CAIR Issue No. 52 - May 2007

CANADIAN AVIATION INDUSTRY REVIEW

In this issue…

Features Columns: • Expanding U.S. Airspace Capacity: Implementing a Next Generation Air Traffic Control System in the U.S. (p.1) • An Update on Canada’s Domestic Seat Capacity (p.3) • Facilitation Increases Passenger Volume at Canadian Airports (p.10) • The Enthusiast Corner (p.11)

Regular Reports: • Airline Data – Canada (p.4) • Airline Data – U.S. (p.5) • Selected Canadian Airport Data (p.6) • Industry News (p.7) • The European Report (p.12) • The Ottawa Report (p.13) • The Washington Report (p.14) • InterVISTAS News (p.15)

EXPANDING U.S. AIRSPACE CAPACITY: IMPLEMENTING A NEXT GENERATION AIR TRAFFIC CONTROL SYSTEM IN THE U.S. May 2007

The FAA held its 32nd annual Aviation Forecast Conference in Washington DC earlier this year. One topic that received a lot of attention was the implementation of the Next Generation Air Transportation System (NGATS) in the U.S.

Next Generation Air Transportation System – timing is everything…

Travis Archibald Senior Analyst

Based on updated FAA forecasts, U.S. commercial carriers are expected to handle over 1 billion passengers per year by 2015. However, these forecasts are unconstrained, and driven entirely by demand – that is, they do not take into account any potential capacity constraints. This is important as industry stakeholders question whether the forecasted traffic levels can be achieved if the U.S. National Airspace System (NAS) continues to operate with the existing technology.

NGATS refers to an initiative that was started in 2003, which would transform the U.S. air transportation system. NGATS would impact security, safety, and the efficiency of passenger, cargo and aircraft operations. One of the NGATS objectives is to transform the existing ground based air traffic control system to a satellite based system by 2025. The new satellite based system will rely on Automatic Dependent Surveillance Broadcast (ADS-B) technology. FAA administrator Marion Blakey has referred to ADS-B as “the backbone of the Next Generation System”. ADS-B is more adaptive and flexible than the current ground based technology, and most importantly, it will have the ability to handle up to two to three times current demand.

What are other countries doing?

First step taken by NAV CANADA: NAV CANADA has taken a step forward with respect to the implementation of a satellite based air traffic control system. It has committed to invest $10 million towards ADS-B technology, as part of its $100 million capital program for the 2006-2007 fiscal year. ADS-B is consistent with the next generation air traffic control system recommended by IATA and ICAO and which has been committed to by the U.S., Europe and Australia.

This first step involves deploying the technology in the Northern Canadian airspace at six specific locations around Hudson Bay between 2007 and 2008 (Akulivik, Inukjuak, Fort Severn, Coral Harbour, Rankin Inlet, and Churchill). To take advantage of the ADS-B technology, aircraft must be equipped with ADS-B avionics, including global positioning systems (GPS). It is estimated that the initial deployment of ADS-B around Hudson Bay will reduce fuel costs by $200 million over 15 years, through more flexible and fuel-efficient flight routes.

Page 1 May 2007

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2007 InterVISTAS Consulting Inc., all rights reserved.

EXPANDING U.S. AIRSPACE CAPACITY: IMPLEMENTING A NEXT GENERATION AIR TRAFFIC CONTROL SYSTEM IN THE U.S. – CON’T Europe in the definition phase of SESAR: SESAR (Single European Sky Air Traffic Management Research) is the European equivalent of NGATS (including non air traffic control system components), and is the operational/technological portion of the Single European Sky (SES) initiative. This initiative was launched in 2004 to reform the organisation of air traffic systems in Europe. The project is organised in three phases: •

Definition phase (2005-2007): Sets out the road map, the technologies to be deployed, and methods of organization. The cost is €60 million, split between the European budget and Eurocontrol.

•

Development phase (2008-2013): Involves systems design and production of key systems components. The cost is estimated at around €300 million per year (the European budget, Eurocontrol and industry each funding one third).

•

Deployment phase (2014-2020): The system will be financed entirely by industry and installed widely across Europe.

Co-operation between the U.S. & Europe: In 2006, the U.S. and Europe made strides towards ensuring a seamless coordination between the U.S. NGATS and Europe’s SESAR. FAA Administrator, Marion C. Blakey, and European Commission VP, Jacques Barrot, agreed to enhance cooperation between Europe and the U.S. on airspace modernisation, which will require working together on various issues, including: (i) regulation, (ii) standards and procedures; (iii) coordination with international organisations; (iv) R&D; and (v) general aviation air traffic management issues.

What’s next and at what cost?

While it is widely agreed that a new satellite based air traffic control system is necessary for the U.S., industry stakeholders have voiced their concerns regarding the costs associated with implementation.

While these costs are significant, the question industry should be asking is what are the costs of not implementing a new air traffic control system?

Airspace capacity constraints negatively impact the airline industry and its consumers through congestion, delays, and increased operating costs. Given the existing capacity issues facing the industry and the traffic growth that is expected, the negative impacts associated with not implementing a satellite based system will become even more apparent.

Furthermore, there is also a need for continued coordination between NGATS and the air traffic control systems being introduced in other jurisdictions.

Page 2 May 2007

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2007 InterVISTAS Consulting Inc., all rights reserved.

