AIR Issue No. 1 - January 2011

CANADIAN AVIATION

INTELLIGENCE REPORT

IN THIS ISSUE:

CEO Update – p 1

Fuel Price Update – p 2

2010 Airbus and Boeing Aircraft Orders – p 3

Canada’s Domestic Seat Capacity – p 5

Airline Data – p 7

Airport Data – p 10

News – p 11

Cargo Capers – p 16

Asia Report – p 17

European Report – p 18

Washington Report – p 19

InterVISTAS News – p 21

JANUARY 2011

InterVISTAS’ Canadian Aviation Intelligence Report January 2011 Copyright ©2011 InterVISTAS Consulting Inc., all rights reserved. Page 1

Gerry Bruno

CEO

CEO UPDATE January 2011

Welcome to the January 2011 edition of InterVISTAS Consulting Inc.’s Canadian Aviation Intelligence Report (CAIR). Below are some interesting new projects we are currently working on

InterVISTAS Consulting, MAC Consulting and DG+CG to provide Financial Services Consulting to Jacksonville International Airport InterVISTAS Consulting, MAC Consulting and DG+CG have been selected as the Financial Services Consultant to Jacksonville International Airport. The scope of the work includes developing a rates and charges model, negotiating an airline agreement and other projects such as supporting bond issuances and development of non-aeronautical revenue streams including airport cities concepts.

InterVISTAS Consulting to Facilitate Meeting of Canadian Aviation Executives Safety Network (CAESN) Paul Ouimet and Eugene Chu will facilitate the next meeting of the Canadian Aviation Executives Safety Network (CAESN) in Ottawa, Ontario on 12 May 2011. This is a forum created by Transport Canada to facilitate discussion and enhance aviation safety in Canada. This year’s theme will be “Leading for tomorrow: Setting the course for Aviation in Canada”. As part of the workshop, InterVISTAS will provide CAESN members with an update of key industry trends and developments as well as facilitating discussion around this year’s key theme.

InterVISTAS Consulting to Prepare Strategic Plan for the Nova Scotia Air Gateway Committee InterVISTAS Consulting has been retained by the Halifax Gateway Council (HGC) to assist in preparing a strategic plan for the Nova Scotia Air Gateway Committee (a sub-committee of the HGC). The plan will be an action oriented document designed to guide the Committee towards developing and achieving goals and objectives in alignment with the vision & strategic priorities outlined in the Halifax Gateway Council’s 2010-2015 Strategic Plan: Building the Halifax Gateway.

The January 2011 CAIR Line-Up In this month’s publication, we lead off with a fuel price update and an article on Canada’s domestic seat capacity, followed by our regular monthly columns, which include:

Asia Report

European Report

Washington Report

We hope you enjoy this issue.


Doris Mak

Director, Special Projects

FUEL PRICE UPDATE January 2011

Crude oil prices at $90 a barrel…

Crude oil prices for the first week of January 2011 continued to hover at around $90 per barrel, ranging from as high as $92 to as low as $88. The U.S. Energy Information Administration reported a decrease in the supply of oil, with U.S. commercial crude oil inventories at 333.1 million barrels for the week ended 7 January 2011. This is a decline of 2.2 million barrels from the previous week.

… with future prices at $94 per barrel in 2019.

Currently, a futures contract for delivery of crude oil in December 2019 costs $94 per barrel (5.4% higher than the current spot price). Figure 1 below shows that the prices established at market peak in May 2008 remain higher than the price of this contract (by 35.4%).

Figure 1. Crude Oil Spot and Future Prices


Celina Ramirez

Project Analyst

2010 AIRBUS AND BOEING

AIRCRAFT ORDERS BY

REGION

January 2011

Overview

This column provides a summary of aircraft orders for each of Airbus and Boeing in 2010. Overall, aircraft orders for both manufacturers were up compared to 2009. Airbus orders are up 52%, whereas Boeing orders are up 58% compared to last year.

Airbus

As of 31 December 2010, Airbus reported a total gross order of 644 aircraft and a total net order of 574 aircraft for the year.1 Based on the total number of gross and net orders, Airbus outperformed Boeing in the year 2010. As shown in Figure 1, more than half (62% or 400 aircraft) of Airbus’ customers were based in North America and Asia in the past year. Customers in these regions placed a total gross order of 211 and 189 aircraft, respectively. This was followed by customers in the Europe & CIS region, who placed a total gross order of 101 aircraft (16% of Airbus’ total gross orders) in 2010. Customers based in Africa had the lowest gross orders for the year, with orders for only 5 aircraft.

Boeing

For 2010, Boeing reported a total gross order of 625 aircraft. There were 95 order changes for the year, resulting in a total net order of 530 aircraft for 2010 for Boeing.2 In 2010, North American customers comprised nearly 38% (235 aircraft) of Boeing’s total gross orders for the year, while Asian customers contributed to almost 29% (179 aircraft) of the total as shown in Figure 1. Customers based in the Middle East region, made up close to 10% (60 aircraft) of the total gross orders for the year. Boeing’s Africa-based customers also had the lowest gross orders for the year, with orders for only 10 aircraft.

1 Total gross orders do not include order changes, such as cancellations or conversions, while the net total includes order changes.

