CAIR Issue No. 74 - September 2009

CANADIAN AVIATION INTELLIGENCE REPORT

In this issue…

Features Columns: • CEO Update (p.1) • Fuel Price Update (p.2) • Caribbean Report (p.11) • Asia Report (p.12) • Europe Report (p.13) • Ottawa Report (p.14) • Washington Report (p.15)

Regular Reports: • Airline Data – Canada (p.3) • Airline Data – U.S. (p.4) • Airline Data – International (p.5) • Selected Canadian Airport Data (p.6) • News (p.7) • InterVISTAS News (p.16)

CEO UPDATE September 2009

Welcome to the September 2009 edition of InterVISTAS Consulting Inc.’s Canadian Aviation Intelligence Report (CAIR).

InterVISTAS Project Update The InterVISTAS Group is pleased to provide an update on our current consulting assignments, in particular:

•

InterVISTAS to explore potential for MRO and Related Facilities at Don Muang Airport (Bangkok) InterVISTAS is part of a consortium that was awarded a contract to explore the potential for a MRO and related facilities at Don Muang Airport in Bangkok (formerly the city’s international airport). Airports of Thailand is planning to reopen the airport for domestic/LCC flights and other uses. InterVISTAS’ responsibilities will include a regional maintenance market overview, strategic planning, and preliminary revenue and cost guidance for potential new facilities at the airport.

Gerry Bruno CEO

•

Route Analysis for Helsinki Airport

•

Successful completion of PreClearance Act Review

InterVISTAS has been commissioned by Helsinki International Airport to undertake comprehensive route analysis for a proposed new Asia air service. The assessment includes detailed forecasts of local and connecting market shares, load factors, flight revenues, codesharing implications and impact on competing carriers. The analysis will be used to strengthen the business case for operating the potential service.

Consulting on U.S. Preclearance is a specialty of InterVISTAS. Few people realize that this capability started in Toronto in 1952, and U.S. Customs and Border Protection is now active preprocessing U.S.-bound passengers at 14 airports around the world including 8 in Canada. As a result of InterVISTAS experience, Foreign Affairs Canada asked the firm to complete a Preclearance Act Review. Including stakeholder feedback as well as an evaluation of trends and issues, the Preclerance Act Review was tabled before Parliament August 19, 2009 and this month the report became public at http://www.canadainternational.gc.ca/canam/bilat_can/preclearance-precontrole.aspx?lang=eng. The close U.S.-Canada relationship in Preclearance is an important one to commercial aviation in Canada; future maturation of process, technologies and the legal framework will make Preclearance better to take full advantage of Open Skies capabilities.

The September CAIR Line-Up This month’s publication line-up includes a column on fuel prices. Our regular columns include: ▪ Caribbean Report

▪ Asia Report

▪ Ottawa Report

▪ Washington Report

▪ Europe Report

I hope you enjoy this month’s publication!

Page 1 September 2009

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

FUEL PRICE UPDATE October 2009

Crude oil prices at $70 per barrel Crude oil prices for near term delivery is currently at just under $70 per barrel. Crude oil prices continue to rebound from a low of $39 per barrel in April 2009.

A recent report from the Energy Information Association in the U.S. indicated that crude oil inventories were down 978,000 barrels compared to the previous week. A survey of financial analysts had forecast a gain of 2 million barrels instead. Oil prices have been on the rise recently amid optimism that global economic conditions are improving and that economic recovery is underway.

… with futures prices at $80 by 2012 and $90 by 2017

Crude Oil Futures Prices Spot Month - October 2009 $160

May 2008

$140

Sep 2008

$120

Mar 2008 Jun 2009

$100

Oct 2009 $80

Apr 2009 Jan 2009 Crude Oil Futures Prices

$60

Crude Oil Spot Prices

$40

$20

Jan-17

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

$0 Jan-03

Director, Special Projects

US $ per Barrel

Doris Mak

Currently, a futures contract for delivery of crude oil in December 2012 costs 14% more than the current spot price ($80 per barrel), while a futures contract with a December 2017 delivery date costs 30% more than the current spot price ($90 per barrel). The current price of this contract is 38% less than the price of the contract if purchased during the market peak in May 2008.

Month of Delivery

Page 2 September 2009

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

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

August 2009 Air Carrier

Air Canada1 Domestic (Mainline) International & Charter

WestJet

Passenger Traffic Revenue Passenger Kilometres % Change % Change over 2008 from 2007

Capacity Available Seat Kilometres % Change over 2008

% Change from 2007

Change over 2008

Change from 2007

-0.9%

-2.3%

-3.6%

-5.7%

+2.4pts (to 86.8%)

+3.0pts (from 83.8%)

+1.7%

-2.5%

-2.8%

-4.6%

+3.8pts

+1.9pts

-2.2%

-2.3%

-3.9%

-6.2%

+1.5pts

+3.5pts

-4.7%

+16.6%

-0.40%

+21.4%

-3.9pts (to 84.5%)

-3.5pts (from 88.0%)

Analysis: • Air Canada domestic traffic sector increased 1.7% in August 2009 over August 2008; however, system-wide passenger traffic declined 0.9% in the same period. Overall domestic load factor was up 3.8 pts to 85.3%.

