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CANADIAN AVIATION INTELLIGENCE REPORT

In this issue… Features Columns: • CEO Update (p.1) • Farnborough Airshow 2008: Summary of Aircraft Orders (p.2) • Fuel Drops to $64 Per Barrel (p.4) • The Environmental Report (p.14) • The Caribbean Report (p.15) • The Asia Report (p.16) • The European Report (p.17) • The Ottawa Report (p.19) • The Washington Report (p.20)

Regular Reports: • Airline Data - Canada (p.5 ) • Airline Data – U.S. (p.6 ) • Selected Canadian Airport Data (p.7) • News (p.8) • InterVISTAS News (p.21)


CEO UPDATE October 2008

Welcome to InterVISTAS Consulting Inc.’s October 2008 edition of the Canadian Aviation Intelligence Report (CAIR). This month, I would like to share some exciting news about the InterVISTAS Group.

InterVISTAS Consulting Inc. Joins DHV Group InterVISTAS has now merged with Delcan and the DHV Group which includes Innova, and NACO. This new relationship creates a high profile, internationally experienced team of recognized experts in transportation, aviation and tourism. This partnership will combine the proven excellence of the four companies to continue providing outstanding customer service, as well as bring additional depth and resources to innovative solutions to solve client needs.

Gerry Bruno President & CEO

Each of our new partners will bring expanded capabilities to InterVISTAS as we continue to deliver strategic solutions in the transportation, aviation and tourism sectors. Our dynamic team of transportation, tourism, environmental planning and economic development professionals assist private and public sector clients in developing and achieving their visions and potential. Joining forces with DHV, NACO, Delcan and Innova will open a new and exciting chapter in our work for our clients. Delcan’s Chairman and CEO, Jim Kerr, indicated that “our strategic partnership with InterVISTAS and its transportation industry focus provide synergy for both firms. Delcan sees significant opportunities to expand our business in transportation infrastructure and intelligent transportation systems. We are excited about this new partnership and the additional value it brings not only to our client base, but to the transportation industry in general.” “This partnership brings an excellent opportunity to further expand our business,” said Roel Overakker, Chairman of NACO and Global Director of DHV’s Aviation Group. “Our clients require customized services and our approach is Local Delivery of Global Solutions. The consolidated team expands our ability to provide local delivery via a team of global experts.” With its roots in the Vancouver Airport Authority, InterVISTAS was created in 1999, when local airport employees purchased the former YVR-VISTAS, a subsidiary of the Airport Authority. “All of us at Vancouver Airport Authority are proud of what InterVISTAS has accomplished at home and around the world over the past nine years,” noted Larry Berg, President and CEO, Vancouver Airport Authority. “This latest international opportunity reinforces the tremendous potential of InterVISTAS as one of the transportation industry’s top consulting firms, a real credit to the employee-owners who have grown the business in recent years.” I hope you enjoy this month’s CAIR publication after our two month hiatus!

Page 1 October 2008

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


FARNBOROUGH AIRSHOW 2008: SUMMARY OF AIRCRAFT ORDERS October 2008

The Farnborough International Airshow was held in Farnborough, United Kingdom from 14 to 20 July 2008. This year’s aerospace exhibition attracted more than 130,000 business visitors and over 150,000 public visitors from around the world. Major sales announcements made at the Airshow include 480 total aircraft and equipment systems orders valued at US$89 billion, more than twice as much as the previous airshow held in 2006. Table 1 provides a summary of transactions made at the Airshow for the world’s leading aircraft manufacturers: Airbus and Boeing.

Connie Chang Project Analyst

Table 1: Summary of Aircraft Orders at the Farnborough International Airshow 2008 Aircraft Type

Order Quantity

Number of Other Commitments

Buyer

AIRBUS A320s

A320s Subtotal A321s

70

Dubai Aerospace Enterprise (Firm)

23

Aviation Capital Group (Firm)

20

Etihad Airways (Firm)

10

Tunisair (Firm)

123

0

5

A321s Subtotal A330s

5

Aeroflot (Firm) 4

Qatar Airways (MOU)

2

Qatar Airways (Options)

6

3

A330-200s A330-300s A330s Subtotal

Tunisair (Firm) 5

8 11

Alis of Italy (MOU) Saudi Arabia Airlines (Firm)

5

A350 XWBs

30

Asiana Airlines (Firm)

A350 XWBs

25

Etihad Airways (Firm)

A350 XWBs

10

Synergy Aerospace (Firm)

A350 XWBs

3

Tunisair (Firm)

A350-900 XWBs

30

Dubai Aerospace Enterprise (Firm)

A350s Subtotal A380s

98

0

10 A380s Subtotal

Total Airbus Orders Page 2 October 2008

Etihad Airways (Firm)

10

0

247

11

Valued at US$40.5 billion

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


FARNBOROUGH AIRSHOW 2008: SUMMARY OF AIRCRAFT ORDERS – CON’T Aircraft Type

Order Quantity

Number of Other Commitments

Buyer

BOEING B737-700s

15

Aviation Capital Group (Firm)

B737-800s

54

FlyDubai (Firm)

B737-800s

35

Malaysian Airlines (Firm)

B737-800s

30

Air China (Firm)

B737-800s B737s (Next Gen) B737s Subtotal B777-300ERs

B777s Subtotal B787-9s

20 7 141

Malaysia Airlines (Purchase Rights) Arik Air (Firm)

20

15

Air China (Firm)

10

Etihad Airways (Firm)

25

10

Etihad Airways (Options)

5

Etihad Airways (Purchase Rights)

15

35

Etihad Airways (Firm) 25

Etihad Airways (Options)

10

Etihad Airways (Purchase Rights)

B787s Subtotal

35

35

Total Boeing Orders*

201

70

Other Aircraft and Equipment Systems Orders

32

n/a

Valued at US$48.2 billion

Total Aircraft and Equipment Systems Orders

480

n/a

Valued at US$88.7 billion

Source: Press releases from Boeing, Airbus and Farnborough International Airshow 2008 websites. Notes: * Total Boeing firm orders is a summation of firm orders mentioned in Boeing news releases and may not include all aircraft orders made at the Airshow.

Page 3 October 2008

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


FUEL DROPS TO $64 PER BARREL October 2008

Crude oil prices fall to $64 as global demand weakens… Crude oil prices for near term delivery closed at a 17-month low on 24 October 2008, falling over $3 to $64 a barrel. The decline occurred despite an announcement made by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by 1.5 million barrels per day for the next month. OPEC President Chakib Khelil commented that the organization’s intention is to stabilize oil prices between $70 and $90 a barrel. If oil prices continue to tumble, analysts expect OPEC to reconvene in December to negotiate further cuts aimed at restoring market equilibrium. Crude oil prices have been in fluctuation for the past several weeks, much of it due to uncertainty in the global financial markets.

…with futures prices at $82 in 2012 and $86 in 2016. Futures prices in October 2008 remain lower than futures prices established in September 2008. A futures contract in October 2008 for delivery of crude oil in December 2012 is currently priced at $82; a 26% decline from the same contract if purchased in September 2008 but still 9% higher than if the contract was purchased a year ago in October 2007. In December 2016, the price of a crude oil futures contract is $86, 35% higher than the current spot level.

