CAIR Issue No. 60 - March 2008

CANADIAN AVIATION INDUSTRY REVIEW

In this issue…

Features Columns: Fuel Price Update (p. 2) Canadian Tourism Trends (p. 3) Singapore Airshow Highlights (p.4) TSA Tests Self-Select Lanes (p. 5) The Caribbean Report (p.13) The Asia Report (p. 14) The European Report (p. 15) The Ottawa Report (p. 16) The Washington Report (p. 17)

Regular Reports: Airline Data - Canada (p. 6) Airline Data – U.S. (p. 7) Selected Canadian Airport Data (p. 8) Industry News (p. 9) InterVISTAS News (p. 18)

FUEL PRICES STEADY ABOVE $100 March 2008

Crude oil prices rise to record $111 per barrel…

Crude oil prices for near term delivery reached a record $111 per barrel; this is the highest price level achieved since crude oil futures began trading in 1983. The U.S. Government reports that U.S. oil inventories are on the rise and consumption on the decline mainly due to the slowing U.S. economy.

Crude oil prices have increased 26% since 6 February 2008; financial analysts are concerned that prices have risen too high, too fast.

OPEC cut its production forecast for non-cartel members with indications that lower output is expected from Western Europe, North America and Mexico. OPEC believes that investors are buying crude oil to “hedge against inflation and the declining value of the U.S. dollar.” OPEC maintains that market fundamentals are currently well balanced and prices are likely expected to soften in the short term.

…with futures prices at $100 in 2012.

Futures prices in March 2008 are much higher than futures prices established just two months ago. A futures contract in March 2008 for delivery of crude oil in December 2012 is currently priced at $100; a 22% increase over the same contract if purchased in January 2008 and 36% higher than if the contract was purchased in October 2007.

Crude Oil Futures Prices $120

Mar 2008

$100

Jan 2008 Nov 2007

$80

Oct 2007 Sep 2007 $60

Nov 2006

$40

Crude Oil Spot Prices

Crude Oil Futures Prices

$20

Sep-12

Jan-12

May-12

Sep-11

Jan-11

May-11

Sep-10

Jan-10

May-10

Sep-09

Jan-09

May-09

Sep-08

Jan-08

May-08

Sep-07

Jan-07

May-07

Sep-06

Jan-06

May-06

Sep-05

Jan-05

May-05

Sep-04

Jan-04

May-04

Sep-03

Jan-03

$0 May-03

Manager, Special Projects

US $ per Barrel

Doris Mak

Month of Delivery

Page 2 March 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

CANADIAN TOURISM TRENDS March 2008

Over the past several years, the Canadian tourism industry has faced numerous challenges. This includes escalating oil prices, the appreciating Canadian dollar, health pandemics, security threats, and increasing competition for travellers, among others. This column examines international travel trends to Canada from 2002 to 2007, with a particular focus on the U.S. and international overseas markets.

International Travel to Canada

Eugene Chu Senior Analyst

U.S. Travel to Canada. Much of the decline in visitor arrivals to Canada can be attributed to the drop in visitors from the U.S. as the U.S. accounts for the majority of visitors to Canada.

In particular, visits from the U.S. by automobile (most of which is same-day travel) declined by 43%. Meanwhile, travellers by air from the U.S. also declined slightly.

50 Arrivals (millions)

International Travel to Canada. Over the last five years, international travel to Canada has declined by 32% to 30.4 million visitor arrivals in 2007 (including overnight and sameday visitors).

44.9 38.9

40

38.8

36.2

33.4

30.4

30 20 10 0 2002

2003

2004

2005

2006

2007

Source: Statistics Canada.

International Overseas Travel to Canada.

In comparison, international overseas travel to Canada increased by 16% between 2002-2007.

Much of this can be attributed to increased visitor arrivals from Europe and the Asia Pacific region, especially from the U.K., France, Spain, China, India, South Korea, Australia and New Zealand.

Moving Forward. It is clear that U.S. travel to Canada has declined over the last several years as a result of the challenges mentioned above. In contrast, international overseas travel to Canada has been relatively strong. Looking ahead, the U.S. outbound travel market faces considerable uncertainty given the current economic challenges in the U.S. Canada as a destination must diversify its source of visitor arrivals to mitigate the effects of a U.S. downturn. This will require focused international marketing, supportive government policy, and additional air services between Canada and international markets.

Page 3 March 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright Š2008 InterVISTAS Consulting Inc., all rights reserved.

SINGAPORE AIRSHOW 2008 – HIGHLIGHTS OF AIRCRAFT ORDERS March 2008

The Singapore Airshow, Asia’s largest aerospace and defence event, recently took place in Singapore from 19 to 24 February 2008. This year, the sold-out show attracted more than 120,000 visitors; 30,000 trade visitors and 90,000 from the general public. Arranged by the Civil Aviation Authority of Singapore and the Defence Science & Technology Agency, this air show is one of the three largest in the world. This is the 26th year that the show has been held. The other two major air shows are held in Paris, France and Farnborough, United Kingdom.

Connie Chang Project Analyst

According to event organisers, the Singapore Airshow generated more than $13.4 billion in sales of aircraft and related equipment, as well as another $2.6 billion in contracts for facilities and other services. Table 1 highlights some of the major aircraft orders announced at the 2008 Singapore Airshow.

Table 1: Singapore Airshow 2008 Highlights, Ranked by Estimated Value Order Quantity

Aircraft Type

Estimated Value of Orders

Additional Notes

Lion Air (Indonesia)

56

Boeing 737-900ER

$4.4 billion

Firm Order

Garuda (Indonesia)

4

Boeing 777-300ER

$1 billion

Firm Order

BOC Aviation (China)

5

Airbus 330-200F

$877 million

Firm Order

Bjets (Indonesia)

40

Cessna and Hawker jets

$600 million

Firm Order

Jetscape Inc. (U.S.)

