AIRLINE YIELDS – NOT THE EXPLANATION OF POOR AIRLINE PROFITS Air Canada’s recent poor financial performance is not due to poor yields.1 In fact, in 2002, its yield for domestic services rose. In contrast, WestJet has been able to stay profitable while its yields have fallen.
Air Canada’s Domestic Yields
30% 25% 20% 15%
Year-Over-Year % Change in Yield
-20% 2000 Q1
WestJet System-Wide Yields In contrast to Air Canada, which had increasing yields in 8 of the last 12 quarters, WestJet’s system-wide yield has ben on a downward trend in the last three years. Its yields declined in 8 of the last 12 quarters. Fourth quarter yields in 2002 were 17% below the same quarter in 2000. In spite of this, the carrier has remained profitable.
WestJet System-Wide Yield 25
Conclusions: What does this mean?
Year-Over-Year % Change in Yield
Senior Market Analyst
Air Canada Domestic Yield
The graph at the right shows Air Canada’s 2002 domestic yields. As is well known, in 2000, the year after the merger took place, AC’s domestic yields rose significantly. This was reversed in 2001, when yields declined, even prior to September 11, with the onset of negative economic growth in the first quarter. Trends at AC reversed again in 2002, when yields rose in every quarter. It should be noted that the AC data include its low-cost brands, Tango and Zip. With their low fare format, it suggests that yields for mainline services rose even more than the graph shows.
-20% 2000 Q1
Air Canada’s deteriorating financial situation is not due to declining yields in 2002. To the contrary, its yields rose every quarter. The source of its trouble lies elsewhere. • WestJet has been on a near continuous downward yield trend, yet it remains profitable. It is interesting to note that in early 2000, WJ’s yields were slightly above AC’s domestic yields, but they are now well below. WJ’s shift to longer haul flying, where yields are lower, may be a factor. •
Yield is measured here as revenue per revenue passenger mile. Data source: WestJet- quarterly financial reports. Air Canada, various presentations to investment community, available on AC web site. 1
InterVISTAS Consulting Inc. March 2003
AIRLINE DATA - CANADA Air Canada has changed the reporting of its traffic data. In the past, monthly traffic data reported by Air Canada excluded Jazz. Beginning with February 2003, AC’s monthly traffic report includes Jazz, although its results are reported separately and not integrated with AC Mainline. The table below shows both AC mainline and Jazz. Traffic and Load Factors on Canada’s Major Air Carriers – February 2003 Passenger Traffic Capacity Load Factor Revenue Passenger Kilometres Available Seat Kilometres Air Carrier
NEW CARRIERS: LOAD FACTORS Jetsgo: Zip: CanJet:
% Change over 2002
% Change from 2001
% Change over 2002
% Change from 2001
% Change over 2002
% Change from 2001
Air Canada 2
-3.6 pts (to73.2%)
-3.0 pts (to 75.2%)
+6.6 pts (to 63.2%)
-3.7 pts (to 75.3%)
-4.0 pts (to 66.8%)
73.6% not reported not reported
Jazz International & Charter
Note: n/a – As Jazz was not reported in 2001, a percentage change from 2001 could not be calculated. WestJet WestJet Analysis. A number of interesting observations 80% can be made from the February traffic data: 70% 60% • WestJet continues to grow at a 50% year 50% RPK over year basis. 40% ASK • However, WestJet’s capacity continues to 30% 20% grow faster than traffic. Its load factor continues to decline, and now is down to the 10% 0% Mar- Apr May Jun Jul Aug Sep Oct Nov Dec Jan- Feb 65% range. 02 03 • Air Canada’s domestic traffic continues to decline, even relative to the depressed levels of early 2002. • Traffic for Jazz, however, is growing strongly, even as capacity is reduced somewhat; but load factor for Jazz is 12 points below domestic mainline services. • Air Canada’s international traffic declined for the first time since August 2002. Air Canada Canada Domestic Domestic Mainline Mainline 25% 20% 15% 10% 5% 0% -5% -10% -15%
Air Canada International International 25%
Jazz data is not included in this graph
20% 15% Dom RPK Dom ASK
Int'l RPK Int'l ASK
5% 0% -5%
Mar- Apr May Jun Jul Aug Sep Oct Nov Dec Jan- Feb 02 03
Mar- Apr May Jun Jul 02
Aug Sep Oct Nov Dec Jan- Feb 03
Air Canada Mainline consists of all Air Canada with the exception of Jazz.
