CAIR Issue No. 30 - June 2005

InterVISTAS’ CANADIAN AVIATION INTELLIGENCE REPORT

In this issue…

Feature Columns: • SCoT Interim Report (p.1) • Crude Oil Prices (p.3) • Airport Terminal Planning (p.15) • Cargo Capers (p.17) • Tourism & the End to World Poverty (p.20)

Regular Reports: • Airport & Airline Data (p.4) • Industry News (p.8) • Airport Best Practices (p.19) • The Ottawa Report (p.21) • Washington Report (p.22) • InterVISTAS’ News (p.23)

THE STANDING COMMITTEE’S INTERIM REPORT June 2005

In May, the House of Commons Standing Committee on Transportation (SCoT) released its report, Air Liberalisation and the Canadian Airports System. The report followed a series of hearings across Canada on both airport issues and issues regarding liberalising commercial aviation policies. The report is only an interim report, as the Committee has indicated a need for further study and consultation prior to finalising recommendations on certain issues. However, the Committee’s views on airports and charges for security and customs were quite well defined.

Josh Drury

•

Airport Rent. SCoT recommends that the federal government immediately reduce airport rents by at least 75% and for airports with less than 2 million passengers no rent be paid. This goes beyond the rent relief announced earlier in the month by Minister of Transport in terms of the magnitude of the reduction, although the Minister should be credited with having made a large first step toward the SCoT recommendations. SCoT’s recommended relief is more extensive and immediate, and limits rent payments to a smaller set of airports.

•

SCoT goes on to recommend that airport rental revenues received by Transport Canada be used to increase funding for the Airport Capital Assistance Program (ACAP), that the funding be long term and stable and that the process for applying for this program be simplified and made less costly. While ACAP is a useful program, SCoT said it is too limited in scope and funding to fully meet the needs of Canada’s airports. Expanded, stable funding through airport rents as recommended would address this issue.

•

Security Charges. SCoT recommended that the government eliminate the Air Transport Security Charge (ATSC). SCoT correctly noted that the ATSC is unique in levying security fees on air transport users (unlike other modes), and that aviation security is a national security issue, not a transportation issue, and thus should be paid for from general revenues.

•

Customs Services. SCoT recommended that the government pay for CBSA services at airports that can demonstrate that they have regular transborder and/or international services. SCoT noted that the current system is applied in an inequitable and arbitrary manner, since some airports pay for Customs services while others have services fully funded by the government.

This recommendation would have funding applied in a uniform and fair manner.

•

Regulatory Burden. SCoT recommended that the government ensure that where regulations on small and regional airports result in a significant increase in costs to these airports, such costs be borne by the government. These additional recommendations (particularly those requiring firefighting and emergency response services) have in many cases greatly increased costs at smaller airports, and have represented a threat to their long-term viability.

•

Government exemptions. SCoT also recommended that within 5 years, government departments and agencies should pay for all services they receive from airport authorities. Under current rules, many receive services such as office and other space at no charge, representing lost revenue to authorities.

Transportation Specialist

Page 1 June 2005

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

THE STANDING COMMITTEE’S INTERIM REPORT – CON’T Air Policy Liberalisation. After SCoT had started its work on airport issues, the Minister of Transport asked the Committee to address a set of questions regarding the desirability and extent of liberalising Canadian international air transport policy. SCoT received numerous submissions which it discussed in the interim report, but indicated it was not yet in a position to make specific recommendations. SCoT noted that “we must now seek input from stakeholders in other countries as their actions have a critical impact on Canada’s aviation policies”. Following such consultation, recommendations can be expected to follow in the final report. Some of the observations made in the report include: •

Liberal Bilaterals. With respect to bilateral agreements outside of the U.S., many stakeholders – particularly airports – felt that bilaterals should be much less restrictive. A few stakeholders favoured a more cautious approach. However, SCoT noted that “it would seem fair to say that the status quo is not serving the needs of the travelling public and the present agreements are too restrictive in nature.” This suggests that the recommendations on international bilaterals in the final report may be supportive of further liberalisation.

•

Canada-U.S. Open Skies. The 1995 Canada-U.S. transborder agreement falls short of true ‘open skies’ and many submissions noted Canada should be moving towards this. Many stakeholders called for the expansion of the agreement to include fifth freedom rights, and some advocated a more extensively liberalised agreement to create a single aviation market, along the lines of that existing in the EU.

•

Cargo. Special rights for cargo were also discussed in a Canada-U.S. context. A central issue was that of co-terminalisation. If this were allowed, U.S. carriers would be allowed to carry cargo to multiple Canadian stops on the same flight (though not to carry Canadian cargo between these points). Some stakeholders have expressed concern that this could result in loss of jobs and revenue by Canadian carriers that currently distribute U.S. cargo beyond gateways; however, while there might be changes in certain areas, others noted that the overall impact on Canadian carriers and airports would likely be small. SCoT acknowledged that the concept seems attractive from the perspective of airports and shippers, but indicated the need for more study on the impact on carriers, and perspective from the U.S. on the issue, before making a recommendation.

•

Right of establishment was the final major international issue discussed in the report.

Establishment, as it is being considered, would allow U.S. carriers (or other investors) to set up domestic Canadian subsidiaries and vice versa for Canadian carriers. While many strongly support such an initiative, the concept is being met with mixed views in Canada, as some stakeholders fear U.S. carriers would cherry-pick main markets and threaten the viability of Canadian carriers. Unlike other international issues where the interim report hints at supporting liberalisation, there is no indication as to what the recommendation on this issue will be. SCoT notes only that “the Committee is of the view that it requires more information on this subject and intends to examine the experience in other countries before making a recommendation.”

The timing of the final report is difficult to predict. The committee has not yet scheduled its next phase of investigation, and parliament seems focused on other issues at the present.

Page 2 June 2005

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

CRUDE OIL PRICES SURGE HIGHER 15 June 2005

Continued high crude oil prices of $55 in June 2005…

After hitting a record high of US$57 per barrel, crude oil prices then cooled to below US$50 in May before surging to US$55 in June. It does not appear that the sustained upward trend in prices will soften in the near future. Futures contracts for December 2011 are priced at $54.70 today, the same price level for near term deliveries. The indication is that crude oil prices will continue at these high levels for the foreseeable future. Concerns over refining capacity and OPEC are contributing to the continued high prices.

OPEC. Today, OPEC raised its quotas for oil production by 500,000 barrels per day; however, the quota increase is not expected to cool high prices as several OPEC countries are already operating at near maximum capacity. Iran, OPEC’s second largest oil producer, indicated that they are currently operating very close to capacity and that in 2006, they will have no spare capacity available. OPEC’s recent actions have not significantly impacted global crude oil price levels.

…. The level of futures prices continue upward Futures prices have continued to climb through the first half of 2005, as displayed in the graph below.

The price of a barrel of crude oil contracted in the current month for delivery in January 2006 is US$58. Contract prices for delivery in future years are above the US$55 level.