10

Embraer 190 jets

$375 million

Firm Order

10

Embraer 190 jets

10

Embraer 190 jets

4

Embraer 190 jets

Customer Name and Origin

Virgin Blue (Australia)

Options $750 million

$150 million

Purchase Rights Purchase Rights

Source: Press Release from Domain-b.com Aviation and Aerospace, 25 February 2008.

Page 4 March 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

TSA TESTS SELF-SELECT LANES March 2008

In mid-February, the Transportation Security Administration (TSA) introduced a pilot program called the Diamond Self-Select Screening Program in Salt Lake City, Utah. The self-select screening program is aimed at enabling travelers to select a screening lane, with the help of a Transportation Security Officer (TSO), that is customized to their pace and knowledge of the screening process.

Green lanes (beginner) are dedicated for families traveling with children, people who need special assistance or for first time travelers. These individuals may not travel that often and may require extra time and help with security procedures.

Blue lanes (intermediate) are for casual travelers who are somewhat familiar with pre-board screening procedures and have multiple carry-on items.

Eddy Bordignon Project Analyst

Black “Diamond” lanes (expert) are dedicated for those passengers who are very familiar with pre-board screening procedures (frequent flyers and trusted travelers for example) and arrive at the checkpoint with the appropriate items removed from their carry-on luggage or have limited or no carry-on items.

Regardless of the screening lane used, all passengers are subjected to identical screening procedures. The objective of the pilot is to increase efficiency and throughput, and reduce queue times by allowing passengers to proceed at their own pace.

Advantages - If this pilot were to be become industry standard practice, the TSA may benefit operationally in terms of smoother passenger flows and staff efficiency. The TSA would realize better staff management by placing fewer TSOs on the Black “Diamond” line and increasing the number of TSOs on the Green line to assist those that require extra time to be processed.

Passengers can benefit from the success of this pilot because the program provides a more efficient screening process, along with a more relaxed environment. For example, the frequent flyer that is knowledgeable with the security process would no longer be queued behind a family of four traveling for the first time for leisure purposes since these types of travelers would be placed in separate dedicated lines. The family of four can proceed at their own pace knowing that any person or group behind them will also require some extra time to be processed.

In order for the pilot to be successful some intervention is needed by a TSO to assist passengers in determining their ‘skill level.’ If there is no intervention by an officer, passengers may be confused as to which line to choose and may end up in the wrong queue by making the wrong choice based on their own merits. This could lead to situations where passengers may decide to proceed to a black lane instead of a blue lane because the black lane is moving faster or is less busy.

An Early Success – Early results from the pilot project indicate an overall increase in throughput and customer satisfaction while wait times have been cut by 35% since the trial began. The TSA has announced that the pilot project has recently been expanded to include six additional airports (yet to be determined) by the end of April 2008. It remains to be seen how a broader implementation of this program may work in non-leisure travel environments or in environments where these symbols are not familiar, especially in the southern Sun Belt states.

Page 5 March 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

AIRLINE DATA – CANADA Traffic and Load Factors on Canada’s Major Air Carriers February 2008 Air Carrier

Passenger Traffic Revenue Passenger Kilometres % Change % Change over 2007 from 2006

Capacity Available Seat Kilometres

Load Factor

% Change over 2007

% Change from 2006

Change over 2007

Change from 2006

Air Canada1

+5.6%

+10.5%

+6.2%

+9.4%

-0.5pts (to 79.5%)

+0.8pts (from 78.7%)

Domestic (Mainline)

+5.5%

+11.3%

+6.9%

+7.4%

-1.1pts

+3.0pts

Jazz

+8.0%

+27.9%

+7.0%

+21.3%

+0.7pts

+4.0pts

International & Charter

+5.6%

+10.2%

+6.0%

+10.1%

-0.3pts

+0.3pts

+19.0%

+45.5%

+18.2%

+41.9%

+0.5pts (to 82.8%)

+2.0pts (from 80.8%)

WestJet

Analysis:

1

Air Canada Mainline’s domestic load factor fell 1.1 percentage points from February 2007 to 82.6% in February 2008, despite the increase in domestic passenger traffic of 5.5% during the same period. This is a result of the expansion in domestic seat capacity by 6.9% over the same period, likely due to the addition of year-round service from Ottawa to Fredericton, Moncton, and St. John’s, effective 28 October 2007, as well as increased seasonal frequencies on other domestic routes.

Air Canada Mainline’s international operations also experienced a decline in load factor in February 2008 over February 2007, decreasing 0.3 percentage points to 78.4%. This is again due to the expansion of international seat capacity outpacing the growth in overseas passenger traffic. The number of available seats offered by Air Canada to the “Atlantic” and “Latin America and Other” regions increased by more than 10% in February 2008 over February 2007.

Air Canada Domestic Mainline

9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% Dec

Jan-07

Feb

Mar

Apr

May

Jun

Dom RPK

Jul

Aug

Sep

Oct

Nov

Dec

Jan-08

Feb

Jazz data is not included in this graph

Dom ASK

Air Canada International 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% Dec Jan- Feb Mar 07

Apr May Jun

Int'l RPK

Jul

Aug Sep

Oct

Nov Dec Jan- Feb 08

Oct

Nov

Int'l ASK

WestJet 25% 20% 15% 10% 5% 0% Dec Jan- Feb 07

Mar

Apr

May Jun

Jul

Aug Sep

Dec Jan- Feb 08

RPK ASK WestJet saw an 18.2% increase in seat capacity accommodated by even greater growth in passenger traffic of 19.0% in February 2008 over February 2007. Consequently, WestJet’s systemwide load factor was up 0.5 percentage points to 82.8%.