•

•

Load Factor

Air Canada Mainline’s international sector experienced declines in both traffic (-2.2%) and capacity (-2.3%) in August 2009 versus August 2008. Only Atlantic traffic was up for the month while all other international regions were in decline. The Pacific market suffered the greatest declines in traffic (-11.1%) and available capacity (-13.9%) of all international sectors.

WestJet reported a system-wide load factor of 84.5%, down 3.9 percentage points in the month of August. Both passenger traffic and available seat capacity are down 4.7% and 0.4%, respectively. August marks the fourth consecutive month of traffic declines for the airline.

6% 4% 2% 0% -2% -4% -6% -8% -10% -12%

Air Canada Domestic Mainline

M ay- June July Aug Sep 08

Oct Nov Dec Jan- Feb Mar Apr May Jun 09

Dom RPK

Dom ASK

Air Canada International 10% 5% 0% -5% -10% -15% -20% May- June July Aug Sep 08

Oct Nov Dec Jan- Feb Mar Apr May Jun 09

Int'l RPK

Jul Aug

Int'l ASK

WestJet 25% 20% 15% 10% 5% 0% -5% -10% May- June July Aug Sep Oct Nov Dec Jan- Feb Mar Apr May Jun 08 09

RPK

1

Jul Aug

Jul Aug

ASK

As of July 2009, Air Canada reports only consolidated results including Jazz.

Page 3 September 2009

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

AIRLINE DATA – U.S. U.S. Airlines Release August 2009 Traffic Figures

2

1

2

Notes:

(RPMs – millions)

(ASMs – millions)

Capacity

Load Factor

11,173 ↓8.1%

13,194 ↓9.4%

84.7% ↑1.2 pts

682 ↓3.1%

938 ↓7.2%

72.7% ↑3.0 pts

18,727 ↓2.2%

21,635 ↓3.2%

86.6% ↑0.9 pts

11,025 ↓3.3%

12,804 ↓6.2%

86.1% ↑2.5 pts

8,783 ↓3.9%

10,231 ↓6.0%

85.8% ↑1.9 pts

5,497 ↓3.9%

6,415 ↓3.8%

85.7% ↑0.0 pts

6,693 ↑1.0%

8,343 ↓6.1%

80.2% ↑5.6 pts

1,846 ↓6.1%

2,175 ↓3.4%

84.9% ↓2.4 pts

2,561 ↑0.0%

2,959 ↑0.6%

86.6% ↓0.5 pts

826 ↓10.3%

932 ↓13.0%

88.7% ↑2.7 pts

Traffic

Airline

1. Mainline operations only.

2. Load factor includes scheduled service only.

Sources: Carrier traffic reports.

Page 4 September 2009

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

AIRLINE DATA – INTERNATIONAL International Airlines Release August 2009 Traffic Figures (RPKs – millions)

(ASMs – millions)

Capacity

Load Factor

1

19,335 ↓2.9%

22,808 ↓4.2%

84.8% ↑1.1 pts

2

15,418 ↑9.0%

18,476 ↑7.2%

83.5% ↑1.4 pts

10,870 ↓0.7%

12,840 ↓2.4%

84.7% ↑1.5 pts

8,797 ↓2.1%

10,612 ↓2.8%

82.9% ↑0.7 pts

7,035 ↓12.9%

8,984 ↓14.1%

78.3% ↑1.1 pts

4

6,887 ↓9.6%

10,308 ↓8.7%

66.8% ↓0.7pts

5

7,894 ↑1.9%

9,389 ↓5.0%

84.1% ↑5.7 pts

Traffic

Airline

3, 4

1. Includes Martinair.

2. Includes Lufthansa Passenger Airlines, SWISS and from July 2009 onwards British Midland.

3. Includes Qantas Domestic, QantasLink, Jetstar Domestic, Qantas International, Jetstar International, and Jetstar Asia.