InterVISTAS Consulting Inc. March 2003
AIRLINE DATA – U.S. US AIRLINES 2003 TRAFFIC FIGURES Airline
Traffic ( RPMs – millions)
(ASMs – millions)
á 1.2 pts
â 5.3 pts
â 3.2 pts
á 1.9 pts
á 0.5 pts
â 1.1 pts
á 1.3 pts
á 0.5 pts
Notes.1 Includes American Airlines and American Eagle 2 Includes Continental Express. 3 Load factor includes scheduled service only. Source: Carrier traffic reports.
InterVISTAS Consulting Inc. March 2003
CHANGES TO WESTJET FLEET PLAN WestJet Airlines periodically releases its multi-year fleet plan, which outlines a) the number of 737700 jets it will take delivery of, by month; b) the number of 737-200 jets it plans to retire, by month; and c) the number of 737-700 options it may exercise, by year. In January 2003, WestJet released an update to its previous plan, released in May 2002. The revised plan increases the number of aircraft it plans to operate over the next several years. WestJet has established a firm delivery schedule for its new 737-700 jets. Although these delivery dates can be adjusted, there has been no change between May 2002 and January 2003. All revisions have been adjustments to the estimated retirement dates of 737-200 aircraft. Since May 2002, WestJet decided to accelerate the retirement of two 737-200s, removing them from the fleet in Q4 2002, rather than Q1 2003. As a result, WestJet operated two fewer aircraft at yearend 2002 than originally planned. WestJet will retire two additional jets in 2003, as planned; however the retirement date for the first of these planes has been postponed from March to August, allowing its use through much of the peak travel season.
John Weatherill Senior Airline Analyst
WestJet had originally indicated that four aircraft would be retired in 2004. However, three of these retirements have been deferred to later years. As a result, WestJetâ€™s total fleet capacity at year-end 2004 will be 6% higher than originally planned. These changes are summarised below, and an updated delivery calendar is included on the following page. WestJet Fleet Plan
May 2002 737-200
Net Adjustment Aircraft
Net Adjustment Capacity
*WJ does not plan to convert any options until 2005.
InterVISTAS Consulting Inc. March 2003
Note: Unless otherwise specified, all deliveries are 737-700 jets; all retirements are 737-200 jets. * Indicates addition/removal of 737-800s on temporary lease. Source: WestJet Airlines, effective January 1, 2003. Retirement dates are estimates only.
Summary of Total Year-Over-Year Passenger Traffic Performance at Selected Airports â€“ 2002 -2003 Vancouver
June 2nd Quarter
Toronto does not report monthly or quarterly traffic levels.
NEWS ARTICLES AIR CANADA UPDATE
OTHER CANADIAN AIRLINES
AIR CANADA RAISES FUEL SURCHARGE
WESTJET RAISES TICKET PRICES
Starting March 11, Air Canada and its subsidiaries (Tango and Jazz) will increase its fuel surcharge on domestic long haul flights. A C$25 surcharge, up from C$10, will be applied each way to flights over 300 miles. The surcharge for short haul services will remain at C$15.
AIR CANADA SUED BY TRAVEL AGENTS
Air Canada, along with American, United, Delta, Continental and Northwest, are among the airlines in a class action lawsuit filed jointly by travel agencies in Montreal and Toronto and an association representing travel agents. The lawsuit claims that starting in February 1995, the airlines conspired to drive down and eliminate commissions paid to Canadian travel agents. The allegations have yet to be proven and the lawsuit has yet to receive certification from the Federal Court of Canada.
AIR CANADA NEEDS TO SAVE $650M
A document prepared by Air Canada states that it must cut labour costs by at least 20% or $650 million to remain competitive with its discount rivals. Air Canada has asked flight attendants to accept concessions equaling $143 million and have asked pilots to take a 15% pay cut and forgo raises and bonuses.