Air Canada Mainline consists of all Air Canada operations with the exception of Jazz.

Page 6 March 2008

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AIRLINE DATA – U.S. U.S. Airlines Release February 2008 Traffic Figures

1

2

2

Notes:

(RPMs – millions)

(ASMs – millions)

Capacity

Load Factor

2,030 ↑16.7%

2,642 ↑21.5%

76.8% ↓3.2 pts

607 ↓2.4%

880 ↓1.9%

69.0% ↓0.4 pts

5,427 ↑12.0%

7,908 ↑9.0%

68.6% ↑1.8 pts

6,768 ↑4.5%

8,905 ↑5.8%

76.0% ↓1.0 pts

8,149 ↓0.5%

10,953 ↑3.7%

74.4% ↓3.1 pts

9,974 ↑2.5%

12,979 ↑2.0%

76.9% ↑0.3 pts

8,472 ↑6.7%

11,307 ↑5.6%

74.9% ↑0.8 pts

5,924 ↑5.0%

7,383 ↑4.5%

80.2% ↑0.3 pts

4,457 ↑2.9%

5,776 ↑2.2%

77.2% ↑0.5 pts

249 ↓5.6%

325 ↓7.1%

76.7% ↑1.2 pts

1,421 ↑28.2%

1,820 ↑14.0%

78.1% ↑8.6 pts

744 ↑18.1%

957 ↑7.5%

77.8% ↑7.0 pts

Traffic

Airline

1. Mainline operations only.

2. Load factor includes scheduled service only.

Sources: Carrier traffic reports.

Page 7 March 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

Summary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian Airports Toronto

Vancouver

2007

January February March st 1 Quarter April May June 2nd Quarter July August September 3rd Quarter October November December 4th Quarter Full Year

+3.0% +2.0% +1.5% +2.2% +0.7% +0.3 +1.3% +0.8% -0.4% +0.7% +1.5% +0.5% +3.7% +5.0% +2.8% +3.8% +1.7%

+5.5% +2.7% +3.6% +3.9% +4.2% +2.4% +1.8% +2.7% +0.2% +2.6% +3.6% +2.1% +3.2% +7.7% +4.4% +5.2% +3.3%

MontréalTrudeau +10.2% +7.1% +8.9% +8.7% +8.9% +6.3% +8.6% +7.9% +10.9% +10.4% +8.9% +10.1% +8.4% +6.1% +8.1% +7.3% +8.7%

2008

January

+4.8%

+9.2%

+3.8%

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

St. John’s

+11.7% +11.7% +9.5% +10.9% +11.9% +8.6% +7.6% +9.1% +5.4% +7.1% +7.9% +6.8% +8.3% +8.0% +3.7% +7.1% +8.5%

+18.3% +18.3% +17.1% +17.9% +18.8% +17.5% +22.2% +19.5% +17.8% +17.1% +12.4% +15.9% +13.9% +15.9% +8.2% +12.4% +16.3%

+5.9% +8.3% +4.9% +6.3% +8.0% +7.3% +7.6% +7.6% +9.0% +6.6% +3.7% +6.4% +8.4% +11.0% +9.2% +9.5% +7.4%

+3.2% +6.8% +5.4% +5.1% +12.2% +8.7% +7.5% +9.3% +3.9% +5.0% +1.9% +3.7% +3.5% +5.7% +3.8% +4.0% +5.5%

+2.3% +2.0% -1.2% +0.9% +0.5% -2.5% +3.4% +0.4% +4.4% +4.4% +4.2% +4.3% +4.6% +5.7% +4.2% +4.8% +2.7%

+4.7% +4.0% +7.9% +5.6% +9.6% +6.2% +1.9% +5.8% +6.7% +5.4% +6.1% +6.1% +8.0% +10.8% +8.1% +8.9% +6.6%

+15.2% +12.9% +15.6% +14.6% +20.8% +17.8% +14.7% +17.7% +7.4% +9.2% +9.6% +8.7% +7.5% +4.2% +3.7% +5.0% +11.3%

+6.7% +11.0% +5.7% +7.8% +12.1% +12.7% +11.6% +12.1% +4.6% +9.0% +7.9% +7.2% +7.2% +8.4% +7.5% +7.7% +8.6%

+18.8% +24.2% +8.2% +17.0% +7.4% +9.9% +8.0% +8.4% +13.6% 5.7% +10.5% +9.9% +5.5% +9.1% +3.7% +6.0% +10.2%

+4.6% +10.9% +9.1% +8.1% +2.1% -4.2% -1.0% -1.2% -6.5% -5.8% -0.6% -4.6% +5.2% +0.8% -5.5% +0.5% -0.2%

+3.1%

+7.6%

+6.4%

n/a

+2.2%

+6.1%

+7.8%

+11.2%

-0.3%

-2.4%

Source: Transport Canada and individual airports’ traffic reports. N/A: not available at press time.

Note: Subject to revision. These figures are accurate as of the date of tabulation production.

Page 8 March 2008

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NEWS AIR CANADA UPDATE AIR CANADA AND JET AIRWAYS FORGE PARTNERSHIP Air Canada and Jet Airways have agreed to a codeshare partnership effective 28 February 2008. The codeshare agreement includes Jet Airways operated flights between Mumbai and London Heathrow continuing to/from Toronto, Vancouver, Calgary, Montreal and Edmonton on flights operated by Air Canada. Mr. Wolfgang Prock-Schauer, Jet Airways’ CEO, said “We are proud to join hands with Air Canada, an airline of global stature.”

