AIR Issue No. 2 - February 2011

CANADIAN AVIATION INTELLIGENCE REPORT FEBRUARY 2011

IN THIS ISSUE: CEO Update – p 1 2010 Airline Market Caps – p 2 Airline Data – p 3 Airport Data – p 6 News – p 7 The Sky Is the Limit – p 11 Asia Report – p 14 European Report – p 15 Washington Report – p 16

InterVISTAS News – p 17

CEO UPDATE February 2011

Welcome to the February 2011 edition of InterVISTAS Consulting Inc.‟s Canadian Aviation Intelligence Report (CAIR).

Below are a couple of interesting new projects we are currently working on:

Gerry Bruno CEO

InterVISTAS to Develop a Business Plan for Northern Rockies Regional Airport Following the completion of a comprehensive airport planning study in 2010, InterVISTAS was awarded a project by the Northern Rockies Regional Municipality to develop a business plan for the Northern Rockies Regional Airport, located at Fort Nelson, B.C. The plan will help the airport adapt its operations to meet changing market conditions.

InterVISTAS Conducts Micro Economic Studies for Denver International Airport InterVISTAS has conducted a series of micro economic impact studies for Denver International Airport for potential new international air services. Estimated employment, wage, GDP and economic output impacts are assessed and presented. The economic impact of airport employment, tourism spending by non-locals tourists, and catalytic impact are analysed.

The February 2011 CAIR Line-Up In this month‟s publication, we have an article on the unique sustainability program at Schiphol Airport, followed by our regular monthly columns, which include: 

Asia Report



European Report



Washington Report

We hope you enjoy this issue.

Page 1 February 2011

InterVISTAS‟ Canadian Aviation Intelligence Report Copyright ©2011 InterVISTAS Consulting Inc., all rights reserved.

2010 AIRLINE MARKET CAPS February 2011

Picture

Matt Boire Project Analyst

Amidst economic uncertainty and upwards pressure on oil prices, major air carriers in Canada and abroad experienced significant increases in market capitalizations in 2010. This builds on the momentum initiated in 2009 and is backed by IATA forecasts of growth in global air traffic by 800 million travelers.

Domestically, as of 31 December, 2010 Air Canada (AC.A) saw an increase in its market cap of 164% to $926 million from $364 million, with ACE Holdings divesting its share in Air Canada in December 2010. WestJet (WJA) recognized 12% growth in their market cap to $1.9 billion.

In the U.S., air carriers across the Full Service, Low Cost, and Miscellaneous categories saw increases in their market caps ranging from 1% to 250%. In 2010, further consolidation took place with the merger of United and Continental Airlines (represented by United* in Figure 1), resulting in market cap growth of the combined United and Continental entity of 250%.

Overseas, China Eastern saw growth of 111% in its market cap to US$5.7 billion and Cathay Pacific seeing a 46% increase in its market cap to US$10.9 Billion. Growth in Asian air markets is expected to continue through to 2014. According to Giovanni Bisignani, IATA‟s DG and CEO, by 2014 global air travel will increase by more than 800 million travellers to 3.3 billion travelers, of which 360 million travelers will be on Asia Pacific routes. In South America, GOL Linhas Aereas and LAN Chile SA both showed increases in their market cap with 2% and 85% growth respectively, although slowing from their 2009 market cap growth levels. In Europe, Ryainair saw a 15% increase in its market capitalization to $10.9 billion.

Figure 1: Airline Market Capitalization by Carrier as of 31 December, 2010

SOURCES: CANADIAN CARRIERS: AIR CANADA AND WESTJET 2009 AND 2010 ANNUAL REPORTS, AND DECEMBER 31ST 2009 AND DECEMBER 31ST, 2010 CLOSING PRICES FROM GLOBEINVESTOR.COM. US AND INTERNATIONAL CARRIERS: DECEMBER 31ST 2009 AND DECEMBER 31ST 2010 MARKET CAPITALIZATION VALUES FROM AVIATION DAILY, AVIATION INDUSTRY STOCK PERFORMANCE, DECEMBER 2009 AND DECEMBER 2010.

Note: * Indicates the merger of Continental and United Airlines, and United* accounts for this merge

Recent volatility in the Middle East, especially in Libya which is the 3rd largest oil producer in Africa, combined with rising commodity prices have provided for a challenging start for 2011 and with continued moderate global economic recovery, 2011 will be an interesting year for the international airline industry.

