CAIR Issue No. 61 - April 2008

CANADIAN AVIATION INDUSTRY REVIEW

In this issue…

Features Columns: WestJet Seat Capacity 2008 (p.1) Economic Outlook (p.2) Caribbean Report (p. 10) Asia Report (p.11) European Report (p.12) Ottawa Report (p.13) Washington Report (p.14) EU/U.S. Open Skies (p. 15)

Regular Reports: Airline Data - Canada (p.3) Airline Data – U.S. (p.4) Selected Canadian Airport Data (p.5) News (p.6) InterVISTAS News (p.20)

WESTJET SEAT CAPACITY 2008 April 2008

WestJet began operations in 1996 with three aircraft serving five Canadian cities. In 2008, the airline operates 73 aircraft with flight operations to 47 cities in Canada, the U.S. and the Caribbean. This column reviews WestJet’s 2008 seat capacity.

Overall Change – Capacity Increases Between January 2007 and January 2008, WestJet increased its overall weekly non-stop capacity by 10%. The largest increases were noted in Toronto (5,800 seats), Calgary (4,400), Vancouver (3,800), Edmonton (2,200), Las Vegas (2,200) and Halifax (1,360) year-over-year. Following its 2006 introduction of international service, WestJet continues to increase its international destinations served with six new locations (San Jose Cabo, Montego Bay, Punta Cana, Mazatlan, Puerto Plana and Saint Lucia) with 1,900 seats offered weekly amongst them.

Aaron Beeson Project Analyst

Transborder Services – now 9% of WestJet seats Between January 2007 and January 2008, WestJet increased its overall weekly transborder non-stop capacity by 8%. The majority of growth was realized at Vancouver and Toronto.

Kelowna was the only new Canadian origin city added to WestJet’s transborder network, with the introduction of twice weekly flights to Las Vegas.

January 2008 Transborder Seat Capacity 19%

Toronto Transborder

14%

Vancouver

8%

Calgary

Other Passenger Traffic

Source: OAG January 2007 and 2008 discs

Today, the transborder sector makes up almost 9% of WestJet’s non-stop capacity (27,000 weekly seats). Compared to 2005, when all transborder flights were operated through its three main focus cities – Calgary, Toronto and Vancouver, WestJet now offers transborder services at six additional cities (Edmonton, Hamilton, Kelowna, Montreal, Ottawa and Winnipeg). The above graph shows the share of transborder capacity at each of the three focus cities as a percentage of total WestJet operations at each airport.

Distribution of Transborder Capacity The airline currently flies to 12 different U.S. Kona, 1% destinations, with Las Vegas, Orlando, Fort West Palm Lauderdale, Palm Springs, Phoenix and Los Beach, 2% Angeles assuming 75% of the services. The graph Fort Myers, 4% Las Vegas, to the left shows the share of weekly seats Kahului, 6% 24% WestJet flies to each U.S. market. Of the original Tampa, 6% 2004 U.S. markets, only San Francisco and New York are not currently served by WestJet. Honolulu, 6% However, starting 2 June 2008, WestJet will Los Angeles, commence a seasonal Calgary-New York route.

7% Orlando, 15% This deviates from its initial operation to New York Phoenix, 8% which was only served from Toronto. This is a further indication that WestJet is increasing Palm Springs, Fort 9% services to business markets as opposed to its Lauderdale, 12% typical concentration on tourist and sun Source: OAG January 2007 and 2008 discs destinations.

Note: Seat capacity figures represent weekly non-stop seats flown in both directions

Page 1 April 2008

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

ECONOMIC OUTLOOK April 2008

Measures of consumer confidence can be a useful indicator of consumer expenditures in the near future. While not necessarily accurate in predictions of economic performance as a whole, the relationship between consumer sentiment and spending means that changes in sentiment can have an effect on the economy overall. In general, high levels of consumer confidence signal strong consumer spending, while low expectations of future performance may cause consumers to scale back discretionary spending, particularly on large purchases. A look at indicators for the U.S and Canada shows consumer confidence in the two countries has exhibited some differences in recent trends.

Jan-08

Jul-07

Apr-07

Jan-07

Jul-06

Oct-06

Apr-06

Jan-06

Jul-05

Oct-05

Apr-05

Jan-05

Jul-04

Oct-04

Apr-04

Jan-04

Oct-07

110

After reaching a two-year high of 96.9 in January 100 2007, U.S. consumer confidence has shown a sharp decline throughout the latter half of 2007 90 and the first few months of 2008. Specifically, 80 the index decreased from 90.4 in July 2007 to 69.5 in March 2008, its lowest level since 70 February 1992. This dramatic decrease can 60 largely be explained by the recent turmoil in the housing and financial markets. To make matters worse, consumers are seeing record high oil Source: University of Michigan Consumer Sentiment Survey prices combined with predictions by many economists that the U.S. economy is headed for recession.

Canada. In Canada, consumer sentiment is measured using the Decima-Investor’s Group Index of Consumer Confidence. This index uses a methodology closely based on the University of Michigan Index and is considered to provide a comparable measure. The index is measured every four months, in February, June and October.

Canadian Consumer Sentiment 1.1 1 0.9 0.8 0.7

Compared to the U.S., the Canadian index has been relatively stable over the past few years.

That being said, it appears that consumer confidence over the past few months has Source: Decima-Investors Group Index of Consumer Confidence started to trend downwards, although not to the same extent as that in the U.S. Specifically, the index decreased from a 4-year high of 0.88 in June 2007 to 0.81 in February 2008. It should be noted that the most recent measure of the index is February 2008, thus it remains to be seen whether the sharp decline in U.S. confidence over the past six months will be reflected to any extent in Canada.

Page 2 April 2008

Oct-07

Feb-08

Jun-07

Oct-06

Feb-07

Jun-06

Oct-05

Feb-06

Jun-05

Oct-04

Feb-05

Jun-04

Oct-03

Feb-04

0.6

Jun-03

Senior Analyst

Feb-03

Alex Welch

The U.S. Several measures of consumer confidence in the U.S. are collected regularly, including the University of Michigan Consumer Sentiment Index. This index measures monthly consumer sentiment based on a survey of households, including U.S. Consumer Sentiment views of current conditions and expectations.