Crude Oil Futures Prices $160

$140

May 2008 Jun 2008

$120 Sep 2008 Mar 2008

$100

Oct 2008 $80

Oct 2007 Sep 2007 Nov 2006

$60

Crude Oil Spot Prices

$40

Crude Oil Futures Prices

$20

Sep-12

Jan-12

May-12

Sep-11

Jan-11

May-11

Sep-10

Jan-10

May-10

Sep-09

Jan-09

May-09

Sep-08

Jan-08

May-08

Sep-07

Jan-07

May-07

Sep-06

Jan-06

May-06

Sep-05

Jan-05

May-05

Sep-04

Jan-04

May-04

Sep-03

Jan-03

$0 May-03

Director, Special Projects

US $ per Barrel

Doris Mak

Notwithstanding a few spikes, oil prices experienced a freefall from their peak close of $145 per barrel in early July. Several factors have contributed to the downward pressure on crude oil prices, including a strengthening U.S. Dollar, global economic slowdown, turbulence in the financial and housing sectors, an over-supply from crude oil producers and weakened demand from consumers.

Month of Delivery

Page 4 October 2008

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


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

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

Capacity Available Seat Kilometres

Load Factor

% Change over 2007

% Change from 2006

Change over 2007

Change from 2006

-4.8%

-1.9%

-6.9%

-3.4%

+1.8pts (to 80.9%)

+1.3pts (from 79.6%)

Domestic (Mainline)

-4.0%

-1.8%

-3.7%

+0.4%

-0.2pts

-1.7pts

Jazz

-7.3%

-1.5%

-1.6%

+1.9%

-4.3pts

-2.4pts

International & Charter

-5.1%

-1.9%

-8.1%

-4.9%

+2.6pts

+2.5pts

+11.0%

+30.8%

+15.8%

+30.5%

-3.2pts (to 75.5%)

+0.3pts (from 75.2%)

Air Canada 1

WestJet

Analysis: •

1

Air Canada Mainline’s domestic sector, which decreased by 4.0% over September 2007, contributed to an overall passenger traffic decline of 4.8%. The carrier’s domestic load factor also decreased slightly from 78.3% in September 2007 to 78.1% in September 2008. September marks the third straight month of domestic traffic declines. Air Canada Mainline’s international sector experienced declines in both passenger traffic and seat capacity levels, decreasing by 5.1% and 8.1% respectively in September 2008 over September 2007. The Transborder sector shows the largest decrease in seats during this period (-20.8%), a likely result of Air Canada’s capacity and staff reductions announced in June 2008, which detailed the elimination of 13% of U.S. Transborder capacity. On a positive note, passenger traffic and seat capacity in the Latin America and Other sector increased by 7.2% and 11.3%, respectively, between September 2007 and September 2008.

Air Canada Domestic Mainline

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

Jul07

Aug

Sep

Oct

Nov

Dec

Jan08

Dom RPK

Feb

Mar

Apr

Dom ASK

May June July Aug

Sep

Jazz data is not included in this graph

Air Canada International 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% Jul07

Aug

Sep

Oct

Nov

Dec Jan- Feb 08

Int'l RPK

Mar

Apr

May June July Aug

Sep

Int'l ASK

WestJet 25% 20% 15% 10% 5% 0% Jul- Aug 07

Sep

Oct

Nov

Dec Jan- Feb 08

Mar

Apr May June July Aug Sep

RPK ASK WestJet reported a decrease in its systemwide load factor by 3.2 percentage points to 75.5% in September 2008 over September 2007. The load factor decline reported in September 2008 was due to seat capacity growth (+15.8%) outpacing traffic (+11.0%) growth over last year.

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

Page 5 October 2008

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

1

2

2

Notes:

(RPMs – millions)

(ASMs – millions)

Capacity

Load Factor

1,748 ↓4.8%

2,279 ↓11.5%

76.7% ↑5.3 pts

587 ↓17.2%

910 ↓9.9%

64.5% ↓5.7 pts

5,309 ↓5.9%

8,378 ↑0.8%

63.4% ↓4.5 pts

6,494 ↓10.9%

8,486 ↓8.1%

76.5% ↓2.5 pts

8,333 ↓9.2%

10,459 ↓8.6%

79.7% ↓0.5 pts

9,858 ↓9.1%

12,869 ↓7.0%

76.6% ↓1.8 pts

9,710 ↓0.8%

12,139 ↓3.7%

80.0% ↑2.4 pts

5,533 ↓4.3%

6,523 ↓4.7%

84.8% ↓0.3 pts

4,641 ↓1.0%

5,792 ↓3.5%

80.1% ↑2.0 pts

1,231 ↓2.0%

1,656 ↓9.7%

74.4% ↑5.9 pts

711 ↓8.3%

859 ↓13.7%

82.8% ↑4.9 pts

Traffic

Airline

1. Mainline operations only. 2. Load factor includes scheduled service only.

Sources: Carrier traffic reports.