4. Traffic results are for July 2009 – August 2009 results are not yet posted.

5. Includes Cathay Pacific and Dragonair.

Page 5 September 2009

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

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

2008

Toronto

Vancouver

July

+3.0%

+0.7%

MontréalTrudeau -2.1%

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

+1.9%

+7.2%

+9.1%

-1.4%

-3.9%

+5.6%

+2.7%

+8.8%

-1.5%

St. John’s +0.3%

August

+3.0%

+0.3%

-0.9%

+1.2%

+4.1%

+9.9%

-4.8%

+2.0%

+6.7%

+4.8%

+8.1%

+6.9%

+3.0%

September

-1.6%

3rd

-6.0%

-5.1%

-5.7%

+4.9%

+6.9%

-2.4%

-4.1%

+3.5%

+2.0%

+14.9%

+4.7%

+2.5%

+1.6%

-1.4%

-2.6%

-0.7%

+5.4%

+8.6%

-2.9%

-1.8%

+5.4%

+3.2%

+10.5%

+3.2%

+1.9%

October

-4.8%

-3.2%

-4.0%

-3.2%

+6.1%

+1.0%

-3.7%

-1.0%

+3.5%

+2.4%

+12.3%

+10.3%

+2.7%

November

-3.2%

-5.9%

-4.6%

-0.1%

+2.7%

-5.6%

-1.3%

-8.5%

+3.2%

-1.1%

+7.4%

+0.6%

+4.3%

Quarter

2009

December

-1.1%

-6.7%

-3.3%

+0.8%

+6.8%

+3.5%

-0.9%

-4.9%

-7.1%

-3.1%

+15.1%

+5.3%

+3.8%

4th Quarter

-3.1%

-5.3%

-4.0%

-0.9%

+5.2%

-0.3%

-2.0%

-4.5%

-0.1%

-0.7%

+11.6%

+5.4%

+3.5%

Full Year

+2.6%

+2.0%

-0.1%

+2.0%

+6.1%

+6.1%

+0.1%

+3.2%

+3.8%

+2.1%

+9.6%

+5.0%

+3.2%

January

-4.0%

-9.6%

-2.7%

-4.2%

-1.7%

-0.9%

-1.0%

-7.5%

+1.1%

-8.8%

+10.5%

+7.1%

-0.1%

February March 1st Quarter April May June 2nd Quarter July

-5.9% -8.8% -6.3% -6.7% -11.9% +12.3% -10.4% -4.9%

-11.3% -11.3% -10.7% -8.1% -14.6% -16.0% -13.1% -11.7%

-7.0% -5.7% -5.3% -6.4% -10.4% -7.8% -8.2% -1.5%

-3.5% -7.7% -5.2% -5.1% -8.3% -6.9% -6.8% -2.5%

-3.2% -3.7% -2.9% 1.5% -8.5% -9.9% -5.7% -7.5%

-8.0% -4.1% -4.4% -7.1% -4.5% -6.9% -6.2% -5.5%

-3.5% -5.2% -3.3% -3.2% -8.1% -8.3% -6.6% -7.6%

-11.3% -14.3% -11.5% -1.9% -8.4% -7.5% -5.9% -3.0%

-2.8% -1.2% -1.0% 0.1% -3.4% -4.1% -2.5% +8.0%

-8.5% -5.5% -7.6% -0.7% -2.9% 11.0% +2.4% +2.0%

+6.5% -0.1% +5.7% 11.8% -2.0% -1.9% +2.3% +8.0%

+0.8% -5.1% +0.9% 6.4% -2.8% 1.0% +1.4% +1.2%

-5.9% -4.1% -3.4% 3.3% 2.0% -4.4% +0.1% +1.5%

Source: Transport Canada and individual airports’ traffic reports. Note: Subject to revision.

Page 6 September 2009

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NEWS JAZZ AIR APPOINTMENTS Jazz announced the following new

AIR CANADA UPDATE NEW SERVICES

appointments: • Mr. Colin Copp: Chief Administrative Officer

Commencing 3 June 2010, AC will add seasonal three times weekly service between both Athens and Montréal and Barcelona and Montréal. Flights will operate on a 244-seat Boeing 767-300ER until 18 October 2010.

• Ms. Jolene Mahody: Chief Operating Officer

On 12 June 2010, AC will introduce daily year round service between Montréal and Brussels.

Flights will be operated on a newly refurbished 211-seat Boeing 767-300E.

REVISED FLEET DELIVERY SCHEDULE ANNOUNCED

Commencing 3 June 2010, AC will add seasonal three times weekly service between both Athens and Toronto and Barcelona and Toronto. Flights will operate on a 244-seat Boeing 767-300ER until 18 October 2010.

WESTJET UPDATE On 24 August 2009, WestJet announced a revised fleet delivery schedule, in order to align the addition of new aircraft with the company’s future strategic plan:

On 5 December 2009, AC will offer the only non stop services between Calgary and Maui and Calgary and Honolulu. The seasonal services will operate on a Boeing 767-300ER up to 5 times per week.

Effective 30 November 2009, AC Jazz will offer the only daily non-stop year round service between Montréal and Houston.

Flights will be operated on a 75-seat CRJ-705 aircraft.

NEW APPLICATION FOR APPLE IPHONE AND IPOD TOUCH Air Canada released an Apple ® iPhone ™ / iPod touch ® application. This application enables travellers using an iPhone or iPod to check-in or obtain information on flights.

NEW TRAVEL PACKAGE FOR EASTERN FLYERS On 9 September 2009, WestJet announced a travel package containing 20 one-way tickets between Toronto and Montréal and Toronto and Ottawa.

RON BRENNEMAN JOINS WESTJET WestJet announced on 8 September 2009, that Mr. Ron Brenneman has joined the airline’s Board of Directors. Mr. Brenneman is currently Executive Vice Chairman of Suncor Energy Inc.

Page 7 September 2009

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NEWS WESTJET UPDATE – CON’T SHARES AGREEMENT WITH UNDERWRITERS WestJet and a syndicate of underwriters led by CIBC entered into a shares agreement on 9 September 2009. The agreement states that the underwriters must purchase from WestJet and sell to the public an aggregate of 13,390,000 common and voting variable shares at a price of $11.20 per share.

