter 2017 operating income of $133 million. During the quarter, on capacity growth of 9.5%, we increased passenger revenues by 11.4% to a record $3.4 billion on traffic growth of 9.9% and a yield improvement of 1.4%.

This is the second consecutive quarter where we experienced positive yield growth year-over-year before adjusting for stage length, and the fourth consecutive quarter that our relative yield performance improved, a very important trend for us given our capacity additions. On a stage length adjusted basis, yield increased 4% when compared to the same quarter in 2016.

This speaks to a robust revenue environment, strong local market performance, as well as improvements in premium cabin traffic and yields. During 2017, we continued to selectively and profitably expand our international services with the launch of 30 new routes, 15 of these were new international city pairings, including Montreal, Shanghai; Toronto, Mumbai; and Vancouver, Melbourne.

We carried a record 48 million customers. This included growth of 20% in international to international connecting passengers via Canada, so called sixth freedom flying, with a significant portion originating from the United States.

Each of Air Canada Cargo and Air Canada Vacations had their best year ever in 2017 with record revenues. The airline recorded more than $1 billion in ancillary revenues.

Looking at 2018, we continue to see a strong demand environment and growth in global connecting traffic, and we remain committed to meeting the key financial targets set out at our September 2017 Investor Day, namely EBITDAR margin, ROIC, free cash flow, and leverage ratio. Over the last several years, we have been a North American industry leader in reducing adjusted CASM.

Indeed in 2017, adjusted CASM decreased 3%, significantly better than the 3.6% average increase of other primary North American carriers. In fact, Air Canada’s adjusted CASM level is now comparable to the average adjusted CASM of the three large US carriers both measured in local currencies.

Building on the momentum of our strategy and to underscore that cost transformation is a permanent ingredient in our DNA, we have undertaken a new companywide cost transformation program intended to deliver $250 million in savings by the end of 2019. Mike will discuss this initiative in a little more detail later on the call.

This is particularly relevant now that capacity growth will slow with our wide-body fleet renewal being substantially completed and 2018 full year adjusted CASM projected to range between a decrease of 0.5% and an increase of 1.5% over last year. As we shift our focus to our mainline narrow-body replacement program, we will keep investing in products and services to bolster our objective of sustainable profitability over the long-term.

This will include our new loyalty program, technology to enrich the travel experience, investments in AI and enhanced airport services and enhancements. As a result, adjusted CASM for 2018 is projected to be slightly higher than historical levels.

We see long-term value to Air Canada in these non-recurring specifically targeted investments, making their shorter term cost worthwhile. In 2017, we were extremely pleased to be named best airline in North America by Skytrax given the very competitive context we find ourselves in.

We intend to continue providing superior products to our customers, whom I thank on behalf of all Air Canada employees for choosing to fly with us. But before turning the call to Ben for a discussion of our revenue performance in the quarter, I would also like to thank our 30,000 employees for their hard work in 2017, carrying a record number of customers safely to their destinations, especially during the very challenging and disruptive winter conditions we experienced over the holiday period.

Ben?

Thank you, Calin, and good morning. I'd like to start out by thanking all our employees for an incredible 2017, as well as our many returning old customers and new customers for choosing to fly with us, and our many shareholders for their support of our plan.

I would also like to acknowledge and thank all of our employees in the operation, who performed exceptionally well while facing extremely challenging weather that affected many of our major markets during the holiday peak season and into the beginning of January. As Calin mentioned, it was a very strong year for Air Canada.

Not only did we carry a record number of customers, achieved record EBITDAR and record revenues, we also began the next phase of our evolution with the introduction of our first Boeing 737 Max 8 into our fleet. The delivery of this aircraft in the fourth quarter signaled the beginning of the rejuvenation and optimization of our narrow-body fleet, focused around the 737 Max aircraft, and the Bombardier C-Series, the latter of which will begin delivery in 2019.

We look forward to continue taking deliveries of the 737 Max in 2018, and realizing the CASM benefits this aircraft provides as well as the additional flexibility we will have in our strategic deployment of narrow-body aircraft throughout our network. Throughout the year, we continued our focus on premium customers as well as profitable international growth stemming from our three strong hubs in Toronto, Montréal and Vancouver.