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 March 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

+3.6%

+9.0%

+3.9%

+6.2%

-0.2pts (to 83.5%)

+2.1pts (from 81.4%)

Domestic (Mainline)

+1.5%

+7.0%

+3.2%

+3.2%

-1.4pts

+2.9pts

Jazz

+4.8%

+22.4%

+4.1%

+16.5%

+0.5pts

+3.6pts

International & Charter

+4.4%

+9.7%

+4.1%

+7.3%

+0.2pts

+1.6pts

+21.7%

+49.0%

+19.6%

+41.0%

+1.4pts (to 86.6%)

+4.7pts (from 81.9%)

Air Canada 1

WestJet

Analysis: Air Canada Mainline’s domestic load factor dropped 1.4 percentage points from March 2007 to 82.9% in March 2008, due to the 3.2% increase in seats outpacing the 1.5% growth in passenger traffic over the same period. This year, Air Canada Mainline’s domestic sector experienced the first decline in its March load factor since 2003.

Air Canada Mainline’s international passenger traffic increased by 4.4% in March 2008 over March 2007. The “Latin America and Other” region experienced the strongest traffic growth at 18%. Since the growth in passenger traffic slightly exceeds that of seat capacity, this results in the modest increase in international load factor of 0.2 percentage points.

WestJet announced a record load factor of 86.6% for systemwide operations in March 2008, up 1.4 percentage points from March 2007. This is due to strong passenger traffic growth of 21.7%, with a 19.6% increase in seat capacity in March 2008 over the same month in 2007.

Air Canada Domestic Mainline

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

Jan07

Feb

Mar

Apr

May Jun

Jul

Dom RPK

Aug

Sep

Oct

Nov

Dom ASK

Dec

Jan08

Feb

Mar

Jazz data is not included in this graph

Air Canada International 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% Jan07

Feb

Mar

Apr

May Jun

Jul

Int'l RPK

Aug

Sep

Oct

Nov

Dec

Jan- Feb 08

Mar

Oct

Nov Dec Jan- Feb 08

Mar

Int'l ASK

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

Mar

Apr May Jun

Jul

RPK 1

Aug Sep

ASK

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

Page 3 April 2008

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

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

1

2

2

Notes:

(RPMs – millions)

(ASMs – millions)

Capacity

Load Factor

2,455 ↑8.4%

3,001 ↑13.4%

81.8% ↓3.7 pts

685 ↓9.5%

933 ↓8.6%

73.4% ↓0.7 pts

6,679 ↑9.8%

8,736 ↑5.3%

76.5% ↑3.2 pts

8,291 ↑4.3%

10,074 ↑4.6%

82.3% ↓0.3 pts

10,041 ↓2.7%

12,137 ↑0.0%

82.7% ↓2.3 pts

11,595 ↓2.8%

13,816 ↓4.6%

83.9% ↑1.5 pts

10,656 ↑2.3%

12,743 ↑1.5%

83.6% ↑0.6 pts

7,160 ↑2.0%

8,235 ↑0.6%

87.0% ↑1.3 pts

5,393 ↓0.2%

6,384 ↓2.7%

84.5% ↑2.1 pts

N/A N/A

N/A N/A

N/A N/A

1,709 ↑15.8%

2,146 ↑12.9%

79.6% ↑1.0 pts

942 ↑14.7%

1,117 ↑4.5%

84.4% ↑7.6 pts

Traffic

Airline

1. Mainline operations only.

2. Load factor includes scheduled service only.

Sources: Carrier traffic reports.

Page 4 April 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

2007 2008

Toronto

Vancouver

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%

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

+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%

St. John’s +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%

January

+4.8%

+9.2%

+3.8%

+4.9%

+7.6%

+6.4%

n/a

+2.2%

+6.1%

+7.8%

+11.2%

-0.3%

-2.4%

February

+7.7%

+12.8%

+9.9%

+7.4%

+10.2%

+8.3%

n/a

+8.6%

n/a

+10.3%

+9.1%

+8.3%

+3.6%

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

Page 5 April 2008

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NEWS AIR CANADA UPDATE

WESTJET UPDATE

NEW YORK WEEKENDER PASS

AIR MILES PARTNERSHIP RENEWED

Air Canada is offering Western Canadians easier access to New York City with its multi-trip New York Weekender Pass promotion. The pass is available for travel for direct or connecting flights between Vancouver, Calgary and Edmonton and New York JFK and Laguardia airports. The Weekender Pass is available starting at $899 for four flights (or two return trips).

UNLIMITED HONG KONG PASS

Air Canada has announced the launch of the Hong Kong Getaway Pass. The Pass provides travellers with the ability to realize unlimited travel between Hong Kong and Vancouver for $1,088. Travel is restricted to Mondays, Tuesdays and Wednesdays between 14 April 2008 and 18 June 2008. The Pass is only available until 29 April 2008.

WestJet Airlines recently signed a multi-year renewal agreement with the AIR MILES Reward Program to continue offering its passengers the ability to collect reward points.

Since the original agreement in 2000, over 1.2 million AIR MILES collectors have redeemed their reward points on WestJet flights.

GUARDIAN FARE INTRODUCED WestJet has introduced a Guardian Fare to replace its Unaccompanied Minor Program. The Guardian Fare enables a parent or guardian, 18 years or older, to accompany a child, 11 years or younger, on their flight at a 50% reduced rate.

The only condition is that the parent or guardian must return to their origin city within 24 hours.

The new Guardian Fare also provides the option for a different parent or guardian to accompany the child on the return portion of the flight.

NEW OTTAWA TO FRANKFURT ROUTE Effective 1 June 2008, Air Canada will introduce a direct Ottawa to Frankfurt route. Upon its commencement, it will be the only scheduled daily non-stop service between the two cities.

AIR CANADA PREPARES FOR SECOND ANNUAL FILM FESTIVAL

Air Canada has announced the 2008 enRoute Student Film Festival will run from July through December 2008. For the second straight year, Air Canada will offer passengers the opportunity to watch short listed entries onboard Air Canada flights and online at www.enroutefilm.com.

Prizes will be awarded in five categories: Best Student Film, Achievement in Animation, Achievement in Direction, Destination Inspiration and The People's Choice Award. Charles McKee, Vice-President, Marketing, said: "Air Canada is extremely excited to offer hundreds of emerging Canadian filmmakers the unique opportunity to premier their work in front of millions of people around the world.”