2 Same as above.


2010 AIRBUS AND BOEING

AIRCRAFT ORDERS BY

REGION – CON’T

Figure 1. Airbus and Boeing Total Gross Aircraft Orders by Region, 2010

Notes: Total gross orders do not include order changes, such as cancellations or conversions. Sources: Airbus, Orders and Deliveries (http://www.airbus.com/company/market/orders-deliveries/) and Boeing Orders and Deliveries (http://active.boeing.com/commercial/orders/index.cfm).

http://www.airbus.com/company/market/orders-deliveries/

http://active.boeing.com/commercial/orders/index.cfm


Celina Ramirez

Project Analyst

CANADA’S DOMESTIC SEAT

CAPACITY (2009-2010)

January 2011

Overview

In Canada, total domestic seat capacity did not have significant changes in 2010 compared to 2009. However, there were changes in the airlines’ share of domestic seat capacity year-over-year. This article looks into the year-over-year change in monthly domestic seat capacity and airline share of domestic seat capacity in Canada.

Year-over-year change in monthly domestic seat capacity

Total domestic seat capacity in 2010 was 50.2 million seats. This was -1.5% lower than the total seat capacity in 2009. Monthly domestic seat capacity in Canada in 2010 was relatively similar to that in the previous year, with an average of 4.2 million seats each month. The largest (and only) increase was in July, with monthly seat capacity increasing by 6.3% (to 4.8 million seats) that month compared to the same period the previous year. Seat capacity in the month of June decreased by the same magnitude (to 4.5 million seats) year-over-year. This was followed by January and April, which had a decrease in monthly seat capacity of -6.0% and -5.6%, respectively. Monthly domestic seat capacity remained constant in the months of May, August, September, November and December year-over-year.

Figure 1. Monthly Domestic Seat Capacity in Canada, 2009-2010

Source: Official Airline Guide (OAG).


CANADA’S DOMESTIC SEAT

CAPACITY (2009-2010) –

CON’T

Airline share of domestic seat capacity

Airline share of domestic seat capacity in Canada varied slightly in 2010 compared to 2009 for some airlines, in particular WestJet. WestJet experienced a decrease in its share of domestic seat capacity by -15.5 points, from 31.6% of total capacity (16.1 million seats) in 2009 to 26.7% of total capacity (13.4 million seats) in 2010. Air Canada continued to maintain a 50% share of domestic seat capacity, with the carrier’s seat capacity increasing slightly by 1.14 points (to 51.0%) in 2010. Together, other airlines that offer domestic services in Canada gained a greater share of domestic seat capacity by 24.2 points year-over-year. In 2009, Air Canada and WestJet both accounted for 82.1% (a total of 41.8 million seats) of total domestic seat capacity. However, in 2010, the two carriers only accounted for 77.8% (a total of 39.0 million seats) of total domestic seat capacity.

Figure 2. Airline Share of Domestic Seat Capacity in Canada, 2009-2010

Source: Official Airline Guide (OAG).


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

December 2010

Air Carrier

Passenger Traffic Revenue Passenger

Kilometres

Capacity Available Seat Kilometres

Load Factor

% Change over 2009

% Change from 2008

% Change over 2009

% Change from 2008

Change over 2009

Change from 2008

Air Canada3 +7.2% +10.8% +7.6% +12.0% -0.4pts

(to 80.8%) -0.9pts

(from 81.7%)

Domestic +1.7% +2.7% -0.5% +1.9% +1.8pts +0.7pts

International & Charter

+9.7% +14.7% +11.6% +16.9% -1.3pts -1.5pts

WestJet +10.9% +19.9% +12.9% +20.9% -1.4pts

(to 80.3%) -0.6pts

(from 80.9%)

Analysis:

Air Canada’s system-wide traffic increased by +7.2% and available capacity increased by +10.8% in December 2010 over December 2009.

Air Canada’s domestic sector experienced an increase in traffic (+1.7%) and load factor (+1.8 percentage points to 81.8%). Available capacity remained roughly constant (-0.5%) over the same period.

Air Canada’s international sector experienced increases in both traffic (+9.7%) and available capacity (+11.6%) year-over-year. All regions experienced an increase in traffic, except the Atlantic region wherein traffic decreased by -1.7%.

WestJet reported an increase in traffic by +10.9% and an increase in capacity by +12.9% in December 2010 over December 2009. The carrier’s load factor decreased by -1.4 percentage points (to 80.3%).

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


AIRLINE DATA – U.S. U.S. Airlines Release December 2010 Traffic Figures

Airline Traffic (RPMs – millions)

Capacity (ASMs – millions)

Load Factor

2,364

3.7

2,880

1.1%

82.1%

2.1 pts

746

19.0%

1,031

16.8%

72.3%

1.3 pts

1,2

16,996

1.4%

20,809

2.3%

81.7%

0.7 pts

10,333

1.8%

12,820

1.8%

80.6%

0.0 pts

15,036

2.4%

18,780

3.9%

80.1%

1.1 pts

1 4,740

5.7%

5,866

3.7%

80.8%

1.5 pts

1,576

2.7%

1,996

1.1%

78.9%

1.2 pts

Notes: 1. Load factor includes scheduled service only. 2. United Airlines and Continental Airlines combined traffic results. Sources: Carrier traffic reports.