Gross proceeds from the sale of the shares are expected to raise $150 million. There is also an over-allotment option of 2,008,500 shares which could raise an additional $22.5 million for the airline.

U.S. AIRLINES

SOUTHWEST OFFERS LINE CUTTING OPTION

As of 2 September 2009, travellers flying with Southwest can jump to the front of the boarding line by paying a $10 fee.

FRONTIER TO EXITS CHAPTER 11

Frontier exited Chapter 11 bankruptcy protection on 2 October 2009 as a wholly owned unit of Republic Airways Holdings Inc. Citing reorganization costs of US$10.5 million; the airline won court approval of its bankruptcy plan on 10 September 2009.

UNITED AND ASIANA DISCUSS CODESHARE POTENTIAL

U.S DOT APPROVES GRENADA SERVICE

On 8 September 2009, the U.S. Department of Transportation approved Delta’s application to offer service between the U.S. and Grenada. The approval takes effect on 12 December 2009.

DELTA EXPECTS A 3%-4% OPERTING MARGIN IN 3rd QUARTER In an investor report issued on 14 September 2009, Delta stated that it expects to report a 3 -4% operating margin for the 3rd quarter, and a breakeven for the full year.

This is due to lower jet fuel prices than previously anticipated. In July 2009, Delta had projected a 1 – 3 % operating margin for the 3rd quarter, based on a jet fuel price of $2.17/gallon.

Current jet fuel prices are now expected to be $2.14/gallon, with Delta projecting the final fuel cost to average out at $2.13/gallon for 2009.

DELTA’S CODE SHARING STATUS On 1 September 2009, the U.S. DOT approved code sharing for Delta and Virgin Blue.

However, The U.S. DOT will not approve code Page 8 September 2009

sharing between Delta and Virgin Blue’s V Australia or Pacific Blue until Delta completes safety audits with those carriers.

On 31 August 2009, United and Asiana announced their interest to codeshare on routes between South Korea and the U.S.

AIRTRAN TO EXPAND INTO THE CARIBBEAN MARKET AirTran is awaiting approval from the U.S. DOT to operate flights out of Orlando International Airport to Nassau, Montego Bay and Aruba. The carrier is hoping to begin service at the end of 2009 or early 2010.

INTERNATIONAL AIRLINES JAPAN AIRLINES SEEKS TO STABILIZE ¥ 99 BILLION LOSS

Between April-June 2009, Japan Airlines lost ¥ 99 billion (US$1 billion), and is currently considering capital investments from Air France-KLM, American Airlines, travel agencies, trading groups, business partners and financial investors to stabilize its financial losses.

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

NEWS INTERNATIONAL AIRLINES – CON’T JAL CUTS 60% OF ROUTES AT OSAKA Japan Airlines plans to cut about 60% of its international routes at Kansai International Airport (Osaka). The airline wants to withdraw from money-losing routes to rebuild its operations, as it lost approximately US$1 billion last quarter.

QANTAS’ RECEIVES

4TH

A380

With the delivery of its fourth Airbus A380, Qantas increased flight frequency to London and Los Angeles on 7 September 2009. The airline’s Sydney-Singapore-London service increased from three to five times per week. Service between Sydney and Los Angeles increased from three to four times per week.

AIR NEW ZEALAND REPORTS PROFIT

For the year ending 30 June 2009, Air New Zealand reported its net profit to be US$14.4 million for the year ending June 30.

KOREAN AIR REPORTS NET PROFIT

Korean Air reported a net profit of US$63 million Q2, 2009.

The airline also reported that September reservations for international travel were up 21% relative to last year.

FARE WAR BETWEEN GOL AND TAM As of late August, South American airlines, GOL and TAM, have been competing against each other in discounting walk-up fares. As a result, the cost of one way air travel between Sao Paulo and Rio has declined to US$74 from US$242. The price of a one way fare between Brasilia to Sao Paulo has declined to US$76 from US$293.

Page 9 September 2009

LUFTHANSA TAKES OVER AUSTRIAN AIRLINES On 3 September 2009, Lufthansa took control of Austrian Airlines by buying a 90% stake. On 9 October 2009, the remaining free-float shareholders accepted the public takeover offer by Lufthansa.

AIR FRANCE TO CUT JOBS Air France plans to reduce 1,500 jobs due to capacity cuts in its passenger network and due to a decline in its cargo activity.

CARGO IATA AND ICAO COLLABORATE IN DEVELOPMENT OF NEW WEB-BASED PRODUCTS FOR TRANSPORT OF DANGEROUS GOODS On 9 September 2009, The International Air Transport Association and International Civil Aviation Organization signed an agreement to create web-based products that will facilitate the ease of dangerous goods transportation. Two products will be developed, iShip and DGOnline. iShip will integrate dangerous goods shipping tools with IATA’s Dangerous Goods Regulations content.

DGOnline will display up-to-date information from dangerous goods regulatory and industry publications in multiple languages.