Page 2 February 2011

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

January 2011 Air Carrier

Passenger Traffic Revenue Passenger Kilometres % Change % Change over 2010 from 2009

Capacity Available Seat Kilometres

Load Factor

% Change over 2010

% Change from 2009

Change over 2010

Change from 2009

Air Canada1

+9.1%

+4.1%

+8.4%

+4.9%

+0.5pts (to 78.0%)

-0.1pts (from 78.1%)

Domestic

+1.7%

-1.0%

+0.2%

+0.8%

+1.1pts

-0.2pts

International & Charter

+12.1%

+6.3%

+11.8%

+6.7%

+0.2pts

-0.1pts

+9.7%

+9.7%

+11.2%

+6.9%

-1.0pts (to 77.8%)

+1.0pts (from 76.8%)

WestJet

Analysis: In January 2011, Air Canada‟s system-wide traffic increased by +9.1% and available capacity increased by +4.1% compared to January 2009.

While Air Canada‟s domestic sector experienced an increase in traffic (+1.7%), available capacity decreased (-1.0%) year-over-year. Load factor increased (+1.1 percentage points to 76.5%). over the same period.

All regions experienced increases in traffic and available capacity, resulting in an increase in Air Canada‟s international traffic by +12.1% and available capacity by +11.8% year-over-year.

WestJet reported a decrease in its system-wide load factor of -1.0 percentage points to 77.8% year-over-year.

Available capacity growth (+11.2%) outpaced passenger traffic growth (+9.7%) over January 2010.

1

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

Page 3 February 2011

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AIRLINE DATA – U.S. U.S. Airlines Release January 2011 Traffic Figures Airline

2, 3

2

Notes:

Traffic

Capacity

(RPMs – millions)

(ASMs – millions)

2,214 5.1%

2,767 2.6%

80.0% 5.9 pts

681 19.7%

1,059 18.2%

64.4% 0.8 pts

15,836 0.4%

20,319 0.4%

77.9 0.0 pts

9,868 2.0%

13,020 2.5%

75.8% 0.4 pts

14,121 2.3%

18,766 4.2%

75.2% 1.4 pts

4,462 3.9%

5,700 0.3%

78.3% 3.2 pts

1,366 0.6%

1,825 -3.2%

74.8% 2.8 pts

Load Factor

1. Mainline operations only.

2. Load factor includes scheduled service only.

3. Results are for United and Continental„s combined consolidated traffic.

Sources: Carrier traffic reports.

Page 4 February 2011

InterVISTAS‟ Canadian Aviation Intelligence Report Copyright ©2011 InterVISTAS Consulting Inc., all rights reserved.

AIRLINE DATA – INTERNATIONAL International Airlines Release January 2011 Traffic Figures Traffic

Capacity

(RPKs – millions)

(ASKs – millions)

1

16,626 4.8%

21,004 3.3%

79.2% 1.1 pts

2

14,305 9.1%

19,696 10.1%

72.6% 0.7 pts

8,793 6.4%

12,261 10.1%

71.7% 2.5 pts

54,592 6.0%

66,821 7.0%

81.7% 0.7 pts

7,499 2.9%

9,602 4.2%

78.1% 1.0 pts

4

4,545 24.8%

7,025 25.4%

64.2% 0.5 pts

5

8,552 6.8%

10,518 10.1%

81.3% 2.5 pts

Airline

3, 4

Load Factor

1. Includes Martinair.

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

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

4. Traffic results are for December 2010 – January 2011 results are not yet posted.

5. Includes Cathay Pacific and Dragonair.

Page 5 February 2011

InterVISTAS‟ Canadian Aviation Intelligence Report Copyright ©2011 InterVISTAS Consulting Inc., all rights reserved.

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

2009 2010

Toronto

Vancouver

Montréal

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

St. John’s

December

-0.8%

-0.7%

+0.6%

+0.7%

-2.6%

+4.8%

-2.9%

+4.3%

+13.1%

+2.1%

+4.8%

+1.4%

+3.8%

4th Quarter January February March 1st Quarter April May June 2nd Quarter July August September 3rd Quarter October November December 4th Quarter

-2.0% -0.7% 0.0% +4.1% +1.2% +2.7% +8.2% +7.9% +6.3% +7.3% +4.7% +6.8% +6.2% +8.4% +4.7% +3.6% +5.6%

-4.1% -1.9% +3.4% +3.0% +1.5% +2.3% +7.3% +8.2% +6.0% +4.7% -0.3% +3.0% +2.4% +7.3% +5.8% +3.0% +5.3%

-2.2% +0.7% +0.9% +3.3% +1.7% +3.6% +9.1% +11.4% +8.1% +7.1% +5.3% +10.3% +7.4% +8.1% +8.2% +6.0% +7.4%

-0.3% +2.1% +1.0% +5.0% +2.8% +0.1% +7.5% +7.6% +5.0% +5.9% +1.1% +3.3% +3.4% +3.2% +7.8% +0.4% +3.6%