TANGO SEAT SALE UP TO 50% OFF, NEW NON-STOP TORONTO-ST. JOHN’S SERVICE
In response to increasing fuel costs, WestJet has increased its ticket prices by up to $20 for round-trip tickets.
WESTJET BEGINS SERVICE TO HALIFAX
On February 27, WestJet launched a new four flight daily non-stop service between HalifaxHamilton.
CANJET INTRODUCES REDUCED FARE STRUCTURE
Effective immediately, CanJet will reduce all regular fares by 40%. The fare reduction is a response to the overwhelming success of its January “Winter Sizzler Seat Sale.”
JETSGO ADDS CALGARY & EDMONTON TO NETWORK
Jetsgo has expanded its network to include Calgary and Edmonton. The carrier will add: • daily weekday Calgary-Toronto service on April 16 with Sunday and Saturday flights on May 4 and 24, respectively; •
daily Edmonton-Toronto service on June 7;
non-stop Montreal-Vancouver Saturday service on March 22; and
weekly non-stop Montreal-Calgary service on May 25.
On March 5, Tango launched a seat sale ending March 10, with discounts of up to 50%. The airline will also begin a new summer nonstop service between Toronto-St. John’s.
NEWS ARTICLES NEW QUEBEC REGIONAL AIRLINE
Quebecair Express, a small Quebec Citybased regional airline is expected to begin operations in mid-March. The airline is backed by Guy Marcoux, former owner of Regionnair Inc. The carrier will connect several Quebec cities including Montreal, Quebec City, Baie Comeau, Rimousky, Sept-Iles and Gaspe.
HMY SET TO EXPAND
David Ho, owner of HMY Airways plans to expand internationally and is looking at non-stop flights from Vancouver to Macau. Currently, Ho is in the process of acquiring new Boeing 767s and 777s and intends to place an order within the next few months. In the summer, he plans to increase focus on domestic and transborder destinations including Toronto, Los Angeles and other US cities.
UNITED EXPRESS TO OFFER NEW SERVICES
On April 6, United Express will offer thricedaily non-stop service between Montreal-Chicago using Canadair CRJs. On May 5, the carrier will offer four daily Montreal-Washington service.
ASIANA TO BECOME STAR MEMBER
On March 1, Korean carrier Asiana became the 15th member of Star Alliance. The addition of Asiana to the network means that member airlines will be serving 18 destinations in China with almost 600 flights and a total capacity offering more than 160,000 seats per week.
US & INTERNATIONAL AIRLINES AIRLINES IMPOSE FUEL SURCHARGE ON DISCOUNTED FARES
Northwest Airlines has imposed a US$10 each-way fuel surcharge on all its published discount fare types systemwide. The surcharge applies to its discounted business fares and all domestic and international leisure fares. American Airlines will also add a US$20 charge on round-trip domestic tickets to cover the rising cost of fuel. Other airlines are expected to follow suit.
COURT RULES TERMINATION OF US AIRWAYS PILOT PENSION PLAN
The US Bankruptcy Court has ruled that US Airways has met the â€œfinancial standards for a distress terminationâ€? of the defined benefit pension plan for its pilots. This ruling completes the requirements for the Pension Benefit Guaranty Corporation to begin the process to terminate the pension plan by March 31, 2003.
NEWS ARTICLES CARGO US CARGO INCREASES
FUEL PRICES March 5, 2003 SPOT OIL PRICES RISING FUTURES PRICES STILL LOW Crude Oil Price: Spot – US$36.80 Increasing (up 4.8% from February) Future: • 6 month - $30.70 (September 2003 delivery) • 12 month - $27.48 (March 2004 delivery) • 2 year - $24.21 (March 2005 delivery) • 5 year - $23.82 (March 2008 delivery)
Danzas-AEI will be renamed DHL Danzas Air and Ocean
US Air Transport Association figures for January show a 45% increase in revenue ton miles for domestic cargo and a 10% increase in international cargo. Total freight volume for the month increased 7% from the previous year.