Page 6 October 2008

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

2007

Toronto

Vancouver

August

+0.7%

+2.6%

MontréalTrudeau +10.4%

September

+1.5%

+3.6%

3rd

+0.5%

October November

Quarter

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

+7.1%

+17.1%

+6.6%

+5.0%

+4.4%

+5.4%

+9.2%

+9.0%

5.7%

St. John’s -5.8%

+8.9%

+7.9%

+12.4%

+3.7%

+1.9%

+4.2%

+6.1%

+9.6%

+7.9%

+10.5%

-0.6%

+2.1%

+10.1%

+6.8%

+15.9%

+6.4%

+3.7%

+4.3%

+6.1%

+8.7%

+7.2%

+9.9%

-4.6%

+3.7%

+3.2%

+8.4%

+8.3%

+13.9%

+8.4%

+3.5%

+4.6%

+8.0%

+7.5%

+7.2%

+5.5%

+5.2%

+5.0%

+7.7%

+6.1%

+8.0%

+15.9%

+11.0%

+5.7%

+5.7%

+10.8%

+4.2%

+8.4%

+9.1%

+0.8%

December

+2.8%

+4.4%

+8.1%

+3.7%

+8.2%

+9.2%

+3.8%

+4.2%

+8.1%

+3.7%

+7.5%

+3.7%

-5.5%

4th Quarter

+3.8%

+5.2%

+7.3%

+7.1%

+12.4%

+9.5%

+4.0%

+4.8%

+8.9%

+5.0%

+7.7%

+6.0%

+0.5%

Full Year

+1.7%

+3.3%

+8.7%

+8.5%

+16.3%

+7.4%

+5.5%

+2.7%

+6.6%

+11.3%

+8.6%

+10.2%

-0.2%

January

+4.8%

+9.2%

+4.1%

+4.9%

+7.6%

+6.4%

+4.4%

+2.2%

+6.1%

+7.8%

+9.2%

-0.3%

-2.4%

February

+7.7%

+12.8%

+9.9%

+7.4%

+10.2%

+8.3%

+7.4%

+8.6%

+7.9%

+10.3%

+9.1%

+8.3%

+3.6%

March

+6.2%

+8.0%

+2.2%

+8.0%

+8.2%

+6.8%

+4.7%

+20.4%

+2.5%

+0.9%

+19.0%

+15.8%

+5.8%

Quarter

+6.2%

+9.9%

+5.2%

+6.8%

+8.6%

+7.2%

+5.5%

+11.2%

+5.4%

+6.2%

+12.2%

+7.6%

+2.5%

April

+5.5%

+6.2%

+3.4%

+2.4%

+5.2%

+10.0%

+4.6%

+9.2%

+3.2%

-0.8%

+1.9%

+3.4%

+2.5%

1st 2008

May

+5.1%

+6.7%

+1.2%

+3.1%

+5.9%

+7.6%

-2.1%

+12.1%

+3.3%

+1.0%

+3.5%

+5.3%

+5.2%

June

+6.4%

+5.1%

-2.8%

+2.3%

+5.2%

+8.5%

-1.4%

+6.6%

+7.6%

+0.3%

+6.1%

+2.2%

+6.4%

2nd Quarter

5.7%

+6.0%

+0.5%

+2.6%

+5.5%

+8.7%

+0.2%

+9.3%

+4.7%

+0.5%

+3.9%

+3.6%

+4.8%

July

+3.0%

+0.6%

-2.3%

+1.1%

+7.2%

+9.1%

-1.4%

-3.9%

+5.6%

+2.7%

+8.8%

-1.5%

+0.3%

August

+3.0%

+0.3%

-1.3%

-0.9%

+4.1%

+9.9%

-4.8%

+2.0%

+6.7%

+4.8%

+8.1%

+6.9%

+3.0%

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

Page 7 October 2008

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NEWS AIR CANADA UPDATE ELEVEN ROUTE CANCELLATIONS IDENTIFIED AC released an update on 18 August 2008 to the announcement it made in June regarding fall and winter capacity reductions. AC identified eleven route cancellations, including Calgary-Prince George effective 2 June 2008, Hamilton-Montréal and Ottawa effective 31 July 2008, Toronto-Port of Spain effective 31 August 2008, Montréal-Deer Lake effective 1 September 2008, CalgaryComox effective 2 September 2008, VancouverOsaka effective 24 October 2008 westbound and 25 October 2008 eastbound, and Vancouver-Sacramento effective 25 October 2008, along with the cessation of winter seasonal routes Calgary-Palm Springs and Ottawa-Orlando. AC also revealed seasonal suspensions and intentional flight reductions, both beginning 26 October 2008. Seasonal suspension will occur on Toronto-Kelowna, Montréal-San Francisco, Toronto-Rome, and Toronto-Madrid routes, while Toronto-Tokyo service will be replaced with one-stop TorontoVancouver-Tokyo service. International flight reductions include Vancouver-Beijing service to three times weekly, Vancouver-Shanghai service to four times weekly, Toronto-Tel Aviv service to three times weekly and Edmontonand Halifax-London Heathrow to four times weekly.

CODESHARE AGREEMENT WITH BRAZIL’S TAM AC concluded a codeshare agreement with TAM, Brazil’s largest airline and future member of Star Alliance, on 7 October 2008. The agreement will expand both carriers’ networks and consolidate reward benefits for members of each respective carrier’s frequent flyer program. AC’s network will expand to include six Brazilian cities operated by TAM on a codeshare basis through connections at Sao Paulo Guarulhos International Airport to Rio de Janeiro, Salvador, Recife, Belo Horizonte, Curitiba and Porto Alegre, while TAM’s network will expand to Page 8 October 2008

include service operated by Air Canada between Sao Paulo and Toronto with connections in Toronto to Vancouver, Calgary, Edmonton, Winnipeg, Montréal and Québec City. The codeshare services will take effect November 2008, subject government approval.

ADDITIONAL WINTER SERVICES ANNOUNCED AC announced two additions to its winter schedule on 2 October 2008; non-stop daily service between Vancouver and Fort McMurray and non-stop weekend service between Kelowna and Toronto. Vancouver – Fort McMurray service will commence 5 January 2009, while Kelowna-Toronto service will operate on Saturdays and Sundays beginning in December.

AIR CANADA RESTRUCTURES BAGGAGE FEES…

On 18 September 2008, AC announced the elimination of all second checked-bag charges and the introduction of excess baggage fees on North American flights. As of 23 September 2008, the $25 fee for second checked bags introduced in May for Tango and Tango Plus fares within North America will be abolished. Beginning 14 October 2008, a single $75 excess baggage fee will be levied in North America for overweight and oversize pieces of luggage.

…AND FUEL SURCHARGE

Effective immediately, AC will incorporate a oneway add-on fuel surcharge between $20 and $60 into the published price of base fares on both domestic and U.S. transborder flights. AC identified that the initiative was made possible by the downward trend in oil prices.

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


NEWS – CON’T AC UPDATE – CON’T AIRCELL PARTNERSHIP TO OFFER INFLIGHT INTERNET SERVICE AC announced 9 September 2008 its intention to offer live Internet service to inflight customers by as early as Spring 2009. Internet access will be offered in partnership with Aircell using its Gogo inflight portal that provides Wi-Fi access. Passengers using devices enabled with Wi-Fi technology, such as laptops, smartphones, and PDAs will be able to access the network and perform various online activities. Presently, AC’s plan is to unveil the service aboard Airbus A319 aircraft on a limited number of flights to the western United States. Although the service will only be offered in the U.S. at the onset, system wide expansion to North America and International markets will follow the expansion of Aircell’s network.

WESTJET UPDATE WINTER SCHEDULE ENHANCEMENTS AND NEW CARIBBEAN AND U.S. DESTINATIONS ANNOUNCED

WestJet announced several additions to its winter schedule 29 July 2008. New non-stop, twice-weekly service to Cancun from Calgary, Edmonton, and Vancouver will begin in early November and non-stop weekly service from Halifax will begin in mid-February 2009. Non-stop service to Puerto Vallarta from Calgary and Edmonton will also begin in early November at a frequency of twice per week. All non-stop services to Cancun out of Calgary and Vancouver will be operated on behalf of West Jet Vacations, the travel-package arm of WestJet Airlines. Furthermore, WestJet announced new non-stop services from Edmonton to Los Angeles, London to Orlando, and Ottawa to Nassau, Bahamas along with enhancements to its existing schedule. The Edmonton-Los Angeles route will begin threetime weekly service beginning 3 November Page 9 October 2008

2008, while weekly London-Orlando and Ottawa-Nassau service will begin 17 February 2009 and 24 December 2008, respectively.

WESTJET ELIMINATES FUEL SURCHARGE Effective 18 September 2008, WestJet eliminated its fuel surcharge in response to the recent decline in fuel prices. The surcharge of $20, $30, and $45 was introduced 13 May 2008 on all short, medium, and long-haul flights.