We successfully launched 30 new routes, 15 of which were international. We also introduced our Air Canada Signature Suite in the fourth quarter, an exclusive premium lounge for eligible international business class customers in Toronto, offering a best in class a la carte dining experience.

These investments in our fleet network and product strengthen our market position as the competitive landscape evolved, continuing to enhance the overall customer experience and enable us to reach our ultimate goal of sustainable profitability. With that I'm pleased to report on our fourth quarter results.

As Calin mentioned earlier, we reported record passenger revenues of $3.4 billion in the quarter, an increase of $346 million or 11.4% from the previous year. We saw traffic increases in all five of the major markets we operate in with system traffic growth of 9.9%.

On a system basis, our yield increased 1.4% in spite of the average stage length in the quarter increasing by 4.6% year-over-year. We are pleased to report we achieved absolute year-over-year yield growth before stage length adjustments for the second consecutive quarter.

On a stage length adjusted basis, yield grew 4.0% versus the same quarter in 2016. When looking to our cabin performance, we are particularly pleased with the strong performance of our business class cabin in the fourth quarter, which reflected a continued strategic emphasis on our premium product offering.

In this cabin, we saw traffic growth of 8.2% and revenues growing by 15.3% or $96 million resulting in a yield increase of 6.6% versus the fourth quarter of 2016. Our premium economy cabin also closed out the year with very strong results in all of our major markets, and was aided by the introduction of our premium economy product on select wide-body aircraft within North America.

Consistent with prior quarters, our strong revenue results were driven by our success in attracting larger volume of higher yielding local traffic, the strong performance of our premium products and improvement in our overall fare mix, increases in base fares, continued leverage of our revenue management capabilities and an increase in ancillary revenues, speaking of which we saw a 16% increase in ancillary revenues in the fourth quarter, and it continues to be a key contributor to our overall revenue growth. We remain confident that our plan is delivering on our strategies to leverage the geography of our Canadian hubs, our industry-leading products and services, our extensive network and other competitive advantages.

In terms of forward bookings, I can also share that we are pleased with what we see for the first two quarters of 2018 with advance bookings in line with our expectations mainly driven by booking volumes trending very positively for our international services. Turning to our key markets.

In the domestic market, on capacity growth of 1.4%, revenues grew $58 billion or 5.4% on a yield improvement of 3.5% and traffic growth of 1.6%. Our yield increase reflected growth on most major domestic services and included yield improvements on connecting traffic as well as in our business cabin.

Our traffic increase was driven by strong demand on services within Canada as well as driving higher connectivity from our hubs to the United States and international destinations. Lastly, we continue to be pleased with the performance of our service in the triangle of Ottawa, Montreal and Toronto.

Looking forward to the first quarter of 2018, in the domestic market we are expecting positive year-over-year traffic and revenue performance. To maintain and grow our competitive position in Western Canada, we have announced enhancements to our network into British Columbia with our non-stop Air Canada Rouge service to [indiscernible] from Toronto, as well as our nonstop Air Canada Rouge service to Victoria and Montréal.

These announcements are made possible with the additional flexibility provided through the ratification of the amendment to our agreement with our pilots, which provides us with the opportunity to grow our Rouge narrow-body fleet within North America at a rate proportionate to the growth of our mainline fleet. On the US trans-border market, revenues were up $43 million or 6.3%, on capacity growth of 6.7%.

Traffic grew 7.1% with increases reflected on all our major services. Our traffic growth was driven by the launch of Air Canada Express Service, which included non-stop service to San Antonio and Memphis from Toronto; non-stop service to Dallas and Denver from Vancouver; and non-stop service to Washington from Montréal.

A yield decline of 0.7% largely reflected the impact of increased industry capacity on U.S. long-haul and short-haul routes partly offset by yield growth on our US sun routes, such as our services to Florida, Hawaii, Phoenix and Las Vegas.