AN UPDATE ON CANADA’S DOMESTIC SEAT CAPACITY May 2007

During the time period from August 1999 to August 2004, Canada was both experiencing a decline in total domestic seats, as well as a shift in capacity from full service carriers (FSCs) to low-cost carriers (LCCs). Total domestic seat capacity recovered to 1999 levels by 2005 and stabilized in 2006, with the domestic share of total seat capacity at 53.4% in both August 2005 and August 2006. Low-cost carrier seats have also remained fairly constant in the past few years, capturing roughly 30% of total seat capacity.

Air Canada Flies Solo as the Final Remaining Full Service Carrier Connie Chang Project Analyst

With Air Canada’s acquisition of Canadian Airlines in 2000, Air Canada became the only FSC in Canada and captured 51.8% of total domestic seats in August 2004, declining from the 79.5% share that it held in August 1999. The following two years show Air Canada’s share of domestic seats stabilizing above 50%, amid the continual transfer of seats to its subsidiary, Air Canada Jazz.

WestJet’s Contribution to Low-Cost Seat Capacity In August 1999, LCCs contributed merely 7.9% of total domestic seats in Canada. Among the LCCs, WestJet alone captured a 6.5% share of total domestic seat capacity (equivalent to 82% of the LCC share). When Jetsgo and CanJet re-entered the LCC market in August 2004, the LCC share of domestic seats increased but WestJet was still the primary LCC provider of domestic seat capacity, with 23.1% of total domestic seats in Canada. When Jetsgo ceased operation in March 2005, WestJet’s share of August domestic seat capacity increased by another 0.7% in 2005. By August 2006, WestJet contributed 27.1% of the total domestic seats in Canada (representing 89% of the LCC share). (Since September 2006, when CanJet ceased operations, WestJet became the only LCC in Canada.)

Table 1: Domestic Seat Capacity in Canada August Volume of Seat Capacity Carrier

1999

2004

2005

2006

1,988,234 2,194,715 2,413,920 2,421,084 44.1% 51.8%

53.4%

53.4%

0.0%

0.0%

0.0%

AC Total 3,585,472 2,194,715 2,413,920 2,421,084 79.5% 51.8%

53.4%

53.4%

Air Canada1

2004

Canadian Airlines 1,597,238

2005 -

2006

Share of August Seat Capacity

-

WestJet

290,848

940,547

Royal Aviation

64,791

-

-

Jetsgo

-

269,592

-

CanJet

-

120,960

-

1,073,787 1,228,867

Grand Total

566,304

674,378

35.4% 6.5%

23.1%

23.8%

27.1%

-

1.4%

0.0%

0.0%

0.0%

-

0.0%

5.9%

0.0%

0.0%

0.0%

2.9%

3.3%

3.3%

7.9%

31.9%

27.1%

30.4%

12.6% 16.3%

19.5%

16.1%

150,875 150,332

LCC Total 355,639 1,331,099 1,224,662 1,379,199 Others2

1999

881,574 730,793

4,507,415 4,200,192 4,520,156 4,531,076 100.0% 100.0% 100.0% 100.0%

Sources: OAG Max August 1999, 2004 and 2006 disk; Planet Profitability Forecasting System

Includes Air Canada mainline, Zip and Jazz Includes Canada 3000, Air Transat, Skyservice, Harmony and other Canadian carriers Page 3 InterVISTAS’ Canadian Aviation Intelligence Report May 2007 Copyright ©2007 InterVISTAS Consulting Inc., all rights reserved.

1 2

AIRLINE DATA – CANADA Traffic and Load Factors on Canada’s Major Air Carriers April 2007 Air Carrier

Passenger Traffic Revenue Passenger Kilometres % Change % Change over 2006 from 2005

Capacity Available Seat Kilometres % Change % Change over 2006 from 2005

Load Factor Change over 2006

Change from 2005

Air Canada1

+3.5%

+6.6%

+2.2%

+3.1%

+1.0pts (to 83.2%)

+2.7pts (from 80.5%)

Domestic (Mainline)

+6.8%

+0.2%

+0.2%

-2.9%

+5.3pts

+2.7pts

Jazz

+24.6%

+121.5%

+20.1%

+111.1%

+2.7pts

+3.5pts

International & Charter

+2.3%

+9.3%

+2.9%

+5.6%

-0.5pts

+2.8pts

+22.6%

+59.9%

+16.1%

+32.9%

+4.3pts (to 82.8%)

+14.0pts (from 68.8%)

WestJet

Analysis: • Air Canada Mainline’s domestic load factor increased by 5.3 percentage points for the month of April, with increases in traffic by 6.8%, outpacing the expansion in capacity by 0.2% over 2006. Air Canada Mainline continues to transfer seat capacity to Jazz, resulting in an increase in Jazz’s seat capacity by 20.1%.

• Air Canada’s international seat capacity increased by 2.9% exceeding the growth in passenger traffic of 2.3%, due to decreases in transborder and Latin American traffic from the prior year.

• WestJet experiences growth in passenger traffic by 22.6% over April 2006, resulting in load factor growth by 4.3 percentage points over April 2006.