AIRLINE DATA – INTERNATIONAL International Airlines Release December 2010 Traffic Figures

Airline Traffic (RPKs – millions)

Capacity (ASKs – millions)

Load Factor

1

16,396

2.0%

20,347

0.9%

80.6%

0.9 pts

2

14,129

4.6%

18,434

4.5%

76.6%

0.0 pts

8,079

8.3%

10,581

7.7%

76.4%

0.4 pts

3, 4

8,5650

3.3%

10,567

4.9%

81.1%

1.2 pts

7,740

0.4%

9,596

4.9%

80.7%

3.6 pts

4 N/A N/A N/A

5

8,346

3.0%

10,419

7.8%

80.1%

3.8 pts

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 for December 2010 results not yet posted. 5. Includes Cathay Pacific and Dragonair.

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

Page 10

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

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

Toronto Vancouver Montréal Calgary Edmonton Ottawa Winnipeg Halifax Victoria Kelowna Saskatoon Regina

St. John’s

2009

November -3.4% -5.2% -4.2% -3.2% -5.2% +3.3% -8.9% +2.2% +1.5% +9.6% -3.8% +2.5% -0.1%

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 -2.0% -4.1% -2.2% -0.3% -4.7% +3.3% -5.4% +1.4% +3.6% +2.0% -1.4% +1.3% +0.3%

2010

January -0.7% -1.9% +0.5% +2.1% -1.4% +4.9% -2.1% +1.2% +0.1% +10.0% +7.0% +10.5% +4.6%

February 0.0% +3.4% +0.4% +1.0% -2.7% +5.4% -3.6% +0.9% -6.8% -1.3% +5.8% +11.7% +4.1%

March +4.1% +3.0% +3.4% +5.0% +1.2% +8.1% +1.2% +5.8% +4.6% +4.4% +5.6% +13.5% +10.9%

1st Quarter +1.2% +1.5% +1.5% +2.8% -1.0% +6.2% -1.5% +2.9% -0.5% +4.4% +6.2% +11.9% +6.8%

April +2.7% +2.3% +3.6% +0.1% -3.8% +5.0% -4.4% +0.5% -1.6% +3.4% +4.9% +9.7% +9.3%

May +8.2% +7.3% +8.9% +7.5% +3.7% +3.9% +1.4% +5.0% +1.5% +0.3% +9.5% +11.0% +8.4%

June +7.9% +8.2% +11.4% +7.6% +3.8% +8.2% +2.4% +1.6% +0.7% -11.7% +6.4% +8.3% +11.2%

2nd Quarter +6.3% +6.0% +8.0% +5.0% +1.1% +5.7% -0.2% +2.8% +0.2% -3.0% +6.9% +9.6% +9.7%

July +7.3% +4.6% +7.1% +5.9% 0.0% +6.9% +2.4% +6.9% +0.8% +3.4% +2.8% +11.6% +12.0%

August +4.7% -0.3% +5.3% +1.1% -1.1% +6.7% -2.5% -1.6% -2.6% +4.1% +3.0% +6.3% +6.0%

September +6.8% +3.0% +10.0% +3.3% +2.1% +3.9% +1.9% -0.2% -2.8% -0.5% +5.1% +3.6% +1.4%

3rd Quarter +6.2% +2.3% +7.3% +3.4% +0.2% +5.8% +0.5% +1.6% -1.6% +2.5% +3.6% +7.1% +6.7%

October +8.4% +7.3% +8.1% +3.2% -1.8% +2.1% -1.0% +0.2% -2.0% +3.0% +2.2% +4.9% +4.4%

November +4.5% +5.8% +8.2% +7.8% +1.2% +7.1% +2.2% +3.9% -3.6% -6.1% +5.0% +9.5% +6.3%


NEWS AIR CANADA UPDATE

AIR CANADA SELECTS SKY REGIONAL AIRLINES TO OPERATE FLIGHTS FROM TORONTO CITY AIRPORT

Air Canada has selected Sky Regional Airlines Inc., an affiliate of Skyservice Business Aviation, to operate flights for Air Canada

from the Billy Bishop Toronto City Airport. The airline will operate Q400 aircraft being leased by Air Canada.

AIR CANADA VOTED TOP AIRLINE IN FIVE CATEGORIES IN MAGAZINE SURVEY

On 9 December 2010, Business Traveler announced that Air Canada was voted as the top airline in five categories in an

annual “Best in Business Travel” survey conducted by the magazine. The readers of the magazine voted the Air Canada as the top carrier for the following: Best In-Flight Services in North America, Best North American Airline for Business Class Service, Best North American Airline for International Travel, Best Flight Attendants in North America, and Best Airline Web Site.

AIR CANADA LAUNCHED DIRECT SERVICE FROM MONTRÉAL TO PHOENIX

On 6 November 2010, Air Canada launched the first non-stop service between Montréal and Phoenix. The new seasonal

service will operate every Saturday and Sunday until 30 April 2010. The carrier also offers daily services to Phoenix from two other Canadian cities – Toronto and Calgary – during the winter season. All flights to Phoenix are offered at times that would allow passengers to easily connect to Air Canada’s other domestic and international services.

WESTJET UPDATE

WESTJET APPOINTS CAMERON KENYON AS EXECUTIVE VICE-PRESIDENT, OPERATIONS

On 5 January 2011, WestJet announced that it

has appointed Cameron Kenyon as the carrier’s new Executive Vice President, Operations. Prior to his appointment at WestJet, Kenyon was the President and Chief Operating Officer of Lynx Aviation in Denver, Colorado since 2008. Kenyon also has experience at Frontier Airlines, serving as the director of flight operations training, chief pilot, and vice-president, flight operations from 2000 to 2008.