SUMMER SUN SPOTS ANNOUNCED

Air Canada and Air Canada Vacations have revealed new destinations (IIxtapa/Zihuatanejo, Mexico; Santa Clara, Cuba; and Turks & Caicos) and increased flights to existing popular summer holiday destinations in Cuba, Mexico, Jamaica, Hawaii and St. Lucia.

EXPANDED SASKATOON SERVICE Air Canada Jazz has announced a new daily non-stop flight from Saskatoon to Ottawa starting in June with same plane service to Montréal. An Air Canada Jazz representative noted that consideration would be given for a similar flight to be operated from Regina in the future.

NEW FLIGHTS TO THE U.S. Air Canada has announced a new non-stop daily flight from Newark to Calgary starting 16 June 2008. The Newark flight will be served by a 120-seat Airbus A319 aircraft with business and economy class seats. A direct daily flight already exists between Calgary and New York JFK.

WESTJET UPDATE EXPEDIA BEGINS OFFERING WESTJET FLIGHTS TO U.S. TRAVELLERS WestJet announced the expansion of its partnership with Expedia, Inc. to include all published fares, schedules and inventory.

Page 9 March 2008

Previously, WestJet’s flights on Expedia were only available to Canadian travellers on Expedia.ca. WestJet CEO Sean Durfy is excited to introduce the “WestJet guest experience to the millions of travellers who visit Expedia.com each month." The decision was made in an attempt to further penetrate the U.S. market.

DESIGNATION FOR BARBADOS

WestJet received clearance from the Government of Canada to operate service to Barbados. While WestJet has not yet announced its schedule, it would be the eighth sun destination in its network in the Caribbean and Mexico. (For more details see The Caribbean Report, page 13.)

NEW REGINA TO TORONTO SERVICE WestJet has announced it will add a new nonstop daily service between Regina and Toronto starting in May 2008.

OTHER CANADIAN AIRLINES PORTER AIRLINES CONFIRMS MORE BOMBARDIER Q400S Porter Airlines exercised existing options for two Bombardier Aerospace Q400 aircraft. They represent aircraft 11 and 12 in the Porter fleet and are scheduled for delivery in early 2009.

Porter Airlines exercised the options from a previous order of 10 firm and 10 option Q400s.

The airline has realized strong financial success and is poised for further route expansion.

U.S. AIRLINES CONTINENTAL ORDERS 27 NEW BOEING AIRCRAFT Continental Airlines announced that it has added 27 aircraft to its firm order positions with Boeing, including eight new 777 and 19 new NextGeneration 737 (737NG) aircraft. The 777’s are destined for international routes while the 737’s will be used to provide fleet flexibility.

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

NEWS CON’T U.S. AIRLINES – CON’T DELTA AIRWAYS LAUNCHES SHANGHAI-ATLANTA SERVICE Delta Airways announced its first nonstop flight between Shanghai Pudong International Airport and Hartsfield-Jackson Atlanta International Airport. Beginning 31 March 2008, the new service will be operated using 268-seat Boeing 777-200ER aircraft.

CARGO IATA REPORTS ‘SLUGGISH’ AIR CARGO GROWTH

The International Air Transport Association (IATA) reports international cargo demand remained ‘sluggish’ in January. Air cargo has been growing at half the rate of global trade expansion. Of major concern, is the different growth rate of the price of ship fuel (200%) compared to aviation fuel (300%). Asia Pacific airlines saw demand increase 6.5%, up from 6% in December.

LUFTHANSA CARGO SETS RECORDS

Lufthansa Cargo says it carried a record 1.8 million metric tons in 2007, up 2.6 percent yearon-year over 2006. Overall, operating profit rose to US$2.0 billion from US$1.2 billion in 2006.

Revenue was up 13 per cent to US$33.2 billion from US$29.3 billion.

CARGOJET TO LEASE 767F

Canadian all-cargo carrier Cargojet plans to lease two 767-200ER freighters as part of its on-going fleet renewal and cargo growth plans.

The freighters are expected to be introduced into service in the second and third quarters of the year. Cargojet plans to use the new planes to expand into selected international markets.

DHL EXPANDS LOGISTICS FACILITIES IN TORONTO DHL Global Forwarding, part of the logistics division of DHL, announced it will move its two primary facilities in Toronto into a new single Page 10 March 2008

location. The new facility, located in Mississauga, will serve as DHL Global Forwarding’s Canadian headquarters and be the gateway for international air freight and ocean freight. The new facility will offer 177,000ft2 of warehouse space and 34,000ft2 of office space, more than doubling the amount of warehousing capacity for Toronto-area logistics customers.

VANCOUVER, ABBOTSFORD AND MONCTON TO JOIN INTERNATIONAL AIR CARGO TRANSHIPMENT PROGRAMME Canadian authorities gave the go ahead to Vancouver and Abbotsford International airports in British Columbia and the Greater Moncton international airport in New Brunswick to participate in an international air cargo transhipment programme. This programme allows for air carriers not otherwise designated to serve Canada to exchange foreign traffic, among its own aircraft, with other air carriers, or with surface modes of transport, at designated airports, as long as the goods are destined for third countries. The international air cargo transhipment programme was first introduced at Montreal Mirabel in 1982 to improve the use of the airport. The program was expanded to include Hamilton (1987), Windsor (1993), Gander (2000), Winnipeg (2004), Edmonton (2006) and Calgary (2007).