DHL CANADA ACQUIRES LOOMIS
AIRLINES RAISE FUEL SURCHARGES
TNT Express has made improvements to its schedule Europe-US-China schedule through cooperative agreements with Polar Air Cargo and China Southern Airlines. TNT will: • Take one-fifth of the capacity on Polar’s six-weekly transatlantic flights
Beginning in March, several airlines will increase fuel surcharges. • Northwest Airlines, Cargolux, KLM, Martinair, Lufthansa and British Airways will raise their fuel surcharges to $0.15/kg, up from the current rate of $0.10/kg. •
American Airlines increased its fuel surcharge to US$0.15/kg for most US origin international shipments and $0.06/lb for US domestic shipments on February 24.
PILOT AIR FREIGHT REPORTS STRONG 2002 FOURTH QUARTER
Transportation and logistics service provider Pilot Air Freight reported fourth quarter revenues of $60.7 million and an increase of 16% from last year in total number of shipments. For the year, Pilot Air reported total revenues of $217 million.
DEUTSCHE POST WORLD NET LAUNCHES STAR
Detusche Post World Net has launched Star, a group-wide value enhancement program aimed to ensure the complete integration of the three wholllyowned companies DHL, Danzas-AEI and Deutsche Post Euro Express. The following will result from the integration: • DHL will act as single brand for all Group Express and Logistics activities.
DHL Canada is now the third largest express delivery provider in Canada following its acquisition of Mayne Logistics Loomis.
TNT IMPROVES EUROPE-US-CHINA SCHEDULE
Take space on China Southern’s twiceweekly service from Shanghai to Liege
PANALPINA BUYS 12% STAKE IN LUXAIR
Panalpina, provider of airfreight services, has acquired a 12% stake in Luxair allowing Panalpina to optimize its airfreight hub in Luxembourg. Luxair would be the operator of Panalpina’s new logistics centre at Cargo City South at Frankfurt Airport.
ATLAS AIR DEFERS 747-400F DELIVERY
Atlas Air Worldwide Holdings has reached an agreement with Boeing on the deferral of a B747-400F delivery from October 2003 until September 2006. The company is also in talks with lessors to reduce or defer operating lease payments on five 747-200Fs and one 747-300F.
ARROW ACQUIRES AGI
Miami based Arrow Air has acquired Air Global International, a major B747 freighter operator, which offers B747200 freighter services to Brazil, Chile, Colombia and Ecuador.
AIRPORTS OTTAWA TERMINAL TO OPEN EARLY
Ottawa International Airport will open its new terminal complex on October 12, 2003, six months earlier than expected. The C$310 million complex will feature: • Two-level access roadway system •
15 new aircraft gates
New de-icing facility
Combined Service Building
Four-level parking structure
a) allowing depreciation of investments, rather than single year expensing of equipment, and b) revising forecasts of air traffic. The principle that air transport users have to pay the entire cost of aviation security has not changed.
NATS SIGNS OCEANIC AGREEMENT
U.K National Air Traffic Services has signed an agreement to use and adapt Nav Canada’s Gander Automated Air Traffic System at the Prestwick center under the name of Shanwick Automated Air Traffic System. The system will be operational in three years and will replace the U.K.’s existing system, the Oceanic Flight Data Processing System.
PEOPLE IN THE NEWS
BOMBARDIER SLASHES 3,000 JOBS
WAA WELCOMES NEW CFO
Airbus parent EADS reported a net loss of US$330 million for 2002. Revenues dropped 3% to US$33 million and earnings before interest and tax fell 16% to US$1.55 billion.
Richard Ball, CGA and past president of Ceridian Canada Ltd. and previously with PriceWaterhouseCoopers has joined Winnipeg Airports Authority Inc. as the new Vice President and Chief Financial Officer. Ball brings with him extensive experience in strategic planning, financial management, mergers, divestitures, human resource development and continuous process improvement.
ROLLS ROYCE PROFITS DOWN 46%
MAY JOINS WAA
Rolls Royce reported 2002 pre-tax profits of US$403.5 million, down 46% from 2001. Deliveries in 2002 fell to 856 compared to 1,362 in 2001.