Over a two year span, April’s load factor increased by 14 percentage points to 82.8%. ______________________ 1 Air

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

Page 4 May 2007

10% 5%

Air Canada Domestic Mainline Jazz data is not included in this graph

0% -5% -10% Feb- Mar Apr May Jun July Aug Sept Oct Nov Dec Jan- Feb Mar Apr 06 07

Dom RPK

Dom ASK

Air Canada International 10% 8% 6% 4% 2% 0% -2% Feb- Mar Apr May Jun July Aug Sept Oct Nov Dec Jan- Feb Mar Apr 06 07

Int'l RPK

Int'l ASK

WestJet 35% 30% 25% 20% 15% 10% 5% 0% Feb- Mar Apr May Jun July Aug Sept Oct Nov Dec Jan- Feb Mar Apr 06 07

RPK

ASK

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2007 InterVISTAS Consulting Inc., all rights reserved.

AIRLINE DATA – U.S. U.S. Airlines Release April 2007 Traffic Figures (RPMs – millions)

(ASMs – millions)

Capacity

Load Factor

2,265

2,673

84.7%

↑11.6%

↑12.8%

↓0.9 pts

738

994

74.2%

↓2.6%

↓2.4%

↓0.2 pts

5,921

8,189

72.3%

↑3.3%

↑9.6%

↓4.4 pts

7,852

9,540

82.3%

↑4.8%

↑5.0%

↓0.2 pts

9,894

11,766

84.1%

↑0.8%

↓0.8%

↑1.3 pts

11,547

14,063

82.1%

↓3.3%

↓3.7%

↑0.4 pts

9,823

12,057

81.5%

↑4.2%

↓0.7%

↑3.9 pts

6,524

7,796

83.7%

↓0.1%

↑0.5%

↓0.5 pts

5,452

6,634

82.2%

↓0.1%

↓0.2%

↑.01 pts

354

406

87.1%

↑6.8%

↓1.1%

↑6.4 pts

1,427

1,858

76.8%

↑18.5%

↑21.5%

↓2.0 pts

788

1,021

77.2%

↑11.4%

↑16.4%

↓3.5 pts

Traffic

Airline

1

2

2

Notes:

1. Mainline operations only.

2. Load factor includes scheduled service only.

Sources: Carrier traffic reports.

Page 5 May 2007

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2007 InterVISTAS Consulting Inc., all rights reserved.

Summary of Total Year over Year Passenger Traffic Performance at Selected Canadian Airports

2007 2007

Toronto

Vancouver

1st Quarter

+1.4%

+1.3%

MontréalTrudeau +3.4%

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

+8.9%

+11.6%

+1.8%

+1.4%

+3.8%

+0.9%

+15.5%

+4.4%

-0.8%

St. John’s +2.6%

April May June

+6.2% +4.8% +2.9%

+4.3% +2.7% +2.6%

+6.5% +8.3% +4.5%

+19.6% +16.0% +9.5%

+20.7% +20.6% +13.2%

+3.8% +0.3% +1.8%

+0.6% +6.4% +4.1%

+6.8% +8.4% +0.7%

+4.2% +10.3% +8.6%

+17.9% +13.2% +13.4%

+9.5% +7.7% +5.3%

+13.9% +23.3% +12.5%

+13.1% +15.1% +3.9%

2nd Quarter

+4.6%

+3.2%

+6.4%

July August September

+2.2% +6.8% +2.2%

+4.8% +3.9% +2.1%

+1.9% +3.5% +2.6%

+14.8%

+18.1%

+1.9%

+3.8%

+5.2%

+7.8%

+14.7%

+7.4%

+16.3%

+10.3%

+7.4% +10.2% +10.0%

+13.8% +18.2% +13.1%

-2.1% +2.2% 0.0%

+4.9% +8.5% +8.8%

+8.5% +7.1% +4.9%

+7.4% +11.3% +6.9%

+14.4% +12.2% +16.6%

+5.9% +5.8% +6.9%

+7.1% +15.9% +10.4%

+13.2% +11.7% -0.5%

3rd Quarter

+3.8%

+3.7%

October November December

+2.6% +3.9% +6.4%

+2.3% +3.7% +6.2%

+2.7%

+9.2%

+15.1%

+0.1%

+7.3%

+6.9%

+8.6%

+14.3%

+6.2%

+11.1%

+8.7%

+3.9% +8.6% +8.7%

+9.9% +14.1% +11.4

+18.4% +15.4% +18.2%

+2.3% +3.0% +3.8%

+7.7% +8.3% +3.4%

+6.2% +0.6% -2.4%

+8.9% +2.7% -0.1%

+13.7% +14.5% +14.5%

+7.1% +2.7% +3.7%

+6.2% +3.7% +10.2%

+1.7% +0.2% -1.1%

4th Quarter Full Year

+4.3% +3.5%

+4.1% +3.1%

+7.0% +4.7%

+11.7 +11.1

+17.4% +15.5%

+3.0% +1.7%

+6.4% +4.8%

+1.7% +4.6%

+3.9% +5.4%

+14.3% +14.7%

+4.5% +5.6%

+6.7% +8.0%

+0.3% +6.0%

January February March

+3.0% +2.0% +1.5%

+5.5% +2.7% +3.6%

+10.3% +7.0% +8.4%

+10.8% +10.4% +9.5%

+18.3% +18.3% +17.1%

+5.9% +8.3% +4.9%

+3.2% +6.8% +5.4%

+2.3% +2.0% -1.2%

+4.7% +4.0% +7.9%

+15.2% +12.9% +15.6%

n/a n/a n/a

+18.8% +24.2% +8.2%

-4.6% +0.0% -1.1%

1st Quarter

+2.1%

+3.9%

+8.6%

+10.9%

+17.9%

+6.3%

+5.1%

+0.9%

+5.6%

+14.6%

n/a

+17.0%

-1.9%

Regina

Source: Transport Canada and individual airports’ traffic reports.