GARUDA AIRLINES CITED BY ACCC IN ALLEGED CARGO PRICE FIXING

Indonesia’s Garuda Airlines is the latest airline to be cited by the Australian Competition and Consumer Commission (ACCC) for alleged air cargo price fixing that took place in Hong Kong and Indonesia between 2001 and 2006. Thus far, the ACCC has collected over US$34 million in penalties from Qantas, British Airways, Air France, KLM, Martinair and Cargolux.

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NEWS expected to break even this period.

OTHER C919 ON DISPLAY AT ASIAN AIR SHOW

On 8 September 2009, Commercial Aircraft Corporation of China’s C919 jumbo jet scale model was on display at the Asian Aerospace show in Hong Kong. Its maiden flight is planned for late 2014.

Some features of the C919 include • Standard range: 4,075 km • Max extended range: 5,555 km • Economy class capacity: 168 seats • Mixed class capacity: 156 seats

TRANSAT A.T. INC. ANNOUNCES EQUITY FINANCING

On 10 September 2009, Transat A.T. Inc. entered into an agreement with a syndicate of underwriters led by National Bank Financial Inc. The agreement provides for the sale of an aggregate of 4,250,000 Class A variable voting shares and/or Class B voting shares from the Corporation’s treasury at $13 per share. Aggregate gross proceeds to the Corporation are projected at US$55.25 million.

IATA FORECASTS AIRLINE LOSSES On 15 September 2009, the International Airport Transport Association announced a modified global financial forecast of US$11 billion in 2009 in airline losses, mainly due to increasing jet fuel prices and declining yields.

This figure is US$2 billion less than IATA’s previous period forecast. IATA also forecasts the airline industry’s revenue for 2009 to decrease to US$455 billion.

A regional comparison amongst the different carriers shows that European carriers posted a loss of US$3.8 billion, followed by Asia-Pacific carriers of US$3.6 billion, and North American carriers of US$2.6 billion. Conversely, Middle Eastern and African carriers each posted a loss of US$0.5 billion. Latin American carriers are Page 10 September 2009

SCHEDULED INTERNATIONAL TRAFFIC LOSSES MODERATE

The International Air Transport Association announced that July’s scheduled international traffic only decreased by 2.9%, compared to 7.2% in June. The international passenger load factors remained unchanged at 80.3%.

A regional comparison amongst the different carriers shows that European, North American, Latin American, and African carriers experienced an average passenger demand decline of around 4%, an improvement from June 2009. Moreover, Asia-Pacific carriers experienced a decline of 7.6% compared to 14.5% in June 2009. Conversely, Middle Eastern carriers’ demand grew 0.3%, due to increased capacity and greater market share of traffic between Europe and Asia.

U.K. GOVERNMENT ADVISOR IN FAVOUR OF AIRLINE EMISSIONS CAPS A U.K. government adviser is in favour of capping aviation emissions as part of a United Nation’s plan for climate change. The Committee on Climate Change notes that by reducing gross U.K. aviation emissions in 2050 to 2005 levels, together with 90% emissions cuts in other sectors, it would achieve the required economywide 80% emissions reduction under the Climate Change Act.

U.S. SENATE PASSES TRAVEL BILL

On 9 September 2009, the Senate passed the U.S. Travel Promotion Act by a 79 to 19 vote. The legislation will inaugurate a budget for U.S. tourism promotion, and will be funded through fees raised from the Travel Authorization’s Electronic System. This electronic system will charge $10 to pre-screened visitors among the Visa Waiver Program countries.

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

THE CARIBBEAN REPORT September 2009

Regional capacity continues to grow This month, capacity increases to the region were led by American Airlines which strengthened its Miami hub with the addition of new routes and enhanced services. The carrier will offer an eighth flight to San Juan, Puerto Rico; add a second daily flight from Fort Lauderdale to Port-au-Prince, Haiti; increase its flight schedule with one additional daily flight to Cancun, Curacao, Grand Cayman, Providenciales, Punta Cana, Santo Domingo and Freeport; and increase weekly services to Antigua, Bermuda, La Romana and Santiago, St. Croix, St. Maarten and St. Lucia. American also announced a new service from Phoenix and Montego Bay and in June 2010, a fourth daily flight from Miami to Kingston Jamaica will be added.

Jacqueline Clarke Manager, Strategic & Tourism Development

Competition for U.S.-Caribbean market share also heated up with AirTran, JetBlue and US Airways announcing plans for service expansions and enhancements. AirTran will increase the number of Caribbean destinations served from two to five with commencement of service to Nassau and Montego Bay from Atlanta (daily service), from Baltimore and Orlando (four weekly flights) to Montego Bay and from Atlanta and Orlando to Aruba. JetBlue, with 71 daily flights to Caribbean destinations will offer two new routes this winter – from Boston and Orlando to Montego Bay. Both airlines are awaiting government approval. US Airways will commence a new seasonal weekly non-stop service from Boston to St. Thomas, effective 19 December 2009.