-4.7% -1.4% -2.7% +1.2% -1.0% -3.8% +3.7% +3.8% +1.1% 0.0% -1.1% +2.1% +0.2% -1.8% +1.2% -2.2% -1.1%

+3.3% +4.9% +5.4% +8.1% +6.2% +5.0% +3.9% +8.2% +5.7% +6.9% +6.7% +3.9% +5.8% +2.1% +7.1% +5.6% +4.9%

-5.4% -2.1% -3.6% +1.2% -1.5% -4.4% +1.4% +2.4% -0.2% +2.4% -2.5% +1.9% +0.5% -1.0% +2.2% -0.6% +0.1%

+1.4% +1.2% +0.9% +5.8% +2.9% +0.5% +5.0% +1.6% +2.8% +6.9% -1.6% -0.2% +1.6% +0.2% +3.9% +7.2% +3.5%

+3.6% +0.1% -6.8% +4.6% -0.5% -1.6% +1.5% +0.7% +0.2% +0.8% -2.6% -2.8% -1.6% -2.0% -3.6% -3.0% -2.8%

+2.0% +10.0% -1.3% +4.4% +4.4% +3.4% +0.3% -11.7% -3.0% +3.4% +4.1% -0.5% +2.5% +3.0% -6.1% +2.4% -0.2%

-1.4% +7.0% +5.8% +5.6% +6.2% +4.9% +9.5% +6.4% +6.9% +2.8% +3.0% +5.1% +3.6% +2.2% +5.0% +3.3% +3.5%

+1.3% +10.5% +11.7% +13.5% +11.9% +9.7% +11.0% +8.3% +9.6% +11.6% +6.3% +3.6% +7.1% +4.9% +9.5% +14.9% +9.8%

+0.3% +4.6% +4.1% +10.9% +6.8% +9.3% +8.4% +11.2% +9.7% +12.0% +6.0% +1.4% +6.7% +4.4% +6.3% +8.8% +6.3%

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

Page 6 February 2011

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NEWS

STRONG DEMAND CAUSES AIR CANADA TO INCREASE CALGARY-TOKYO SERVICES

AIR CANADA UPDATE AIR CANADA INCREASES SEAT CAPACITY BY 450,000 ON TORONTO SUMMER SERVICES On 11 February 2011, Air Canada announced that it will be increasing the seat capacity on its summer services from Toronto by 450,000 seats. The frequency of flights to Santiago/Buenos Aires, Madrid, Copenhagen and Dublin will increase to daily services, while flights to Barcelona and Athens will increase to six times weekly and four times weekly, respectively. Other services from Toronto affected by the additional seat capacity are flights to New Orleans and Gander.

AIR CANADA INTRODUCES NEW NON-STOP SEASONAL SERVICES BETWEEN GANDER, NL AND TORONTO Air Canada announced the addition of new direct nonstop seasonal services between Gander, Newfoundland and Toronto on 8 February 2011. The new daily non-stop services will begin 18 June 2011, and will be operated by 93-seat Embraer190 aircraft. The carrier currently offers services from Gander to Halifax, St. John's, and Goose Bay. Flights to Halifax will be offered twice daily, flights to St. John‟s will be offered thrice daily and flights to Goose Bay will be offered once daily this summer. All together, Air Canada will offer a total of seven daily services to/from Gander in the summer of 2011.

Page 7 February 2011

On 26 January 2011, Air Canada announced that it will be increasing its non-stop services between Calgary and Tokyo in response to strong demand on flights on the route. The carrier currently offers three weekly flights between the two cities, and will be increasing its services to five weekly flights beginning 26 March 2011.

Flights will be operated with Boeing 767-300ER aircraft, with a seat configuration of 211 seats.

Air Canada is awaiting permission from Japan to offer the services between Calgary and Tokyo year-round.

WESTJET UPDATE WESTJET EXPANDS SERVICES FROM TORONTO TO MONTRÉAL AND OTTAWA WestJet announced that it will expand its services between Toronto and the two other cities in the “eastern triangle”, Montréal and Ottawa, on 7 February 2011. The new services aim to target business travellers, with flights offered at peak business times beginning 2 May 2011. Services between Toronto and Montréal will be offered 10 times each business day, while flights between Toronto and Ottawa will be offered nine times each business day.

WESTJET ENTERS INTERLINE AGREEMENT WITH DELTA AIR LINES On 7 February 2011, WestJet confirmed an interline agreement with Delta Air Lines that will take effect immediately. The interline agreement will increase the number of transborder connecting flights, as passengers will be able to connect between the two carriers‟ services to/from 25 airports in Canada and the U.S. Under the agreement, customers of the WestJet and Delta Air Lines will be able to purchase connecting flights on one ticket.

InterVISTAS‟ Canadian Aviation Intelligence Report Copyright ©2011 InterVISTAS Consulting Inc., all rights reserved.