Note: n/a refers to statistics that are not available at press time.

Page 6 May 2007

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2007 InterVISTAS Consulting Inc., all rights reserved.

NEWS ARTICLES AIR CANADA UPDATE AIR CANADA LAUNCHES DAILY NONSTOP GANDER-HALIFAX SERVICE

AIR CANADA BECOMES NORTH AMERICA’S LARGEST 787 CUSTOMER

Beginning 30 June 2007, Air Canada will launch daily non-stop service between Gander, Newfoundland, and Halifax, Nova Scotia. Air Canada Jazz, a subsidiary of Air Canada, will be operating this flight using 50seat Bombardier CRJ regional jet aircraft and 37-seat Dash 8-100 aircraft. Between 30 June and 31 August 2007, Air Canada will be offering one-way flights for a special introductory fare of $139.

AIR CANADA ANNOUNCES WAGE REVIEW AWARD

AIR CANADA EXPANDS FLORIDA NETWORK Starting 16 June 2007, Air Canada will be adding a year-round, non-stop weekly flight between Toronto and Fort Myers, using the 73seat Embraer E175 aircraft.

AIR CANADA AFFILIATES EXPANDS NEWFOUNDLAND SERVICE

EVAS will be launching a twice daily non-stop flight between St. John’s and Deer Lake, effective 30 June 2007. This flight will be operated by Exploits Valley Air Services, a commercial partner of Air Canada, using an 18-seat Beech 1900 aircraft.

AIR CANADA ANNOUNCES THE FLIGHT PASS FOR BUSINESS Effective 27 April 2007, Air Canada launches the Flight Pass for Business – a travel package that is designed to accommodate corporate travel needs. This flight pass allows for up to 25 people to fly 100 times to ten different geographic travel zones in Canada and continental U.S. For travel over a 12-month period, the flight pass is available in both Latitude and Tango Plus fare categories.

Page 7 May 2007

Air Canada announced a $3.5 billion purchase of an additional 23 Boeing 787 aircraft, with its earliest delivery scheduled for 2010. This purchase makes Air Canada the largest Dreamliner customer in North America, with a total of 37 aircraft ordered of this type, and brings the total number of Boeing 787 orders to 567 aircraft.

Air Canada announced that Arbitrator, Tom Jolliffe, has issued his wage review award that grants a 2% wage increase effective July 2006, a 1.75% increase effective July 2007 and a 1.75% increase effective July 2008, to all 6,000 CUPE-represented flight attendants employed at Air Canada. The arbitration responds to a provision in the 2003 collective agreements reached between Air Canada and its unions.

WESTJET UPDATE WESTJET INCREASES DAILY ROUTES TO FILL GAP IN HARMONY SERVICES In response to Harmony Airways’ announcement to cease scheduled air operations on 9 April, WestJet is adding daily flights from Vancouver to various popular destinations including: Las Vegas (beginning 28 April 2007); Toronto (beginning 14 May 2007); Honolulu (beginning 4 November 2007); Maui (beginning 4 November 2007); and Palm Springs (beginning 4 November 2007).

WESTJET EXTENDS NEGOTIATIONS ON RESERVATION SYSTEM WestJet and Travelport have agreed to an extension of their aiRES contract amendment negotiations to 31 July 2007. aiRES is an airline reservation system provided by Travelport.

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2007 InterVISTAS Consulting Inc., all rights reserved.

NEWS ARTICLES U.S. AIRLINES NEWS

U.S. AIRLINES NEWS

DELTA AIR LINES EXITS CHAPTER 11 BANKRUPTCY PROTECTION

US AIRWAYS INCREASES AIRPORT CHECK-IN SERVICES

On 30 April 2007, Delta Air Lines was cleared by a U.S. Bankruptcy court to exit Chapter 11 bankruptcy protection.

Delta plans to issue new shares to its creditors and select a new chief executive. Delta entered into Chapter 11 bankruptcy protection after accumulating $19 billion in debt and $7.5 billion in losses between 2001 and 2005.

US Airways announced on 26 April 2007 that it plans to hire an additional 1,000 workers this summer at airports throughout the carrier’s route system and to install 600 new self-service check-in machines in May, in order to resolve its current traffic problems. The airline’s unsuccessful attempt to combine reservations systems with America West has led to huge delays for thousands of US Airways passengers in March. U.S. Airways and America West merged in September 2005.

NORTHWEST ACQUIRES MESABA

On 24 April 2007, Northwest Airlines announced it had acquired Mesaba as a wholly-owned subsidiary.

Mesaba Airlines is a U.S. based regional carrier that recently emerged from Chapter 11 bankruptcy protection.

AMERICAN AIRLINES MODIFIES FLEET

American Airlines is performing major cabin upgrades to the First Class and Business Class sections of its entire fleet of 47 Boeing 777 aircraft. The airline has also announced plans to launch the Boeing 767300ER wing modification, to be completed by mid-2010. The design of its winglets (vertical fins on the end of each wing) will save more than 290,000 gallons of fuel annually.