WESTJET TO OPERATE LEASED LARGER AIRCRAFT FOR LONG HAUL FLIGHTS

On 21 December 2010, WestJet announced plans

to operate a leased Boeing 757-200 non-stop from Alberta to Hawaii. The seasonal service will be offered between Calgary and Honolulu and Maui, and between Edmonton and Maui, and will operate from February 12, 2011, to April 30, 2011. WestJet will lease the larger aircraft from North American Airlines, a charter air service provider. The carrier’s fleet currently consists of Next-Gen 737 aircraft only. The intended services have yet to be approved by the Canadian government.

WESTJET EXPANDS SERVICES TO ORLANDO

On 24 November 2010, WestJet announced that it

will be expanding its non-stop services to Orlando from Hamilton to include an additional weekly flight departing on Tuesdays. The seasonal service will be offered from 15 February to 26 April 2011. The carrier already offers weekly flights between Orlando and Hamilton on Saturdays.


NEWSU.S. AIRLINES UPDATE

ALASKA AIRLINES LAUNCHED SERVICES BETWEEN BELLINGHAM AND HONOLULU

On 17 January 2011, Alaska Airlines

launched non-stop services from Bellingham, Washington to Honolulu, Hawaii. Flights from Bellingham are offered daily and are operated by Boeing 737-800 aircraft. It will be the first nonstop services to Hawaii from Bellingham. Together with Horizon Airlines, Alaska Airlines currently offers services to Las Vegas and Seattle from Bellingham.

DELTA AIR LINES RE-LAUNCHES FLIGHTS FROM ATLANTA TO SHANGHAI

Delta Air Lines intends to re-launch flights between

Atlanta and Shanghai in June 2011. The carrier initially began operating flights on the route in spring 2008 and discontinued its services in 2009. The renewed services will be offered twice a week. Delta Air Lines’ network currently includes 16 destinations in Asia from nine U.S. cities.

CONTINENTAL AIRLINES TO BEGIN CODESHARE FLIGHTS WITH SPANAIR

On 20 December 2010, Continental Airlines announced

that it will begin codesharing with Spanair on trans-Atlantic flights, in particular on Continental’s services from Newark to Barcelona and Madrid. The U.S. carrier will also be adding its code on Spanair’s domestic flights within Spain and the latter’s international flights to African destinations. Both Continental Airlines and Spainair are members of Star Alliance. All codeshare flights are effective 4 January 2011.

AMERICAN AIRLINES EXPANDS CODESHARE FLIGHTS WITH BRITISH AIRWAYS AND IBERIA

On 17 December 2010, American Airlines announced that it will be

expanding its codeshare flights with British Airways and Iberia. The U.S. carrier will be placing its code on 57 more British Airway flights and to 4 more Iberia flights. Likewise, British Airways will add its code to 42 more American Airlines flights and to 56 more Iberia flights. Iberia will also be adding its code to 72 and 86 American Airlines and British Airways flights, respectively. The airlines began adding their codes on most new codeshare routes 28 December 2010.

CARGO UPDATE

PAN AMERICAN AIRWAYS BEGINS CARGO SERVICE IN 2011

Pan American Airways will begin its cargo services beginning January 2011. The reconstituted

carrier will be operating from its hub in Brownsville, Texas and will offer cargo services to destinations throughout Latin America using two 727 aircraft. Pan American has plans to expand its cargo services to Africa and to include scheduled passenger flights to Mexico in the future.

EUROPEAN UNION TO IMPLEMENT NEW AIR CARGO SECURITY RULES

The European Union (EU) announced that it has plans to implement new air cargo security rules, especially for all

freight originating from outside the EU. The new security measures make use of a risk-based approach and will require coordination among all EU member states. The recommendations and new security rules were released after explosive devices were found in cargo shipments at airports in Dubai, United Arab Emirates and the United Kingdom. The shipments originated from Yemen and were bound to destinations in the U.S.


NEWS CARGO UPDATE – CON’T

INTERNATIONAL AIR TRANSPORT ASSOCIATION FORECASTS LOWER AIR CARGO GROWTH

In the beginning of December 2010, the International Air Transport Association (IATA) announced that air

cargo demand is forecasted to grow by 18.5% by the end of 2010. This is 1.3% lower than the organization’s previous forecast in September 2010. IATA also projects that air cargo yield growth will increase by 7.0%, instead of the previously forecasted 7.9%. For 2011, the organization expects air cargo traffic to grow by 5.5%.

SINGAPORE AIRLINES FINED FOR PRICE FIXING ON AIR CARGO TO AND FROM THE U.S.

Singapore Airlines is to pay a $48 million fine for participating in an international air cargo price fixing scheme on air cargo to and from the United States.

According to the U.S. Department of Justice, the carrier violated the Sherman Act when it engaged in a conspiracy with other airlines to manipulate the fuel charges and other fees of air cargo shipments from February 2002 to February 2006. Twenty other airlines have been charged, including British Airways, Korean Air Lines, and Qantas Airways among others.

PEOPLE IN THE NEWS .