From Canada, WestJet announced its largest seasonal non-stop flight schedule in early September which included 10 new services to the Caribbean and Mexico - from Ottawa to Montego Bay and Punta Cana; from Toronto to one of Cuba’s higher-end resort destinations – Cayo Coco in Cuba, as well as Cozumel, Turks and Caicos, St. Martin, Varadero, Freeport and Holguin; from Hamilton to Punta Cana; from Thunder Bay to Punta Cana; and from Calgary to Ixtapa in Mexico. Also from Canada, Sunwing Vacations added Grenada to its 2009-2010 winter schedule with two weekly services. From Europe, two Czech carriers, Travel Service and Czech Airlines, will begin service to Punta Cana from the Czech Republic this winter.

Second international airport for Guyana A project that had commenced in 2003 to upgrade Ogle Airport, Guyana’s main domestic airport, to international status was completed earlier this month. The facility was expanded to include upgraded facilities for immigration, customs, air traffic control, health and fire services. Phase II of the project, extension of the runway by a further 4,000 feet, is scheduled to be completed later this year.

Puerto Rico gains access to German market Under the new code share agreement signed between Lufthansa and JetBlue, passengers traveling from Frankfurt and Munich will be able to connect with JetBlue flights to San Juan from New York and Boston.

Page 11 September 2009

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THE ASIA REPORT September 2009

JAL delays investment talks with Delta Japan Airlines (JAL) will delay talks with Delta Air Lines about an investment in the airline as JAL completes a new restructuring plan. JAL aims to complete its restructuring plan by November 2009.

The plan includes job cuts and cessation of unprofitable routes. Delta is proposing an investment of US$335 million in JAL.

Taiwan, China launch regular cross-strait flights

Doris Mak Director, Special Projects

Taiwan and Mainland China have collaborated to launch regular cross-strait flights. This ends Taipei’s six-decade ban on non-stop flights to/from Mainland China that has been in place since the 1949 Chinese Civil War. Prior to 31 August 2009, passengers traveling from Taiwan to Mainland China or vice versa were required to transfer flights at an intermediary stop at either Hong Kong or Macau.

Although the availability of non-stop air services will reduce a passenger’s cost and time to travel to and from Taiwan into Mainland China, Hong Kong’s and Macau’s air transport sector will be negatively impacted. Taiwanese and Chinese airlines will now operate a total of 270 round-trips per week, up from the previous 108 charter flights.

Air India and Singapore Airlines sign Frequent Flyer Program Agreement Air India and Singapore Airlines have signed a frequent flyer program agreement that enables passengers of either carrier to earn and redeem mileage points on flights operated by either carrier.

Singapore Airlines’ Kris Flyer program members can earn KrisFlyer miles when flying with Air India, or choose to use their miles for flights with the Indian carrier. Likewise, Air India’s Flying Returns programme members can earn miles when travelling on Singapore Airlines’ flights.

China Southern 6-month net profit down 95.3% China Southern Airlines posted net profit of 38 million Yuan (US$5.6 million) for the first 6-months of the airline’s fiscal year. This is down 95.3% from the same period last year of 809 million Yuan (US$119.2 million). The airline has struggled financially mainly due to the impact that global H1N1 flu outbreak has had on global air travel, as well as stiffer competition.

Thai Airways Ranked Top Three Airline Worldwide According to a recent survey organized by SmartTravelAsia.com, Thai Airways was voted 3rd place for the “Best Airlines Worldwide 2009” category. In addition, Thai also ranked 3rd for “The Best Business Club Worldwide” and 2nd in “The Best Cabin Service Worldwide”. Readers of the Smart Travel Asia online magazine were asked to participate in this survey inquiring about their opinions of different airlines’ quality of service, in-flight and seat comfort, entertainment and staff. Voters were particularly impressed with Thai staff’s readiness to smile, quick meal services, and excellent cabin service.

Page 12 September 2009

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THE EUROPE REPORT September 2009

WTO Distributes Ruling in Airbus Subsidy Case On 5 September 2009, the World Trade Organization (WTO) issued a confidential 1,000 page ruling on whether the “launch aid” money advanced by European Union members to Airbus was illegal.

Although the three member panel’s decision is not expected to be made public for several months, the U.S. press is reporting that the WTO ruled against the EU in finding that the subsidies received by Airbus were in contravention of the SCM Agreement and GATT provisions.

Ian Kincaid Director, Economic Analysis UK Office

The decision marks progress in the nearly five-year old Airbus case. On 4 October 2004, the United States initiated consultations with France, Germany, Spain and the U.K. concerning measures affecting trade in large civil aircraft. Arguing that Airbus was unfairly grabbing market share from Boeing because of a purported $205 billion in “launch aid”, the U.S. asked the WTO to form an arbitration panel. The EU responded by filing a counter-claim arguing that the U.S. was itself providing illegal subsidies to Boeing.

EU officials have responded to preliminary reports of the ruling by stating that the WTO’s decision must be taken into context with the EU’s counter-claim. The Boeing case continues to be in the preliminary stages of the WTO’s dispute resolution process; a similar finding against the U.S. for providing illegal subsidies to Boeing could act as a catalyst for both parties to settle. Without settlement, a final outcome in both of the cases is not expected in the near future, as the voluminous procedural steps and appeal avenues could prolong the cases for several more years.