NEWS WESTJET UPDATE – CON’T WESTJET INTRODUCES SUMMER SERVICES TO ORANGE COUNTY On 26 January 2011, WestJet announced that it will be introducing seasonal non-stop services to Orange County, California from Vancouver and Calgary. The seasonal service will be offered daily, with services from Vancouver beginning 2 May 2011, and services from Calgary beginning 13 June 2011. The carrier will also expand its summer services on other transborder routes, including daily flights to Maui and Honolulu from Vancouver, and twice daily flights to Las Vegas from Calgary.

WESTJET NAMED J.D. POWER CUSTOMER SERVICE CHAMPION On 17 February 2011, WestJet was named a J.D. Power 2011 Customer Service Champion by J.D. Power and Associates. As one of 40 companies and one of only two Canadian companies on the list (the other being Four Seasons), it is among the top five percent of eight hundred companies in 20 industries assessed. Also included in the airlines category were American low-cost carriers JetBlue Airways and Southwest Airlines.

UNITED CONTINENTAL TO LET GO OF UP TO 500 EMPLOYEES United Continental Holdings has informed the Texas Workforce Commission in a letter dated 7 February 2011 that it would be letting go of up to 500 employees at Continental Airlines‟ headquarters in Houston, Texas. The job cuts are expected to affect employees with management and salaried positions. Together, United and Continental employ approximately 6,000 people in these positions. The merged carriers have over 80,000 employees worldwide.

VIRGIN AMERICA PLACES ORDER FOR 60 AIRBUS A320 AIRCRAFT On 17 January 2011, Virgin America announced that it has placed an order for 60 Airbus A320 aircraft. The new orders have an estimated value of US$5.1 billion, and are expected to be delivered beginning in 2013. The new orders include orders for 30 A320neo aircraft, which is manufactured with a new eco-efficient engine.

This is the first commercial order for Airbus‟ new fuel- and carbon-efficient aircraft.

U.S. AIRLINES UPDATE AMERICAN AIRLINES TO RECALL UP TO 368 FLIGHT ATTENDANTS In response to a greater than expected increase in summer traffic, American Airlines announced that it will be recalling up to 368 flight attendants. 147 flight attendants will resume work on 1 June 2011, while an additional 221 flight attendants are expected to return later in the summer. The carrier is expecting capacity on its international services to increase by 7.5% this year.

Page 8 February 2011

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NEWS CARGO UPDATE

PEOPLE IN THE NEWS

UPS INTRODUCES EXPRESS FREIGHT SERVICES TO ISRAEL AND SLOVAKIA

WINNIPEG AIRPORTS AUTHORITY ANNOUNCES NEW CHAIR, VICE CHAIR, AND MEMBERS TO THE BOARD OF DIRECTORS

On 7 February 2011, UPS announced that it will introduce new Express Freight services to Israel and Slovakia. The service guarantees door-to-door service to the two countries within one- to three-business days, including customs clearance. UPS expects import and export commodities to and from Israel to include high-tech goods, airplane and automobile parts, jewellery and precious gems.

The company aims to serve the automobile and industrial manufacturing sectors of Slovakia.

AIR CARGO MANAGEMENT GROUP FORECASTS UP TO 5.5% INCREASE IN AIR CARGO TRAFFIC PER YEAR The Air Cargo Management Group reported that air cargo traffic is expected to increase up to 5.5% per year henceforth, according to their International Air Freight and Express Industry Performance Analysis. According to the report, daily international express volumes increased by 12.5% (equivalent to 2.25 million shipments per day) in 2010 compared to 2009. The analysis also showed that the world freighter fleet has increased by 4% since 2009, and is currently at 1,623 aircraft. However, this is 10% less than the global freighter fleet at a peak in 2007.

LUFTHANSA CARGO PLANS TO EXPAND FLEET SIZE BY 25% Lufthansa Cargo announced that it has plans to expand its fleet size by 25% within the next four years. In particular, the carrier is looking to acquire six aircraft that are similar to the MD-11 freighers, but are more environmentally-friendly and economical. It currently has 18 MD-11 freighers. Lufthansa Cargo is also considering wet-leasing freighters, and will confirm its decision by the end of March 2011.

Page 9 February 2011

Winnipeg Airports Authority Inc. announced a new Chair, Vice Chair, and Members of the Board of Directors. Mr. Thomas A Bryk, FCA has been elected the Chair with Mr. Garth H. Smorang, QC as Vice Chair of the Board. Other new WAA Board appointees include Mr. Thomas Payne Jr., Mr. H. Sanford, and Mr. Paul Soubry.