GEOFF DICKSON TO SERVE AS HEAD OF VICTORIA INTERNATIONAL AIRPORT

Geoff Dickson will serve as the new President and CEO of Victoria Airport Authority. All together, Dickson has 25 years of experience in the air and marine

transportation industry. Prior to this appointment, he had been working with the British Columbia Ferry Services Inc. (BC Ferries), where he served for 12 years. He also has 12 years of experience in the airline industry, working with Pacific Western Airlines. Dickson will be succeeding Mr. Richard Paquette, who will be retiring after leading the authority since 1999.

ONEWORLD ALLIANCE APPOINTS BRUCE ASHBY AS NEW CEO

Bruce Ashby was appointed as the new Chief Executive Officer of oneworld alliance. Ashby is the former CEO of SpiceJet and Sama

Airlines, and has 16 years of experience working with U.S. carriers. He will be succeeding oneworld’s Managing Partner, John McCulloch. Oneworld alliance will also be relocating its headquarters to New York City from Vancouver.

TONY TYLER APPOINTED AS NEW DIRECTOR GENERAL AND CEO OF INTERNATIONAL AIR TRANSPORT ASSOCIATION

The International Air Transport Association (IATA) announced that Tony Tyler, current CEO of Cathay Pacific Airways, will serve as the new Director General and CEO of

the organization. Tyler will be succeeding Giovanni Bisignani, when the latter retires after the 2011 AGM in June of next year. Cathay Pacific Airways COO, John Slosar, will become the next CEO of the airline once Tyler takes up his position with IATA.


NEWS PEOPLE IN THE NEWS – CON’T

NICHOLAS E. CALIO TO SUCCEED JIM MILLER AS NEW PRESIDENT AND CEO OF AIR TRANSPORT ASSOCIATION OF AMERICA

Effective 1 January 2011, Nicholas E. Calio will serve as the new President and Chief Executive Officer of the Air Transport Association of

America (ATA). Calio is currently responsible for the Global Government Affairs division of Citigroup. He was previously the Assistant to the President for Legislative Affairs and chief liaison to the U.S. Congress for both President George W. Bush and President George H. W. Bush. His predecessor, Jim Miller will be retired at the end of last year.

AIR TRANSPORT ASSOCIATION OF AMERICA APPOINTS RICHARD H. ANDERSON AND GARY C. KELLY AS CHAIRMAN AND VICE CHAIRMAN

The Air Transport Association of America (ATA) appointed Delta Air Lines CEO, Richard H. Anderson, as the

Chairman of the organization’s Board of Directors. Anderson has been CEO of Delta Air Lines since September 2007 and is mainly responsible for the carrier’s merger with Northwest Airlines. He will be succeeding Glenn F. Tilton, the President and CEO of United Airlines. The ATA also appointed Gary C. Kelly as Vice Chairman of the Board of Directors. Kelly is currently the Chairman of the Board, President and CEO of Southwest Airlines. Both Anderson and Kelly will serve two-year terms.

AIRPORTS UPDATE

NEW RUNWAY AND CONTROL TOWER OPENS AT CAIRO INTERNATIONAL AIRPORT

Cairo International Airport officially

opened a new runway and control tower. Airport de Paris Ingenierie (ADPI), an architecture and engineering firm based in France, was subcontracted by the airport to construct the runway. The National Air Navigation Services Company (NANSC), an Egyptian government-owned organization, was responsible for building the control tower. Thales, a provider of information systems for defence and security, aerospace and transportation based in France, was chosen as the General Integrator for all ATC equipment. The new runway is 4,000 meters long and 60 meters wide, and the control tower is 110 meters high. There are currently three runways at the airport.

CAN THO INTERNATIONAL AIRPORT IN VIETNAM OFFICIALLY OPENED

On 1 January 2011, Can Tho International Airport in Vietnam officially opened. The airport is located in Can Tho City in the Mekong Delta

region, the southern region of the country. It was previously a regional airstrip, with an estimated traffic of 211,000 passengers in 2010. The new international airport has a design capacity of up to five million passengers per year, and has new runways that can accommodate long-haul aircraft such as the Boeing 747 and 777. Construction at the airport is estimated at US$150 million. Can Tho International Airport is the fourth international airport in the country. It is expected to increase economic activity in the Mekong Delta region.


NEWSAIRPORTS UPDATE – CON’T

DALLAS LOVE FIELD AIRPORT RENOVATIONS AHEAD OF SCHEDULE AND UNDER BUDGET

The renovations at Dallas Love Field Airport are reported to be ahead of schedule and under budget.

The airport is owned by the city; however Southwest Airlines, which is based in Dallas, is responsible for overseeing the renovations. The construction project has a budget of US$519 million. The project is scheduled to be completed by the fall of 2014, but is expected to finish before that time.

OTHER NEWS

BOMBARDIER AWARDED AIRCRAFT TYPE CERTIFICATES FOR CRJ1000

Transport Canada and the European Aviation

Services Agency (EASA) awarded Bombardier with Aircraft Type Certificates for its CRJ1000 NextGen regional jet. The 100-seat aircraft was officially launched in 19 February 2007 and is the largest aircraft of the CRJ series. Bombardier currently has 49 orders for the CRJ1000.