Crude Oil Spot & Futures Prices June 2005

$60.00

$55.00

April 2005 $50.00

$45.00

Futures Prices -----

Spot Prices

February 2005

$40.00

January 2005

$35.00

$30.00

$25.00

May 2003

August 2003

December 2003

April 2004

June 2004

September 2004

$20.00 Ja n-0 3 Ap r-0 3 Ju l-0 3 Oc t-0 3 Ja n-0 4 Ap r-0 4 Ju l-0 4 Oc t-0 4 Ja n-0 5 Ap r-0 5 Ju l-0 5 Oc t-0 5 Ja n-0 6 Ap r-0 6 Ju l-0 6 Oc t-0 6 Ja n-0 7 Ap r-0 7 Ju l-0 7 Oc t-0 7 Ja n-0 8 Ap r-0 8 Ju l-0 8 Oc t-0 8

Senior Project Manager

US$ Per Barrel

Doris Mak

Lack of Refining Capacity. Recently, there have been concerns over the lack of refining capacity available to handle the increased global demand for distillate fuels such as diesel, heating oil and jet fuel. The strong demand for diesel fuel is increasing in China, Europe and the U.S.

Month of Delivery

Impact on the Airline Industry. The International Air Transport Association (IATA) estimates that the global airline industry will lose up to US$6 billion in 2005. Fuel costs were cited as the main reason for airline woes. The loss estimate is based on an average price of US$47 per barrel. Robert Milton, CEO of ACE Aviation, stated that for each dollar per barrel increase, the company’s costs would rise US$28 million per year. Many airlines are attempting to reduce non-fuel costs as a means to cope with increasing fuel prices.

Page 3 June 2005

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

AIRLINE DATA – CANADA Traffic and Load Factors on Canada’s Major Air Carriers May 2005 Passenger Traffic

Air Carrier Air Canada1

OTHER CARRIERS:

Domestic (Mainline) Jazz

LOAD FACTORS CanJet: not reported

International & Charter

WestJet

Revenue Passenger Kilometres

Capacity

Load Factor

Available Seat Kilometres

% Change over 2004

% Change from 2003

% Change over 2004

% Change from 2003

Change over 2004 +1.4 pts (to 79.9%)

Change from 2003 +8.3 pts (71.6%)

+6.7%

+33.7%

+4.7%

+19.8%

+4.1%

+16.8%

+1.7%

-0.3%

+1.9 pts

+12.0 pts

+32.1%

+38.1%

+12.4%

+14.9%

+10.9 pts

+12.2 pts

+7.8%

+42.9%

+6.1%

+31.4%

+1.2 pts

+6.4 pts

+32.2%

+56.3%

+21.8%

+59.8%

+5.5 pts (to 70.6%)

-1.6pts (72.2%)

Analysis: •

Air Canada and WestJet continue to post strong domestic traffic gains, in part as a result of Jetsgo ceasing operations in March 2005.

•

Air Canada reported its fourteenth consecutive month of record system and domestic load factors in May 2005 as the growth in the carrier’s traffic outpaced the addition of capacity.

•

U.S. transborder traffic increased by over 11% during the month. International traffic was strong for Air Canada during May 2005 compared to the same time period in both 2004 and 2003, reflecting the continued strength in demand for international travel. The strong growth relative to 2003 is attributable to the recovery from SARS.

Air Canada Domestic Mainline 15% 10% 5% 0% -5% -10% -15%

Jazz data is not included in this graph

May- Jun July Aug 04

Sep

Oct

Dom RPK

Nov

Dec Jan- Feb 05

Mar

Apr

May

Dom ASK

Air Canada International 40% 30% 20% 10% 0% -10% May- Jun July 04

Aug Sep

Oct

Nov Dec Jan- Feb 05

Int'l RPK

Mar

Apr

May

Int'l ASK

WestJet 60%

•

1

Continuing an earlier trend, WestJet’s traffic growth continues to outpace the addition of capacity, resulting in an improved load factor.

This is the sixth consecutive month in which WestJet’s traffic growth outpaced capacity growth.

50% 40% 30% 20% 10% 0% May- Jun July Aug Sep 04

Oct

RPK

Nov Dec Jan- Feb 05

Mar

Apr

May

ASK

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

Page 4 June 2005

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

AIRLINE DATA – U.S. U.S. Airlines Release May 2005 Traffic Figures Traffic Data – May 2005 Airline

1

2

2

Load Factor

Traffic (RPMs – millions)

(ASMs – millions )

78.1%

11,806

15,107

á5.0 pts

á10.0%

á3.0%

71.4%

701

984

á2.9 pts

á32.5%

á27.1%

65.8%

509

773

â4.3 pts

â49.8%

â46.5%

81.2%

3,360

4,137

á6.1 pts

á7.9%

â0.3%

76.3%

10,532

13,798

á2.5 pts

á9.4%

á5.7%

86.6%

1,704

1,968

á4.8 pts

á32.9%

á25.6%

83.6%

6,573

7,859

á2.9 pts

á6.3%

á2.5%

72.4%

5,241

7,244

â1.5 pts

á12.0%

á14.3%

81.8%

9,720

11,876

á1.7 pts

á0.9 %

â1.2%

75.9%

3,527

4,650

á0.4pts

á2.0%

á1.4%

Notes:

1.

2.

Sources:

Carrier traffic reports.