HORIZON PHASES OUT Q200S WITH AN ORDER OF 15 Q400S

Horizon Air will increase its current fleet of 48 Bombardier Q400 high-speed turboprops to a total of 63, in an attempt to phase out the remaining 20 Bombardier Q200s. With plans to simplify its fleet to two aircraft types (76-seat Q400s and 70-seat CRJ 700 jets), Horizon Air hopes to reap the economic advantages associated with the fleet simplification.

Page 8 May 2007

CARGO NEWS FEDEX FEARS POTENTIAL DELAYS FROM FAA DECISION

FedEx recently documented a letter to the Federal Aviation Administration (FAA), raising concerns of the nationwide package delays that could result from FAA’s decision to end a landing procedure at FedEx’s main distribution hub in Memphis. On 13 April 2007, FAA announced that jets were prohibited from landing at the north-south runway at Memphis International Airport, due to a near-collision with a plane landing at a nearby east-west runway.

ALASKA AIR EXHANCES CARGO CAPABILITIES Alaska Air plans to convert a fifth Boeing 737-400 into a “Combi” aircraft in early September, so that the aircraft could effectively be used to carry passengers and freight at the same time. This conversion will provide consistent year-round cargo service to smaller Alaskan communities, as part of the airline’s $100 million cargo initiative.

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NEWS ARTICLES TSA’S GENERAL MANAGER RETIRES

PEOPLE IN THE NEWS MILLEY TO ACI-NA BOARD, CHERRY TO ACI-WORLD The Canadian Airports Council announced that Reg Milley of Edmonton Airports will replace Garth Atkinson on ACI-NA board, and that CAC chairman Jim Cherry will be reappointed to the ACI-World board.

REMPEL, CHERRY REAPPOINTED TO CAC The Canadian Airports Council has announced that Barry Rempel has been reappointed as CAC Vice chair, with his term extending to April 2008. Jim Cherry was also reappointed as chair to April 2008.

PATA NAMES NEW CHAIRMAN AND CHAIR-ELECT Brian Deeson, the CEO of Greater China and Senior Vice President of Asia Pacific for Accor Hospitality, was appointed Chairman of the Pacific Asia Travel Association (PATA) at the Annual General Meeting (AGM) held in late April. PATA also announced the appointment of Janice Antonson, Vice President of Marketing at Nassau International Airport, as the new PATA Chairman-Elect. PATA is a travel trade association that provides a network for industry partners to generate new business opportunities.

TSA ANNOUNCES NEW ACTING DEPUTY ADMINISTRATOR

The Transportation Security Administration (TSA) announced on 26 April that Gale Rossides has been appointed as Acting Deputy Administrator for TSA. Rossides served TSA since its inception and formerly held the position as Associate Administrator for Business Transformation and Culture.

Page 9 May 2007

On 1 June 2007, Charlotte Bryan will retire from her position as the General Manager for Airports at the Transportation Security Administration (TSA), after serving the federal government for 36 years.

ALASKA AIR GROUP ANNOUNCES MANAGEMENT STRUCTURAL CHANGES The board of directors at the Alaska Air Group announced various changes to its senior management structure.

Announcements include the election of Gregg Saretsky as Executive VP, Flight & Marketing, the appointment of Glenn Johnson as Executive VP, Airport Services, Maintenance and Engineering, and the appointment of Brad Tilden as Chief Financial Officer and Executive VP of Finance.

NEWSON NAMED CHARLOTTETOWN CEO Doug Newson has been named CEO of the Charlottetown Airport Authority. Previously he had worked for Air Canada Jazz and for Canjet.

GINA MARIE LINDSEY TO LEAD LOS ANGELES AIRPORTS

Gina Marie Lindsey has been appointed Executive Director of Los Angeles airports, effective 10 May 2007. Previously, Lindsey managed airports in Seattle and Anchorage, Alaska, and have been heavily involved in major airport improvement projects.

OTHER MONTRÉAL SERVES AS HOST CITY FOR NTA’S ANNUAL CONVENTION IN 2010 The National Tour Association (NTA) has selected Montréal as the host city of its Annual Convention taking place on 13-17 November 2010. It is expected that thousands of tourism travel professionals worldwide will be visiting Montréal on this five-day event.

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2005 InterVISTAS Consulting Inc., all rights reserved.

FACILITATION INCREASES PASSENGER VOLUME AT CANADIAN AIRPORTS May 2007

Canadian airports are actively pursuing larger international passenger numbers through the use of facilitation programs. A successful example is the Transit Without Visa (TWOV) program. This article reviews the recent history and future directions of TWOV and how it will help airports increase their business with non-traditional international markets.

The TWOV concept is simple: the program allows foreign nationals to transit through Canadian airports and on to the United States without a Canadian visa, provided they hold a valid US visa. In other words, international travelers don’t need to go through the bother of getting a Canadian visa if they are simply transiting through a Canadian airport.

Christian Hansen Manager, Security & Trade Policy

TWOV has existed as a pilot program for several years. In 1997, the Canadian Government signed agreements with the Vancouver International Airport Authority and participating carriers to enable the first pilot. Nationals from four countries (Taiwan, Indonesia, Thailand and the Philippines) were allowed to transit through Canada to the US without a Canadian visa in the pilot.

The TWOV pilot was a resounding success. The Canada Border Services Agency (CBSA) and CIC report no major operational or immigration entry abuse problems since the program’s inception nine years ago. Except for immediately after the tragic events of Sept 11, 2001 the TWOV pilot program has operated continuously with no major changes to the TWOV Standard Operating Procedures.