AIRBUS FORECASTS 26,000 AIRCRAFT DELIVERIES BETWEEN 2010 AND 2029

Airbus forecasts a demand of nearly 26,000 aircraft deliveries for the time period between 2010 and 2029, with an equivalent value of over US$3

trillion. According to the firm’s Global Market Forecast, 25,000 of the new deliveries will be passenger aircraft and 1,000 will be freighter aircraft. The new deliveries will replace older, less environmentally friendly aircraft and will be for growth in certain markets. Currently, the world passenger feet is over 14,000 aircraft, and Airbus projects this to increase to around 29,000 aircraft in the next 29 years.

BOEING INCREASES AIRCRAFT PRICES BY 5.2%

On 13 December 2010, Boeing announced that it

will be increasing the prices of its aircraft by 5.2%. The aircraft manufacturer cited higher wages and costs for good and services as reason behind the price increase. Boeing last increased prices in 2008 by 2.6%. In 2007, it raised prices by 5.6%. Boeing also announced that it will no longer be offering the 787-3 Dreamliner aircraft.

TWO-YEAR TRANSITION PLAN FOR MERGER OF ACI-NA AND CAC APPROVED

In the fall of 2010, a two-year transition plan for the merger of Airports Council International – North America (ACI-NA) and Canadian Airports Council (CAC) was approved by the boards of the two organizations. The two-year plan includes

details on the governance and structure of the merged organizations. The governing board will consist of two national boards, the CAC and the U.S. board, that will be responsible for policies related to their own respective countries. The new structure will have three types of committees - Transnational, Joint, and National committees. The merger is expected to provide greater financial stability and to allow for better integration of information.

Article paragraph if necessary to maintain 12pts between

14th Hamburg Aviation Conference

The Record on Aviation and Environmental Sustainability:Industry Achievements and new Challenges

9–11 February 2011

Radisson Blu Hotel Hamburg, Germany

Conference Programme

In association with

University of British Columbia

Centre for Transportation Studies

Deutsche Gesellschaft

für Luft- und Raumfahrt

Contact:

For further information please contact:

Tel.: +49 (0)4050753690

Fax: +49 (0)4050753624

E-mail: [email protected]

www.hamburg-aviation-conference.de

Conference venue:

Radisson Blu Hotel Hamburg

Marseiller Straße 2

20355 Hamburg

Germany

Tel.:+49 (0)40 -3502 -0

Fax:+49 (0)40 -3502 -3530

Please visit our website:

www.hamburg-aviation-conference.de


Robert Andriulaitis

Vice President, Logistics & Transportation

CARGO CAPERS January 2011

Air Cargo Security

Over the past several years, the U.S. Transportation Security Administration has advanced a security program for belly-space air cargo that is based on providing “a level of security commensurate with the level of security for passenger checked baggage.” The criteria for participating in the Certified Cargo Screening Program includes physical access controls, personnel security, procedural security, physical security, information technology security, and facility validation.

Due to the complexity of screening inbound cargo, however, Transportation Security Administration TSA Assistant Administrator John Sammon advised Congress in June 2010 that 100% of air cargo bound for the U.S. would be screened no later than 2013 – three years after the date mandated by the 9/11 Act. While this did not meet Congressional direction, the reality is that achieving U.S. requirements in other sovereign states is something that cannot be unilaterally imposed and would take time.

Upping the Ante – the Yemen Cargo Plot

In late October 2010, a bomb hidden inside a printer cartridge was found on a US-bound UPS aircraft at East Midlands Airport. A similar bomb was intercepted at a FedEx facility in Dubai. Both were found after U.S. authorities received a tip warning of a plot hatched from Yemen to bomb synagogues and other Jewish centres in Chicago and launched an international search to intercept these bombs. Three aircraft with suspicious cargo from Yemen were searched at JFK, EWR and PHL but no bombs were found.

In direct response to the attempted attacks, the TSA announced last week that it is now proposing that the air cargo industry screen 100% of the cargo that is uplifted on U.S.-bound passenger aircraft by December 31, 2011. This date is 17 months after the originally mandated date, but comes half a year after TSA indicated they needed three and half years to accomplish this task.

A Reasoned Response?

At first blush this might seem a Hercluean, if not outright impossible, task to move up the deadline by two years. Even after the failed attack, the U.S. Airforwarders Association was still urging Congress to back off 100% screening of inbound cargo and instead accept risk-based assessment as the only workable approach. Some risk assessment approaches have also been advanced since 9/11 for manifest review by U.S. Customs and Border Protection.

TSA, however, indicated last year that 100% of identified high-risk shipments were already being screened and that overall about 62% of inbound cargo was being screened. In addition, certain airlines, such as Korean Airlines have already implemented 100% screening (not just to the U.S. but regardless of destination), and some countries, such as India have been screening cargo at the piece level for years. In light of these successes, it seems unlikely TSA will back off – and 100% screening and the costs thereof – will become a part of the ever more complicated global supply chain.

The ultimate success of these changes will be the capability of international standards and equivalency to minimize the amount of re-screening that impacted checked bags since 9/11. Carriers have 30-45 days to provide comments.

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Doris Mak

Director, Special Projects

THE ASIA REPORT January 2011

Japan Airlines to start joint venture with American Airlines

Japan Airlines announced that it will start a joint venture with American Airlines on 10 trans-Pacific routes beginning 11 April 2011. In particular, Japan Airlines will be sharing costs and revenue on its nonstop services between Narita and four North American cities - New York, Chicago, Los Angeles and Vancouver – and between Haneda and San Francisco. Revenue and cost sharing will also occur on American Airlines’ nonstop services between Narita and four North American cities – Dallas/Fort Worth, New York, Chicago and Los Angeles – and between Haneda and New York. The joint venture will also include services between Beijing and Chicago, Shanghai and Chicago, and Shanghai and Los Angeles, which are all operated by American Airlines.