Page 5 June 2005

Capacity

Mainline Load factor includes scheduled service only

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

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

2004

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

+20.5%

MontréalTrudeau +31.7%

+11.5%

+8.6%

+20.8%

+11.2%

+16.9%

+12.7%

-0.3%

+10.9%

+2.6%

St. John’s +20.1%

+30.8%

+20.4%

+26.3%

+5.5%

+7.5%

+7.6%

+9.0%

+19.4%

+8.0%

-1.3%

-0.3%

-5.5%

+15.2%

June

+18.5%

+16.1%

+18.1%

+8.0%

+2.8%

+12.1%

+9.2%

+7.8%

+8.6%

+3.0%

+1.7%

-4.3%

+15.9%

2nd Quarter

+26.2%

+18.8%

+24.9%

+8.3%

+6.2%

+13.2%

+9.7%

+14.5%

+9.7%

+0.5%

+3.8%

-2.5%

+16.9%

July

+17.1%

+10.4%

+18.7%

+5.0%

+0.8%

+5.7%

+8.6%

+10.5%

+4.7%

-0.5%

+5.5%

+1.4%

+10.6%

August

+16.0%

+4.9%

+18.1%

+1.9%

+2.2%

+6.2%

+7.4%

+6.9%

-2.0%

-5.9%

+5.4%

+1.5%

+10.1%

September

+16.1%

+11.5%

+13.2%

+13.0%

+6.3%

+7.9%

+8.8%

+8.6%

+8.3%

+12.1%

+5.3%

-0.6%

+13.4%

3rd Quarter

+16.4%

+8.7%

+16.7%

+6.2%

+2.9%

+6.6%

+8.2%

+8.6%

+3.3%

+1.1%

+5.4%

+0.8%

+11.2%

October

+14.3%

+7.0%

+10.7%

+10.7%

-4.0%

+11.9%

+1.1%

+3.7%

-1.4%

+9.1%

+7.9%

+1.9%

+18.2%

November

+13.3%

+6.2%

+17.6%

+9.6

+4.7%

+11.4%

+4.4%

+8.3%

+0.3

+5.1%

+8.0%

-11.1%

+9.9%

December

+14.2%

+6.8%

+20.9%

+8.9%

+8.4%

+11.0%

+5.1%

+8.0%

+2.1%

+3.9%

+8.1%

+3.6%

+6.8%

4th

+14.0%

+6.7%

+16.1%

+9.7%

+3.1%

+11.4%

+3.5%

+6.4%

+0.3%

+5.9%

+8.0%

-2.1%

+11.9%

Full Year

+15.7%

+9.6%

+18.6%

+7.0%

+5.1%

+10.2%

+7.7%

+9.1%

+5.7%

+3.6%

+5.6%

+0.3%

+14.0%

January

+15.0%

+9.8%

+14.4%

+13.2%

+9.6%

+12.9%

+13.6%

+6.6%

+4.7%

+12.4%

+17.7%

+9.7%

+11.9%

Toronto

Vancouver

April

+30.6%

May

Quarter

2005

February

+8.7%

+4.5%

+4.0%

+10.2%

+7.8%

+5.5%

+7.0%

+4.5%

+7.1%

+15.8%

+10.4%

+8.5%

+1.5%

March

+10.9%

+8.2%

+5.1%

+17.5%

+12.5%

+7.3%

+9.7%

+6.6%

+15.4%

+19.5%

+19.1%

+22.2%

+19.6%

1st Quarter

+11.5%

+7.5%

+7.6%

+13.7%

+10.0%

+8.4%

+10.0%

+5.9%

+9.3%

+16.0%

+15.6%

+13.3%

+11.5%

+0.1%

+4.3%

-0.2%

+2.6%

+18.8%

+5.9%

+3.8%

+9.8%

April +4.4% +3.9% +5.8% +3.5% +5.5% Source: Transport Canada and individual airports’ traffic reports.

If your airport is interested in providing InterVISTAS Consulting Inc. with its monthly passenger statistics, please email Doris Mak at doris_mak@intervistas.ca Page 6 June 2005

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

Passenger Market Data for Airports Accurate and Timely Marketing Data: A Key to Air Service Development InterVISTAS Consulting, in conjunction with the International Air Transport Association and other suppliers, is offering a unique, and newly enhanced data product that provides passenger market sizes, travel routings and fare

New!

profile data for domestic, transborder and international markets.

InterVISTAS Consulting Inc. 550-1200 West 73 rd Avenue, Vancouver, BC, V6P 6G5 Canada Telephone: 1-604-717-1800 Facsimile: 1-604-717-1818 E-mail: info@InterVISTAS.com

New!

Expanded Origin & Destination Market Data for all Top Markets Inbound & outbound travel agency data is now available for Canadian domestic and top international air markets.

InterVISTAS’ market data is supported by a number of sources including IATA travel agency ticket sales. Travel agency sales represent approximately 80% scheduled international air tickets issued worldwide. The database includes more than 7 million air tickets issued in Canada and several million tickets destined to Canada annually.

Identify True Origin & Destination Flows •

Quantify city-pair market sizes for air service development initiatives

Analyse Hub Activity & Routings •

Identify key routing patterns to support air service proposals

Understand Competition within Airport Catchment Areas •

Quantify traffic leakage to determine true market sizes

For more information, contact: Nancy Keen Tel: 1-604-717-1822 Email: nancy_keen@InterVISTAS.com

NEWS ARTICLES AIR CANADA JAZZ BEGINS TO TAKE DELIVERY OF CRJ-705 AIRCRAFT

AIR CANADA UPDATE ACE AVIATION PLANS TO INVEST IN MERGED US AIRWAYS-AMERICA WEST ENTITY ACE Aviation Holdings, parent company of Air Canada, announced that it plans to invest CDN$95 million for approximately 7% in equity of the merged US Airways-America West entity. As part of the proposed investment, ACE has obtained commitments from the planned US AirwaysAmerica West merged entity for a five-year maintenance and ground-handling contract worth CDN$1.5 billion in revenue, through Air Canada Technical Services.

AIR CANADA RANKED BEST AIRLINE IN NORTH AMERICA BY SKYTRAX IN 2005 Air Canada has been ranked Best Airline in North America in a global passenger survey of 12 million air travellers conducted by U.K. based Skytrax. The annual survey was conducted between June 2004 and May 2005, and included 35 different measures of passenger satisfaction.

AIR CANADA TO INTRODUCE TORONTO-SANTO DOMINGO SERVICES Beginning 3 November 2005, Air Canada will operate three flights per week between Toronto and Santo Domingo using A319 aircraft.

Including this new service, Air Canada will be operating 21 flights per week to the Dominican Republic.

AIR CANADA TO LAUNCH VANCOUVERLAS VEGAS, CALGARY-LAS VEGAS SERVICES, INCREASES MONTREAL-LAS VEGAS FREQUENCY Beginning 30 October 2005, Air Canada will operate non-stop Vancouver-Las Vegas and Calgary-Las Vegas services using 120-seat A319 aircraft. Air Canada will also increase its Montreal-Las Vegas services from two times per week to daily services effective 30 October 2005.

Page 8 June 2005

Air Canada Jazz has taken delivery of its first CRJ-705, and will be taking delivery of three aircraft per month for a fleet total of 15 by December 2005.

AIR CANADA JAZZ INCREASES CALGARY-HOUSTON SERVICES Effective 1 July 2005, Air Canada Jazz will increase services between Calgary and Houston to three per day using CRJ-705 aircraft.

AIR CANADA JAZZ TO LAUNCH EDMONTON-REGINA, EDMONTONSASKATOON SERVICES Air Canada Jazz will launch twice daily nonstop services between Edmonton-Regina and Edmonton-Saskatoon starting 1 August 2005.

The service to Regina will be operated using 37seat Dash 8-100 aircraft, while the service to Saskatoon will be operated using 50-seat Dash8 aircraft.

AIR CANADA JAZZ LAUNCHES SERVICE TO HAMILTON FROM MONTREAL AND OTTAWA Starting 18 September 2005, Air Canada Jazz will introduce non-stop Hamilton-Montreal and Hamilton-Ottawa services, four and three times daily respectively. The services will be operated with 50-seat Canadair Regional Jet aircraft.

AIR CANADA INCREASES TORONTOSHANGHAI CARGO SERVICES, LINKS CALGARY TO CHINA SERVICE Air Canada plans to increase its cargo flights between Toronto and Shanghai from three per week to five times weekly using a MD-11 freighter wet-leased from World Airways. Four of the weekly flights will operate via Calgary, linking Alberta to the Chinese cargo market.

The expansion is subject to Air Canada receiving the necessary approvals from Transport Canada.

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

NEWS ARTICLES AIR CANADA UPDATE – CON’T AIR CANADA CANCELS B777/B787 ORDER FOLLOWING PILOT’S VOTE Air Canada has cancelled the Boeing order announced on 25 April, after being informed by the Air Canada Pilots Association (ACPA) that the union membership has rejected the tentative agreement on costs and working conditions related to the order. The order with Boeing had included firm orders for 18 B777s, including purchase rights for 18 more, along with firm orders for 14 B787 Dreamliners.