AIRPORT CARGO SERVICE QUALITY AWARDS The fourth edition of Air Cargo World's Air Cargo Excellence Survey found Japan's Nagoya International and Munich International the top rated airports worldwide and Lufthansa Cargo and Swiss WorldCargo the top vote getters among airlines. For North American airports handling 500,000 to 999,999 tons of cargo, Toronto Pearson ranked fifth. In the North American airports handling 499,000 tons or less, Vancouver International placed second, Montréal Trudeau was third, Montreal Mirabel was nineteenth and Winnipeg Airport was twenty-fourth. Airports were evaluated based on performance, value, facilities and regulatory operations and customer service,

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NEWS CON’T CARGO – CON’T

OTHER

performance, value and information technology formed the criteria for airlines.

ACI ANNOUNCES ASQ AWARDS

AEROSPACE

Airports Council International (ACI) announced their annual Airport Service Quality awards on 25 February 2008. AsiaPacific airports won all five of the top Worldwide airport awards with Seoul Incheon leading the way. Halifax was awarded second place in North America, first place among airports with fewer than 5 million passengers and first place as a domestic airport. Ottawa placed third, second and third in these respective categories. Halifax also picked up an “Airport People” Award. In the 15 – 25 million passenger traffic category Vancouver International Airport finished in fourth place. The Awards are based on annual results of overall satisfaction of international passengers.

YEAR-END NUMBERS STRONG AT BOMBARDIER

Bombardier delivered 361 aircraft in the fiscal year ended 31 January 2008, a 10% increase over year-ago deliveries of 326. New aircraft orders nearly doubled to 698 compared to 363 for the previous year.

PEOPLE IN THE NEWS ELEANOR HUMPHRIES APPOINTED VICE CHAIR, TATC

The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, announced the appointment of Eleanor D. Humphries, effective 3 March 2008, as Vice-Chairperson of the Transportation Appeal Tribunal of Canada (TATC) for a term of five years. Ms. Humphries previously served as President & CEO, Halifax International Airport Authority and has 20 years experience in the banking and credit industry.

ANGELA GITTENS APPOINTED NEW DIRECTOR GENERAL, ACI Airports Council International announced the appointment of Angela Gittens as the new Director General of ACI World effective April 2008. Gittens will be replacing current DG Robert Aaronson who is retiring after a short transition stage. Gittens currently serves as Vice-President, Airport Business Services for HNTB Corporation, a leading firm in transportation infrastructure services. Gittens has previously served as a top executive with Miami International Airport, TBI Airport Management, Luton England and Atlanta Hartsfield-Jackson Atlanta International Airport.

Page 11 March 2008

TORONTO PEARSON AIRPORT TO PARTICIPATE IN EARTH HOUR

The Greater Toronto Airports Authority has added itself to the list of businesses all over the world that will be participating in Earth Hour on 29 March 2008. Pearson is the first airport in North America to participate in this landmark event. The goal is to reduce lighting for one hour to save four megawatts of power. This is equivalent to 11% of the airport’s daily energy consumption.

BANGALORE INTERNATIONAL AIRPORT SET TO OPEN Global airlines are lining up to operate out of the new Bangalore International Airport, opening 30 March 2008. Bangalore, the third busiest airport in India after Mumbai and Delhi, will receive daily services by Dragon Air and Oman Air and increased services from Lufthansa, Air France, British Airways, Singapore Airlines and Emirates among others. The opening of Bangalore International will also be followed by the inaugural Jet Airways and Kingfisher flights to Europe.

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NEWS CON’T EVA AIR INTRODUCES TAIPEI-OSAKALOS ANGELES SERVICE

OTHER CON’T OTTAWA INTERNATIONAL AIRPORT SET TO OPEN NEW WING On 13 March 2008 the first flight departed from the new $95 million extension to Ottawa International Airport. The 7,000m2 extension, with seven new passenger bridges and five walk-out gates to serve domestic flights, was completed on budget. “We now have a facility that is world class." Paul Benoit, President of the Ottawa Airport Authority, stated “…the expanded terminal is intended to have the capacity to handle passenger loads until roughly 2020, Air Canada alone in the last six months has added 20 per cent in capacity out of here." As part of the addition, Air Canada will open a new Maple Leaf lounge.

EVA Air announced itself as being the only airline flying non-stop between Osaka, Japan and Los Angeles, with the introduction of three per week Taipei-Osaka-Los Angeles service beginning 30 March 2008. As a result of the new service, flights between Taipei and Osaka will be increased from seven to ten flights per week.

EVA Air will operate the new service using Boeing 777-300ERs.

SKYTEAM PARTNERS TO ADD NEW HEATHROW-U.S. FLIGHTS. Air France-KLM and SkyTeam partners Delta, Continental and Northwest will add 11 new daily flights between the U.S. and London Heathrow on 30 March 2008, when the EU/U.S. Open Skies Agreement takes effect. Air France and Delta will code share on services to Los Angeles, New York Kennedy and Atlanta; Continental will offer air services to Houston and Newark; and Northwest and KLM will code share service to Detroit, Minneapolis and Seattle.

CATHAY PACIFIC ADDS MORE FLIGHTS TO MUMBAI AND DELHI Cathay Pacific Airways announced the addition of three weekly flights from Hong Kong to Mumbai and Delhi on 29 February 2008. The additional flights increase service on both routes to daily frequency, with Delhi service operated on a non-stop basis and Mumbai service operated non-stop three times per week and connecting to Bangkok four times per week.