China Eastern to order additional aircraft after forecasting profit increase in 2010

China Eastern announced that it forecasts an increase in 2010 net income to more than CNY540 million (US$81.6 million). This is a tenfold profit increase compared to 2009. The carrier also indicated that the projected increase is due mainly to growing demand in the carrier’s domestic market. In addition, China Eastern plans on increasing its fleet size and has placed an order for 50 additional Airbus A320 aircraft. The new orders, with an estimated value of US$3.22 billion, are scheduled to be delivered between 2012 and 2015.

Asiana Airlines places order for six Airbus A380s

Asiana Airlines has placed an order for six Airbus A320 aircraft. The new orders are expected to be delivered from 2014 to 2017, and will be used to operate flights from Korea to the US and/or Europe. The Seoul-based carrier has already placed an order for 30 A350 aircraft previously, which are scheduled to be delivered starting 2016. The additional orders have an estimated value of US$1.8 billion. According to the carrier’s President and CEO Young-Doo Yoom, the decision to increase its fleet size is based on the forecasted increase in passenger traffic, following South Korea’s new free trade agreements and the country’s addition to the US Visa Waiver Program.

Cathay Pacific to increase services to North America in 2011

Cathay Pacific announced that it will be increasing the frequency of its services from Hong Kong to two North American destinations – Toronto and New York. Beginning 1 May 2011, two additional weekly flights between Toronto Pearson International Airport and Hong Kong will be offered, increasing services on the route to two flights a day. Starting on 2 May 2011, flights to New York John F. Kennedy International Airport will increase to a total of four flights a day. Cathay Pacific will also be introducing an additional North American destination to its network. The airline has plans to launch daily flights to Chicago O’Hare International Airport from Hong Kong on 1 September 2011. Flights will be operated by a Boeing 777-300ER.

Air New Zealand and Virgin Blue Alliance approved by Australian Government

On 15 December 2010, the Australian Consumer and Competition Commission (ACCC) approved the proposed alliance between Air New Zealand and Virgin Blue. The ACCC initially rejected the partnership between the two carriers, but has concluded that the trans-Tasman alliance is expected to benefit passengers through an increase in available routes and frequencies. The approval by the ACCC will allow Air New Zealand and Virgin Blue to coordinate on pricing, capacity and services provided. The Minister of Transport of New Zealand has yet to approve the alliance.


Ian Kincaid

Vice President, Economic Analysis

THE EUROPEAN REPORT

January 2011

Lufthansa to hire 4,000 new staff in 2011

On 3 January 2011, Lufthansa announced that it will increase its number of employees in 2011, and hire approximately 4,000 new staff. The new employees will be based in Germany. In particular, the carrier intends to employ over 2,000 flight attendants for its hubs in Frankfurt and Munich. Other positions include 900 service agents, 270 airline pilots, 300 apprentices and other aviation specialists. According to Lufthansa’s CEO Christoph Franz, the staff expansion is mainly due to the carrier’s increase in passenger capacity on its regional routes.

European Union air navigation proposals approved by Single European Sky Committee

The Single European Sky Committee approved the target performance measures for European air service providers proposed by the European Union (EU). The agreed upon performance targets are for the period 2012 – 2014, and include performance targets related to the environment, capacity and cost efficiency. More specifically, airlines across the EU will aim to improve the average horizontal en-route flight efficiency indicator by 0.75% in 2014, improve the average en route Air Traffic Flow Management delay so as to reach a maximum of 0.5 minute per flight in 2014, and reduce the average EU-wide determined unit rate for en route air navigation services from €59.97 (US$79.07) in 2011 to €53.92 (US$71.10) in 2014.

European Union and Georgia sign air transport agreement

The European Union (EU) and Georgia signed an air transport agreement on 2 December 2010. Under the agreement, the EU and Georgia will form a “Common Aviation Area” based on common aviation rules in areas such as safety and security. The comprehensive air services agreement will allow integration and cooperation between the respective markets. Restrictions on air services, such as pricing and frequency, between the EU and Georgia will be removed, and EU and Georgian carriers will be allowed to operate direct flights from anywhere between the EU and Georgia. Currently, direct flights to Georgia are offered from nine EU member states – Austria, Czech Republic, France, Germany, Greece, Latvia, Lithuania, Netherlands and Poland – and vice versa.

Ryanair to open three new bases in the Canary Islands, Spain

Ryanair announced that it has plans of opening three new bases in the Canary Islands, Spain – specifically in Gran Canaria, Lanzarote and Tenerife. The carrier will have two aircraft stationed in each base beginning in February 2011. The additional bases are expected to increase the number of tourists to the Canary Islands, as Ryanair will offer an additional 35 new routes to/from the islands. The carrier also announced that it will increase the frequency of its services to Fuerteventura. Ryanair currently offers services on 77 routes to/from the Canary Islands.

British Airways expands services to Cancun, Mexico

British Airways announced that it will increase the frequency of its services to Cancun, Mexico from London Gatwick Airport. Beginning in March 2011, an additional weekly service will be operated on the route with Boeing 777 aircraft. The carrier has been offering two weekly services to Cancun from London Gatwick Airport since November 2010.