Governments around the world have expressed large interest in the Boeing and Airbus cases. A WTO finding that “launch aid” is in fact an illegal subsidy could drastically affect the way aircraft manufacturers fund their operations and the level to which governments are involved in the commercial aerospace industry.

E.U. Protests Pre-Screening Fee The European Union is claiming discrimination towards the proposed $10 fee to pre-screen citizens of visa waivered countries entering the U.S. Rather than needing a visa, citizens from the 35 visa waivered countries are required to confirm their visa-free status prior to arrival via the U.S.’s ‘electronic system for travel authorization’. European Union nations, whom comprise the majority of U.S. visa waivered countries, are criticizing the U.S. for what they perceive as being an attempt to introduce visa requirements on EU travelers. The new pre-screening fee will be used to help implement and fund the U.S. Travel Promotion Act; the legislation is aimed at creating a public-private partnership tasked with marketing the United States as a tourism destination.

Page 13 September 2009

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THE OTTAWA REPORT September 2009

Air Canada Pilots Association applies for judicial review of retirement age decision The Air Canada Pilots Association (ACPA) wants to preserve mandatory retirement. Under their current contract, AC pilots are contractually obligated to retire at 60 years old. Arguing that mandatory retirement is in violation of the Canadian Human Rights Act, two former ACPA members brought the issue before the Canadian Human Rights Tribunal (CHRT). On 28 August 2009, the Tribunal rendered its decision in the Vilven & Kelly v. Air Canada matter. The CHRT ruled in favor of the complainants by agreeing that mandatory retirement - despite being negotiated and agreed to by the union - amounts to discrimination based on age. On 28 September the ACPA applied to the Federal Court for judicial review of the decision. They will argue that the CHRT erred in failing to consider Supreme Court of Canada decisions that permitted employers and employees to negotiate mandatory retirement through collective bargaining.

Solomon Wong Senior Vice President, Borders, Security & Planning

Revised regulations for U.S. charters operating in Canada Effective 2 September 2009, the Canadian Transportation Agency is prohibiting U.S. charters from flying between multiple Canadian cities. Only charters with season long contracts to fly NHL hockey teams will be exempt from the new regulations. Approved charters will be permitted to service multiple Canadian hockey cities so long as they met certain compliance and monitoring requirements, including: - Applicant charters must have a season long contract with an NHL organization; - Disclosure of the NHL organization’s season schedule; - Disclosure of NHL-charter company contracts, including detailed accounting of dates, times, destinations, seating capacity and aircraft type; and - Confirmation that all persons traveling on chartered flights are directly employed or under contract by the NHL organization using the chartered service.

This regulation was in retaliation of U.S. Department of Transportation regulation prohibiting Air Canada charters from flying between multiple U.S. cities.

However, on 18 September 2009, an agreement was reached between Air Canada and the U.S. DOT to allow resumption of the flights prior to the start of the 2009/2010 NHL season. Air Canada has agreed to submit monthly reports to ensure compliance with cabotage laws. Air Canada will also designate official to monitor its own compliance and agreed to only carry passengers that are affiliated with the teams that contracted the charter.

CTA issues implementation guides for service dogs The Canadian Transportation Agency (CTA) has issued two implementation guidelines to assist airlines in providing better service to passengers with a certified need for service dogs (e.g., visually impaired and other disabilities). To encourage implementation of key initiatives under the Code of Practice: Aircraft Accessibility for Persons with Disabilities, deadlines for implementation of section 2.7 are for 1 December 2009 to ensure their aircraft have sufficient space for service dogs. Carriers have until 31 March 2010 to equip their aircraft with tactile row markers (i.e., raised lettering and numbering and/or Braille).

The implementation of such guidelines are expected to provide persons with visual impairments more independence in accessing their seats once aboard an aircraft.

Page 14 September 2009

InterVISTAS’ Canadian Aviation Intelligence Report Copyright Š2009 InterVISTAS Consulting Inc., all rights reserved.

THE WASHINGTON REPORT September 2009

Southers Nominated To Head TSA The Obama Administration announced its intent to nominate Erroll G. Southers to succeed Kip Hawley as the next administrator of the Transportation Security Administration (TSA). This pick has been widely anticipated for weeks, but the White House was waiting until Congress returned from its August recess to make the announcement.

Steve Martin Senior Vice President Washington, D.C. Office

Southers is currently assistant chief for the Los Angeles World Airports Police Department’s Office of Homeland Security and Intelligence. He also serves as the associate director at the center for risk and economic analysis of terrorism events at the University of Southern California. His public safety experience includes positions as California's deputy director of homeland security, as a special agent with the FBI, and as a local police officer in California.

Changes, No Changes at TSA Checkpoints The TSA announced that it will begin additional screening on “certain powders” to prevent passengers from bringing on board ingredients that could be used in improvised explosive devices. TSA noted that while common powders are not prohibited, a small percentage may require additional screening.