Page 6 April 2008

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NEWS CON’T OTHER CANADIAN AIRLINES PORTER AIRLINES LAUNCHES FIRST TRANSBORDER FLIGHT Toronto-based Porter Airlines has announced the launch of seven daily roundtrip flights between Newark Liberty International Airport and Toronto City Centre Airport. This marks the entrance of Porter Airlines into the U.S. market. "The introduction of Porter's Toronto-New York route makes air travel between two of North America's most important business and cultural centres easier than ever," said Don Carty, chairman of Porter Airlines.

PORTER ADDS NEW ROUTES TO SUMMER SCHEDULE

A daily Toronto - Quebec City flight and a daily Quebec City – Halifax flight have been added to the Porter Airlines Summer Schedule which will run from 27 June 2008 until 2 September 2008. The Quebec City – Halifax route is the only scheduled non-stop flight between these two cities. "Porter's fresh approach to airline service is a perfect fit with the customer-oriented approach we take at the airport," said Pascal Bélanger, president and chief operating officer, Aéroport de Québec.

U.S. AIRLINES ON-TIME RESULTS IMPROVE The U.S. Department of Transportation (DOT) Travel Consumer Report revealed the nation’s 20 largest airlines reported an improved on-time performance in February 2008 (68.6%) compared to February 2007 (67.3%). The results were worse than January 2008 (72.4%).

Examples of cause of delays were weather (46.9%), aviation system delays (9.4%), latearriving aircraft (9.7%), airline controllable issues (7.1%) and security reasons (0.05%).

Page 7 April 2008

ALOHA AIRLINES CLOSES

Aloha Airlines announced that it would cease all operations effective 1 April 2008. The shutdown of Aloha passenger operations affects about 1,900 employees. However, its air cargo and aviation services units will still operate as the U.S. Bankruptcy Court seeks potential buyers. “This is an incredibly dark day for Hawaii,” said David A. Banmiller, Aloha’s president and chief executive officer.

“Unfortunately, unfair competition has succeeded in driving us out of business, bringing to an end a 61-year-old company with a proud legacy of serving millions of travelers in the true spirit of Aloha.”

SKYBUS AIRLINE CLOSES As a result of rising jet fuel costs and a slowing U.S. economy, Skybus ceased all operations effective 5 April 2008. Based in Columbus, Ohio, Skybus operated its first flight in May 2007 as an ultra-low cost carrier.

UNITED AIRLINES AND AER LINGUS AGREE TO CODESHARE AGREEMENT

As of 1 November 2008, passengers will be able to realise seamless travel on flights offered

by United Airlines and Aer Lingus. The codeshare agreement will cover all seven of Aer Lingus’ U.S. gateways and benefit Aer Lingus customers by providing access to over 200 additional U.S. destinations on the United Airlines network. U.S. customers will also benefit from greater access to destinations in Ireland and, through Aer Lingus’ extensive short-haul network, to destinations in the UK and Continental Europe. The United Airlines flight code will be placed on all Aer Lingus Transatlantic flights to and from Shannon and Dublin. The codeshare agreement will also result in transferable frequent flyer points, simplified reservations, ticketing, through checkin and coordinated baggage handling for passengers.

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

NEWS CON’T CARGO IATA WARNING FOR AIR CARGO

IATA has called on the air cargo supply chain to coordinate its efforts to drive an industry agenda for change that will improve customer service and competitiveness. “World trade grew 7.5% last year and [air cargo] growth for this year is 4%,” said IATA Director General Giovanni Bisgnani. Bisignani went on to say that IATA “is in a unique position to lead change in the cargo industry” due to the fact that the IATA Cargo Accounts Settlement System now handles US$21 billion annually.

RECORD AIR CARGO GROWTH FOR HUNTSVILLE Alabama’s Huntsville International Airport is now the third fastest growing air cargo market in the world and the fastest outside of Asia. In 2006, the airport posted a 29.2% growth in handled freight tonnes over 2005. Huntsville developed a unique model in that it built the rail side before they opened the air cargo side. As a result, an intermodal system was ready when the first international air cargo flight occurred.

Another major reason for growth has been the increase in outbound cargo. “It has always been relatively full on the inbound flights, but now there is a lot more outbound freight to Europe and Latin America,” said Rick Tucker, Huntsville Executive Director. Over 90% of the 68,760 tonnes of freight Huntsville International handled in 2006 was international in either origin or destination.

AEROSPACE BOMBARDIER PROFITS SOAR

As a result of increased deliveries of business and regional jets and an income tax benefit, profit at Canada's Bombardier nearly doubled in the fourth quarter. Bombardier, the world's biggest passenger train maker and No. 3 civil aircraft Page 8 April 2008

manufacturer, stated that it earned USD$218 million in the quarter ending 31 January 2008.

That was up from a profit of USD$112 million a year earlier. The profit margin in Bombardier's aerospace group rose to 6.7% from 4.8% a year earlier.

BOMBARDIER EYES KANSAS CITY FOR ASSEMBLY PLANT According to city and state officials, Bombardier Aerospace is considering Kansas City as a site for a new $375 million passenger jet assembly plant. While the project is only in its initial stages, discussions have gone far enough that state officials recently outlined legislation to provide state tax credits to help secure the plant.

The Montréal -based Bombardier Aerospace is looking for a site to assemble the C Series of 110- and 130-seat passenger jets. However, Bombardier made a preliminary deal two years ago to build the plant in Canada and is under political pressure to honour that deal. Mirabel, Quebec is the competing Canadian location.

PEOPLE IN THE NEWS BERNARD LEBLANC NAMED CEO OF SAINT JOHN AIRPORT AUTHORITY Saint John Airport Authority has announced the appointment of Bernard LeBlanc, a local business leader, to the position of President & CEO effective early April 2008.

Mr. LeBlanc brings twenty years of senior management experience in generating profitable growth and customer satisfaction in a variety of technical industries, both in the U.S. and in Canada – most recently as General Manager of Saint John based Petroservice. Reporting to the Board of Directors, Mr. LeBlanc’s mandate is to accelerate growth while maintaining the highest levels of operational standards.