Steve Martin

Senior Vice President

THE WASHINGTON REPORT January 2011

U.S. Air Carriers Report Improving Financial Condition

Strengthening revenues helped U.S. air carriers to report improved financials in the 3rd quarter of 2010, despite year-over-year increases in key cost categories.

Carriers reported profits for consecutive quarters for the first time since the middle of 2007, according to data released by the Air Transport Association of America (ATA), the industry trade organization for the leading U.S. airlines.

Revenue per available seat mile increased by nearly 12 percent over the same period in 2009. Yields improved by nearly the same margin. In addition, improvements in fuel efficiency and labour productivity helped offset the higher composite costs, pushing the break-even load factor down 8.7 percentage points to 75.9 percent – the lowest level since the first quarter of 2001.

Carriers still tended to be challenged by costs, which rose faster than the rate of inflation. As measured by the ATA’s “composite cost index,” costs rose 5 percent in the third quarter of 2010 compared to the same period of 2009, outpacing the 1.2 percent increase in the U.S. Consumer Price Index (CPI). The composite airline cost index remains approximately 110 percent higher than its level of 100 in 2000.

The three largest components of the cost index were fuel, labour and transport-related expense, respectively. Combined fuel and labour costs accounted for half of airline operating expenses. The average price paid for fuel rose 10.6 percent, from $1.92 to $2.13 per gallon. The average cost (wages, benefits and payroll taxes) of a full-time equivalent worker rose 5.6 percent to a high of $86,603. Other categories of costs that rose during the period included advertising and promotion (up 12.8 percent), aircraft rents and ownership (up 9.4 percent), travel agency commissions (up 6.1 percent), landing fees (up 3.8 percent) and interest (up 3.6 percent).

Other costs declined. Those categories included maintenance material (cost of maintaining and purchasing materials for airframes, aircraft engines, ground property and equipment, down 6.7 percent) and property rents and ownership (down 5.1 percent).

"The third-quarter results highlight the continued importance of offsetting the rising costs of doing business through operational efficiencies, productivity gains, and diversification of revenue streams. Thanks to a strengthening economy and the continuing efforts of airlines to adapt to a volatile environment, the increase in costs did not stand in the way of profitability this quarter,” said ATA Chief Economist John Heimlich.

No Tarmac Delays Longer Than Three Hours for the Second Month in a Row

November was the second month in a row that the nation’s largest airlines reported no flights with tarmac delays of more than three hours, while the carriers reported only a slight increase in the rate of cancelled flights during the month, according to the U.S. Department of Transportation (DOT). This past October and November were the only months with no tarmac delays of more than three hours by the reporting carriers since the Department began collecting more comprehensive tarmac delay data in October 2008.


THE WASHINGTON REPORT –

CON’T

Data filed with the Bureau of Transportation Statistics (BTS) showed there have been only 12 total tarmac delays of more than three hours reported from May through November 2010 by the 18 airlines that file on-time performance data with DOT, compared to 550 during the same seven-month period of 2009.

The largest carriers cancelled 0.7 percent of their scheduled domestic flights in November, up from the 0.5 percent cancellation rate of November 2009. They posted a 0.97 percent cancellation rate in October 2010. The number of cancelled flights with tarmac delays of more than two hours increased only slightly, from 224 between May and November 2009 to 241 between May and November 2010. There were 11 cancelled flights with tarmac delays of more than two hours in November 2010, up from zero in November 2009.

Southwest Announces Major Change to Frequent Flyer Program

In what it described as the "single biggest new product launch" in its history, Southwest Airlines unveiled a revamped frequent flyer program particularly aimed at attracting business passengers and with the potential to generate "hundreds of millions" of dollars in incremental revenue annually according to the airline.

The 24-year-old “Rapid Rewards” program differs from the typical loyalty program in that it is based on trips taken, without taking into account the distance flown. The new Rapid Rewards that takes effect on March 1 recognizes differences in both the fare paid and distance flown, benefiting those passengers paying more and flying longer. In additional, the new program includes a new level of “status” to their top-tier member, "A-List Preferred." As with other carriers’ affinity programs, Southwest’s premium members will earn "bonus" points on ticket purchases. Program members with Rapid Rewards credit cards will also be able to redeem points for international flights operated by other carriers.

Chairman, President and CEO Gary Kelly said that the new program was developed "from scratch and custom-built for Southwest." He said that "the real benefit here is of course winning more customers, getting more trips, winning more credit card utilization … The big deal here is getting more revenue."


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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INTERVISTAS NEWS John Weatherill Promoted to Senior Vice President

InterVISTAS is pleased to announce that John Weatherill has been promoted to Senior Vice President, effective 1 January 2011. In his expanded role, John will have greater responsibility for management of InterVISTAS’ air service development business line. John’s 10-year career with InterVISTAS began in 2000, and he was promoted to Vice President in 2008.

Olaf van Tol Promoted to Senior Consultant

InterVISTAS is pleased to announce that Olaf van Tol has been promoted to Senior Consultant, effective 1 January 2011. Over the last years Olaf took a number of remarkable initiatives such as publishing articles on Airport City developments in China and as a result being able to acquire and lead projects in this field.

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”.

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”.

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AIR Issue No. 1 - January 2011

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Transcript of AIR Issue No. 1 - January 2011