Peggy May will be joining the Winnipeg Airports Authority Inc. in April as the Director of Marketing. She will have responsibility for airline, concession and land marketing and promotion.
GOVERNMENT AND REGULATORY
WAA ANOUNCES PROMOTION OF TATARYN
As a result of declining orders for corporate and regional jet and turboprop aircraft, Bombardier Aerospace plans to cut its workforce by another 3,000 employees. The cuts will take place over the next 12 months at facilities in Montreal, Toronto and Belfast.
EADS POSTS US$330 MILLION LOSS
AIR SECURITY TAX CUT $5 ON DOMESTIC FLIGHTS
Finance Minister John Manley announced cuts to the Air Travellers Security Tax of $5 on domestic flights. The surcharge will drop to $7 from $12 for each one-way ticket purchased after March 1 for travel within Canada. The surcharge for international travel will remain at $12. The lower charge was justified based on
Shelley Tataryn was promoted to Director People Services, with responsibility for payroll, HR, staff planning and corporate administration.
NEWS ARTICLES OTHER GAO STUDY SHOWS OLDER ENGINES EMIT LESS NITROGEN OXIDE
In an assessment released by the US General Accounting Office (GAO), data revealed that newer engine designs are emitting up to 47% more nitrogen oxides on takeoffs and landings than older models. For example, an older Boeing 737 powered by Pratt & Whitney JT8Ds and CFM International CFM56-3B/Cs emit on average 12.1 pounds of nitrogen oxide compared with 17.8 pounds on a newer 737.
IRREGULARITY IN AIRSPACE BOUNDARIES DATA
Jeppesen, supplier of flight information, has discovered an irregularity in some of the records in the Jeppesen Nav Data. The irregularity will affect special use and controlled airspace boundaries. The company is currently working to resolve the situation.
Exchange Rates and Their Implications for Airports In the past two months, the Canadian dollar has recovered almost 10% against the US dollar. While it was 62 US cents per dollar a year ago, in recent days it has been trading above 68 US cents. What are the reasons behind this and what does it mean for airports? Its not that the Canadian dollar is strengthening, its the US dollar which is weakening. The US dollar has been weakening against most of the worldâ€™s major currencies. The plot at right shows the Euro-US exchange rate (Euro per US Dollar).3 As can be seen, even before September 11, 2001, the US dollar has been in decline. It has fallen in three stages, with the most recent beginning in October of last year.
Allison Padova Manager Economic Services
A number of analysts viewed a decline in the U.S. dollar as inevitable. Their outlook was based, in part, on research showing that countries that have persistent and large (as a percent of GDP) net outflows of payments for goods and services, ultimately experience currency depreciation. Such a currency outflow was sustained in the U.S. throughout the last half of the 1990s. This set the stage for a falling U.S. dollar. In the last few months, the additional impacts of rising unemployment, rock bottom interest rates and uncertainty re armed conflict also put downward pressure on the dollar. The Canadian dollar followed the US dollar down in 2001 & 2002. The Canadian dollar fell against the Euro (and other currencies), just as the US dollar did, as shown in the graph at the left. The fall also began in the summer of 2001.
In 2003, while the US dollar continued to fall against the Euro, the Canadian dollar has not. The past few months have been different. The C$ has not experienced the same degree of fall against the Euro and other currencies since October 2002. This has resulted in the Canadian dollar strengthening against the US$, as we see at the right. Higher Canadian interest rates is one reason.
Source: Prof. Werner Antweiler, University of British Columbia.
The impact will not necessarily be negative for Canadian airports. What does all this mean for airports? A stronger C$ will generally result in reduced tourism. But air travel is bi-directional. Canadian airports will lose some inbound U.S. traffic, but more Canadians are likely to fly south to take advantage of the favorable exchange rate. While the tourism industry has anxiety regarding exchange rates, in some ways, airport traffic doesnâ€™t really depend on value of the dollar. American tourists are replaced with Canadian sun seekers, but both pay AIFs. There will be differences between airports. Those that are strong inbound tourism markets, may see a greater reduction in inbound tourism than is offset by greater southbound traffic. On the other hand, Canadian communities with limited inbound aviation dependent tourism, such as a number of prairie communities, may see a positive net impact of a weaker Canadian dollar.