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

NEWS CON’T PEOPLE IN THE NEWS – CON’T ACI APPOINTS PAUL VAN DEN EYNDEN TO NEW MONTRÉAL POSITION Airports Council International (ACI) has appointed Paul Van den Eynden to a newly created position in its Montréal ICAO liaison office, Senior Manager – Airport Safety and Operations.

OTHER ACI – 2007 A BANNER YEAR FOR INTERNATIONAL TRAFFIC ACI recently released its preliminary air traffic results for 2007: • Total Passengers: 4.5 billion, +6.4% • Total International Passengers: 1.8 billion, +8.2% • Total Cargo (includes mail): 80.3 million metric tonnes, +2.5% • Total International Freight: 48.3 million metric tonnes, +3.6% • Total Aircraft Movements: 68.6 million, +2.4%

NEW DOMESTIC AIRLINE FOR BRAZIL

JetBlue Airways founder, David Neeleman, plans to start a domestic airline in his native Brazil. The airline entrepreneur has already raised $150 million in financing from investors in the U.S. and Brazil and agreed to purchase 36 Embraer E-195 jets with a total list price of $1.4 billion. “The Brazilian market should be three to four times bigger than it is,” Neeleman said.

“Our target market is the 150 million passengers who travel annually by long distance bus as well as those who, for lack of a convenient alternative, don’t travel at all.”

Page 9 April 2008

EMBRAER TO DEVELOP TWO NEW BUSINESS JETS Brazil's Embraer announced its board had approved plans to invest USD$750 million to develop two new business jets, its latest foray into one of the fastest growing niches of the aviation market.

The jets, which will fall into the midlight and midsize categories, will seat between seven and 12 passengers plus two crew members. It expects the midlight and midsize categories to account for 21% of all business jet deliveries in the next 10 years, which works out to about 13,150 aircraft, according to Embraer forecasting.

AIR BERLIN ORDERS BOMBARDIER TURBOPROPS

Bombardier and Air Berlin have announced an order of 10 Q400 turboprop aircraft from the Canadian plane maker with a total value of USD$267 million at list price. Delivery of the first four aircraft is expected this calendar year with the remaining six in 2009. The new aircraft will replace the Fokker 100 jets Air Berlin currently operates. The order, which includes an option for 10 more aircraft, was initially announced by Bombardier back in October 2007 without naming the customer.

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

CARIBBEAN REPORT April 2008

Caribbean Airlines increasing North American services this summer Caribbean Airlines has announced an increase in service between its Trinidad hub and John F. Kennedy International Airport from two to three daily services, commencing on 1 July 2008. The carrier will also be offering nine weekly flights, up from five, to Toronto beginning 15 April 2008.

Divestment process underway

Jacqueline Clarke Manager, Strategic Development

The Jamaican Government has signed an advisory services agreement with the International Finance Centre (IFC), a member of the World Bank group. This is a first step towards divesting the national carrier, Air Jamaica, by March 2009. The carrier incurred the largest loss in its 40-year history in 2007, reporting US$171 million in operating losses. Under the agreement signed last month, the IFC will assume the role of financial adviser and act as coordinator of all specialist consultants to ensure that stipulated objectives are met and that the divestment process is carried out as efficiently as possible. A government-appointed committee will oversee the privatisation process and will be responsible for advising the minister to ensure that the project proceeds in accordance with the stipulated timeline and guidelines and that the government's objectives and interests are met.

Two more major carriers to enter the Guyanese market Skyservice Airlines is set to operate a weekly charter service from Toronto to Georgetown, Guyana starting in July 2008 and Zoom Airlines has entered into negotiations with the government of Guyana to begin service from the United Kingdom in November 2008. The flight from Gatwick Airport would be the first direct service between London and the Cheddi Jagan International Airport.

Financing secured for airport airside work Last month the Antiguan government secured a US$45 million loan from ABI Bank for the completion of airside work at the V.C. Bird International Airport. Major expansion and renovation work airside is expected to begin immediately. This includes an extension of the runway, including the runway end safety area and a link to runway 10, complete resurfacing of the active runway and resurfacing of the airport apron. Work is expected to be completed within 10 months.

Passenger Facility Charge (PFC) for St. Kitts and Nevis Effective 1 April, 2008, a Passenger Facility Charge (PFC) of US$10 per passenger was implemented in St. Kitts and Nevis. The Passenger Facility Charge will be collected by the ticketing air carrier or their agents. Funds from the PFC will be used to assist with financing long term strategic programs and enhancing airport facilities including equipment upgrades, expanding the Terminal Building and upgrading air navigational and ground handling equipment.

American Airlines adds Miami-Antigua service American Airlines will begin daily non-stop service from Miami to Antigua this fall. This is the only nonstop service currently scheduled between Miami and the eastern Caribbean island. The service is scheduled to commence on 20 November 2008 and will be operated by Boeing 737-800 aircraft configured with 16 First Class and 132 Economy Class seats.

Page 10 April 2008

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ASIA REPORT April 2008

Oasis Airlines bankrupt On 9 April 2008, Oasis Airlines, the international budget carrier based in Hong Kong, entered into voluntary liquidation after it was revealed that the carrier was being crippled by fuel, airport and aircraft costs. Oasis Airlines began its operations in October 2006, operating nonstop flights between Hong Kong and London, UK (daily) and between Hong Kong and Vancouver (6 times weekly).

Code sharing agreement between an Jet Airways and ANA

Doris Mak Manager, Special Projects

Mumbai-based Jet Airways, India’s largest private carrier and Tokyo-based All Nippon Airways (ANA) plan to start a code-sharing partnership and link their frequent flier programs, effective 21 May 2008.

This represents the first code-sharing agreement between a Japanese and Indian air carrier. With this agreement, Jet Airways will place its flight code '9W' on ANA's daily business jet flights between Mumbai and Tokyo Narita Airport. Both airlines will link their Frequent Flier Programs, allowing members to accrue and redeem miles on either carrier’s flights.

Private jets “taking off” in Korea After network airlines, charter flights and low-cost carriers, the Asia Pacific region is poised to see a new air phenomenon - the private jet. Once only focusing on a narrow passenger market, the private jet market is now extending to a broader audience, with the costs declining to more affordable levels.