After consulting with stakeholders earlier in 2007, the pilot program in Vancouver has been normalized and expanded to include other Canadian airports. For the moment, the same four countries (Taiwan, Indonesia, Thailand and the Philippines) are covered in the program. Looking forward, it makes sense for Canadian airports to seek similar arrangements for other countries, especially China and India. Gateway airports Vancouver and Toronto (and eventually others) will clearly benefit from TWOV expansion. For example, Air Canada’s on-again, off-again direct flight to Delhi would presumably be made more profitable with increased interest in transiting through to the US (without the need for an additional Canadian visa). Progress in this direction is being made; CBSA has indicated that it is willing to consider a TWOV pilot program for China over the next year.

It is also conceivable that international-to-international TWOV programs may someday be implemented. Connecting extremely distant markets - such as Brazil and Japan - is a possibility over the longer term. Canadian airports would gain an advantage over their US competitors for travel between these two countries under such a TWOV, as it would allow a Brazilian to travel to Japan without getting a visa to enter Canada and without a U.S. visa.

Further expansion of the TWOV program is a possibility. Current CBSA requirements for the TWOV program include (but are not limited to): (1) negotiation of agreements with carriers and airports, (2) risk assessments, (3) current airport infrastructure, and (4) the existence of a “removals” agreement between Canada and the country where flights originate.

TWOV and other facilitation initiatives are important for Canadian airports. As Canada implements its new “Blue Sky” air policy and concludes new bilateral air service arrangements, the number of international air arrivals will likely increase. Without facilitation initiatives to lessen the burden on Canada’s overstretched inspection services officers, accommodating this increase will be a challenge.

Page 10 May 2007

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THE ENTHUSIAST CORNER May 2007

This month, we invite Howard Mann of InterVISTAS' Washington office, to comment on news for aviation buffs and some of his favourite internet sites. Howard tracks daily aviation news including aircraft deliveries, new liveries, manufacturing progress of new aircraft designs, airport infrastructure improvements, and just about everything else that is aviation related. You won't find a greater aviation enthusiast anywhere.

New color schemes expected to hit the runway Whenever I go to the airport, I am always searching for the newest livery to catch or even a classic one that will soon become a distant memory. Be on the look out for these new liveries as they come to an airport near you!

Howard Mann Manager, Policy & Market Analysis InterVISTAS-ga2 Consulting Inc. Washington, D.C. Left to Right (New Delta Livery, New Jet Airways Livery, Air Canada 70th Anniversary livery)

Trying to find that elusive “best airline seat”?

Have you ever sat down in a seat only to find out there was no window? What about disappointment in learning your armrest does not move or you can not recline? Attention smart travelers, the time of flying unprepared is a thing of the past! The website www.seatguru.com can help you strategise the best seat on an airplane for any of the following travel worries: •

A needed power port for your laptop

•

The best airplane for your video entertainment needs

•

An aisle seat at the front of the airplane for a quick connection

•

Being as far away as possible from the lavatory smell

•

A heads up to pack a sweater if you are sitting near the door of the airplane

•

The perfect window seat to view and record the airplanes you see as you land (that may just be me!)

Boeing’s PR taps into a calendar coincidence How does a public relations department generate even more excitement about a fast-selling product?

By turning to the power of the calendar – that’s how! As the new Boeing 787 produces record numbers of orders from airlines throughout the world, the company recently announced that the rollout ceremony for the first aircraft will take place at its Everett facility on 8 July 2007 – (7.8.07).

Perhaps Boeing should think about doing the first flight on 7 August 2007 for those countries that put the month first and date second? Check out all of the new features on the 787 at www.newairplane.com.

Page 11 May 2007

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THE EUROPEAN REPORT May 2007

Airlines Buying and Workers Striking Bids for (and by) Airlines are Progressing Across Europe With a number of struggling airlines and the new EU-US Open Skies agreement creating an environment ripe for consolidation and acquisition, bids for airlines across Europe are moving forward on several fronts.

John Weatherill Director, Airline Planning IVC UK Office

Ryanair’s offer for fellow Irish carrier Aer Lingus (EI) appears to have some life left in it. Although EI shareholder response to Ryanair’s bid has not been overwhelmingly positive, the European Commission has not yet vetoed the takeover on competition grounds. In response to undisclosed concessions offered by Ryanair to address EU competition concerns, the Commission has extended its deadline for review of acquisition from June 13 to July 4. The Commission’s statement of objections to the proposed takeover highlights the loss of competition on 37 routes currently served by the two carriers, as well as concerns that Ryanair would dominate the Irish market following the purchase, resulting in higher fares for travellers.

British Airways (BA) is also looking at acquisition options, and has begun approaching private equity firms about involvement in a consortium bid for Spanish flag carrier, Iberia. BA presently owns 10% of Iberia, and has the right of first refusal on a further 32%. BA is apparently not prepared to proceed with a bid on its own, and is therefore looking for partners. Texas Pacific Group (TPG) has already put forward a €3.60/share offer for Iberia; however, as a non-European entity, TPG would be limited to 49% ownership of the airline.

Texas Pacific Group is also pursuing Italy’s struggling national carrier, Alitalia. TPG and its consortium partners have committed €5 billion (CAD 7.5 billion) for purchasing and investing in the airline, should they be successful. Others rumoured to have an interest in Alitalia include Air One, Italy’s second largest airline, and Russian carrier Aeroflot, a fellow SkyTeam member.