NEW SERVICES TO LAS VEGAS

WestJet commenced new seasonal non-stop Regina-Las Vegas service on 8 September 2008, Victoria-Las Vegas on 9 September 2008, and Saskatoon-Las Vegas on 10 September 2008. Service between Regina and Las Vegas will operate on Mondays and Fridays, while Victoria-Las Vegas service will operate on Tuesdays, Thursdays, and Sundays, and Saskatoon-Las Vegas service will operate on Wednesdays and Saturdays.

OTHER CANADIAN AIRLINES SUNWING EXPANDS WINTER SCHEDULE TO MAZATLAN AND SAN JUAN

Sunwing announced two new additions to its winter schedule in September 2008 with service from Regina to Mazatlan, Mexico and service from both Montreal and Toronto to San Juan, Puerto Rico. Weekly service on the Regina-Mazatlan route will commence 18 December 2008 and conclude 26 March 2008, occurring on every Thursday throughout the period. Service to San Juan from Montreal and Toronto will be offered each Sunday between 21 December 2008 and 26 April 2009. Although no specific details have been released, Sunwing plans to unveil additional services to Mazatlan from Vancouver, Calgary, and Winnipeg.

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


NEWS – CON’T OTHER CANADIAN – CON’T ZOOM CEASES OPERATION, GROUNDS AIRCRAFT Economy carrier Zoom Airlines suspended operations 28 August 2008, citing the price of aviation fuel and a challenging economic climate as principal contributors to the cancellation of routes and the grounding of aircraft. In an announcement released on its website, Zoom stated that the increase in the price of oil added approximately $50 million to its annual operating costs, an amount that could not be recovered from passengers that had already booked their flights. The cessation of services affects both the Ottawa-based Zoom Airlines Inc. and Zoom Airlines Ltd., the UK division based at London Gatwick.

U.S. AIRLINES OIL HEDGE HURTS SOUTHWEST Southwest Airlines reported its first quarterly net loss in 17 years on 17 October 2008, as the fuel hedge that kept the carrier profitable during months of high oil prices had an adverse affect when oil prices began to drop. Despite the US$120 million deficit last quarter, Southwest estimates that the hedge saved US$1.3 billion in the first nine months of 2008. Southwest maintains derivative contracts for over 75% of its estimated fuel consumption for 2009 at a price of approximately $73 per barrel.

CARGO CARGOJET ADDS SECOND B767-200F Canadian domestic overnight air cargo operator Cargojet took delivery of a second Boeing 767-200 Extended Range freighter on 2 October 2008. The new addition gives Cargojet a fleet of 35 all-cargo aircraft, successfully completing Cargojet’s fleet renewal plan for 2008. Page 10 October 2008

GEMINI CARGO SUSPENDS OPERATIONS After failing to find adequate financial support, Washington Dulles-based cargo carrier Gemini announced the shutdown of its operations on 25 August 2008. The announcement follows a Chapter 11 filing in 2006 and another in June 2008. Gemini emerged from bankruptcy in 2006 a stronger carrier but was unable to weather the storm of high fuel prices and a weak economy that continues to challenge carriers. In addition to cargo services, Gemini offered aircraft, crew, maintenance, and insurance to major airlines.

AIRPORTS UPDATE GANDER AIRPORT ACHIEVES CARBON NEUTRALITY Gander International Airport (YQX) became the first carbon neutral airport in North America on 1 August 2008. Sustainable practices were implemented by a newly-formed Green Committee comprised of airport workers, partners (including the Department of National Defence, Thomas Howe Demonstration Forest, Allied Aviation, and NavCanada, among others) and commercial tenants. A reduction in paper consumption and electricity usage, a more aggressive recycling program, anti-idling policies, energy retrofits, and procurement policies that favour environmentally-conscience tenants are some of the direct green initiatives undertaken by YQX to reduce its carbon footprint, while remaining emissions were mitigated through the purchase of carbon offsets. The Gander International Airport Authority commissioned InterVISTAS Consulting in early 2008 to gauge its annual greenhouse gas emissions output and set a goal to further reduce carbon emissions by 33% by 2020.

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


NEWS – CON’T AIRPORTS UPDATE – CON’T

PEOPLE IN THE NEWS

MIDCO AWARDED CHICAGO MIDWAY PRIVITIZATION CONTRACT

AIR CANADA APPOINTS CLAUDE MORIN VP OF GLOBAL SALES

The Midway Investment and Development Corporation (MIDCo), comprised of Citi Infrastructure Investors, Vancouver Airport Services, and John Hancock Life Insurance Company, won a contract for the operation and development of Chicago Midway Airport on 30 September 2008. The US$ 2.5 billion, 99-year lease contract marks the privatization of the first major airport in the United States. Chicago Midway handled more than 19.3 million people and 304,000 aircraft operations in 2007, ranking it among the top 30 airports in the U.S. in passenger volume.

Effective 1 September 2008, former Air Canada Cargo President and CEO Claude Morin will succeed Marc Rosenberg as Air Canada’s Vice President of Global Sales. In his new role, Morin will be responsible for all sales and product distribution activities for AC. Morin joined AC in 1985 and was named CEO and President of Cargo in 2004. Lise-Marie Turpin will assume responsibility for all cargo activities as the General Manager of AC Cargo upon Morin’s reassignment.

AÉROPORTS DE PARIS AND SCHIPHOL GROUP SEEK ALLIANCE

Aéroports de Paris and Schiphol Group announced their intention to form an alliance on 21 October 2008. In anticipation of upcoming challenges in the aviation industry, the two airports will sign an industrial cooperation agreement for an initial term of 12 years. The agreement will be supported by a balanced governance structure, consisting of several committees to oversee the coordination and implementation of operational and strategic initiatives. Moreover, both airports will enter a cross-shareholding agreement that provides an 8% stake in each other’s share capital, a move that will strengthen the industrial cooperation commitment between groups. Aéroports de Paris and Schiphol Group anticipate that the alliance will create synergies between entities in key business areas, increasing the competitiveness of both airports’ aviation activities, non-aviation activities, and international development activities. The deal is expected to be finalized in November 2008.

Page 11 October 2008

MARK RUEL NAMED TO ACI-NA 2009 AIR CARGO COMMITEE Mark Ruel, currently Senior Manager, Cargo & Aviation Support at the Greater Toronto Airports Authority, was appointed an At-Large Member of the Airports Council International-North America 2009 Air Cargo Committee on 9 October 2008.

SAM SAMADDAR NAMED GENERAL MANAGER OF KELOWNA INTERNATIONAL AIRPORT Sam Samaddar was appointed Airport General Manager by the City of Kelowna on 23 July 2008. Samaddar, who has acted as Interim Manager since the retirement of Roger Sellick, joined the Kelowna International Airport in 1992 as Superintendent of Airport Operations.

