Morgan Stanley: Press Release

Market Wire, December, 2006

This announcement relates to the holdings of Morgan Stanley & Co. Incorporated ("MS&Co.") in Air Canada (TSX: AC) (the "Issuer"). Morgan Stanley is issuing this release in its capacity as the parent holding company of, and indirect beneficial owner of securities held by, MS&Co.

Morgan Stanley announces that on November 17, 2006 it acquired an aggregate of 2,247,000 Class A Variable Voting Shares (the "Acquired Shares") of the Issuer. Morgan Stanley purchased 650,000 of the Acquired Shares under the initial public offering of the Issuer and purchased 1,597,000 of the Acquired Shares on the Toronto Stock Exchange.

After giving effect to the acquisition noted above, Morgan Stanley owned and controlled 2,247,000 Class A Variable Voting Shares in the aggregate representing approximately 13.72% of the issued and outstanding Class A Variable Voting Shares and 2.25% of the Class A Variable Voting Shares and Class B Voting Shares of the Issuer, taken as a whole (i.e. aggregating the total number of issued and outstanding Class A Variable Voting Shares with the total number of issued and outstanding Class B Voting Shares) based on 16,382,045 Class A Variable Voting Shares issued and outstanding as at December 15, 2006 and 83,617,955 Class B Voting Shares issued and outstanding as at December 15, 2006 according to information available on the Toronto Stock Exchange website on December 18, 2006.

All securities of the Issuer were acquired through transactions made in the ordinary course of business, and not for the purpose of influencing the control or direction of the Issuer.

Morgan Stanley will be filing a report under National Instrument 62-103 of the Canadian Securities Administrators in connection with this acquisition. For further information and to obtain copy of such report please see contact information below.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contacts: Morgan Stanley Mary Claire Delaney Corporate Communications (212) 726-3154