Page 12 March 2008

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THE CARIBBEAN REPORT March 2008

Air Jamaica restructures for profitability In an effort to become a leaner, more viable national carrier, Air Jamaica has initiated a number of route rationalization, corporate restructuring and aircraft changes. Effective April 2008, the cashstrapped carrier will suspend its three weekly services between New York and St. Lucia and increase capacity on both its Barbados and Grenada routes, upgrading to A321 aircraft on its daily BGI-JFK route and increasing to four flights weekly services on its GND-JFK route. Jet service on its domestic routes will be replaced by two wet-leased ATR72 aircraft. The carrier expects to realize annual cost savings of US$11 million with these aircraft changes.

New air services to the Caribbean Jacqueline Clarke Senior Project Manager, Strategic Planning

Delta Air Lines will introduce new four times weekly services between Georgetown, Guyana and New York beginning 1 June 2008.

WestJet Airlines Ltd. was awarded a designation to operate scheduled international air services between Canada and Barbados under the new ‘open skies’ agreement signed between the two countries last month. WestJet has yet to announce specific routings for the service, but range limitations on the carrier’s 737 aircraft suggest routings from east coast departure points. (See page 16, The Ottawa Report, for further details on the Open Skies Agreement between Canada and Barbados).

American Airlines announced the launch of a daily service between Fort Lauderdale and Kingston, Jamaica, effective 1 June, complementing its three daily flights from Miami to Kingston and two daily flights to Montego Bay.

Jamaica signs air service deal with Spain Jamaica and Spain signed an Air Services Agreement - the first of its kind between the two countries – allowing multiple designations of European Union carriers into Jamaica. The agreement is beneficial to both countries as Jamaica seeks to increase airlift from Europe and it supports Spanish hotel financiers’ recent investments in the Jamaican tourism industry.

Moderate growth projected for Caribbean tourism In its recent Tourism Satellite Account Report, the World Travel and Tourism Council forecasted Caribbean travel and tourism demand to grow by 2.3% in 2008. Long term forecasts indicate a stable phase of growth between 2009 and 2018 with an annual average growth rate of 3.2%. The slower growth rate is attributed to the global economic downturn and emerging markets’ substantial investment in tourism-related programs. Of the Caribbean countries, Trinidad & Tobago is expected to experience the highest level of growth in 2008 at 8.4%, followed by Saint Kitts and Nevis at 5.6% and St. Lucia at 5.1%. Among the largest economies, Puerto Rico leads with travel and tourism demand accounting for US $10.8 billion, followed by the Dominican Republic.

Virgin America Seeks Los Angeles-San Jose del Cabo, Mexico Rights Virgin America recently submitted an application to DOT for rights to provide service between Los Angeles International Airport and San Jose del Cabo, Mexico. The carrier is seeking these rights in response to DOT’s recent announcement that Frontier Airlines will stop serving the route in April 2008. Upon DOT’s approval, this will be Virgin America’s first international destination and will make a significant contribution to expanding the carrier’s air service network.

Page 13 March 2008

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THE ASIA REPORT March 2008

Saudi Arabia and India Revise Bilateral Air Services Agreement India announced that it has signed a revision of the 2002 bilateral air services agreement with Saudi Arabia on 23 January 2008, removing the existing restrictions on all-cargo services between the two countries. This means that all designated freighter operators from the two countries will be allowed to operate all-cargo services between any points in India and Saudi Arabia, without limitations on flight frequency and points of call. The revised bilateral agreement will also permit Saudi Arabia Airlines to extend its scheduled passenger services to Calicut, Lucknow and Bangalore, while allowing Air India to operate new passenger flights to Medina.

IATA Encourages Asia to Lead the Aviation Industry Doris Mak Manager, Special Projects

Giovanni Bisignani, the Director General and CEO of the International Air Transport Association (IATA), made remarks at the Singapore Air Show Aviation Leadership Summit on 18 February 2008, encouraging Asia to take on a more prominent leadership role in the aviation industry. He identified liberalisation, security and environment as key areas of opportunity for Asian leadership that will support industry reform. As well, he pointed out several challenges facing Asia, such as competition with the Middle East, a shortage of skilled workers, and declining profitability. Some of his suggestions include developing a new regional institution to handle air policy issues between the government and industry, establishing a regional security area using the most advanced technology, and harmonising air traffic management systems for the region.

Beijing Tightens Restrictions on Aviation Growth The Beijing Government announced plans to further tighten the existing restrictions on airline growth.

It was announced in 2007 that China would stop accepting applications from new airlines until 2010, with the exception of freight carriers and passenger airlines serving undeveloped regions, and would limit the number of aircraft purchases by existing airlines. The latest amendments to the policy remove these exceptions, such that any new application is refused regardless of the carrier type. In support of the policy, Beijing Capital International Airport announced that it will prohibit overbooking and place restrictions on the number of takeoffs and landings during the time period when Beijing will be hosting the Olympic Games (from July to September 2008). The purpose behind the tightening of this policy is to ensure that China’s air safety record is maintained. One particular concern is the difficulty of maintaining minimum ratios of cockpit crew to aircraft due to the shortage of skilled workers. Another reason for tightening restrictions on aviation growth is to ensure profitability for existing carriers, as higher yields are likely to result from lowered allowed capacities.

Philippines Welcomes New Aviation Agency The Philippines Government signed the Civil Aviation Authority Act of 2008 on 5 March, introducing the Civil Aviation Authority of the Philippines (CAAP) as the new agency responsible for overseeing the nation’s civil aviation. Under the Act, the Aviation Transportation Office (ATO), an agency that governed civil aviation in the Philippines since 1952, will be restructured into the CAAP by May 2008.