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


NEWS – CON’T PEOPLE – CON’T YVES LALUMIÈRE PROMOTED TO VP OF NETWORK AT TRANSAT DISTRIBUTION CANADA

Transat Distribution Canada announced the promotion of Yves Lalumière to Vice President of Network on 14 August 2008. Lalumière, former Vice President of Operations and Business Development, will be responsible for development and operation activities of networks, communications, human resources, industry relations, and marketing. Transat Distribution Canada is affiliated with Transat A.T. Inc and includes the Club Voyages, Voyages en Liberté, TravelPlus, tripcentral.ca, Marlin Travel banners, and the online agency exitnow.ca.

QANTAS APPOINTS ALAN JOYCE AS NEW CEO Alan Joyce has been named CEO of Qantas, effective 28 November 2008. Joyce is currently CEO of Qantas subsidiary JetStar. Joyce is a native of Ireland, and had previously been with Ansett Australia. Joyce indicated he intends to continue the two brand policy (Qantas and JetStar).

NAV CANADA PROMOTES BRIAN AITKEN TO VP OF FINANCE, CFO, AND TREASURER Brian Aitken was appointed Vice President of Finance, Chief Financial Officer and Treasurer at NAV CANADA on 19 August 2008. Mr. Aitken joined NAV CANADA in 2002 as Director of Finance. Mr. Aitken will assume his new role 1 September 2008 upon the retirement of William Fenton.

Page 12 October 2008

ROB MIONIS APPOINTED PRESIDENT AND CEO OF STANDARDAERO

The appointment of Rob Mionis as President and CEO of StandardAero was announced 21 August 2008. Mr. Mionis, currently President and CEO of Dubai Aerospace Enterprise (DAE) Engineering, will replace long-time StandardAero CEO Paul Soubry in an effort to consolidate leadership teams. DAE Engineering completed the purchase of StandardAero, along with Landmark Aviation, Associated Air Center and TSS nearly a year ago.

HAC WELCOMES FRED JONES AS PRESIDENT AND CEO The Helicopter Association of Canada (HAC) announced Fred Jones as President and CEO effective 1 September 2008. Prior to joining HAC, Mr. Jones was Vice President Operations and Legal Affairs with the Canadian Airports Council (CAC), and held several positions of increasing responsibility with the Air Transport Association of Canada (ATAC).

JAZZ PRESENTS EXECUTIVE REORGANIZATION PLAN In line with cost-saving initiatives announced earlier in the summer, Jazz Air announced several executive appointments on 7 August 2008. Nick Careen was appointed Senior Vice President of Operations, Colin Copp was named Senior Vice President of Employee Relations, and Jolene Mahody was appointed Senior Vice President of Operations Support. All of the individuals were promoted from within Jazz and will report to CEO Joseph Randell, effectively immediately.

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


NEWS – CON’T OTHER ONEWORLD PARTNERS FILE FOR ANTITRUST IMMUNITY oneworld partners American Airlines (AA), British Airways (BA), Iberia (IB), Finnair, and Royal Jordanian confirmed 14 August 2008 that they filed for worldwide antitrust immunity from the U.S. Department of Transportation as well as notified regulatory authorities in the European Union. AA, BA, and IB signed a joint business agreement that would allow the three carriers to cooperate commercially on services in North America, the EU, Switzerland, and Norway and would permit the partners to share revenue, but not profit. Airlines operating in competing alliances, such as the six airlines that comprise SkyTeam and the nine airlines that comprise Star Alliance, have antitrust immunity, while Oneworld is the only alliance that is presently not operating with transatlantic antitrust immunity.

STANDARDAERO EXPANDS WINNIPEG FACILITY StandardAero broke ground on a $20 million expansion to its Winnipeg facility 7 August 2008. The 80,000 square-foot addition addresses the company’s growth in turbine-engine-overhaul contracts and will accommodate the maintenance and repair of General Electric CF34-series engines.

UK-BASED XL LEISURE GROUP COLLAPSES The shutdown of XL Leisure Group, the UK's third-largest tour operator, was announced 15 September 2008 after it failed to secure adequate funding amid volatile fuel prices and an economic downturn. Following an unpaid fuel bill, an XL Airways plane was seized by creditors at Sanford International Airport in Orlando, Florida. At the time of the announcement, over 80,000 passengers were Page 13 October 2008

on holiday and an estimated 240,000 passengers booked travel arrangements with the failed carrier in upcoming months. XL Leisure Group flew primarily from London Gatwick, Manchester, Newcastle, Birmingham, Nottingham, and Glasgow to vacation destinations in the Mediterranean, Florida, and the Caribbean. Divisions of the XL Group in France and Germany are thus far unaffected by the failure of their UK counterpart.

CANADA AND DOMINICAN REPUBLIC INK OPEN SKIES AGREEMENT

Canada concluded a Blue Skies air bilateral agreement with the Dominican Republic on 5 September 2008. The agreement allows airlines in Canada and the Dominican Republic to serve any city in both countries using their own aircraft and code-sharing services for passenger and cargo transport. Furthermore, air carriers are permitted to determine the frequency and price of services offered and also have the option of adding service to and from a third country. The agreement also allows unrestricted fifth and sixth freedoms for passenger services as well as seventh freedoms for air cargo transportation.

EUROPEAN PARLIAMENT GETS TOUGHER ON EMISSIONS On 13 October 2008, the European Parliament announced a more aggressive position on aviation emissions under the EU Emissions Trading Scheme. The Parliament’s environment committee wants to increase the amount of auctionable credits that airlines must purchase under the scheme by 5%, a move that would increase carriers’ responsibility to offset 20% of average emissions from 2013 onward. The current agreement between the European Commission and Parliament, which required airlines to purchase 15% of the permits needed to offset their emissions, was established in July. The Parliament will vote on the amendment on 16 December 2008.

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


THE ENVIRONMENTAL REPORT October 2008

Cost of Carbon Credits

European Climate Exchange CFI Futures Contracts: Price and Volume 20

€40

18

Total Volume

Dec08 Sett

Dec10 Sett

Dec12 Sett

€35

16 €30 14 €25

12 10

€20

8

€15

6

PRICE (per tonne EUR)

Director, Environmental Services

VOLUME (million tonnes CO2)

Joe Kelly

As the European Union Emissions Trading Scheme expands its scope, so do the markets in which carbon financial instruments are exchanged. The European Climate Exchange (ECX) in London is currently the largest and most liquid platform for trading carbon credits, accounting for over 85% of the volume traded in the European market. Carbon financial instruments bought and sold on the exchange - ECX EU Allowances (EUAs) and Certified Emission Reductions (CERs) - are emissions allowances that permit the holder to emit one tonne of carbon dioxide. Although both instruments have the same fundamental purpose of offsetting carbon dioxide emissions, EUAs are primary instruments issued under the EU ETS, whereas CERs are a secondary instrument issued under the Clean Development Mechanism of the Kyoto Protocol. Essentially, CERs allow industrialised nations to invest in emission-reducing projects in developing nations rather than investing in more costly projects at home. Once issued, CERs are compliant with EUAs, and both carbon financial instruments (CFI) are traded as standardized futures and options contracts, similar to the exchange mechanisms of other commodities. Since the trading floor on the ECX opened in April 2005, ECX EUA futures contracts alone have facilitated trade of 2 billion tonnes of carbon dioxide representing a market value of €24 billion. The chart below shows the upward trend in CO2 volume traded since 2006 and plots the settlement prices of CFI futures contracts with various expiry dates. A total of 208 million tonnes of CFIs were traded on the ECX in August 2008 alone, a 100% increase over August 2007. Moreover, the price per tonne of carbon is becoming increasingly stable relative to volatile prices experienced throughout 2006 and 2007.

