Royal Airlines Completes a Transition Year in View ofMajor Growth and the Upgrading of its Fleet.

DORVAL, Quebec--(BUSINESS WIRE)--June 30, 1998--(ME: ROY) (TSE: ROY)

- For fiscal 1998, Royal posts net earnings of $3.0 million or $0.20 per share, including the gain on disposal of its old fleet of Boeing 727s.

- In light of the 10-year strategic alliance concluded with Signature

For the fiscal year ended April 30, 1998, ROYAL AVIATION INC. recorded revenues of $224 million compared with $163 million for the previous year, excluding the results of the subsidiary Royal Vacations Inc. which was sold to Signature Vacations in May 1998. The growth of $61 million or 37 percent in revenues arose from the expansion of Royal's European program using threeAirbus 310-300s during the summer of 1997, and the integration in August 1997 of transcontinental air cargo services using a fleet a five of Boeing 737-200s.

Royal's operating income amounted to $1.7 million compared to $6.4 million in 1997. After two excellent quarters, the Company's profitability was affected in the second half of the year by airline overcapacity, especially on the Toronto-Florida axis, as well as the aftermath of the ice storm. Royal recorded an $8.0 million gain on disposal of capital assets, following the sale of its last five Boeing 727s in August 1997. It also recorded a $1.4 million loss from discontinued operations, more specifically those of Royal Vacations, compared with a loss of $1.8 million one year earlier. Consequently, the Company posted net earnings of $3.0 million or $0.20 per share compared with $4.7 million or $0.34 per share in 1997.

Royal's cash flow from operations totalled $10 million or $0.70 per share, compared with $11 million or $0.80 per share for the previous year. The past year give rise to important transactions that considerably changed Royal's operational and financial structure. As part of its fleet upgrading program, the Company collected net proceeds of $26 million on the sale of its Boeing 727s and net proceeds of $23 million on the issue of special warrants. It invested $60 million in the purchase of capital assets, consisting primarily of an Airbus 310-300 in the summer of 1997 and three Boeing 737 Cargos in December of the same year. As at April 30, 1998, Royal had available cash of $18.5 million.

Major developments for fiscal 1998-1999:

10-year strategic alliance with Signature Vacations and completion of fleet upgrading program

On May 11, 1998, Signature Vacations and Royal Airlines forged a three-tiered strategic alliance. First, they signed a 10-year contract under which Royal becomes, as of the winter season beginning November 1, 1998, Signature Vacations' preferred airline for carrying passengers to Mexico, Latin America, the Caribbean and the Continental United States. Second, Royal becomes the airline favoured by Signature Vacations for its programs to Florida, Hawaii, Europe and some 20 Canadian destinations. Lastly, Royal's subsidiary Royal Vacations, specializing in tour operator services in Quebec, was sold to Signature Vacations.

This alliance offers Royal a base of long-term stability, since it should generate more than $100 million in additional revenues annually and therefore provide the Company with the security of a solid distribution network in Canada for the next 10 years. The alliance will also enable Royal to finish upgrading its fleet by integrating seven state-of-the-art Boeing 757 aircraft, one of which was put into service this summer and the remainder, in November 1998 for the winter season. Next fall, Royal will therefore have completed the upgrading of its passenger fleet, which will consist of seven Boeing 757s and four Airbus 310s.

Outlook

Michel Leblanc, President and Chief Executive Officer, indicated that Royal will continue to operate in a difficult environment in the short term, marked by overcapacity. "We are nonetheless well positioned to face this challenge. In the first half of the year, we will benefit from a much broader program in Europe and we will operate five new-generation aircraft compared with three in 1997. The second half should give rise to strong growth thanks to the implementation of the 10-year contract with Signature Vacations and the commissioning of six additional Boeing 757s."

Mr. Leblanc added that it is as of the year 2000 that the Company will reap the full benefit of this strategic initiative. "Aside from benefiting from the full impact of our alliance with Signature Vacations, we will have one of the most efficient fleets in North America to increase our profitability," concluded the President.

   CONTACT:  Royal Airlines Inc.
              Michel Leblanc, 514/828-9000
                       or
              Royal Airlines Inc.
              Jacques A. Tremblay, 514/828-9000