PRESIDENT AND CEO OF GTAA TO RETIRE ON 31 JANUARY 2012 On 23 February 2011, the Greater Toronto Airports Authority (GTAA) announced that Dr. Lloyd McCoomb, President and CEO will retire on 31 January 2012 upon the conclusion of his 5 year term. The Board of Directors with the assistance of an executive recruitment firm have initiated the search for a new President and CEO.

AIRPORTS UPDATE CHANGES TO AIRPORT SCREENING TO TAKE PLACE AT CANADIAN AIRPORTS On 3 February 2011, the Honourable Chuck Strahl, Minister of Transport, Infrastructure and Communities, and the Honourable Rob Merrifield, Minister of State announced that resulting from the completed review of the Canadian Air Transport Security Authority (CATSA), changes to airport screening will take place to increase the convenience of the traveling public while maintaining the rigour and level of safety.

Passengers are now able to bring small scissors or tools less than six centimeters in length, while knives of any length are still prohibited.

InterVISTAS‟ Canadian Aviation Intelligence Report Copyright ©2011 InterVISTAS Consulting Inc., all rights reserved.

NEWS AIRPORTS UPDATE – CON’T HALIFAX STANFIELD INTERNATIONAL AIRPORT RECEIVES FUNDING FOR RUNWAY EXPANSION On 21 February 2011, the governments of Canada and Nova Scotia announced that both governments will be investing in the expansion of the main runway at Halifax Stanfield International Airport. The total funding received by the airport for extending the runway from 8,800 to 10,500 feet amounts to CA$14 million. The new infrastructure investment will allow larger and heavier aircraft to operate at the airport, and is expected to faciliate an increase in air crago traffic.

NEW $5.50 FEE FOR U.S. VISITORS FROM CANADA PROPOSED On 16 February 2011, President Barack Obama released a proposal that would introduce a $5.50 fee on each visitor to the U.S. from Canada. The new fee would apply to visitors traveling by air or sea, but would not apply to those traveling in private vehicles.

According to Statistics Canada, over 16.3 million travellers flew between Canada and the US during 2009. The proposed fee could generate upwards of $110 million dollars a year for the U.S. Department of Homeland Security.

LAGUARDIA AIRPORT DEDICATED NEW AIR TRAFFIC CONTROL TOWER LaGuardia Airport dedicated a new 233-ft Air Traffic Control Tower, replacing the existing 151-ft tower which was built in 1964.

The new tower, costing an estimated $100 million, has Sesnis ASDE-X and Integrated Control and Monitoring System and will help to “enhance the safety and efficiency of air travel in and out of New York metropolitan area,” said Transport Secretary Ray Lahood.

OTHER NEWS NAV CANADA REPORTS INCREASE IN TRAFFIC IN JANUARY 2011 On 16 February 2011, NAV Canada released its traffic figures for the month of January 2011. Traffic increased 5.0 per cent in January 2011 over the same month in 2010.

Page 10 February 2011

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THE SKY IS THE LIMIT February 2011

Picture

Roel Klein Vice President, Environmental Services

An Interview: The Strategy for Sustainable Growth at Amsterdam Airport Along with Marjolein Demmers (DHV) and Gerard van der Veer (NACO), InterVISTAS‟ Roel Klein sat down with Birgit Otto, Director Asset Management of Amsterdam Airport Schiphol to discuss the airport‟s unique and industry-leading sustainability program. This article summarizes their insightful conversation.

The secret of Amsterdam Airport International airports are constantly looking for opportunities to reduce costs, increase the efficiency of passenger and cargo movements, and obtain an attractive position in the world wide mobility system. Amsterdam Airport Schiphol differentiates itself from other European airports partly because the Schiphol Group, which owns and operates the airport, constantly invests in sustainability and innovation. According to the Schiphol Group‟s Director of Asset Management Birgit Otto, “Sustainability plays an important role in the quest for a balance between cost effectiveness and quality control. We support sustainable developments, especially because the return on investment is often fast. Our current leading position is based in the fact that we are early adopters in sustainable technologies such as geothermal energy, combined cycle powerplants, solar power, electric vehicles and energy efficient lighting systems.”

A leading position A leading position in sustainability and innovation results in low costs, not only in times of high energy prices. It makes it possible for Schiphol to continue investing in new projects, even during economic downturns.

Otto: “At Schiphol Airport, people and cargo come together, but it is also a platform where many different players, companies and ideas meet. Renewable energy systems are working in many places, and we are aiming now at facilitating new ways of cooperation. We are developing a platform called “The GROUNDS” in which we bring together leading companies and knowledge institutes to develop innovative applications which are financially attractive for immediate application in airport environments. Schiphol works together with Delft University, Wageningen University & Research Centre and TNO. By bringing together expertise on a suitable location for implementation and testing we can safeguard our leading position in the long term. Some of the initiatives are in demandcontrolled LED lighting, Combined Cycle Energy generation and insulation techniques. In energy intensive environments like airports there is a lot to gain”.