The strength of our US leisure routes also helped to offset the short-term currency pressure that we experienced in the fourth quarter. We anticipate that the strong performance of our leisure sun routes will continue into the first quarter complimented by the introduction of our new non-stop service to Phoenix from Montréal.

Looking to the first quarter, we are anticipating continued traffic and revenue growth from the United States. The strong performance in this market had given us confidence to further build out our trans-border network acting with the announcements of seven new US routes that we will launch in the first two quarters of 2018.

We are pleased with the strong customer demand between Canada and the US, especially the incremental connecting traffic and in 2018 we are continuing our focus to enhance [indiscernible] for our passengers transiting our hubs to and from the United States. Turning to the Atlantic, which was our best performing market in the quarter, revenues increased $138 million or 22.2% versus the same quarter in 2016.

Our strong results were driven by an increase in traffic of 14.4% and a yield improvement of 6.8%. In 2017, the Atlantic market exceeded our expectations with the successful introduction of our non-stop service to Mumbai from Toronto, which has enhanced our presence into India, as well as our strategic use of Air Canada Rouge to offer seasonal service to several new European leisure destinations.

Looking ahead, we anticipate another very strong quarter over the Atlantic in Q1 in a traffic, revenue and yield perspective. We are anticipating a material shift to bookings over the Atlantic in the first quarter related to Easter Sunday, which is on Sunday, April 1 this year as opposed to later in April as it was last year.

This will result in a softening of bookings for April with the strengthening of bookings in March. We continue to be pleased with the outlook for our non-stop service to Delhi from both Toronto and Vancouver, which gave us the confidence to announce that our non-stop Vancouver to Delhi service will be year-round starting next summer.

Moving onto the Pacific. On capacity growth of 12.2%, revenues increased $60 million or 13.5% driven by traffic growth of 13.7%.

This traffic growth was largely driven by the launch of year-round non-stop service from Montréal to Shanghai, Vancouver to Taipei, and Vancouver to Melbourne. The yield was only slightly below 2016 levels, down 0.2%.

This is the best year-over-year yield performance we have seen in this market in the first quarter of 2016, which we are very pleased with considering the competitive pressures. As we look ahead to the first quarter, the Pacific continues to face competitive pressures particularly for the China and Hong Kong market resulting in a slight downward pressure on yields.

We do however anticipate continued strong year-over-year revenues and traffic performance. When we look to our remaining markets on capacity growth of 18.7%, passenger revenues increased $47 million or 23.7% driven by a traffic increase of 17.9% and a yield improvement of 4.8%.

The traffic increase versus 2016 was largely driven by the use of larger aircraft on routes from Toronto to Sao Palo, San Diego and Buenos Aires. Yields improved on services to South America aided by a recovering Brazilian economy and on routes to traditional leisure destinations.

The yield improvement seen in our services to our sun destinations represented the third consecutive quarter of yield improvement for this market, a promising trend we hope to continue into 2018. Looking ahead to the first quarter, we anticipate continued strong revenue and traffic results into South America, partially resulting from the significant turnaround in the Brazilian market, but also contributed to by our enhanced service into Peru and Colombia, which began last quarter with our non-stop service from Montréal to Lima, as well as our non-stop service into Cartagena from Toronto.

Similarly, we anticipate continued strong revenue traffic and yield performance to our traditional sun destinations. Now turning to our cargo performance, which generated once again very strong results.

Cargo revenues increased $28 million, or 18.4% year-over-year driven by traffic growth of 19%. In the fourth quarter of 2017, both the Atlantic and Pacific markets reflected yield increases for cargo versus the same quarter in 2016.

Looking ahead to the first quarter, we anticipate continued strong cargo performance year-over-year from a revenue, traffic and yield perspective. Strong demand of the Pacific market was the primary driver of the continued growth and healthy industry wide growth is also proving to be a positive factor.

I will now turn the call over to Mike for a discussion on our cost performance and balance sheet metrics.

Thank you, Ben and good morning to everyone. I also want to thank all our employees for another excellent year of record financial results, including a record fourth quarter.

Turning to our unit cost performance in the quarter, on an adjusted basis, CASM declined 1.2% from the fourth quarter of 2016. This is in line with the 0.5% to 1.5% decrease projected in our Air Canada Q3 news release.