INTEGRATED A PPROACH TO NEXUS DEVELOPMENT IS NEEDED A key initiative of the Canada-US Smart Border Accord is the development of expedited border-crossing programs for lowrisk, pre-approved travellers. The programs will not only increase security, they will provide a "carrot" of a faster means of travelling through border points.
Solomon Wong Director Security & Planning
Nexus-Land. The first of these is a land crossing program, Nexus. It is jointly managed by the Canada Customs & Revenue Agency (CCRA), Citizenship and Immigration Canada and the US Bureau of Customs and Border Protection. Since it was launched in summer 2002, Nexus has expanded to include 6 land border crossings in Ontario and B.C. Participants use an identification card, which allows them access to special dedicated lanes, a system for faster customs declaration and payment of duties via a pre-authorized credit card. Citizens and permanent residents of the U.S. or Canada can apply for a Nexus card for an CA$80 application fee. Applicants are subject to a customs and immigration check, followed by a 20-minute interview. During the interview, a digital photograph and 2-print finger biometric are recorded, followed by the issuance of a card. The program has received interest from an estimated 30,000 participants to date. Not integrated with upcoming Nexus-Air. However, the current program is challenged in several areas that would be relevant to a future deployment of Nexus-Air at Canadian Airports: ยง
Card technology not machine readable: While identity information is printed on the card, the technology used does not include common barcode, PDF417, magstripe or other means of storing information. If the Nexus card is to be used in an airport kiosk environment, the current set of cards will need to be upgraded to a machine readable international standard.
The challenge: Integration. These and other challenges will ultimately impact the market size for expedited border clearance programs. Improvements are needed to integrate Nexus programs for air and other modes of transport. As well, it would be desirable if it could be integrated with other applications such as security screening.
Re-registration will be needed for Nexus-Air program: Nexus-Air would use a full biometric technology to authenticate an individual travelling through a border point. Presently, only the finger biometric and some facial information is recorded for the NexusLand program. Current users would need to be re-registered to participate in the Nexus-Air program.
CARGO CAPERS 10 March 2003 The Minister’s Vision for Air Cargo Transportation in Canada. The long-awaited “Transportation Blueprint” was released on February 25, 2003. Entitled Straight Ahead - A Vision for Transportation in Canada, the appropriately named document outlines a vision that does not stray from the path that Transport Canada has followed for years. The result is reminiscent of the Clint Eastwood classic The Good, the Bad, and the Ugly. A warning – don’t strain your eyes looking for the air cargo vision – there isn’t one! The term “air cargo” appears once in the document, in relation to the “scheduled economy,” then disappears from sight. Apparently the Minister, at least when it comes to viewing air cargo, is in dire need of the aid of an optometrist. Robert Andriulaitis Director, Cargo and Logistics Studies
The Good. The vision recognizes transportation’s fundamental role in Canada’s prosperity and our quality of life. It recognizes the importance of competitiveness and adopts market-based system efficient as a “lasting principle.” It also addresses a number of other issues that few could argue with: safety and security; respect for the environment; removal of undue obstacles for persons with disabilities; partnerships among jurisdictions and with the private sector; and research and skills development. The Bad. The Minister obviously feels that the current direction in air policy is the correct one. Key elements that remain in place: Canadian air carriers as symbols of our national identity; avoidance of change that might have an impact on incumbents; no right of establishment; no unrestricted access for foreign air carriers; and a gradual liberalization of air bilateral agreements where there is a net benefit for Canada (i.e., Canadian air carriers). The Minister fails to recognize the differences between cargo and passenger needs, and thus ignores the potential for differential treatment in policy and in air bilateral agreements. In effect, Canada’s policy remains to nurture Canadian air carriers and leave shippers to function as best they can in a restrictive environment. The Ugly. The Minister uses terms such as “proper” and “appropriate” that hint at a greater degree of government control. He notes the need for users to assume a larger share of the full cost of transportation, which suggests he does not recognize that aviation users already more than cover their costs, or that he believes aviation should remain a cash cow for the federal government. The Air Cargo Challenge. The Minister’s Vision