Typical security checkpoint procedures will remain the same. The vast majority of commonly carried powders, like most medication, infant formula and makeup, are unlikely to need further screening.

Officers will use X-ray technology to determine which substances may require additional screening with a powder test kit. If a particular powder is determined to be a potential threat, it will not be permitted into the secure area or checked baggage.

TSA also acknowledged that it is not prepared to lift the 3-ounce limitation on liquids. Security rules adopted three years ago after the liquid-bomb plot was foiled limit passengers to carrying 3-ounce containers, which must fit in a 1-quart bag. Former TSA chief Kip Hawley predicted that passengers would be able to carry large liquid containers through checkpoints by this fall. TSA has installed new screening devices at many airports, but most airports have not received the upgrades. In addition, the software used for screening the liquids is still producing an unacceptable number of “false positives” – that is, the software is identifying benign liquids as dangerous. TSA believes that the 3ounce restriction may be in place for another year.

On 8 September 2009, a British court convicted three men of leading a plan to detonate bombs on aircraft bound for the United States and Canada, using liquid explosives hidden in pop bottles. They had been arrested in August 2006. This was the act that triggered the global ban on liquids.

U.S. Senate Encourages Foreign Travel The U.S. Senate passed the "Travel Promotion Act" with strong bipartisan support. The legislation creates a public-private partnership to promote the U.S. as a premier travel destination. Research suggests that visitors to the U.S. from overseas spend approximately $4,500 per person, per trip – far more than U.S. domestic travelers. The U.S. Travel Association said that "The Travel Promotion Act will generate $4 billion in new stimulus each year; 40,000 new U.S. jobs in the first year; and $425 million in deficit reduction over 10 years - at no cost to U.S. taxpayers.”

The bill is modeled after a similar one in Australia. The program would be funded by a combination of private sector contributions and a $10 fee on foreign travelers from countries now covered under the visa waiver program. However, that fee has generated some controversy, particularly within the European Union, which labelled the fees a de facto visa.

Page 15 September 2009

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

INTERVISTAS NEWS InterVISTAS Speaking Engagements Rob Beynon, Vice President, Development Economics • NCDC: Prince George, B.C., – 07 October 2009.

Mr. Beynon will be delivering a presentation titled “Identifying Economic Opportunities along Transport Corridors.”

Nigel Brownlow, Vice President, Commercial Intelligence • Airline Information – Ancillary Revenue and Frequent Flier Programs: Los Angeles, CA – 22-23 October 2009.

Mr. Brownlow will be delivering a presentation titled “Integrating Ancillary Revenue and Revenue Management” and will be participating in a panel discussion on the integration of Frequent Flyer Programs and Ancillary Revenue objectives.

Steve Martin, Senior Vice President • Transportation Research Board Annual Research Conference: Washington, D.C. – 11 January 2010.

Mr. Martin will be moderating panel that will include presentations in the following topics: o

Effects of trans Atlantic liberalization

o

Nav Canada’s use of traffic forecasts in financial planning

o

Flight delay costs for passengers in the U.S.

o

Recent developments in supply chain management and air freight

George Novak, Director, Safety, Borders and Security • AVSEC World 2009 Conference: Cape Town, South Africa, – 10-12 November 2009.

Mr. Novak will be delivering a presentation titled “How to set up a One-Stop Security System: Methodology and Best Practices.”

Barney Parrella, Executive Vice President • ACI Latin America/Caribbean Annual Conference: Salvador de Bahia, Brazil – 17 November 2009.

Mr. Parrella will be delivering a presentation titled “Airport Privatization in Latin America.”

Page 16 September 2009

InterVISTAS’ Canadian Aviation Intelligence Report Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

INTERVISTAS NEWS – CON’T InterVISTAS Speaking Engagements (continued) Dr. Mike Tretheway, President & Chief Operating Officer • International Open Skies Summit: Vancouver, BC – 25 September2009.

Dr. Tretheway will be a keynote speaker at the Open Skies summit.

• Canadian Aviation Maintenance Council: Halifax, NS – 22 October 2009.

Dr. Tretheway will be a keynote speaker at the conference, delivering a presentation titled “Economic Outlook.”

• IATA, Agenda for Freedom, 2nd Summit: Montréal, QC – 15 November 2009.

Dr. Tretheway will present “Liberalization of Air Transport.”

John Weatherill, Vice President, Route Development • Aviation - The Catalyst for Economic Development Conference: Beijing, China – 14 September 2009.

Mr. Weatherill will deliver a presentation titled "Measuring and Leveraging the Economic Impact of New Air Services.”

• 4th Annual Airport Marketing & Business Development Conference: Munich, Germany – 15-16 October 2009.

Mr. Weatherill will deliver a presentation titled “Airport Revenue Recovery: Action Plan for Generating Revenue and Funding Marketing in a Difficult Economy.”

InterVISTAS’ Canadian Aviation Intelligence Report is a collection of information gathered from public sources, such as press releases, media articles, etc., information from confidential sources, and items heard on the street. Thus, some of the information is speculative and may not materialise.

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Page 17 September 2009

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