All in CASM also decreased 1.2% from last year. Moving onto fuel.

Our average price of fuel for the quarter was 67.5 Canadian cents per liter, up 13.8% versus the same quarter in 2016. Fuel expense increased $159 million or 23% in the quarter with higher jet fuel prices increasing fuel expense by $151 million, and a higher volume of liters consumed adding another $55 million.

The stronger Canadian dollar and our hedging program partly offset these increases, lowering fuel expense by $47 million. We currently have no fuel hedging contracts in place, although we continue to closely monitor the market and may add hedges later this year.

We certainly continue the benefit from the natural hedge that the US Canadian foreign-exchange rate provides. Looking forward our assumption is the price of jet fuel will average $0.72 Canadian per liter in the first quarter of 2018, and $0.70 Canadian per liter for the full year 2018.

And now to provide some guidance on costs. For the full year 2018, we project adjusted CASM to range between a decrease of 0.5% and an increase of 1.5% when compared to 2017.

Of this approximately 0.75 percentage points will be driven by non-recurring items and investments. These non-recurring items and investments include expenses related to branding and new uniforms, investments in customer service, including training, technology, airport services and amenities to enrich the travel experience.

Accelerating depreciation for our Embraer 190s and startup costs related to the launch of our new loyalty program in 2020. Loyalty startup costs are expected to amount to $10 million in 2018.

Shifting to the first quarter, we expect adjusted CASM to increase 2% to 3% when compared to the first quarter of 2017. One third of this increase is the one-time event relating to new uniforms, which are being delivered to employees in the first quarter.

Our projections are based on the assumption that the Canadian dollar will trade on average at $1.25 Canadian per U.S. dollar in the first quarter, and for the full year 2018.

We continue to aggressively focus on lowering our cost structure. In fact, in 2017 through the execution of companywide initiatives, we have realized savings of approximately $90 million.

Moreover, through the renegotiation of agreements with key suppliers, cost increases totaling $120 million over the life of these agreements. Looking ahead and building on what we achieved in 2017, we have undertaken a new cost transformation program aimed at securing incremental savings of $250 million by the end of 2019.

This speaks to the ongoing efforts to foster a culture of continuous cost improvement across the organization. This type of program involves digging deeper and looking at all aspects of our business to find efficiencies, and implementing cross functional improvement projects.

It includes initiatives around procurement events, maintenance, material and repair processes, aircraft leases and return conditions, internal engineering cost efficiency, streamlining our overhead structure, and simplifying our business process. Air Canada’s 2018 outlook is not dependent on the new cost transformation program.

With respect to the loyalty program, through extensive research with over 10,000 customers, bloggers and Air Canada employees, we have received valuable feedback on what stakeholders value in a loyalty program. We have also identified opportunities unserved or underserved by existing programs.

We have continued to design the program in the process of running on schedule and on budget. In the fourth quarter of 2017, we contracted for a leading Cloud-based customer data platform, as well as a customer identity and access management provider.

Both are critical foundations for the new program. In addition to the RFP launch last September for our co-branded credit card partner we have recently launched the procurement process for a loyalty technology platform partner.

Decisions for both these RFPs are expected by the end of 2018. Turning to balance sheet and liquidity we ended the year with unrestricted liquidity levels of 4.2 billion given this high level of cash we plan using excess cash to purchase some of our new aircrafts scheduled for delivery in 2018 and potentially in 2019.

We reported record free cash flow of over $1 billion in 2017. 1.2 billion above last year which reflects a lower level of capital expenditures, net of the [project free cash flow] transactions as well as the impact of higher cash flows from operating activities versus 2016.

This was also above the range of our 600-900 million projected in our October 25 news release, on higher than expected cash flow from operations including a greater than anticipated increase in advanced ticket sales. For 2018 we project free cash flow of $250 million to $500 million.

We are not contemplating any aircraft sale or lease back transactions in 2018. We took delivery of 11 new aircrafts in 2017, three of which were purchased for cash, increasing the number of owned and uncovered aircraft to 56 at year end 2017.