Sustainability Goals and Financial Advantage The sustainability goals Schiphol formulated together with the Dutch government are concrete and ambitious: by 2012, achieve CO2 neutrality for its own activities and improve energy efficiency by 30% in comparison with 2005. Schiphol also aims to generate 20% of its own energy needs from renewable sources on its own property. This sustainable energy generation will contribute to a total reduction of CO2 emissions by 20%. Said Otto: “This is not something that happens automatically. In order to realize our goals we aim at the „Trias Energetica‟: reduce total energy consumption, use renewable energy where possible, and use fossil energies efficiently. Awareness raising is very important in sustainability issues. Every department in Schiphol is being motivated to generate ideas for possible increases in energy efficiency and other sustainability improvements. The sustainable view assures that an optimum solution is found between the environment, the social aspects and the Page 11 February 2011

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financial side. It can thus happen that a higher energy use option is chosen when safety is at play.”

NACO is an important technical and organizational adviser to the Schiphol Group. This aviation consultant has been involved for the last 50 years in the successful development of the airport.

According to NACO‟s Director, Architectural Engineering, Gerard van der Veer: “We help 550 airports in 100 countries to reach their goals. We have seen the interest in sustainability increase over the years, but very few have been able to translate sustainability practices into financial advantages as well as Schiphol, where innovations are implemented organization-wide so they can reinforce each other.”

“It is a misunderstanding that sustainability costs money,” said Schiphol‟s Otto. “The opposite is true.

If you look at the total cost of ownership, you often see that an early renewal of equipment results in more sustainable and cost efficient results. The interest paid for new capital investments is often more than offset by the decreased operations cost. It is essential to remain well informed of the last technical developments and know where your opportunities and limitations lie. We are therefore very open to expertise from the market.”

Sustainability in projects Schiphol is planning a new pier that will be needed to handle the expected increase in passenger traffic. Sustainability considerations are prominent in its planning.

Said Otto, “In large construction projects like this, it is important to integrate sustainability into the project and its processes at a very early stage. A risk is that where project expenses are getting close to the target, savings are often made in the wrong place. A small, temporary saving that is not sustainable can grow into a large, unnecessary and constant cost factor.”

Marjolein Demmers, Director Environment and Sustainability of DHV Consultancy and Engineering, is assisting with the implementation of sustainability aspects in new projects at Schiphol.

She notes that “Organizations that are not willing to see sustainability as a key success factor will pay an unnecessarily high price later. Because Schiphol integrates sustainability aspects very early and organization-wide, very high quality solutions result with advantage for all: the airport, the passengers, people that work on the airport, local residents, companies and last but not least the environment.”

Page 12 February 2011

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Working With Partners to Innovate Schiphol‟s Otto argues that the operational and management challenges faced every day at the airport can best be met with innovation and partnerships. “Every airport is dealing with asset- and lifecycle management, with renewal of equipment, environmental regulations and safety aspects. As an airport you can create opportunities by using market knowledge in a smart way. That is the reason we like to take into consideration the innovations that our partners see elsewhere.”

“We also work proactively with our partners to influence them. As an airport organization you can use your influence to make big improvements in cooperation with airlines and airport contractors. We use the concept of „Control, Guide & Influence‟: optimize your own organization, create opportunities for new ways to cooperate, and discuss with your partners. We have developed a very close relation with our colleagues at Aeroports de Paris, who have developed interesting business cases in the areas of biomass and geothermal energy. At Schiphol, we also invest in geothermal energy, solar power, biomass and reuse of waste heat from processes and buildings. Through the exchange of experiences, we have been able to create new insights that can lead to new innovative solutions that give sustainability advantages.”

Schiphol has developed solid sustainable business cases that can be used by many airports to their advantage, in particular during financially challenging times. A strategic approach based on a broad view results in bottom line improvements and quality improvements. Sustainable innovation is the route for a successful future of the airport industry. A lot more is possible than most people believe.

The sky is the limit.

Page 13 February 2011

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THE ASIA REPORT February 2011

Japan Airlines to expand services and change aircraft operated on trans-Pacific routes in 2011

Doris Mak Director, Special Projects

On 14 January 2011, Japan Airlines (JAL) announced that it will expand services and will change aircraft operated on trans-Pacific routes effective 27 March 2011. The carrier will increase flight frequency between Japan and Moscow from twice weekly to thrice weekly services. In addition, two of the carrier‟s current trans-Pacific services will be operated with larger aircraft. Flights between Narita to Vancouver that are currently operated with Boeing 777-200ER will be operated with Boeing 767300ER, while flights between Haneda and Honolulu that are currently operated with Boeing 767300ER will be operated with Boeing 777-200ER. Air New Zealand to acquire up to 15% of Virgin Blue On 20 January 2011, Air New Zealand announced that it has plans to acquire between 10% to 15% of Virgin Blue. The Australian Foreign Investment Review Board granted the New Zealand-based carrier authorisation to purchase up to 15% of Virgin Blue. This is following approval from regulators on a Tasman alliance between the two carriers. Air New Zealand does not intend to make a takeover bid for the Australian-based carrier.