€10 4 €5

2

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-06 ep 7-S

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Implications for Aviation From 2012 onwards, the EU Emissions Trading Scheme will include aviation emissions from both EU and non-EU airlines flying in, out and between the 27 member states. The scheme will calculate airline emissions based on historical average emissions between 2003 and 2006, requiring that participants reduce annual output by 3% in 2012 and by 5% thereafter (under review). Eighty-five percent of the permits needed to emit carbon dioxide will be provided at no cost, while airlines will have a responsibility to purchase the remaining 15%. Based on the current settlement price of an ECX EUA futures contract delivered in December 2012 (€25.97), a total of €4,867 would be needed to offset the estimated 188 tonnes of carbon dioxide from a typical flight on a 747-400 from New York (JFK) to London (LHR). This is equivalent to €13.75 per passenger, assuming that the aircraft achieves a load factor of 85% of its approximate 416 seat capacity. Assuming only 15% of the total credits are purchased, the cost to the airline would be €730, or €2.06 per passenger. Page 14 October 2008

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


THE CARIBBEAN REPORT October 2008

Airline Incentive Programs Yield Results

Jacqueline Clarke Manager, Strategic Development

Puerto Rico and Jamaica responded with airline incentive programs to earlier announcements made by American Airlines (AA) for cuts to mainline and subsidiary services at its Puerto Rico hub and to other Caribbean destinations. Both announced revenue guarantees and Puerto Rico also announced a marketing co-op program. Both islands have secured new services and protected previously planned service cuts. For Puerto Rico, JetBlue will add a weekly service between Washington and San Juan, two flights to its existing route between Boston and San Juan, four flights to its existing New York-San Juan route and a new daily service between Orlando and San Juan. The airline also launches its first intra-Caribbean service with a daily flight to Santo Domingo from San Juan. Delta Airlines will add a fifth daily service between Atlanta and San Juan commencing 22 November. AA will continue non-step service from Los Angeles and Baltimore to San Juan and Air Tran Airways will launch a non-stop service from Baltimore to San Juan on 20 December. For Jamaica, AA will maintain service from Miami, continue and expand its service from Dallas to Montego Bay to five times per week and expand with one flight five times per week from Chicago to Montego Bay in exchange for a $4.5 million revenue guarantee.

Air Capacity Changes … Reduced Service from the UK Several Caribbean destinations are faced with significant seat capacity reductions from Europe for the 2008 winter season. At the beginning of September, XL Airways announced that it was ceasing operations to the Caribbean citing rising fuel costs. However, the carrier suddenly entered bankruptcy in mid-September, ending service two months earlier than expected. XL was the only carrier providing service from Europe to St. Kitts. Other affected islands include Antigua, Tobago, St. Lucia, Barbados and Grenada.

Equity Firm Buys Major Stake in Dominican Republic Airports A global private equity firm, Advent International, announced the company’s acquisition of 100% of Aeropuertos Dominicanos Siglo XXI SA, one of the largest airport operators in Central America and the Caribbean. Initial estimates value the Bank of Nova Scotia and ING Group-financed deal at $350 million. Advent has acquired the rights to operate, manage and develop six airports in the Dominican Republic including Las Americas in Santo Domingo, the country’s leading international gateway, La Isabelain in Santo Domingo and Maria Montez in Barahona.

Air Caraibes Set to Purchase the Airbus A350-1000 Guadeloupe-based carrier, Air Caraïbes has signed a Memorandum of Understanding to purchase three A350-1000 aircraft, the largest version of the A350 XWB. The aircraft will be deployed on the airline’s existing routes between Paris and the islands of Guadeloupe and Martinique and will be used on the soon-to-be-added service to French Guiana. Air Caraïbes’ long-haul fleet currently includes two A330-200s and one A330-300, with three more A330-300s on order. The carrier operates approximately 20 flights per week from its Paris hub at Orly Airport, serving Guadeloupe and Martinique and its inter-island network.

Carib Aviation Suspends Operations Carib Aviation announced that it will suspend operations on 30 September 2008. The airline cited the loss of seven pilots to regional carrier LIAT and rising fuel costs as the reasons for ceasing service. The loss of the majority of the carrier’s Twin Otter crew and the lack of replacements will force the carrier to reduce service to Montserrat and Barbuda and suspend service to Anguilla, Dominica, St. Kitts and Nevis effective immediately and to cease operations at the end of the month. Page 15 October 2008

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THE ASIA REPORT October 2008

Temasek Holdings to Take Over Singapore Changi Temasek Holdings, a state-owned investment company, announced 9 October 2008 that it will take over Singapore Changi International Airport on 1 July 2009. Singapore Changi’s current owner, the Civil Aviation Authority of Singapore, will become a separate aviation regulatory and safety authority that handles safety and economic regulation, air traffic services, and negotiations. Changi handled 36.7 million passengers in 2007 and is among the top 20 busiest airports in the world.

Singapore and Malaysia Agree to Expand Bilateral Air Services Agreement

Doris Mak Director, Special Projects

Singapore and Malaysia agreed on 7 October 2008 to expand their bilateral air services agreement. The expanded agreement, which takes effect 1 November 2008, will allow low cost carriers from each country to operate a total of 7 flights per week between Singapore and the three East Malaysia cities of Kota Kinabalu, Kuching, and Miri. The frequency of flights will double to 14 per week beginning 1 March 2009. The expanded agreement comes shortly after both countries agreed 1 October 2008 to liberalise the Singapore – Kuala Lumpur region by extending an existing codeshare between Singapore Airlines and Malaysia Airlines to include SilkAir, a sister airline of Singapore Airlines.

All Nippon Airways and Air China Extend Code-Share Agreement All Nippon Airways and Air China agreed to expand their code-sharing agreement on 15 September 2008 to include flights on nine routes in Japan and seven routes in China. The result is an increase in per week, one-way code-share flights to 233 domestic and 532 international operating under both airlines. Members of each respective airline’s frequent flyer program are able to accrue and redeem mileage throughout both airline’s networks, as well as the networks of other member airlines in Star Alliance.

AirAsia and MATTA Form Partnership AirAsia and the Malaysian Association of Tour and Travel Agents (MATTA) announced the signing of a Memorandum of Understanding (MoU) on 12 September 2008. The initiative will promote the Government Fare Scheme, a program recently introduced by AirAsia that provides affordable government travel to officials by discounting fares to all AirAsia destinations. The Scheme is intended to support Malaysia’s Federal Government in the efficient management of public funds while keeping costs between 20-30% below published AirAsia fares.