Strikes Adding to Difficult Situations Any successful purchaser of Alitalia will have to deal with the airline’s notoriously difficult unions. With the carrier losing over €1 million per day and takeover rumours circulating, Alitalia’s cabin crew recently staged a one day strike, resulting in the cancellation of almost half of the airline’s 800 daily flights. An estimated 30,000 passengers were affected, with schedule disruptions spilling into a second day. Such action is likely to increase if a takeover of the airline progresses.

Like their counterparts at Alitalia, workers at Airbus have responded to financial losses and future uncertainty with industrial action. Airbus workers in France have staged wildcat strikes at a number of production locations. Employees are upset with reduced annual bonus payments and the recent announcement of 10,000 planned job cuts as part of the manufacturer’s turnaround plan. Workers’ sentiments are unlikely to improve as shareholders of Airbus parent company, EADS, voted themselves the maximum allowed dividend at the AGM in early May. This came as EADS reported a €10 million net loss in Q1 2007 (down from a €500 million profit a year earlier), and net orders for the January-April period were received for 158 aircraft. By comparison, Boeing secured orders for 315 planes over the same period.

Page 12 May 2007

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THE OTTAWA REPORT May 2007

Canada and Ireland reach Blue Sky Agreement

Brian Kelly Executive Consultant

Canada and Ireland have entered into a new Open Skies agreement under the Canadian Government’s Blue Sky policy, effective 30 April 2007. Replacing the previous bilateral agreement that had been in effect since 1947, the new agreement removes several past restrictions on air services between Canada and Ireland. In addition to permitting Canadian and Irish air carriers to fly between any city in Canada and any city in Ireland, the agreement also allows Canadian carriers to carry passengers from Ireland to a third nation and vice versa (i.e. 5th freedom rights). In addition, the agreement terminates by March 2008 the requirement for Canadian carriers to stop at Shannon Airport. However, the agreement does not abide to the European bilateral clause – thus, Ireland can only designate Irish carriers (and not EU carriers) to fly to Canada. The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities of Canada, announced that the agreement “will lead to the introduction of new air services between our two countries, providing more choices for Canadian passengers, shippers, air carriers and airports”. This partnership will also create new opportunities for Canadian businesses to export and invest in Ireland, as well as stimulate outbound Irish travel to Canada.

Canada, U.S. and Mexico sign Trilateral Ministerial Declaration The Trilateral Ministerial Declaration was signed between Canada, United States and Mexico on 27 April 2007, after the Honourable Lawrence Cannon (Canadian Minister of Transport, Infrastructure and Communities), Mary E. Peters (United States Secretary of Transportation) and Luis Téllez Kuenzler (Mexican Secretary of Communications and Transportation) met for the first time in Tucson, Arizona. As part of the Trilateral Ministerial Declaration, the representatives recognised the need to improve their existing transportation infrastructure to minimise traffic congestion, delays, environmental degeneracy and increasing travel/shipping costs. In order to resolve these current issues, the three countries have agreed to cooperate in the areas of trade facilitation, safety, regulation and information.

CAC Endorses Standing Committee’s Trade Recommendations The Canadian Airports Council (CAC) expressed support for the House of Commons Standing Committee on their recommendations on International Trade’s Ten Steps to a Better Trade Policy.

Specifically, the CAC agreed with the committee’s advice to conclude free trade agreement (FTA) negotiations, actively seek foreign investment protection and promotion agreements (FIPAs) and improve domestic policy to support the competitiveness of Canadian companies on a global level.

The Standing Committee’s recommendations are consistent with the CAC’s Five Point Plan for Competitiveness of airports.

NAV CANADA Proposes Reduced Service Charges by 3% NAV CANADA proposed a 3% reduction in its customer service charges to be taken into effect 1 September 2007. As required by legislation, the proposal will be discussed in a consultation period and then reviewed by NAV CANADA’s Board of Directors. Last year, customer service charges were reduced by an average of 1.8%. Overall service charges have grown by 7% since the full implementation of NAV CANADA services charges in 1999, equivalent to 13 percentage points below the growth of inflation.

Page 13 May 2007

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THE WASHINGTON REPORT May 2007

U.S. Hopes to Achieve Full Open Skies with China U.S. Transportation and State department negotiators recently attended the third round of aviation liberalization talks in Chengdu, China. During this meeting, the United States hoped to widen their access to Chinese airports by proposing a timetable that would remove limits on U.S. commercial flights to China. However, Chinese negotiators were reluctant to accept the proposal in its entirety, agreeing only to minor increases in annual flight awards to U.S. carriers through 2011 due to the competition that Chinese carriers already face on current U.S.-China routes. The U.S. will continue to pursue the transition to full open skies with China during the next Strategic Economic Dialogue (SED) meeting that will take place in Washington on 23-24 May. SED, the semi-annual meeting held between China and the United States, deals with a wide range of trade issues involved in the economic relationship of the two countries.

Jon Ash President InterVISTAS-ga2 Consulting Inc. Washington, D.C.

DOT to Increase Regulatory Oversight of Commercial Airlines The Inspector General (IG) of the Department of Transportation (DOT) announced its plans to improve monitoring and regulation of commercial airlines, as a means to improve airline customer service. The IG recommended for commercial airlines to perform self-audits on their service plans, enhance employee training, and improve passenger notification procedures during the event of severe flight delays. In June, the IG will be publishing a report on airline customer service to suggest regulatory measures that could prevent instances such as last February’s service disruption that led to massive delays for thousands of JetBlue passengers. The Senate has also been trying to resolve flight delay issues, with their recent introduction of a bill that gives passengers the option to deplane even after the door has been closed, under the condition that the plane has been on the ground for more than three hours.