AIR CANADA INCREASES DOMESTIC FARES DUE TO HIGH FUEL PRICES Air Canada is adjusting all domestic fares due to high fuel prices. Fares for short-haul domestic flights (up to 483 km) will be increased

by CDN$8, while fares for domestic mediumhaul (484-1609 km) and long-haul flights (over 1609 km) will be increased by CDN$10 and CDN$15 respectively. The increase is effective on all tickets issued starting 23 June 2005.

OTHER CANADIAN AIRLINE NEWS WESTJET BOOSTS TORONTOCALGARY, TORONTO-HALIFAX, HALIFAX-ST. JOHN’S AND CALGARYLONDON SERVICES Effective 14 August 2005, WestJet will add seven flights per week to its Toronto-Calgary services, for a total of 45 per week (includes return flights). From 6 September 2005, seven flights per week will also be added to the carrier’s Toronto-Halifax and Halifax-St. John’s services, for a total of 21 and 14 flights per week respectively (includes return flights). CalgaryLondon services will be increased to three times per week starting 31 October 2005.

Page 9 June 2005

WESTJET INCREASES SERVICES BETWEEN TORONTO AND ORLANDO, TAMPA AND FORT LAUDERDALE, ADDS CALGARY-ORLANDO FLIGHTS Beginning 6 September 2005, WestJet will increase services between Toronto-Orlando and Toronto-Fort Lauderdale to four per week and three per week respectively. Services between Toronto and Tampa will be increased to seven per week (includes return flights). Effective 13 October 2005, the carrier will double services between Calgary and Orlando, to two per week.

WESTJET WITHDRAWS WINDSOR SERVICE WestJet announced that it will withdraw services from Windsor, Ontario, effective 30 October 2005. The carrier began services to Windsor in April 2003. The capacity from Windsor will be redeployed to London, where WestJet will increase Calgary-London services.

WESTJET LAUNCHES NEW SERVICES FROM LAS VEGAS TO TORONTO, KELOWNA, WINNIPEG, CALGARY AND EDMONTON Beginning 8 September 2005, WestJet will introduce new services between Toronto and Las Vegas. Services between Kelowna-Las Vegas and Winnipeg-Las Vegas will be launched starting 6 October 2005. In addition, Calgary-Las Vegas and Edmonton-Las Vegas services will begin 3 November 2005. All services will be operated twice per week.

WESTJET EXPANDS SERVICES TO PHOENIX WITH FLIGHTS FROM TORONTO, WINNIPEG AND VANCOUVER WestJet will launch two times per week services between Toronto and Phoenix starting 5 September 2005. In addition, Winnipeg-Phoenix services will be launched once per week beginning 14 October 2005, while VancouverPhoenix services will be operated three times per week (includes return flight) starting 15 October 2005.

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

NEWS ARTICLES OTHER CANADIAN AIRLINE NEWS – CON’T WESTJET LAUNCHES FLIGHTS BETWEEN FORT LAUDERDALE AND CALGARY, MONTREAL, BEGINS TORONTO-FORT MYERS, VANCOUVERPALM SPRINGS, WINNIPEG-LOS ANGELES SERVICES Beginning 5 September 2005, WestJet will launch three flights per week between Montreal and Fort Lauderdale. From 6 September 2005, services between Toronto and Fort Myers will be operated two times per week. Once per week Winnipeg-Los Angeles services will be launched from 12 October 2005. Flights between Calgary and Fort Lauderdale will begin 14 October 2005, three times per week (includes return flight), while two times per week Vancouver-Palm Springs services will start 16 October 2005.

WESTJET TO MOVE TORONTO OPERATIONS TO TERMINAL 3 Effective 22 June 2005, WestJet will move its operations at Toronto Pearson International Airport from Terminal 2 to Terminal 3. WestJet stated that Terminal 3 is a lower cost terminal from which to operate, and also has more room to accommodate the carrier’s growing operations.

WESTJET COMPLETES INSTALLATION OF LIVE IN-FLIGHT T.V. ON ALL B737700 SERVICES WestJet has completed installation of live satellite television services on its entire fleet of 39 B737-700 aircraft in partnership with Bell ExpressVu and LiveTV. The service is complimentary and individually controlled by each passenger.

Page 10 June 2005

WESTJET AND TRANSAT A.T. EXTEND CHARTER PARTNERSHIP WestJet and Transat A.T. have reached a 30-month agreement that allows Transat A.T. subsidiaries Transat Holidays and World of Vacations to charter WestJet’s Boeing 737 aircraft between Canada and international destinations. The contract is in effect from 1 May 2005 to 31 October 2007, with a value of over CDN$80 million in the first winter season (mid-December-end of April).

WESTJET CONVERTS TWO B737-600 PURCHASE OPTIONS INTO FIRM ORDERS WestJet has converted purchase options for two B737-600 aircraft into firm orders for delivery in August 2006. The carrier is scheduled to receive 10 B737-600s and one B737-700 aircraft in 2006.

TRANSAT A.T. REPORTS CDN$38 MILLION NET INCOME IN SECOND QUARTER 2005 Transat A.T., parent company of Air Transat reported a net income of CDN$38 million in the second quarter of 2005, a decrease of 15% from the same period last year. The tour operator attributed the lower net income to increased competition in the Ontario market and higher fuel prices. The number of travellers booking with the operator increased by 9.6% during the quarter.

HARMONY ACQUIRES FOURTH B757200, PLANS TO START CALGARYHAWAII AND KELOWNA-HAWAII SERVICES Harmony Airways has acquired its fourth B757200 aircraft and plans to expand services to Hawaii. This will include two flights per week between Calgary and Honolulu, and once per week between Calgary and Maui.

Service between Kelowna and Honolulu will also be launched once per week. Exact start dates to be announced later.

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

NEWS ARTICLES OTHER CANADIAN AIRLINE NEWS – CON’T HARMONY AIRWAYS RECEIVES DESIGNATION FOR CHINA SERVICES Harmony Airways has received designation from Transport Canada to operate scheduled air services between Canada and China. Allowable destinations include Beijing, Shanghai, Huangzhou, Xian, Chengdu, Kunming, Qingdao, Chongqing, Harbin and Dalian. Harmony is in negotiations to acquire long range aircraft for service to China in 2006, but has not yet announced which destinations it will serve.

CANADIAN AIRPORTS

ELECTRONIC TICKETING SAVES US$9.

Ralph Thompson, Director of Infrastructure Strategy at IATA, indicated that electronic ticketing saves US$9 per passenger. Mr. Thompson was speaking at the joint conference of ICAO/World Bank/ATAG in Montreal on 7 June 2005.

EU PROPOSES TICKET TAX The European Commission is considering adding a tax to airline tickets to pay for humanitarian aid. Current plans for the tax call for it to be non-mandatory.

The Association of European Airlines opposes the plan.