NDRC Approves Expansion of Baiyun Airport The National Development and Reform Commission (NDRC) officially approved the expansion of Guangzhou’s Baiyun International Airport on 25 August 2008. The USD $2.05 billion project will include a 3,800m x 60m runway, two taxiways, a parking building, a parking area, and a transportation centre. The expansion will accommodate the 75 million passengers expected to travel through the airport by 2020 and will have the ability to handle 620,000 aircraft and nearly 2.2 million tonnes of cargo each year.

Page 16 October 2008

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THE EUROPEAN REPORT October 2008

Exchange Rates The recent financial crises and ongoing economic downturn have had a notable impact on exchange rates, as illustrated in the chart below. The chart shows the performance of a number of currencies, as well as gold, against the U.S. Dollar since the start of 2007. Many of these currencies rose in value against the U.S. Dollar in 2007 and the beginning of 2008. In the case of Canada and Australia, this was driven in large part by the rise in commodity prices. However, the Yen and the Euro also appreciated in value. The major exception was the British Pound which remained fairly flat against the U.S. Dollar for much of 2007 and early 2008 (although it saw rises in earlier years).

Ian Kincaid

Major Currencies Against the U.S. Dollar (7-day Moving Average)

Director, Economic Analysis InterVISTAS- EU UK Office

1.60 Canadian Dollar Euro

1.50

UK Pound Japanese Yen

1.40

Index (January 2007 = 1.00)

Australian Dollar Icelandic Krona

1.30

Gold

1.20 1.10 1.00 0.90 0.80 0.70 Source: UBC Sauder School of Business Pacific Exchange Rate Service (24 October 2008) Dec-08

Nov-08

Oct-08

Sep-08

Aug-08

Jul-08

Jun-08

May-08

Apr-08

Mar-08

Feb-08

Jan-08

Dec-07

Oct-07

Nov-07

Sep-07

Aug-07

Jul-07

Jul-07

Jun-07

May-07

Apr-07

Mar-07

Feb-07

Jan-07

0.60

However, in the last few months, many of these currencies have dropped sharply against the U.S. Dollar: the Canadian Dollar has dropped 20% since June 2008, while the Australian Dollar has dropped 30% and the Pound and the Euro about 18%. For Canada and Australia, falling commodity prices have been a major factor in this decline. More generally, the financial crisis which started in the U.S. has spread to the rest of the world, resulting in money moving out of equities in many economies and into safer havens such U.S. t-bills and government bonds, and the ultimate safe haven, gold. The price of gold has been on the rise since 2001, rising from less than US$300 an ounce in 2001 to highs of around US$1000 an ounce in 2008, but in the last year or so there has been very sharp rises (gold increased by nearly 60% between January 2007 and March 2008). More recently, though, the price of gold has moderated.

Page 17 October 2008

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THE EUROPEAN REPORT – CON’T The one exception among the major currencies has been the Japanese Yen which has continued to rise against the Dollar. Japanese banks do not seem to have been exposed to the financial crisis as other banks, but the main reason is probably the unwinding of carry trade: money borrowed at low interest rates in Yen and used to purchase higher yielding assets elsewhere; investors are now selling these assets and paying off their Yen debt obligations. This is probably not good news for the Japanese economy as it makes their exports more expensive to the rest of the world. The biggest loser to come out of the financial crisis (so far) has to be poor Iceland. The country is effectively bankrupt and will likely have to accept an IMF bailout package. Iceland deregulated its small financial sector in the 1990s, which grew dramatically over the last decade and in the process acquired foreign liabilities estimated to be worth US$100 billion (nearly ten times the country’s GDP). With global credit drying up, Iceland’s three major banks (i.e., its whole banking sector!) have either been closed down or nationalised. As a result, the Icelandic Krona has lost half of its value in the last year (in U.S. Dollar terms). 1 One of the impacts of falling currency values in many countries is that consumers will not appear to see the full benefit of falling oil prices, as oil is priced in U.S. Dollars. Consider this example: The price of oil drops from US$100 a barrel to US$80 a barrel (a 20% drop); at the same time the Canadian Dollar drops from US$0.90 to US$0.80, then the actual drop in the price of oil for the Canadian market is only 10%: ƒ

Price of oil in C$ before the price drop: US$100 / 0.90 = C$111;

ƒ

Price of oil in C$ after the price drop: US$80 / 0.80 = C$100, a 10% drop.

It is worth bearing in mind that, when oil prices were rising, many economies were cushioned against the full price rise as the U.S. Dollar was weakening at the same time.

There’s worse: many Icelanders were convinced to take out mortgages denominated in foreign currencies (mainly Euros) to take advantage of lower interest rates overseas. Not only are these people now seeing the value of their house plummet, but their mortgage obligations have almost doubled.

1

Page 18 October 2008

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THE OTTAWA REPORT October 2008

Federal Election Delays Significant Legislative/Regulatory Initiatives On 7 September 2008 Prime Minister Stephen Harper requested and received the dissolution of Canada’s 39th Parliament and a national general election for 14 October 2008. With the move, several significant pieces of legislation and regulations that had not yet made their way through parliament are cancelled and must be re-introduced in the new Parliament if they are to advance: •

Bill C-43: An Act to Amend the Customs Act. This Bill, which was introduced in the House of Commons this past February and had not yet made significant progress was primarily designed to enable Customs officers to conduct searches and exercise control over certain segregated passenger areas in airports and would have expanded the regulatory authority of the Minister to collect advanced commercial and passenger information, not already provided for by law. Although a setback for airport clients and others looking to modernize their passenger processing facilities, it is anticipated that this item will remain as a legislative priority.

Bill C-7: An Act to amend the Aeronautics Act. This Bill – which is on its third iteration through two successive Parliaments – was introduced in the House of Commons in October 2007 and had progressed through all three stages of consideration prior to the dissolution of Parliament, except for its final vote at third reading. The Bill, although highly technical in nature, essentially serves to provide the legislative and regulatory frameworks for proceeding with aviation safety and security management systems (SMSs). It became a highly contentious piece of legislation due to its’ implicit move away from an inspection-based compliance regime towards a more targeted system based on audits of approved safety and security protocols, which would be required of all holders of a Transport Canada Operator Certificate. Given the successful characterization of this Bill by its' opponents as a move towards industry self-regulation and similar recent high-profile criticisms about the food inspection regime, it is entirely possible that the new minority Parliament may alter this Bill's contents or prevent further progress altogether.

Fred Gaspar Regional Vice President InterVISTAS Ottawa Office

Transport Canada Launches ‘Passenger Bill of Rights’ On 5 September 2008, Transport Minister Lawrence Cannon launched ‘Flight Rights Canada.’ This is a codification of many of the existing tariff rights currently available to the majority of commercial aviation customers in Canada, that was made in response to a unanimous motion in the House of Commons earlier in the summer demanding that the Government of Canada enact a ‘Passenger Bill of Rights’. The new program provides for the following passenger protections: the right to information on flight times and schedule changes; the right to take the flight they paid for; the right to punctuality; and the right to retrieve their luggage quickly. Nothing in Flight Rights Canada would make the airline responsible for acts of nature or the acts of third parties. For each of these provisions, customers are provided with specific alternatives that airlines must offer in case of failure to meet these standards. It is expected that debate on this issue may re-surface depending on the political context in Ottawa, as it does not extend protections beyond what is already legally available to customers and has been widely disparaged by proponents of the original motion and consumer groups.