Chinese government authorizes order for 200 Boeing aircraft On 19 January 2011, the Chinese government gave final authorization for the order of 200 Boeing aircraft. The new orders consist of 737s and 777s, and are expected to be delivered from 2011 to 2013. The government‟s aircraft agreement with Boeing has an estimated value of US$19 billion. In addition, the aircraft orders are estimated to have an impact of over 100,000 jobs at Boeing and throughout the U.S. Currently, more than half of the commercial airplanes operated in China are manufactured by Boeing.

All Nippon Airways and United Continental joint venture to begin on 1 April 2011 On 18 January 2011, All Nippon Airways (ANA) and United Continental Holdings Inc. announced that the joint venture between the carriers will begin on 1 April 2011. Together, ANA, United Airlines (UA) and Continental Airlines (CO) will promote and operate trans-Pacific routes between Japan and the U.S. In particular, ANA will operate services from Narita to five U.S. cities - Los Angeles, San Francisco, Chicago, New York City and Washington D.C. The Japanese airline will also offer services from Haneda to Los Angeles. Under the joint venture, UA will also operate services from Narita to five U.S. cities – Los Angeles, San Francisco, Seattle, Chicago and Washington, D.C. Other flights operated by United are between Kansai International airport and San Francisco. Flights between Narita and Houston and New York City will be operated by CO under the joint venture.

Qantas to operate flights between Sydney and Dallas/Fort Worth On 14 January 2011, Qantas announced that it will operate flights between Sydney and Dallas/Fort Worth International Airport (DFW). The flights from Sydney to DFW will be nonstop services, while the flights from DFW will stop at Brisbane. The carrier is expected to launch the new service on 16 May 2011. It will be offered four times a week and will be operated by Boeing 747 aircraft. The new service is an initial initiative to increase cooperation between oneworld partners Qantas and American Airlines. On the same day, Qantas also announced that it will discontinue its nonstop services between Sydney and San Francisco beginning 14 May 2011.

Page 14 February 2011

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THE EUROPEAN REPORT February 2011

IATA calls on the British government to improve air transportation policy

Ian Kincaid Vice President, Economic Analysis

The International Air Transport Association (IATA) has called on the British government to improve its air transportation policy. The association has asked the UK to improve its global competitiveness by focusing on policy changes in the following areas: cost, capacity, climate change, and the economic regulatory structure for airports. Giovanni Bisignani, the association‟s director general and CEO, noted that the country‟s reputation as a leader in the aviation industry is negatively affected by excessive taxes and inefficient airport regulation.

Finnair reports net loss of over €22.8 million (US$31 million) in 2010 On 4 February 2011, Finnair announced that it experienced a net loss of over €22.8 million (US$31.3 million) in 2010. According to Finnair, disruptions in operations caused by the volcanic ash crisis in April 2010, and a 10-day strike by its cabin staff in December 2010 contributed to the loss. The disruptions caused by the ash crisis and the industrial action resulted in an estimated loss in profit of €55 million (US$75.4 million). The deficit incurred by the carrier in 2010, was less than that of the prior year. In 2009, the carrier had a net loss of €95.2 million (US$130.6 million).

Infringement proceedings over Russia air service agreements begin On 27 January 2011, the European Commission (EC) commenced infringement procedures over Russia air service agreements. The EC will assess the impact of bilateral aviation agreements between Russia and several Member States on competition, and whether or not these agreements comply with EU rules on freedom of establishment. The EC will also evaluate the Serbian overflight charges. The infringement procedures are against the following Member States - Belgium, Denmark, Italy, Luxembourg, the Netherlands, Sweden and the UK. These states have been notified by the EC through a letter of formal notice, and have two months to respond.

Lufthansa to launch A380 service between Frankfurt and San Francisco On 26 January 2011, Lufthansa announced that beginning 10 May 2011 services between Frankfurt and San Francisco will be operated by Airbus A380 aircraft. Flights between the two cities are currently operated by Boeing 747-400 aircraft. The services will continue to be offered daily. With a seat configuration of 526 seats (eight seats in First Class, 98 seats in Business Class and 420 seats in Economy Class), the carrier forecasts that the change of aircraft to the Airbus A380 will increase capacity on flights to San Francisco by approximately 30%.