fails to address pressing air cargo issues. The challenge then is to find ways to achieve liberalization despite Straight Ahead. One opportunity is for airports to take Transport Canada up on its invitation for comments on the blueprint and to “fill in the gaps” concerning air cargo. Another possibility is to press for inclusion of air cargo under the General Agreement on Trade in Services. Straight Ahead leaves this door open (undoubtedly inadvertently) when it notes how Canada’s economy is one of the most open, and that as globalization progresses, Canada and its trading partners will have to harmonize their transportation industries’ safety and regulatory regimes. Another opportunity is to work with other airports globally to push for a multilateral agreement on air cargo. Canadian airports need to advance the cause of air cargo by taking up the role of optometrist and helping correct the current deficient vision. Page 16
THE OTTAWA SCENE 14 March 2003 The Feds have been active on a number of transportation fronts this month. Budget. The Budget on February 18 earmarked new funds for future infrastructure and for sustainable development, some of which is expected to go to high-speed inter-city rail. Any use of infrastructure funds for aviation is unclear. The Budget also reduced the Air Transportation Security Charge for domestic flights from $12 to $7 each way in response to industry concern that the security charge was unduly harmful to air travel demand. However, the principle that air travelers must pay the full cost of security remains. International, including transborder, continues to pay a $12 charge.
Roland Dorsay Regional Vice President Ottawa
“Straight Ahead” Blueprint: On February 25, Transport Canada presented its long awaited visioning blueprint document entitled “Straight Ahead”. It calls for no fundamental change to Transport Canada’s so-called “Made in Canada” air policy; including no liberalization of foreign ownership rules; no provision for new “right of establishment” domestic air carriers; no provision for cabotage; and no change in approach to negotiating 5 th Freedom traffic rights on a case by case basis. Air cargo issues are ignored. This is in marked contrast to developments in Europe, where the European Commission came out the following day with new plans to liberalize access to international traffic rights for all EU carriers from any airport in the EU, regardless of the EU carriers’ nationality and to negotiate more liberal arrangements with the USA and others. Bill C-26. On February 25th, the Minister also tabled Bill C-26. The Bill proposes to amendment to the Canada Transportation Act and the Railway Safety Act. It will also enact a Via Rail Canada Act The House Transport Committee has not yet given notice of when it will take up its consideration of the Bill. Bill C-26 introduces new measures to improve transparency in advertising airfares by requiring air service providers to indicate the total amount to be paid by the purchaser. Airport fees and charges; security charges, and federal/provincial taxes can continue to be set out separately. Similar transparency requirements were not introduced for other competing modes such as rail and inter-city bus. Bill C-26 also introduces new measures to enhance competition in the domestic airline industry. It empowers the Canada Transportation Agency (the CTA) to require domestic air carriers under certain conditions to enter into commercial agreements on such matters as Frequent Flier Programs and Inter-line and Prorate agreements. How the Agency would perform these new regulatory functions remains far from clear. Data. In Straight Ahead, the Minister indicated he would address the problem of the lack of data on the aviation sector, and Bill C-26 amends section 50 of the Act to allow the Minister to collect data. However, the Bill does not empower the Minister to make such data available. He is required to produce a report on the transport industry every two years, but this is unlikely to disclose much needed information, such as traffic and fare data on individual markets.
VIA. VIA Rail finally gets a parliamentary mandate. It has been operating since 1977 with no legislative basis. The new Act will make it possible for VIA to borrow funds in its own right. This will be important should it pursue investment in high speed rail. The Canada Airports Act, which will set out new governance rules for the larger airports is still to come, likely around March 17-20. Preclearance: President Bush has signed into law new legislation that enables the US to give Canada reciprocal treatment under the Preclearance Agreement of 2000. As a result , the modernized preclearance agreement is expected to finally come into effect when President Bush visits Ottawa in May
This is a collection of information gathered from public sources, such as press releases, media articles, etc., information from Confidential sources, and items heard on the street. Thus some of the information is speculative and may not materialize.
Prepared by InterVISTAS Consulting Inc.