U.S. AND MEXICO CONSIDERS ADDING CANCUN TO U.S. AIR PRE-CLEARANCE PROGRAM

RESURFACING OF SECONDARY RUNWAY AT EDMONTON INTERNATIONAL AIRPORT From 13 June to 25 July 2005, a resurfacing of the secondary runway will take place at Edmonton International Airport. The CDN$2.6 million project is not expected to cause any carrier delays. The airport’s main runway will remain fully operational.

The U.S. and Mexico are considering adding Cancun International Airport to the U.S. Air Pre-Clearance program. The program allows immigration, customs, and agriculture checks for all passengers on direct flights to the U.S. to be completed at approved airports by U.S. officers, saving time at destination airports.

OTHER STANTEC ARCHITECTURE RECEIVES AANB LIEUTENANT GOVERNOR’S AWARD OF EXCELLENCE IN ARCHITECTURE FOR MONCTON INTERNATIONAL AIRPORT TERMINAL DESIGN Vancouver based Stantec Architecture has been awarded the AANB Lieutenant Governor’s Award of Excellence in Architecture for their design of the Moncton International Airport Terminal. Stantec has completed over 30 airport terminal design projects to date.

Page 11 June 2005

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NEWS ARTICLES CANADIAN NEWS CANADIAN PASSENGER LISTS COULD BE REQUIRED FOR U.S. FLYTHROUGHS A U.S. proposal has been put forward that would require Canadian airlines flying through, but not landing in, U.S. airspace to submit passenger lists. The passenger lists would be checked against the no-fly lists developed after the September 11 attacks on the United States. Currently, passenger lists are only required for flights landing on U.S. soil.

Canadian airlines often use shorter routings that cross U.S. airspace when flying between two Canadian cities, a tactic that saves fuel and shortens flight time. Seventy-five percent of Canadian flights entering U.S. airspace each year are for domestic travel. Canada’s industry stakeholders are not keen on the proposal becoming law, citing concerns on guarding the country’s sovereignty and increased wait times at airports.

PEOPLE Transport Minister Jean C. Lapierre proposed the appointment of David Gardiner as chair of the board of directors of the Pacific Pilotage Authority.

Eleanor Humphries has been named President of the Halifax International Airport Authority. She had previously been President and CEO of Credit Union Atlantic for the past five years and was honoured among the Top 50 CEOs in Atlantic Canada on three occasions.

Page 12 June 2005

Air Canada has announced the following executive appointments: Rob Reid, former Senior Vice President, Operations, is appointed Executive Vice President and COO of Air Canada with responsibility for Flight Operations, Flight Safety, System Operations Control, and Customer Service Strategy and Delivery.

Chantal Baril, former General Manager of Airport Operations – Eastern Canada, has been appointed to President and CEO of Air Canada Ground Handling Services.

Sean Menke, former Senior Vice President and COO of Frontier Airlines, has been appointed Executive Vice President and Chief Commercial Officer.

Joshua Koshy, former Senior Vice President of Information Technology at Emirates Group, joins Air Canada as the airline's Executive Vice President and CFO. David Tait, former Vice President of Virgin Atlantic’s North American operations, has been appointed to Senior Vice President, Customer Service.

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

NEWS ARTICLES AIR FRANCE CONVERTS B747S WHILE IT WAITING FOR B777FS

PEOPLE – CON’T Transport Minister Jean C. Lapierre announced the appointment of General Joseph Maurice Gérard Baril as chair of the board of directors of the Canadian Air Transport Security Authority (CATSA). General Baril retired from the Canadian Forces in 2001 and has since served as special advisor to the Ambassador for Mine Action of the Department of Foreign Affairs, and inspector general in the Department of Peacekeeping Operations at the United Nations Secretariat.

Richard Smithies, Director of Policy Analysis at IATA, announced his retirement after 42 years service in the Aviation Industry. Many in Canada will remember his stint as Economist at ICAO in Montreal as well as his time in The Economist Intelligence Unit. Richard will be retiring to Vancouver and will be succeeded at IATA by Simon Ralph.

Robert Barron, formerly vice president of maintenance and engineering, has been appointed Vice President and COO of Kitty Hawk Aircargo Inc.

CARGO

Air France will convert three Boeing 747-400 passenger aircraft from its fleet into freighters as part of the B747-400 Special Freighter (SF) programme offered by Boeing. The Air France B747-400s, which were previously in combi configuration, will have a capacity of 110 tonnes or 30 main-deck cargo palletts, and will be able to seat up to 19 people, a new option offered by Boeing. The first conversion will be delivered in June 2007 and will accelerate the phasing out of the airline’s B747-200 freighters in preparation for the arrival of the B777 freighter in fall 2008.

DHL U.S. REPORTS LOSS WHILE DEUTSCHE POST SEES PROFIT Deutsche Post reported a 2004 profit of €1.6 billion, up 21.3% from 2003, on revenues of €43.2 billon. Its U.S. operations, however, reported a loss of US$623 million on revenues of US$5.4 billion. John Mullen, joint CEO of DHL Express, said the company does not plan to pursue more market share until its hub network is complete in 18-24 months. So far, DHL Express in the U.S. has opened seven new hubs, has 1.3 million customers, handles 389 million shipments per year and has invested US$1.2 billion.

KITTY HAWK REPORTS GREATER Q1 LOSS OVER 2004 Kitty Hawk Cargo reported a net loss of C$2.1 million for the first quarter of 2005.

The carrier reported that soft demand, caused by poor economic conditions among domestic manufacturing sectors and a shift to less expensive transport modes due to higher fuel prices, widened its loss from C$1.8 million in Q1 2004. Scheduled freight revenue was down 1.1% to $32.8 million. Yields were up 5.9% from the previous year, but chargeable weight carried dropped 6.6%.

Page 13 June 2005

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NEWS ARTICLES WORLD AIRWAYS, AIR CANADA SIGN MULTI-YEAR ACMI AGREEMENT

CARGO – CON’T AIR CANADA TO FOCUS ON INTERNATIONAL CARGO EXPANSION In a recent interview, Claude Morin, President and CEO of Air Canada Cargo, said that the business unit’s focus is on expanding its international cargo services and that it will not return to the domestic allfreighter market. While the airline will continue to offer bellyspace on its passenger flights it recently started leasing a 727F from Cargojet, which has taken over the overnight cargo market in Canada. Air Canada Cargo currently has all-freighter service to Shanghai and Frankfurt and is looking at 15-20 other destinations, including Guangzhou, Tianjin, Hong Kong, Taipei, Japan, and Korea in Asia; Brazil, Santiago, Lima and Mexico in Latin America; and Milan, Spain and the U.K. in Europe. The airline’s cargo business unit is looking to acquire more freighters, particularly the MD-11F.

World Airways will operate two MD-11F aircraft for Air Canada from Toronto to points in China and North America through August 2007. The first of the all-cargo flights began in May 2005 to Shanghai, operating five times per week, with intermediate service to Calgary on four of those flights. The second flight will start in June.