In Korea, the number of people using private jets is growing fast. In 2005, 179 private jets took off or landed at Gimpo International Airport. The number rose to 429 in 2006 and 571 last year, according to the Korea Airports Corporation. The trend is likely to continue, with various forms of private jet use and private jet ownership being introduced. Fractional aircraft ownership, for example, would allow up to 16 people to share the cost, making the private jet a more affordable choice.

Airlines seeking compensation from Boeing for 787 delay Boeing is facing compensation demands from Qantas and Air New Zealand, after further delaying its new 787 Dreamliner. Asian carriers are the biggest customers for 787 orders. Boeing is now widely expected to delay initial deliveries of the 787 to launch customer, All Nippon Airways (ANA), until September 2009. ANA ordered 50 787s and planned to begin flying the first of them last month, in preparation for a spike in demand for the Beijing Olympics in August. With the delay in aircraft delivery, the 787's maiden commercial flight is likely to be one year and three months behind schedule. ANA said that it is “extremely disappointed” with Boeing and may also consider compensation demands.

Asia Pacific fleet to surge in the coming decade Asia Pacific airlines are expected to take delivery of one new aircraft every day over the next five years, resulting in a 49% increase in the total number of aircraft in the region’s fleet, net of disposals.

The data, contained in the latest Ascend Global Aircraft detailed global fleet forecast, shows a 35% increase in the Asia Pacific (including India and China) widebody aircraft fleet (to 1,585 units by 2013), a 51% increase in narrowbodies (to 3,195 aircraft) and a 113% increase in regional jets (to 375 aircraft), due mainly to expected growth in China. A further 1,759 aircraft are scheduled for delivery to Asia Pacific airlines between 2013 and 2018, resulting in a regional fleet of 2,158 widebodies, 4,047 narrowbodies and 709 regional jets. The proportion of widebodies in the region compared to the worldwide fleet is set to rise from 38% in 2008 to 41% by 2018, while the region’s narrowbody fleet is poised to soar from 21% of the worldwide total this year to 25% in five years and stay at that proportion to 2018.

Page 11 April 2008

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EUROPEAN REPORT April 2008

EU to harmonize in-flight mobile calls To the pleasure of some and disappointment of others, in-flight passengers will soon be able to use their mobile phones to make and receive calls, text messages and use email. At the start of April, the European Commission unveiled a harmonized EU approach to licensing in-flight mobile phone services. The objective of the new legislation is to provide a licensing “one-stop shop” for airlines and avoid a patchwork of approaches emerging across the various Member States. "One regulatory decision for all European airspace was required for this new service to come into being," said EU Information Society and Media Commissioner Viviane Reding. Commissioner Reding will closely monitor the cost of the service offered by airlines before any legislative intervention, such as the price cap on mobile calls made on land she implemented, is considered.

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

European Commission initials Civil Aviation Agreement with India On 8 April, 2008 delegations of the European Commission and the Government of the Republic of India initialled a Horizontal Aviation Agreement to restore legal certainty to the bilateral air services agreements between India and 26 EU Member States. The agreement will bring several provisions in the 26 bilateral air services agreements between EU Member States and India in line with EU law.

Most importantly, it will remove nationality restrictions in the bilateral air services agreements between EU Member States and India and thereby allows any EU airline to operate flights between India and any EU Member State where it is established and where a bilateral agreement with India exists and traffic rights are available.

KLM-Air France cease negotiations to purchase Alitalia Maruizio Prato, Alitalia Chairman has resigned following the decision by Air France–KLM to put takeover negotiations on hold. Prato led the Alitalia efforts to find a much needed buyer, but his efforts were hindered by complicated union and government demands and conditions of sale. The negotiations were cancelled due to the inability of the unions to reach an agreement on the Air France-KLM proposal which would have resulted in hundreds of job cuts. Air France Chairman JeanCyril Spinetta said, "I regretfully acknowledge the breakdown in negotiations, which is none of our doing. This is a project I have profoundly believed in and continue to do so, because it would have ensured Alitalia a rapid return to profitable growth.” Alitalia’s Board was scheduled to meet to determine the future of the airline. Alitalia has said it has 170 million Euros of funds available as of 31 March 2008 to keep the airline afloat.

The government's sale of Alitalia to Air France-KLM has been opposed by Milan's airport operator and recent Prime Minister-elect Silvio Berlusconi. Since his election victory and the European Commission’s statement that the Italian government is not eligible to provide further restructuring aid to the airline, Berlusconi has acted quickly to bring Aeroflot back to the negotiating table.

BAA and BA act cautiously with recent success at Terminal 5 British Airports Authority (BAA) and British Airways (BA) have announced that they will delay moving the remainder of long-haul BA flights to Terminal 5 until June 2008. The original plan called for the majority of BA’s long-haul operations, approximately 60 departures and 60 arrivals per day, to transfer from Terminal 4 to Terminal 5 on 30 April 2008. BAA and British Airway’s have decided to postpone the move to ensure that the recent operational success they have realized at the new Terminal will also be realized with the increased number of passengers that are part of the long-haul operations. As of 8 April 2008, Terminal 5 has been operating a normal schedule of flights following the confusion it experienced during the opening weeks due to software glitches with the new high-tech baggage system and improperly trained staff.

Page 12 April 2008

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THE OTTAWA REPORT April 2008

Canadian Government funds airport safety in Red Deer, Alberta The Government of Canada has agreed to provide more than $2.1 million in funding to improve safety at the Red Deer Regional Airport in Alberta, as part of the 2008-2009 Airports Capital Assistance Program. The government funding will be used to rehabilitate its airfield lighting system. According to Bob Mills, the Member of Parliament for Red Deer, “this improvement project will help the airport to meet the growing needs of the community it serves and enhance safety for air passengers.” The Airports Capital Assistance Program provides funding for capital projects pertaining to safety, asset protection and operating cost reduction.

CTA rejects Air Canada’s proposal to discontinue the carriage of small animals as checked baggage Martin Copeland Senior Vice President, Aviation

The Canadian Transportation Agency (CTA) rejected Air Canada’s proposed tariff revisions which would have discontinued passenger rights to carry animals and their kennels weighing less than 70 pounds as checked luggage on all domestic and international flights. The Agency announced their decision that the proposed revisions were unreasonable, as the revisions would only create advantages for carriers, while imposing significant disadvantages to pet owners. Air Canada has until 5 May 2008 to amend its domestic tariff to allow for the carriage of small animals as checked baggage. With this ruling, the Agency confirms its July 2007 suspension of Air Canada’s proposed revision regarding international tariffs.