At December 31 with adjusted net debt of 6.1 billion down 974 million from December 31, 2016. Our leverage ratio was 2.1, our reduction was 50 basis points from the end of 2016.

We achieved a return on invested capital of 13.9%, 630 basis points above our weighted average cost of capital of 7.6%. At quarter end our weighted average cost of debt stood at 4.5%.

Now turning to pensions. As disclosed in our year end MD&A on a preliminary basis we had aggregate [solvency] surplus of 2.5 billion in our domestic registered pension plans on January 1, 2018.

This is an increase of $600 million on January 1, 2017. Total pension funding contributions are forecasted to be $90 million in 2018.

When we began our transformation we said the objective was for Air Canada to become sustainably profitable over the long term. This involves the statutory lowering the risk profile of the company.

I would like to take a moment now to review the steps we have taken to materially derisk the company. One, our cost structure on an [ASM] basis declined significantly over the past four years.

And now our adjusted CASM is comparable to the average of the three large U.S. network carriers, open global currency.

Two, liquidity levels have been at all time highs. Three, debt levels are declining.

Four, our leverage ratio has never been lower with the past investment grade credit ratings by the end of 2020. Five, our return on invested capital has been well and excess of our cost to capital.

Six, we have significant pension solvency surplus versus the cash [indiscernible] deposit. Next, our major labor contracts are in place for the next six and half to eight years.

And we presently have 56 uncovered aircrafts with that number expected to grow versus null or zero on uncovered aircrafts only a few years ago. And this as we [bow] on the past providers us with additional financial flexibility.

We believe that Air Canada share prices deserves the higher multiple, given our significant global risk profile. And are confidence in attaining the financial targets we described at our investor day last September.

Turning to the fleet. We have taken delivery of two Boeing 787 and two Boeing 737 since yearend.

We expect to take delivery of another three 787s and 14 737s in the first half this year. Further more in 2019 we plan of replacing five main line Boeing 767s with four at least air bus 330s.

We have also made decisions to accelerate the removal of the Embraer 190s from our mainline fleet. To do this we will retain the airbus 319 aircraft a little bit longer than initially planned at the bridge to the deliveries of the Bombardier C-Series scheduled to commence in late 2019.

The airbus 319 aircraft typically has a lower CASM than the E190. On the Rouge front we recently transformed one mainline Boeing 767 to Rouge for total wide- body fleet of 25 aircraft.

We have also recently leased an airbus 321 aircraft and are planning to transfer two airbus 319s from our mainline fleet to Rouge with all three aircraft expected to be in operation this summer. As a result of our improved financial condition including leverage ratios and profitability in mid 2017 we successfully lowered the margin on our term loan B by 50 basis points.

In addition in connection with financing of four 787 to nine 737 Maxes arriving in 2018, we recently closed a private offering of three investment grade franchise of EETCs. These are the combined weighted average interest rate of 3.4% per annum.

The lowest rate of the four EETC offerings we have conducted in the last four and half years. With respect to the outstanding deliveries in 2018 some are expected to be debt financed as I mentioned earlier some will be purchased with cash.

So we will further increase the number of fully owned and uncovered aircraft in our fleet. We currently have a pool of unencumbered assets including aircraft valued at over $2 billion U.S.

We continue to leverage our normal course issuer bid in 2017 Air Canada repurchased approximately 4 million shares. This program is affected until May 30 of this year and we will be looking to renew it.

Now moving to more technical issues cash accounting and [new] accounting standards. In 2017 AirCanada determined that was probable that substantially all of its unrecognized income taxes including non-capital losses would be realized.

Accordingly a cash recovery of $787 million were recorded in the third quarter representing initial income statement recognition of previously unrecognized tax assets. Beginning in the fourth quarter of 2017 adjusted net income is determined net tax and that includes the tax effects of adjustment included in the measurement of adjusted net income.

A tax expense of $16 million affected both fourth quarter and full year 2017 adjusted net income results. This in detail more results for the year and fourth quarter can be found in the financial statement and MD&A which we was post on our website and filed on CDAR this morning.