CARGOJET RECEIVES AWARD FOR EXCELLENCE Cargojet was the recipient of the Air Cargo World Excellence Award for achieving superior ratings from customers in four key areas of measurement: Customer Service, Performance, Value Added Services and Information Technology. The airline also achieved its highest on-time performance levels in May 2005 of over 99.1%. Cargojet provides overnight air cargo service with 727-200 aircraft to 13 major city centres across Canada.

Page 14 June 2005

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AIRPORT TERMINAL PLANNING IN A NEW ENVIRONMENT PLANNING FOR THE PASSENGER PROCESS June 2005

Marcel Champagne Senior Planner

Considerable work has been done over the past few years to improve passenger processes and flows to render existing facilities and services more efficient and user-friendly. However, many airports continue to struggle with frequent bottlenecks at key processing points. In part, this is a result of the never ending introduction of new pre-board screening or border entry measures. With passenger traffic finally surpassing pre-9/11 levels, passenger terminal congestion will increasingly impact passenger service levels and create new demand for facility reconfiguration and/or expansion projects. This will ultimately require airport operators to revisit recently completed projects and existing development plans – sometimes requiring relatively costly capital projects.

Passenger Processing Improvements All is not gloomy though. Recent technological advancements have provided cost-efficient platforms to improve the efficiency and security of individual passenger processes. Major initiatives that have emerged in these areas include: •

The expanded availability of check-in kiosks and recent increased promotion of web-based check-in by air carriers to minimise passenger handling costs.

•

The implementation of such programs as CANPASS, INSPASS and NEXUS AIR by Canadian and U.S. border agencies to expedite the processing of pre-approved low-risk travellers.

•

The testing of a Registered Traveller program in the U.S. by Transportation Security Administration (TSA) to facilitate the screening of known low-risk travellers. (A similar program has been under consideration in Canada by CATSA.)

Automated processes such as kiosk check-in is greatly improving passenger flows and reducing queue lengths in certain areas of the air terminal building.

From a technological standpoint, the increasing use of these passenger processing technologies is contributing to greatly improving passenger flows at air carrier check-in counters and is facilitating the movement of those travellers that are participating in expedited border crossing and other registered traveller programs. Technological integration between programs still remains a challenge however and, as a result, these programs still have not reached their full potential in terms of ultimately enabling a seamless passenger process.

Page 15 June 2005

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AIRPORT TERMINAL PLANNING IN A NEW ENVIRONMENT – CON’T Moving Beyond ‘One Size Fits All’ Standards From a facility standpoint, much work remains to be done to fully incorporate the spatial requirements these initiatives create within existing terminals or into future facility designs. The 2004 IATA Airport Development Reference Manual (ADRM) takes a step in this direction by establishing updated recommendations for air terminal facility development, notably incorporating a section on hold baggage screening systems. However, in an era when passenger processing is becoming increasingly layered and based on risk management measures, the ‘one size fits all’ approach to air terminal development is now difficult to adopt. While installation of Retrofitting existing passenger check-in kiosks are relatively easy to undertake at most processing spaces based on airports due to the smaller footprint involved, retrofitting existing facility standards existing pre-board screening checkpoints to potentially continues to pose challenges in accommodate expedited screening lines or queuing areas terms of efficient passenger flows for registered travellers will be more difficult. and queuing spaces.

Differentiating Passenger Flows The new technologies and risk-based passenger processing measures ultimately differentiate between various categories of travellers – those that travel frequently, those that travel occasionally but are familiar with the passenger process, and those that travel infrequently and are unfamiliar with the processing requirements. As a result, air terminal buildings will increasingly need to account for the different processing requirements and flows these diverging groups of travellers generate.

Existing planning standards and guidelines typically provide a basis for facility reconfiguration and expansion projects. However, consideration must now also be given at early stages of the planning process to the characteristics of the travellers the projects intend to serve. This not only involves understanding current passenger facilitation and security processes but also recognising that these processes may change over the life-cycle of the facility. Keeping well informed of the trends that are shaping passenger processing and related technological advances in this area will help understand how these will influence future facility requirements.

While planning for the unknown may prove to be a challenge, adopting a planning approach that expects changes to occur will be key in delivering facilities that are both flexible and cost-effective for airport operators and their stakeholders.

Page 16 June 2005

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CARGO CAPERS 08 June 2005

Air Cargo Gateways to NAFTA. One

of the key strengths of Canadian airports is their location just to the north of the world’s largest economy. This advantage may not be so obvious when looking at the traditional Mercator map we are all familiar with, but our advantage really stands out when looking at an Azimuthal Equidistant projection centred on the North Pole.

Robert Andriulaitis Director, Transportation & Logistics Studies

This style of map (or a globe) shows that traffic flowing along two of the world’s largest trade corridors (EU-U.S. and Asia-U.S.) could be served using Canadian airports as gateways to/from the NAFTA marketplace. Benefits include increased aircraft utilisation (by getting goods off aircraft and reloading them with additional revenue traffic sooner), increased payloads (the shorter flights require less of a fuel/payload trade-off), and lower distribution costs (by minimising use of expensive aircraft and maximising use of inexpensive truck transport). Indeed, Canadian airports recognise this advantage – it has been a theme adopted by Canadian airports at the last TIACA International Air Cargo Forum and Exposition under an initiative co-sponsored by the airports and the Department of Foreign Affairs and International Trade.

A Growing Threat to Canadian Airport Gateways: Surface Border Congestion .

The ability of Canadian airports to serve as effective gateways between Eurasia and the U.S., however, is being undermined by growing congestion on the roads – particularly at border crossings between Canada and the U.S. The Ontario Chamber of Commerce recently released a study that estimates the cost of border delays to the U.S. economy.1 The cost is staggering: US$4.13 billion a year, or to put it in terms that might be easier to grasp, US$471,461 an hour! The impact on Ontario is also massive. A study released by the same group back in May 2004 estimated the cost to Ontario as CDN$5.25 billion per year. 2

1Cost of Border Delays to the United States Economy, prepared by the Ontario Chamber of Commerce Borders and Trade Development Committee, April 2005. A copy of the study is available on-line at: http://www.occ.on.ca/2policysubmissions/Microsoft%20Word%20%20Cost%20of%20Border%20Delays%20to%20US%20Economy_04.2005(1).pdf 2 Cost of Border Delays to Ontario, prepared by the Ontario Chamber of Commerce Borders and Trade Development Committee, May 2004. A copy of the study is also available on-line at: http://www.occ.on.ca/2policysubmissions/OCC%20Borders%20Cost%20Study%20(ONTARIO).pdf Page 17 InterVISTAS’ Canadian Aviation Intelligence Report June 2005 Copyright ©2005 InterVISTAS Consulting Inc., all rights reserved.

CARGO CAPERS – CON’T This is not a new issue. While security concerns following the September 11, 2001 terrorist attacks have certainly exacerbated border delays, congestion was a concern even before then. The continuing growth in Canada-U.S. trade, cross-border investment, and integration of manufacturing on both sides of the border following the FTA and later NAFTA means that traffic is going to increase in the future – unless congestion brings this flow to a grinding halt. Investment in infrastructure and technology certainly has been made, but efforts to date not only have failed to solve the problem, they have failed to stem the growth of the problem.