Clear Bag System approved for use in Canadian airports 311 Travel Bag, Inc., a developer of carry-on solutions for travellers, announced that the Clear Bag System has been approved by the Canadian Air Transport Security Authority (CATSA). The Clear Bag System is now accepted at all Canadian airport pre-board security checkpoints in all 89 CATSAserviced airports in Canada. Equipped with assorted reusable containers for storage of shampoo, lotion and other toiletries, the Clear Bag System is designed to reduce confusion regarding the current restrictions imposed on carrying liquids, gels and aerosols on flights.

Flyglobespan offers 2nd season of Canadian flights Flyglobespan will be offering its second season of air service from three Canadian gateways (Hamilton, Calgary and Vancouver) between 12 May 2008 and 26 October 2008. The carrier will be introducing two new routes this year, including Hamilton-Bristol (beginning 25 May) and VancouverDublin (beginning 1 June). In addition, the carrier will continue to operate the following routes: from Hamilton to London Gatwick, Manchester, Glasgow, Edinburgh, Belfast and Dublin; Calgary to London Gatwick, Manchester and Glasgow; and Vancouver to London Gatwick, Manchester, and Glasgow. According to Stephen Elmy, General Manager, North America, Flyglobespan, the first season of operating flights from Canada in 2007 yielded a 96% load factor. Flyglobespan is a subsidiary of the Globespan Group, which serves predominately as a tour operator providing services to Canada.

New Canadian airline to launch – Spring 2008 Corporate Jet Air, a new Calgary-based Canadian carrier that plans to offer all-business class flights, is expected to launch in spring 2008. Corporate Jet Air will be offering three per day Calgary-Toronto service using Bombardier CRJ 200s, which have been reconfigured from their original 50 seats to 18 seats for added comfort and space. Corporate Jet Air is selling plane tickets in bulk only (10 one-way tickets that have a one-year validity) and are priced competitively against Air Canada’s executive service and private jet charters. Corporate Jet Air is considering future expansion to include Vancouver-Toronto and Calgary-Houston routes.

Page 13 April 2008

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THE WASHINGTON REPORT April 2008

DOT proposes expanded transatlantic alliance The U.S. Department of Transportation (DOT) proposed in its 9 April 2008 Show Cause Order to allow six Skyteam airlines to combine their existing transatlantic alliances. Two U.S. carriers, Delta Air Lines and Northwest Airlines, along with four international partners, Air France, Alitalia, Czech Airlines and KLM Royal Dutch Airlines, seek anti-trust immunity on transatlantic routes. This preliminary decision allows the six carriers to coordinate their services and to act as a single carrier on U.S.Europe routes. The carriers are required to implement the immunized alliance within 18 months and will remain subject to antitrust laws for all flights not covered under the agreement.

Delta and Northwest agree to merge Jon Ash President Inc. Washington, D.C.

InterVISTAS-ga2 Consulting

Delta Air Lines and Northwest Airlines announced that the two carriers have signed a merger agreement on 14 April 2008 in which Delta Air Lines essentially would acquire Northwest Airlines and the new airline would take on the Delta name. The merging of Delta and Northwest creates a massive airline – with $35 billion in annual revenue, 800 aircraft and 75,000 employees combined. The new airline and its regional partners would establish a route network that consists of 390 destinations extending across 67 nations. Despite the support of the Air Line Pilots Association, representing Delta pilots, the merger still requires the support of the Northwest Master Executive Council, representing Delta pilots. The NWA MEC is most concerned with the current agreements seniority list integration process, for which they feel will position NWA pilots “on a b-scale for years.”

DOT Proposes United Air Lines to fly Los Angeles-San Jose del Cabo The U.S. DOT proposed to grant United Air Lines the right to operate flights between Los Angeles and San Jose del Cabo, Mexico. The proposal was made immediately upon notification by Frontier Airlines that it would cease operations on that route starting 14 April 2008. If granted, United Air Lines would have the authority to operate this route for two years and Delta Air Lines will serve as a backup carrier to United. Under the U.S.-Mexico aviation agreement, a total of three U.S. airlines are allowed to operate flights between Los Angeles and San Jose del Cabo. Currently, American Airlines and Alaska Airlines are already serving the market.

U.S. DHS agrees to Visa Waiver Program with five EU States The U.S. Department of Homeland Security (DHS) signed a Memorandum of Understanding (MOU) with Estonia, Latvia, Slovakia, Hungary and Lithuania for the potential implementation of the Visa Waiver Program (VWP). The security enhancements indicated in the agreements put all five countries on track for visa-free travel to the U.S and could potentially lead to the designation of the five countries as VWP members later this year.

U.S. reports record passenger levels and inbound travellers The U.S. DOT reported a total of 10.7 million domestic and international flights operated by U.S. carriers in 2007, resulting in a record 769.4 million passengers, up 3.3% over 2006, the previous record-setting year. The 2007 total consisted of 679 million domestic passengers (up 3.1% over 2006) and 90 million international passengers (up 4.7% over 2006). The U.S. Department of Commerce announced a record 56.7 million international visitors to the United States in 2007, up 11% over 2006.

Visitors from Western Europe made up the largest group, representing 46% of international visitors to the United States. The number of Canadian visitors to the United States came in second, representing roughly 31% of international travellers to the United States. As a result of inbound travel to the United States, $17.8 billion was generated from travel expenditures and tourism within the United States.

Page 14 April 2008

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EU-U.S. OPEN SKIES – THE EUROPEAN PERSPECTIVE April 2008

On 30 March 2008, the “Open Skies” agreement between the European Union and United States came into force. The agreement followed 11 rounds of negotiations started in June 2003 and ending with the signing of the agreement in Washington, DC on 30 April 2007. Open Skies creates a single transatlantic Open Aviation Area replacing the patchwork of individual bilateral agreements between the U.S. and the 27 EU member states (in fact, a number of member states, such as Bulgaria, Estonia, Latvia, Lithuania and Slovenia, had no prior air service agreement with the U.S.).