And just before passing it back to Calin I want to take a few minutes to update you on certain accounting standard changes. For 2018 we have planned to adopt IFRS 15 the new international financial reporting standard for revenue recognition which took effect from January 1.

Changes to Air Canada's reporting under this new standard are limited. Credit flight cost, and global distribution fees will now be capitalized at the time of passenger ticket booking.

And expense at the time of revenue recognition which is when the flight occurs. Previously these costs were being expensed at the time of ticket booking.

This change better aligns the timing of expense recognition with a related revenue recognition. The anticipated impact from the balance sheet as of December 31, 2017 is increased fleet paid expenses and other current assets of $64 million and equivalent increased opening retained earnings.

Moving forward the amount of prepaid expense were fluctuate on a quarterly basis in line with changes in the advanced ticket sales liability. We are also re-classifying certain passenger in cargo with the [indiscernible] revenues to passenger revenue and cargo revenue.

This is a presentation change only. It doesn't impact the timing or total operating revenues previously reported.

Based on the Air Canada's full year 2017 result the amount expected to be re-classified is $122 million passenger revenue and $58 million to cargo revenues. A reclassified [indiscernible] will be included in our first quarter MD&A.

And in 2019 we will be applying a new standard for leases IFRS 16 we are still evaluating which transition method to apply in the full impact of the standard. It introduces a single on balance sheet recognition model eliminating the distinction between an operating and finance for leases.

This will have a significant impact on our balance sheet as most operating lease aircraft including those which are operated by our CPA carriers are expected to be recognized as right of use assets and lease liabilities. Lease facilities and property will also have to be evaluated.

Finally, the expenses related to those leases will change as IFRS 16 replaces a straight mind operating lease expense with a depreciation charge for right of use assets and interest expense on these liabilities. This certainly will disclose additional information including transitional methods and estimated financial impacts during 2018.

And with that I will turn it back to Calin.

Thanks Mike. So Air Canada celebrated its 88th anniversary in 2017.

And we did so with the vitality and sense of urgency at the new economy startup. We carried more passengers than ever.

Won numerous industry awards including being named as best airline in North America. We generated record EBITDA of over 2.9 billion and record operating revenues of close to 16.3 billion an increase of nearly $1.6 billion in revenue year-over-year.

We also further strengthened our business for the long term. We reduced the adjusted CASM by 3% our unrestricted liquidity reached 4.2 billion.

We lowered adjusted net debt by almost a billion dollars and we advanced our $10 billion fleet renewal program and spent more than 2.4 billion on CapEx. Air Canada shares outperformed those of all of its North American network carrier peers for the second consecutive year appreciating nearly 19% during 2017.

This was our 5th consecutive year of record EBITDA. Set in the context of these ever stronger performances we fully expect to delivery on our commitment of long term sustainable profitability as well as the specific financial targets that we made in our most recent investor day.

In fact as you have heard we are raising the bar higher with this new CTP program to secure additional $250 million in savings by the end of 2019, but also as you heard we will continue to invest in technology and loyalty, in CRM, in artificial intelligence. In fact just yesterday the super cluster on artificial intelligence and robotics in supply chain was approved by the Canadian government and we are one of the key partners in the transport category.

Our strategy has given us the financial resilience in the operational flexibility to thrive and changing economic circumstances and compete in any arena whether that the globally against other full service international carriers or domestically against our existing competitors or new ULCC entrance. As well as our strategy has also brought a very important culture change which our employees have fully embraced and which has been recognized by Canada's top 100 employers several years running.

Culture change has been a key to our success and has shown not only by this another awards we won for service, work place engagement, our HR practices and diversity environmental and sustainability but also in the daily commitment our employees demonstrated taking care of our customers. Their dedication as I said earlier was fully on display in the past quarter when due to temperature and storms disrupted entire industry but our employees faced down the elements and worked tirelessly to move hundreds of thousands of holiday travelers safely to their destinations.

I am extremely proud of the work that they do and with that I will turn it over to you for some questions.

Thank you, Valerie and thank you everyone for joining us on our call today. Thank you very much.

Thank you.