Public-Private Partnerships and Multimodal Approac hes. Now while it may be natural for airlines and airports to view trucks as competitors and problems, trucks are an integral part of virtually all air cargo movements. If Canada’s airports are to maximise their potential and Canadian airlines grow beyond the scope of our relatively small market, they will have to rely on serving more than Canadian origin/destination traffic. Serving the U.S. marketplace will be key.

Airports and airlines need to be participants in multimodal solutions to transportation impediments, be they infrastructure, policy, or regulatory. Public-Private Partnerships such as the Gateway Councils in communities such as Vancouver and Halifax are one means of working to resolve such issues.

Whatever particular approach may work in your community, it is important for airports and airlines to be ready, willing and able to work with federal, provincial and municipal governments, as well as the other modes of transport, to address impediments if they want to be players in the global air transportation industry rather than be relegated to the minor leagues.

Page 18 June 2005

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AIRPORT BEST PRACTICES 14 June 2005

New Kelowna P3 Aerospace Training Facility Common wisdom holds that airports cannot attract public-private partnership investment. Kelowna International Airport turned this wisdom upside down when it secured a new aircraft maintenance and aerospace training facility and $3 million in federal and provincial funding through a unique public-private partnership (P3) agreement.

Rob Beynon Director, Airport Marketing

Private Partners. While municipalities like to call joint municipal, provincial, federal initiatives P3s, this agreement has true private sector investors. Private sector partners Kelowna Flightcraft Inc. and WestJet supported the new facility and program with investments and in-kind contributions.

Public Education Partners. Public partners in the agreement include the BC Institute of Technology (BCIT) and School District #23 (Central Okanagan), who will provide training for maintenance of large Boeing aircraft, such as 757s, and ultimately train certified Aircraft Maintenance Engineers (AMEs) at the new facility. The Kelowna program is unique in that high school students can begin taking AME prerequisites in Kelowna area high schools.

Airport Initiative. The City of Kelowna and its airport staff led and co-ordinated the P3 initiative.

Kelowna Airport Manager Roger Sellick noted that the program will train new AMEs for aerospace at a time when the Canadian industry is seeking trained personnel. A separate project undertaken by the Okanagan Partnership, a government-business partnership, had identified aviation as an economic cluster that the Okanagan Valley should focus development around, and noted that Kelowna International Airport and its aerospace manufacturing are enablers of growth. 1 The new facility will be constructed on the west side of the airport. It will include training facilities, a hangar, and an apron large enough to accommodate a Boeing 757.

Opens new land to aviation development. To access the planned facility, the City of Kelowna will provide a tugway which will cross the CN Rail line, which runs north-south, parallel to the main runway. This new tugway will allow the development of adjacent lands for aerospace uses in the future.

Jobs. The education/maintenance facility will generate up to 109 direct person years of labour annually generating wages of up to $6.2 million, analysis by InterVISTAS for the Kelowna International Airport showed.

This innovative program is a strong example of how a public airport working with private and public partners can develop a facility and program that no single participant could have developed on their own.

ICF Consulting, “Okanagan Competitiveness Strategy: Analysis,” January 2004.

Page 19 InterVISTAS’ Canadian Aviation Intelligence Report June 2005 Copyright ©2005 InterVISTAS Consulting Inc., all rights reserved.

1

TOURISM AND THE END TO WORLD POVERTY 15 June 2005

World Bank/ICAO/ATAG Conference. I had the honour to be invited to attend and

address a joint conference of the World Bank, ICAO and ATAG. The theme of the conference was “Maximising Civil Aviation’s Economic Contribution.” One theme that was emphasised at the conference was the new view of the UN and the World Bank of the role of tourism in lifting nations out of poverty.

An about face on the role of tourism in economic development. Consider

Michael Tretheway Executive Vice President

this from UN Secretary General Kofi Annan: “It is now widely understood that tourism can play a significant role in helping people lift themselves out of poverty”. This statement reflects an emerging consensus view which in many ways is an about face. Not too long ago, tourism was viewed at best as supporting only low wage jobs, and at the worst as perpetuating colonial suppression of the less developed nations.

However, as reported by Naomi Cide at the conference, the evidence indicates that the fastest growing economies in Africa are those that had the largest share of tourism in GDP. This and other evidence has changed the view of world leaders, and the developing nations themselves, as to the strong positive role that tourism can play in lifting nations out of poverty. Meles Senawi, Prime Minister of Ethiopia, recently stated: “My Government believes an increased focus on tourism can play a more significant role in the War on Poverty in Ethiopia & across Africa as a whole.”

As a result, tourism has been included in UN’s Millennium Development Goals (MDGs). In explaining the integrative role of tourism, Kofi Annan stated that: “It can benefit other economic sectors and small businesses, such as traditional agriculture and food production, handicrafts and textiles. Through eco-tourism -- one of the fastest growing parts of the industry -- it can contribute significantly to rural development, while promoting the environmentally sensitive development of basic infrastructure in remote locations.”

For conference program and information: http://www.icao.int/ATWorkshop/

The World’s Largest Economic Sector. Geoff Lipman of the World Tourism

Organisation (and formerly with InterVISTAS’s predecessor Global Aviation Associates) stated that tourism is now the largest economic sector in the world, and that the UN is recognising that it can play a significant role in lifting the least developed nations out of poverty. ICAO’s Cornelia Fischer reported on the role of air transport. She indicated that air transport accounts for over 5 million direct jobs (airlines and airports) world-wide, plus up to 8.5 million indirect and induced jobs. However, when ‘catalytic impacts’ are considered, those 5 million jobs drive up to 33 million jobs globally. The catalytic jobs from air transport are those enabled in other economic sectors (e.g., tourism, distribution services) by the availability of well connected, accessible and affordable air transport.

The policy link. Geoff Lipman and others emphasised that to enable the full potential of

tourism and other catalytic effects from aviation, nations must re-examine archaic foreign ownership limits on air transport. Commercial aviation’s mercantilist/protectionist approach is virtually the last sector excluded from the world trade regime, yet it is the catalyst to lifting nations from poverty. ICAO agrees and recommends that nations repeal foreign ownership limits in bilateral air service agreements, and replace them with “principle place of business” clauses.

A final note: For those interested in the MDGs to end poverty, I highly recommend reading Jeffrey Sach’s new book The End of Poverty. Jeffrey is special advisor to Kofi Annan, and one of the most brilliant and influential economists of our age.

Page 20 June 2005

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THE OTTAWA REPORT 16 June 2005

Transport Canada Releases Consultation Document on the Current Canada-U.S. Air Services Agreement

Sam Barone Regional Vice President

On 26 May 2005, Transport Minister Jean-C. Lapierre released a consultation document to obtain stakeholder views on the current CanadaU.S. Air Transport Agreement. The current agreement was signed in 1995 but since then, the U.S. has defined “open-skies” more precisely (the current agreement is not considered “open-skies” by the U.S.), and a more liberalised agreement is being considered. The 1995 agreement has only very limited provisions for fifth freedom services (pick up traffic in the other partner’s territory and carry it to a third country as part of a service from the home territory), seventh freedom services (stand-alone services between the other partner’s territory and a third country), co-terminalisation of certain cargo flights, and contains restrictions on pricing and flight numbering. Transport Canada estimates that the current size of the Canada-U.S. air transportation market is about 18.6 million annual passengers, one of the largest international air transportation markets in the world.