Major Features Ian Kincaid Director, Economic Analysis, InterVISTAS-E.U. UK Office

From a European perspective, the major feature of the new agreement is that it allows any EU carrier to fly between any point in the EU to any point in the U.S., without restrictions on pricing or capacity. For example, Lufthansa now has the right to fly from London to New York and British Airways the right to fly from Paris to Los Angeles, etc, whereas previously these carriers were restricted to operating transatlantic flights from their home countries. In addition, the agreement provides the following opportunities for EU carriers:

5th freedom rights to fly passengers beyond the U.S. to third countries (this right was already provided in many of the previous agreements with member states);

7th freedom rights to operate direct passenger flights between the U.S. and European countries outside the EU (members of the European Common Aviation Area such as Norway, Croatia, Iceland, etc., but not Switzerland);

For all-cargo flights, 7th freedom rights to operate flights between the U.S. and any third country (without a requirement that the service starts or ends in the EU); and

Greater freedoms to enter into commercial relationships with other carriers and the possibility of antitrust immunity for the development of airline alliances.

Anticipated Outcomes It is anticipated that the agreement will lead to a greater number of routes operated between the U.S. and EU, lower fares as a result of increased competition and increased traffic volumes over the Atlantic. The U.S. FAA is forecasting a 14.5% increase in EU-U.S. passenger traffic in 2008 and a similar level of increase in 2009. 2 IATA reports that scheduled flights between the EU and U.S. have increased by 11% in April 2008, relative to the same month last year.

Much of the early response by carriers seems to be focused on London Heathrow (Heathrow accounts for approximately 40% of all flights between the EU and U.S.). Under the previous Bermuda 2 agreement between the UK and U.S., access to Heathrow was restricted to two U.S. carriers (United and American) and two UK carriers (British Airways and Virgin Atlantic). Under the new EU-U.S. agreement, Heathrow is now open to all U.S. and EU carriers. To date, five carriers have announced new services from Heathrow: Air France-KLM, Delta, Continental, Northwest and US Airways. However, the challenge for carriers is obtaining slots at Heathrow, as the airport operates at virtually full capacity. Illustrating this scarcity, Continental Airlines announced that it paid US$209 million for four daily slots at Heathrow. This shortage of slots has 2

Source: Federal Aviation Administration Aerospace Forecast Fiscal Years 2008-2025, March 10th, 2008.

Page 15 April 2008

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EUROPEAN PERSPECTIVE CON’T also made UK carrier BMI an attractive takeover proposition – the carrier holds 12-13% of the slots at Heathrow, second only to British Airways which has around 40% of the slots at Heathrow.

Press stories indicate that Virgin and Lufthansa (which already has a 30% stake in BMI) have both been eyeing the carrier. This influx of carriers into Heathrow has put considerable pressure on the home carrier, British Airways, which has responded by moving some of its flights from Gatwick to Heathrow and announcing a subsidiary airline, called OpenSkies, operating service between Brussels and Paris to New York.

While the initial air carrier response to the Open Skies agreement has largely focused on major hubs or cities (new services to/from Paris and Madrid have also been announced), it can be expected that new routes will emerge, connecting secondary cities in the U.S. and Europe, as occurred when the EU internal aviation market was liberalised. And as with the liberalisation of the EU aviation market, Open Skies will likely result in low cost carriers entering the market. Ryanair CEO, Michael O’Leary, has said that he is considering setting up a new airline offering service to the U.S. from Europe for fares as low as £7 (US$14) one-way utilising secondary airports such as Baltimore and Long Island Islip Macarthur (in New York).

It remains to be seen what sort of low cost model will be sustainable on transatlantic routes.

Nevertheless, there are likely to be significant opportunities for secondary and regional airports in Europe to develop direct air service to the U.S., provided they can demonstrate a sufficient level of demand or traffic stimulation potential. For regional governments in many parts of Europe, the liberalisation of the EU aviation market has contributed to economic development and tourism growth and has allowed a number of secondary airports to grow and thrive. In a similar manner, the Open Skies agreement offers additional tourism and economic development opportunities for many European regions through the securing of viable transatlantic air service.

Issues There have been a number of complaints about the Open Skies agreement from European carriers and governments (notably the British) arguing that the arrangement is not fully reciprocal.

Firstly, the agreement does not allow EU carriers any access to the U.S. domestic market (i.e., cabotage) but does allow U.S. carriers the right to carry passengers between EU member states, as a 5th freedom service (although not within member states, e.g., U.S. carriers can carry passengers from London to Paris but not from London to Manchester). Secondly, the ownership and control rules are imbalanced: U.S. investors can hold up to 49% of voting shares in EU carriers while EU investors can hold only a maximum 25% share of voting stock in U.S. carriers (EU investors can hold up to 49% of non-voting stock).

Recognising this, the EU obtained a “suspension clause” in the agreement which commits both sides to further negotiations regarding these remaining issues (to develop a “Stage Two” agreement), starting by the end of May 2008. If no substantial progress has been made by November 2010, then the EU could suspend or terminate the current agreement. The European Commission head of transport, Jacques Barrot, has indicated that the EU will also press for U.S. carriers to take part in the EU emissions trading scheme. 3 This second stage of negotiations is likely to be particularly challenging for the EU negotiators, as there appears to be little support for

In the UK, reaction to Open Skies has been mixed, due to environmental concerns. One British newspaper announced the start of the agreement with the headline, “A revolution in the skies…a disaster for the planet”.

Page 16 InterVISTAS’ Canadian Aviation Intelligence Report April 2008 Copyright ©2008 InterVISTAS Consulting Inc., all rights reserved.

3

EUROPEAN PERSPECTIVE CON’T cabotage and ownership revisions with U.S. carriers, unions or Congress (the current agreement did not require congressional approval, but any changes to ownership restrictions would likely require such approval). Furthermore, it is perhaps not entirely convincing that the EU would be willing to throw away the current agreement, by triggering the suspension cause, in order to “force the hand” of the U.S. government, particularly once the changes brought about by the agreement have become established in the transatlantic air market.