European Commission rejects Greek airline merger On 25 January 2011, the European Commission (EC) announced that it rejected the merger between two Greek airlines, Aegean Airways and Olympic Air. The two carriers announced their plans to amalgamate in February 2010, and in July 2010, the EC initiated an antitrust inquiry into the proposed merger. Results from the investigation indicated that the tie-up between the two carriers will lead to higher fares and lower quality of service. An analysis on routes operated by the carriers revealed that together, Aegean Airways and Olympic Air control over 90% of the Greek domestic air transportation market. Thus, the EC has concluded that the proposed union will result in a quasi-monopoly on routes between Greeks‟ two largest cities, Athens and Thessaloniki, and has decided to prohibit the merger between the two carriers.

Page 15 February 2011

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THE WASHINGTON REPORT February 2011

FAA Reauthorization Bills Move through the House FAA Reauthorization Bill

Steve Martin Senior Vice President

The four-year FAA Reauthorization Bill valued at $59.7 billion dollars has cleared the US House of Representatives Transportation and Infrastructure Committee with a 34-25 vote making its way to the House of Representatives. The Bill which is touted as a “job creating, fiscally responsible bill” will help to streamline FAA activities and programs while saving a projected $4 billion dollars and providing consistent funding. The FAA has been operating under 17 consecutive short term extensions from its original funding agreement from September 30th, 2007.

FAA Bill Passed In Senate In an 87-8 vote, Senate has passed a $35 billion Bill that would help improve air traffic control systems and reduce competition among major airlines on routes between Washington and the West Coast over two years. The Bill does not, however, include federal funding and investments to assist airlines in updating navigation and air-traffic control systems.

Rural Flight Subsidy Remains in Effect For 23 years the Essential Air Service program has provided subsidies for flights that depart and arrive from rural airports and has cost close to $200 million annually. In a 61-38 vote, Senate acted to uphold the subsidy, which Sen. Lisa Murkowski (R-Alaska) says is vital to basic transportation by her constituents in Alaska.

FAA Bill to Reduce Airport Improvement Program Budget The House Bill to authorize $59.7 billion dollars for the FAA would also reduce the amount of funds available for the Airport Improvement Program (AIP). The AIP, created under the Airport and Airway Improvement Act of 1982, funds projects that are aimed at increasing safety and infrastructure at small or medium sized airports. The Bill would see a reduction in the AIP budget from $3.5 billion to $2.1 billion raising „serious concerns‟ for the Airports Council International – North America.

Tom Ridge Discusses “Homeland Security is About Logistics” In a recent interview for the Material Handling & Logistics blog, Tom Ridge, former secretary of Homeland Security and current founder and CEO of Ridge Global LLC Consulting, honed in on the importance of logistics in building resiliency not only for companies but for countries as a whole.

Discussing issues from Just In Time (JIT) Delivery to the interconnectedness of the world to recent upheavals in Egypt, Mr. Ridge focused on the connection between prosperity and security. Identifying key challenges in cross border transportation, Mr. Ridge acknowledged the difficulties associated with additional security measures in a post 9/11 environment, but also challenged companies and logistics specialists to view expenditures to resiliency and security not solely as an expense, but also as investment in the future of companies and the country alike.

Page 16 February 2011

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INTERVISTAS NEWS Matt Boire Joins InterVISTAS InterVISTAS is pleased to announce that Matt Boire joined InterVISTAS as a Project Analyst on February 21, 2011 in the Vancouver office. Matt has a Masters in Economics from the University of Toronto, as well as a Bachelor of Finance and Commerce. His most recent experience was as a consultant with the Social Research and Demonstration Corporation completing project design and implementation. As an amateur pilot, he is very excited and enthusiastic to join our firm. We look forward to having him as part of the Project Resource Team. With his econometrics background, his primary role will be to support economic witness work.

InterVISTAS Upcoming Speaking Engagements Dr. Mike Tretheway, President, InterVISTAS Consulting Inc., Executive Vice President and Chief Economist, InterVISTAS Group CAC 2011 Conference: Ottawa, ON – 20 April 2011 Dr. Tretheway will be participating in a panel and speaking on “Piloting through Clear Skies? Putting the Canadian Footing into a Global Context”.

Karla Petri, Manager, Consumer Research 14th Annual Manitoba Aviation Council Conference: Winnipeg, MB – 26-27 April 2011 Ms. Petri will be presenting an overview of global economic and industry trends with a focus on factors that impact Manitoba‟s aviation industry.

Mark Haneke, Vice President, Network and Strategic Planning Terrapinn Low Cost Airlines World Americas Conference: Miami, Florida – 3-4 May 2011 Mr. Haneke will be participating as a panel moderator on “Maximizing Passenger Yields with Effective Route Development Strategies”.

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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