These structural changes were implemented as a result of the downgrade of the Philippines’ aviation safety rating by the U.S. Federal Aviation Administration (FAA) in December 2007. The nation’s safety rating was downgraded from Category 1 to Category 2 because the FAA’s assessment showed that the ATO did not comply with six of the seven safety criteria set forth by the International Civil Aviation Organization (ICAO). As a result, the CAAP was created to improve the safety of air travel in the Philippines. According to Transportation Secretary Leandro Mendoza, there is a good chance that the Philippines will have their Category 1 safety rating reinstated; however, this will also mean that there will likely be increases in airport charges, as CAAP runs more than 80 airports nationwide. Further announcements indicate that the Philippines’ Department of Transportation and Communications will be inviting the FAA to conduct another assessment by June and that ICAO would conduct a comprehensive assessment of the nation’s aviation systems, personnel and facilities later this year.

Page 14 March 2008

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THE EUROPEAN REPORT March 2008

BAA: New Leadership and Regulatory Victories British Airports Authority, operator of seven UK airports including London Heathrow, Gatwick and Stansted, announced that CEO Stephen Nelson will be replaced on 1 April 2008 by former British Airways Director-Technical Operations Colin Matthews. During his tenure, Nelson faced investigations from the UK Competition Commissioner on antitrust allegations, industry calls for BAA to be brokenup and IATA remarks that BAA’s service level was “embarrassingly low.” However, Nelson did call attention to the “landmark occasion” which will be the 27 March 2008 opening of BA’s Terminal 5 at London Heathrow.

John Weatherill Regional Vice President, InterVISTAS-E.U. UK Office

The Civil Aviation Authority (CAA) has granted BAA the right to raise airline charges at London Heathrow and Gatwick Airport by as much as 23.5%. The increase is much higher than what industry and airlines expected the CAA to grant BAA. The CAA justified the increase due to BAA’s need for a much-delayed refinancing of its debts by the end of June and to account for additional investment and security. In a joint statement, Virgin Atlantic, easyJet, Ryanair and bmi stated that the, “…dramatic price rises at Heathrow and Gatwick clearly demonstrates that the system is broken and needs to be changed.”

Update on Alitalia – Air France/KLM Takeover Talks On 15 January, Alitalia began takeover talks with Air France-KLM. The sale is supported by the outgoing Italian government, but needs support from the new government, which is expected to be elected in April and seated in May. Air France-KLM said it will inject €3 billion into Alitalia over the next six years and would like to acquire 100% of the Italian carrier, but would not pursue the deal without the new government’s support. In line with Air France-KLM demands, on April 1, Alitalia will more than halve its Milan Malpensa service to 105 flights a day; Milan’s Lombardy regional government and labor forces are strongly opposed to this action and Malpensa Airport is seeking €1.25 billion in damages from Alitalia. In addition, Italian carrier Air One filed suit over Alitalia's decision to pursue exclusive talks with Air France-KLM, demanding transparency and a nondiscriminatory process. The suit was rejected by a Rome court and Air One is appealing the decision.

Singapore Concludes Open Skies Agreement with Portugal Singapore and Portugal signed an Open Skies Agreement on 27 February 2008, allowing for open access to any point in the respective countries for flights originating in the other. Scheduled to enter into force in the Summer of 2010, the agreement also enables fifth freedom flights.

Croatia and U.S. Sign Open Skies Agreement Croatia and the United States signed an Open Skies Agreement on 13 March 2008, allowing any number of Croatian and U.S. airlines to operate on routes of their choice without limitations on capacity and pricing. This agreement is the first between the two countries.

European Parliament Approves Aviation Security Overhaul Common EU rules for aviation security have been approved by the European Parliament which will enter into force within two years, despite misgivings over who should finance the new security measures. For the first time, in-flight security measures, such as access to cockpits, unruly passengers and so-called "sky marshals" are also dealt with by EU legislation. Member State governments will decided "in which circumstances and to what extent the costs of security measures should be borne by the State, the airport entities, air carriers, other responsible agencies, or users."

MEPs had initially insisted that it be made compulsory for governments to take on at least part of security costs in order to avoid competitive distortions for airports and air carriers in different states.

Page 15 March 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

THE OTTAWA REPORT March 2008

Canada Announces Open Skies Agreement with Barbados The governments of Canada and Barbados have negotiated an Open Skies type air transport agreement with the hope it will stimulate trade and tourism between the two nations. The agreement marks the first such agreement in the Caribbean for Canada. The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, stated “I am pleased with the outcome of these negotiations, marking another bilateral air services agreement achieved under Canada’s Blue Sky Policy.” Under the Open Skies agreement, carriers can provide scheduled services as frequently as they desire between the two countries. The agreement also applies to air cargo services between Canada and Barbados. In 2007 trade between Canada and the Caricom Members, including Barbados, was $2.2 billion, up 20% from 2006.

Martin Copeland Senior Vice President, Aviation

Ottawa Announces $40 million in Funding from the 2008-2009 Airports Capital Assistance Program The Government of Canada announced almost $40 million in funding through the 2008-2009 Airports Capital Assistance Program (ACAP). ACAP finances capital projects related to safety, asset protection and operating cost reduction. The majority of the 49 projects will fund the rehabilitation of runways, taxiways, visual aids and heavy airside mobile equipment. Yellowknife Airport will receive the greatest amount of funding for a single airport; close to $5.4 million for runway rehabilitation.

Ontario airports, consisting of 19 projects, will share close to $11.5 million and Québec airports, consisting of 14 projects, will share close to $10.7 million for these safety enhancements. Since the program’s inception, the program has distributed over $466 million for 562 projects at 164 airports.

Over 99% of these were airside safety-related projects.

Zoom Airlines Receives Designation to Operate Flights to the UK The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, announced Zoom Airlines' designation to operate scheduled international air services between Canada and the United Kingdom will be expanded to include Bermuda, an overseas territory of the United Kingdom. Minister Cannon declared the expansion of Zoom Airlines as a “…great example of growth in the airline industry.” International air services to Bermuda are governed by the bilateral air transport agreement already in place between Canada and the UK.