Regardless of these challenges, the EU-U.S. Open Skies agreement is a significant development in the evolution of the global air transport industry. As with previous examples of air service liberation in North America, Europe and elsewhere, Open Skies is likely to result in great choice for travellers, lower fares and better levels of air service for many parts of Europe.

Page 17 April 2008

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EU-U.S. OPEN SKIES – THE U.S. PERSPECTIVE April 2008

On 30 March 2008, the “Open Skies” agreement between the European Union and United States came into force. The agreement followed 11 rounds of negotiations started in June 2003 and ending with the signing of the agreement in Washington, DC on 30 April 2007. Open Skies creates a single transatlantic Open Aviation Area replacing the patchwork of individual bilateral agreements between the U.S. and the 27 EU member states (in fact, a number of member states, such as Bulgaria, Estonia, Latvia, Lithuania and Slovenia, had no prior air service agreement with the U.S.).

Major Features Steve Martin Senior Vice President, Government Relations & Policy Analysis

InterVISTAS-ga2 Consulting Inc. Washington, D.C.

From the U.S. perspective, the key elements of the new agreement are:

Elimination of restrictions on the number of flights, aircraft, routes and pricing;

Ability to enter into cooperative arrangements, including codesharing, franchising and leasing;

Eliminate restrictions affecting market access to Heathrow;

Preserve flexible beyond and intermediate routings; and

Allow EU airlines to transport non-Defense U.S. Government passengers and cargo on flights between two foreign points and on all EU-U.S. routes.

Anticipated Outcomes The transatlantic market has already begun to see changes, although none are drastic or completely unexpected. U.S. carriers that had previously served London through alternative airports – Northwest, Continental, Delta, and US Airways - have purchased slots at Heathrow and begun operations there and the four incumbent carriers also added nonstops. American shifted its Gatwick flights to Heathrow, and United announced new LHR service from its Denver hub. In addition, AirFrance/KLM also announced that it would launch service to Los Angeles from Heathrow and Delta announced it had joined AF in that effort as part of a joint venture.

Aer Lingus announced that it would initiate service from Dublin to new U.S. cities, now that it is not required to make the “Shannon Stop.” British Airways announced plans to operate a new carrier – cheekily dubbed “Open Skies” – between New York, Paris, and Brussels. Lufthansa acquired a 19% percent investment stake in JetBlue in December 2007, and is considering expanding the relationship.

Through its hub at JFK, JetBlue would provide significant flow traffic to Lufthansa.

Issues There is some question at this point as to which side “won” more. Clearly, from the U.S. perspective, the greater access to Heathrow has been beneficial, if albeit expensive (Continental is said to have paid over $50 million each for four pair of slots). Some would argue that several major EU (non-UK) airlines may be the early winners. Given their fleet mix, they may be better positioned to take advantage of the new access to Heathrow and opportunities to launch service from non-home countries. Business travelers may benefit from the additional capacity in the front of aircraft. But with carriers adding surcharges to cover rising fuel prices, few believe that economy passengers will see great deals across the Atlantic any time soon.

Page 18 April 2008

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U.S. PERSPECTIVE CON’T The axe over the neck of the projected benefits? The agreement included a pledge to begin “phase II” talks with a goal of further liberalizing the agreement. The parties that signed the "phase one" agreement can terminate it if there is no agreement between U.S. and EU negotiators on "phase II," which is supposed to be in place by 2010. That is, individual EU states have the power to withdraw flying rights to U.S. carriers if they are dissatisfied with progress.

EU airlines complained that the initial agreement unfairly favors U.S. carriers. Several carriers – notably British Airways and Virgin (which, coincidentally stand to be the biggest losers of having Heathrow opened up) – have said that they will exercise that right unless Washington does allows EU airlines to increase ownership and control of U.S. carriers and permits them to run domestic U.S. services. For international alliances with antitrust-immune codesharing agreements, the implications of reversing those commercial arrangements would be financially devastating.

That stance sets up a head-on collision with the position of the powerful Chairman of the House Transportation Committee. Congressional leaders objected to provisions in the phase I agreement relating to liberalizing ownership and control of U.S. carriers and included language in its FAA reauthorization bill that would specifically block any such changes. That legislation has stalled though because the U.S. Senate has been unable to settle a disagreement concerning FAA’s future source of financing.

With U.S. carriers struggling financially, some on Capitol Hill have indicated opposition to allowing foreign carriers to swoop in and take controlling interests in these carriers at bargain-basement prices.

And with labor-friendly Democrats controlling Congress and hopeful about winning the White House in November 2008, they have turned an attentive ear to the positions of unions that foreign ownership would threaten jobs.

Resolving the coming clash of positions promises to be extremely challenging for negotiators, unnerving for airline executives and fascinating for interested observers.

Page 19 April 2008

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INTERVISTAS NEWS Debbie Homonai Appointed Manager, Administrative Services InterVISTAS is pleased to announce that Debbie Homonai has been appointed Manager, Administrative Services for InterVISTAS-ga2. Debbie joined InterVISTAS in June 2005 as Office Administrator and was promoted to Office Manager in 2006 and her commitment and dedication over the past 3 years has contributed greatly to the success of the Washington operation. As Manager, Administrative Services, Debbie will be responsible for administrative oversight of ga2 including accounting, HR, office services and IT, in addition to continuing to provide support for Service Delivery and Business Development.

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

• Canadian Ski Council Symposium: Sun Peaks, Canada – 16 July 2008 Dr. Kelly will be delivering a presentation titled, “Climate Change and the Ski Industry: Issues, Trends and Solutions.”

Dr. Mike Tretheway, Executive Vice President, Marketing & Chief Economist • Canadian Transportation Research Forum Annual Meeting: Fredericton, New Brunswick – 2 June 2008 Dr. Tretheway will be delivering a presentation titled “Essential Priorities for Canada’s Air Transport System.”

• 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.”

• ACI-NA Marketing and Communications Conference and JumpStart® Air Service Development Program: Pittsburgh, Pennsylvania – 23 June 2008 Dr. Tretheway will be delivering a presentation titled, “State of the Aviation Industry.”

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.

To inquire about advertising opportunities or to provide comments/feedback on the InterVISTAS’ Canadian Aviation Intelligence Report, please contact Rob Beynon at rob_beynon@InterVISTAS.com or 1-604-717-1864.

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