TSA Implements Employee Screening Plans The Transportation Security Administration (TSA) has made plans to strengthen employee screening using a “risk-based” approach that was developed in partnership with the American Association of Airport Executives (AAAE), Airports Council International-North America (ACI-NA) and National Air Transportation Association (NATA). TSA will be implementing the six-point pilot program that includes “behavioural recognition, employee training, targeted physical inspection, biometric access control, certified employees and technology deployment” at selected U.S. airports over the next three months.1 In addition, under TSA’s Aviation Direct Access Screening Program (ADASP), all U.S. airport employees are required to perform random security checks to prevent acts of terrorism and crime.

FAA Introduces Oceanic Technology The Federal Aviation Administration (FAA) has implemented the final version of the Advanced Technologies and Oceanic Procedures (ATOP) at the Anchorage Air Route Traffic Control Center.

The implementation will enable aircraft that are crossing the North Pacific Ocean to fly more direct routes, improve aircraft fuel efficiency and increase on-time performance for passengers. The technology allows aircraft to be controlled in regions outside radar coverage or direct radio communication, providing improved satellite data link communication and information on aircraft positioning to air traffic controllers. ATOP is already being used by FAA centers in Ronkonkoma, NY and Oakland, CA, when flying over the Atlantic and Pacific regions.

1

Washington Aviation Summary, May 2007 edition (Kirstein & Young PLLC)

Page 14 May 2007

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INTERVISTAS NEWS May 2007

Jacqueline Clarke Joins InterVISTAS’ Vancouver Office InterVISTAS is pleased to announce that Jacqueline Clarke has joined InterVISTAS’ Vancouver office as Project Manager, Strategic Planning, effective 16 April 2007. From 2002 to 2005, she was the General Manager of the Yacht Services Association of Trinidad and Tobago, responsible for developing and implementing the organization’s strategic plan for the sustainable development of the yacht services industry. Jacqueline is an MBA candidate at the UBC Sauder School of Business and holds a Bachelor of Commerce Degree in Hospitality and Tourism from Ryerson Polytechnic University. She also has her Certificate in Project Management through the American Management Association.

Eddy Bordignon Joins InterVISTAS’ Vancouver Office InterVISTAS is pleased to announce that Eddy Bordignon will be joining InterVISTAS’ Vancouver Office as Project Analyst to support PLA (Planning, Facilitation and Security) and SPA (Strategic Planning) business units, effective 4 June. He has been working as a part-time Contract Consultant with InterVISTAS since 2004 and worked for Canadian Airlines and Air Canada for nine years. Eddy has a Bachelor or Arts degree in Geography from Simon Fraser University, and a Diploma in Airport Operations from BCIT.

Janice Bruno Appointed as Corporate Services Manager InterVISTAS is pleased to announce that Janice Bruno has been appointed as Corporate Services Manager of the newly established Human Resources and Corporate Services Department. She will provide administrative support to the InterVISTAS Group of Companies.

Geneva Tretheway Appointed as Senior Analyst InterVISTAS is pleased to announce that Geneva Tretheway has been appointed Senior Analyst, Air Service Development, effective 1 May 2007. She has taken on a leading role in the Air Service Development Practice regarding route analysis with the Planet route planning system, and has been instrumental in pulling together comprehensive business cases presented to airlines for new air services.

Kahlil Philander Appointed as Senior Analyst InterVISTAS is pleased to announce that Kahlil Philander has been appointed Senior Analyst, Economics, Regulatory and Logistics, effective 7 May 2007. He originally joined IVC in December 2005 as Project Analyst. During the past eight months, Kahlil has been studying at the University of Toronto completing his Masters degree in Economics.

New Publications Available at www.intervistas.com InterVISTAS recently released a publication entitled Trends in Aviation and Tourism. This is available at www.intervistas.com. The publication collects a series of articles on key tourism markets, lists air carrier fleets and provides airport and airline market data.

Page 15 May 2007

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INTERVISTAS NEWS - CON’T InterVISTAS Upcoming Speaking Engagements Gerry Bruno, President and Chief Executive Officer • ATAC Spring Symposium: Ottawa, Ontario – 16 May 2007 Mr. Bruno will be delivering a presentation titled, “Seamless Border Strategies for Gateway Competitiveness”.

Paul Ouimet, Executive Vice President • Premier of Nova Scotia’s Gateway Symposium: Halifax – 30 May 2007 Mr. Ouimet will be delivering a presentation titled, “Building the Atlantic Gateway”.

Dr. Mike Tretheway, Executive Vice President and Chief Economist • Canadian Airline Investment Conference: Toronto, ON – 8 June 2007 Dr. Tretheway will be delivering a presentation titled, “Sustainable Aviation: Emerging Environmental Challenges and Solutions – Are There Investment Incentives for Manufacturers?”

John Weatherill, Director, Airline Planning • Low Cost Carriers Evolving Business Models Conference: Cologne, Germany – 6/7 November 2007 Mr. Weatherill will be delivering a presentation titled “Adapting Airport Route Development Strategies to Reflect Changing LCC Business Models”.

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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