Minister Day Looks to Amend Canadian Customs Act Public Safety Minister Stockwell Day introduced Bill C-43 on 15 February 2008 to amend the Canadian Customs Act. The Bill proposes to modify the definition of a “Customs Controlled Area” (CCA) to enable or support implementation of airport initiatives such as international transfer departures facilities, sterile transit area holdroom operations and arrivals duty free. The second reading of Bill C-43 is scheduled around 14 March 2008. It appears the Bill could realize an expedited process through Parliament as it has yet to face controversy from the Opposition. The amendments have also received strong support across industry stakeholders and airports.

Page 16 March 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

THE WASHINGTON REPORT March 2008

DOT Submits Budget Request for FY 2009 The U.S. Department of Transportation (DOT) recently submitted a $68 billion budget for fiscal year 2009, including a request of $14.64 billion for the Federal Aviation Administration (FAA). The allocation of FAA’s budget request is as follows: $9.67 billion for FAA’s Air Traffic Organization; $2.05 billion for safety and operations; $2.75 billion for airport grants; and $171 million for research, engineering and development. The fiscal year 2009 budget request reflects the reauthorization proposal that was submitted by FAA on 14 February 2007 to transform FAA’s current financing system, which expired at the end of fiscal year 2007.

DOT Delays New Landing Fee Policy Jon Ash President Inc. Washington, D.C.

InterVISTAS-ga2 Consulting

DOT has postponed its plans to alter the landing fee policy by at least a month, upon the request of airline trade groups for a 30-day extension to the comment period. The goal of the new federal policy is to reduce airport congestion by encouraging airlines to spread their flights more evenly throughout the day by increasing landing fees during peak periods. The policy also encourages airports to capture the cost of expansion projects in their landing fees. David Castelveter, spokesman for the Air Transport Association (ATA), which represents the largest airlines in the United States, expressed appreciation for “more time to thoroughly review the proposal and provide meaningful input.”

FAA Limits Flights to Newark to Reduce Congestion U.S. Transportation Secretary Mary E. Peters announced that carriers serving Newark Liberty Airport have agreed to limit the number of flights per hour to 83, beginning in early May for a temporary twoyear period. With the airport normally handling 85 to 90 hourly flights during peak hours, FAA’s flight limitations will help reduce chronic delays during busy periods. By encouraging airlines to spread out their flights at Newark, Secretary Peters predicts that this will actually allow 30 more flights per day compared to the previous summer season. The two other New York airports, John F. Kennedy and LaGuardia, have already placed caps on hourly flights last year.

In the meanwhile, the DOT plans to launch market-based mechanisms at Newark, allowing the DOT to auction slots at the airport as capacity grows to promote market competition and ultimately reduce congestion and delays at the airport. The DOT will also take the initiative to accelerate the delivery of NextGen, the new satellite-based aviation system designed to minimize airport delays across the United States. The new system will be tested in Florida this summer.

DOT Announces Airline Rights to Washington and Bogota, Colombia The DOT recently awarded AirTran and Spirit Airlines with the right to provide daily round-trip service to Ronald Reagan Washington National Airport, mandated to commence by 3 May 2008. AirTran will either fly to Jacksonville (Florida) or Milwaukee (Wisconsin), and Spirit plans to serve Fort Lauderdale (Florida). The DOT awarded both carriers with two exemptions to slot limitations at the airport, equivalent to a single daily round-trip flight.

The DOT also proposed four U.S. carriers to be granted the right to operate one daily flight between the United States and Bogota, Colombia. The proposed carriers include Delta Air Lines (from New York JFK Airport), JetBlue Airways (from Orlando), Spirit Airlines (from Fort Lauderdale), and Continental (from Houston). The DOT’s tentative decision is made possible by the U.S.-Colombia aviation agreement made in September 2007 and will be finalised following the three-week comment period, beginning 5 March 2008.

Page 17 March 2008

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

INTERVISTAS NEWS Nicole Geitebruegge Joins InterVISTAS’ Vancouver Office InterVISTAS is pleased to announce that Nicole Geitebruegge has joined InterVISTAS’ Vancouver Office as a Project Analyst. Nicole has a Masters equivalent degree in Business and Engineering, specializing in technology management and transportation engineering, from the Berlin University of Technology. She also has one year of PhD studies in Marketing Modeling at the Sauder School of Business at UBC. Nicole brings strong quantitative, statistics, SPSS, econometrics, data modeling and forecasting skills. She is fluent in both English and German languages.

InterVISTAS Upcoming Speaking Engagements Dr. Mike Tretheway, Executive Vice President, Marketing & Chief Economist • CAC – 1st CEO Strategic Industry Forum: Toronto, Canada – 10 March 2008 Dr. Tretheway will be delivering a presentation titled, “The 2011 Eurasia Capacity Glut and Implications for Canadian Airports.”

Dr. Joe Kelly, Director, Environmental Services • 2008 Tourism Educators Conference: Whistler, Canada – 8-10 May 2008 Dr. Kelly will be delivering a presentation titled, “Tourism and Climate Change: Issues Trends and Solutions.”

Dr. Mike Tretheway, Executive Vice President, Marketing & Chief Economist • Canadian Airline Investment Conference: Toronto, Canada – 10 June 2008 Dr. Tretheway will be delivering a presentation titled, “The Carbon Footprint: Emerging Environmental Challenges and Solutions for Sustainable Aviation.”

InterVISTAS’ Canadian Aviation Intelligence Report 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 materialise.

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