Canada and India Reach New Air Services Agreement

Canada has reached a new air services agreement with India that increases the allowable number of flights between the two countries by five-fold to 35 roundtrip flights per week for each country.

Canadian air carriers will now have access to the Indian markets of Bangalore, Chennai, Hyderabad and Kolkata (Calcutta), in addition to Delhi and Mumbai. Indian air carriers now have access to Edmonton, Vancouver, and two other cities to be named by India, in addition to Montreal and Toronto.

The agreement allows for unlimited cargo capacity between the two countries. Each country can also designate as many carriers as it wants for Canada-India services. The Canadian and Indian negotiating delegations have agreed to meet again in 2007, or sooner if necessary, to ensure that the new bilateral meets market demands.

New Truck Route Announced for Sault Ste. Marie to Improve Access to the U.S. The governments of Canada and Ontario and the City of Sault Ste. Marie has announced the construction of a CDN$12.6 million truck route in Sault Ste. Marie to improve access to the International Bridge connecting traffic between Ontario and Michigan. Over 120,000 commercial trucks carry approximately CDN$3.5 billion in goods over the International Bridge each year. Federal government funding comes from the CDN$65 million Border Crossing Transportation Initiatives portion of the Strategic Highway Infrastructure Program (SHIP) that was announced in 2001.

Page 21 June 2005

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THE WASHINGTON REPORT June 2005

DOT Report Finds ATC Modernisation Costs and Delays Growing

U.S. air traffic control modernisation is being hampered by cost increases and implementation delays, says a report released by the Department of Transportation’s Office of Inspector General. Sixteen FAA projects to modernise and improve equipment and facilities for air traffic controllers were reviewed and eleven were found to have costs grow by over US$5.6 billion. Nine were found to have delays ranging from two to twelve years and two projects were deferred. The report recommends that the FAA review the benefits and timing of each project given the current cost situation, and delays and cuts in funding from Congress.

ATA Forecasts 4.1% U.S. Domestic Passenger Volume Increase

Charles Chambers Senior Vice President InterVISTAS-ga2 Consulting Inc. Washington, D.C.

The Air Transport Association (ATA) expects about 200 million passengers to travel on U.S. airlines this summer, an increase of 4.1 per cent over what was carried last year. Low fares were cited as one reason why passenger volumes will increase without much profit for U.S. airlines, who are continuing to struggle with increased fuel prices and taxes.

New Acting TSA Administrator The Transportation Security Administration (TSA) announced that Ken Kasprisin, currently acting deputy administrator for TSA, has been named acting assistant secretary for TSA, replacing David Stone, whose last day was 3 June 2005. Tom Blank, TSA’s chief systems support officer, fills Kasprisin’s previous post.

DHS Announces New Security Plan to Re-open Washington Reagan to GA Traffic

As part of the 2003 Vision 100 - Century of Aviation Reauthorization Act, Congress had the Department of Homeland Security (DHS) develop a security plan to permit general aviation aircraft to operate into and out of Washington Reagan Airport (DCA). The new security measures will allow General Aviation (GA) traffic to return to DCA, but will be limited to a maximum of 48 flights per day and will be subject to strict security measures, including: • • •

Advance registration and pre-clearance of flights; TSA inspection and enhanced background checks of crew, passengers, baggage and cargo; and All flights must have a Law Enforcement Officer on board.

GA flights are expected to resume 90 days after the publication of an interim final rule, which will be released shortly. GA operations to DCA have been suspended since the terrorist attacks in 2001, at which time there were approximately 95 daily GA and charter flights in and out of the airport.

DOT Modifies Law for Rebooking Stranded Passengers of Bankrupt Airlines

The DOT recently modified the 2001 law that requires carriers to accommodate passengers of airlines that cease operations due to bankruptcy or insolvency. The DOT’s latest clarification allows carriers to charge up to $50 for accepting the ticket of an insolvent airline, and any departure fees the carrier must pay to a foreign government. The DOT added that a carrier must honor the ticket even if it flies to a different airport near the same city, or if the routing is a connection rather than non-stop. The law will expire on 19 November 2005, but has been extended several times already due to the poor financial condition of the aviation industry.

Page 22 June 2005

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INTERVISTAS NEWS June 2005

Former Air Canada executive Doug Port joins InterVISTAS Consulting Airline executive Doug Port has joined InterVISTAS Consulting Inc. as Executive Consultant, Airline Services and Tourism Development. Port, who retired from Air Canada as Senior Vice President, Customer Services, has more than 32 years’ experience in the industry, including airport operations, marketing and sales, government and community relations.

As a company executive, he led major portfolios including Airports, Corporate Communications, Marketing and Sales, Sales and Product Distribution, International, Corporate Affairs and Government Relations and Customer Service.

He will be based in the Greater Toronto area and will assist InterVISTAS’ clients in airline and airportrelated strategic services, as well as developing new initiatives to stimulate tourism. Port started his career in Air Canada in Public Affairs before becoming Executive Assistant to Claude Taylor, the airline’s then President and CEO. He was General Manager for Southern Alberta, and then for five years ran Air Canada’s major hub at Pearson International Airport. As Senior Director, Airports Development, he was responsible for the redevelopment of Terminal II.

Yesawich, Pepperdine, Brown & Russell and InterVISTAS Launch New Portrait of Canadian Leisure Travellers Survey Yesawich, Pepperdine, Brown and Russell (YPB&R) and InterVISTAS Consulting Inc. have formed a partnership to launch a new study on the travel habits, preferences and intentions of Canadian leisure travellers. The results will be based on a survey of 1300 pre-qualified Canadian leisure travellers.

Canadian leisure travellers account for 80 million overnight trips and $10 billion in travel expenditures.

The new Portrait survey will provide critical insights into the lifestyles and motivations of these travellers, their future trip intentions, their views on recent travel experiences at home and abroad, trip planning and booking behaviour, emerging lifestyles and brand preferences.

YPB&R is a U.S.-based marketing communications company that specialises in serving clients in the travel and leisure industries. The firm has gained international recognition for its series of forwardlooking syndicated marketing research studies which include the YPB&R/Yankelovich Partners National Travel MONITOR™, the YPB&R Portrait of Affluent Travelers, the YPB&R Portrait of Family Travelers and the YPB&R Portrait of American Gamblers.

The survey, entitled the “2005 Portrait of Canadian Leisure Travellers,” will be completed this summer, and copies of the results will be available in August. For further information contact Dennis Marzella at YPB&R, 407-838-1706 (dennis_marzella@ypbr.com) or Paul Clark at InterVISTAS, 604717-1837 (paul_clark@intervistas.com).

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.

To subscribe, please send an email to subscribe@InterVISTAS.com To unsubscribe, please send an email to unsubscribe@InterVISTAS.com.

Prepared by InterVISTAS Consulting Inc.

Page 23 June 2005

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