Page 19 October 2008

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THE WASHINGTON REPORT October 2008

USDOT/FAA Stand Firm on Slot Auctions

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

On 10 October 2008, The U.S. Department of Transportation (USDOT) announced that it plans to move ahead with the slot auctions at JFK, LaGuardia (LGA), and Newark (EWR) airports. Airlines operating at the three airports would receive 10-year ownership of slots they currently operate, while 10% of the remaining slots would be auctioned by the Federal Aviation Administration (FAA) over the next five year period. The US$89 million in revenue generated from the slot auctions will be used toward capital improvement projects, including a series of taxiway upgrades. The controversial plan has raised objections from airlines and airports that question the legality of USDOT’s actions. Specifically, critics have cited a report by the General Accountability Office that determined that neither the USDOT nor the FAA have the authority to auction slots. Other opponents, such as the Airports Council International – North America claimed that the proprietors of the airports, the Port Authority of New York & New Jersey, are the rightful managers of the facilities, not the DOT/FAA. The first round of slots, consisting of 18 at both JFK and EWR and 22-23 at LGA, are scheduled to be auctioned on 12 January 2008.

DoD Nullifies KC-X Tanker Contest Following a controversial and emotional selection process of the highly lucrative refuelling tanker contract, the U.S. Department of Defense (DoD) cancelled the KC-X contest on the grounds that the contract will not be awarded before a new presidential administration takes office in January 2009. Northrop Grumman was originally selected by the U.S. Air Force (USAF) for its Airbus A330-based KC-45 tankers but the decision was successfully disputed by Boeing in a Government Accountability Office appeal. Defense Secretary Robert Gates stated that a cooling-off period following the seven year process will permit the subsequent administration to objectively review its military requirements and acquisition strategy, while avoiding the inheritance of an incomplete and eristic process. In the meantime, the USAF Boeing KC-135 tanker fleet will remain in service.

IAM Strike Halts Production at Boeing Approximately 27,600 members of the International Association of Machinists and Aerospace Workers walked off the job on 5 September 2008 after rejecting Boeing’s final offer to reconcile differences between the aircraft manufacturer and its union. Boeing, a federal mediator, and the union spent two days in negotiations after 87% of the IAM membership voted to strike on 3 September 2008. The strike, which is estimated to cost Boeing up to $100 million per day, has serious implications for its commercial aircraft delivery schedule. Boeing’s pre-strike unfilled orders amounted to 3,695 on 31 July 2008 and its 787 program is presently behind schedule by fifteen months. In terms of deliverables, one day of lost production equals one less Next Generation 737 delivered to customers, while every five days means one less wide body twin-engine 777 delivered. The machinist’s union previous strike in 2005 lasted 28 days. BOEING STRIKE UPDATE: Discussions between IAM and Boeing resulted in a stalemate 13 October 2008 as both parties were unable to reconcile differences over job security, a principal issue given the current economic conditions. Boeing now faces the possibility of a strike by the 21,000 member s of the Society Professional Engineering Employees in Aerospace over similar job security concerns.

Page 20 October 2008

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INTERVISTAS NEWS Bruce Okabe joins InterVISTAS’ Vancouver Office InterVISTAS is pleased to announce that Bruce Okabe has joined InterVISTAS as Senior Vice President, Business Strategy Group in Vancouver. Mr. Okabe will take a lead role in delivering tourism, strategic planning, business planning and climate change services to a diverse range of clients. For the past two years, Mr. Okabe was the Deputy Minister of the Ministry of Tourism, Sport and the Arts for the Province of British Columbia, where he was responsible for daily operations of the ministry and implementation of the government’s initiatives. Prior to joining the Provincial Government, Mr. Okabe held the role of Vice President Strategic Solutions at TELUS, and a variety of other executive level positions in areas of marketing, business, consumer, strategy, retail distribution, outbound call centres and Web development. Mr. Okabe is also a past board member of the Canadian Tourism Commission, Tourism BC and the 2009 World Police and Fire Games.

Jean-Paul Laube joins InterVISTAS’ Vancouver Office InterVISTAS is pleased to announce that Jean-Paul Laube has joined InterVISTAS as Manager, Sustainability Solutions with the Environmental Services Department in Vancouver. Mr. Laube brings a wealth of industry knowledge to the new position, including five years in the environmental and sales groups at Boeing. Mr. Laube possesses a BA in Economics and a Masters in Economics with a specialization in environmental economics: both degrees are from Simon Fraser University.

Karla Petri joins InterVISTAS’ Winnipeg Office InterVISTAS is pleased to announce that Karla Petri has joined InterVISTAS as Manager, Economic and Financial Analysis in Winnipeg. Prior to accepting this position, Ms. Petri was an Associate Consultant with InterVISTAS providing support in the areas of retail and financial planning for airport clients while concurrently working part-time as a Market Planning Officer with Manitoba Hydro. Ms. Petri possesses a BA Honours Degree in Economics and Political Science from the University of Winnipeg, an MA in Economics from UBC, and a diploma in Urban Land Economics from UBC.

InterVISTAS Upcoming Speaking Engagements Dr. Mike Tretheway, Executive Vice President, Chief Economist • IATA Environment Conference "Green Synergies Across the Aviation Value Chain Europe-North America Symposium.": Washington, DC – 14 November 2008 Dr. Tretheway will be delivering a presentation titled, “Measuring the effectiveness of private sector efforts to address the challenge of aviation's environmental Impact.” • IATA Revenue Management and Pricing section within IATA Commercial Strategy Symposium: Las Vegas, NV – 2-4 December 2008 Dr. Tretheway will be delivering a presentation titled, “Rising Airfares are Stretching the Elasticity of Consumer Demand.”

Page 21 October 2008

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INTERVISTAS NEWS – CON’T T

InterVISTAS Upcoming Speaking Engagements – Con’t Dr. Joe Kelly, Director – Environmental Services • Ecotourism and Sustainable Tourism Conference 2008: Vancouver, BC – 2729 October 2008 Dr. Kelly will be delivering a presentation titled, “Tourism and Climate Change.” Howard Mann, Director – Policy & Market Analysis • ACI Latin America & Caribbean Seminar: Air Service Data and Planning: Panama City, Panama – 22 November 2008 Mr. Mann will be delivering a presentation titled, “Using available National government and tourism related data sources to develop air service.”

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 Andriulaitis at rob_andriulaitis@intervistas.com or 1-604-717-1807. To subscribe, please send an email to subscribe@InterVISTAS.com To unsubscribe, please send an email to unsubscribe@InterVISTAS.com Page 22 October 2008

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CAIR Issue No. 65 - October 2008  

InterVISTAS report on aviation industry.

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