CAIR Issue No. 15 - March 2004

IVC MarketIntelligence

Report

InterVISTAS Consulting Market Intelligence ReportMarch 2004 ©InterVISTAS Consulting Inc. Page 1

HAS WESTJET REPLACED CANADIAN

AIRLINE’S DOMESTIC SEAT CAPACITY?12 March 2004

WestJet is 59% of Canadian’s domestic capacity. Although WestJet has aggressively grownsince 1999, the low cost carrier is currently providing only 59% of the domestic seat capacityCanadian Airlines provided prior to its merger into Air Canada. In 1999, Canadian Airlines offered 19million seats compared to WestJet’s current domestic seat capacity of 11 million. It will be a fewyears before the low cost carrier completely replaces Canadian Airline’s seat capacity.

Air Canada has shed all of Canadian’s capacity. Air Canada steadily reduced seat capacityafter the merger with Canadian Airlines. In 1999, Air Canada offered 21.6 million seats compared toCanadian Airline's 18.8 million seats. Combined, the airlines offered 40.4 million domestic seats. In2000, the combined seat capacity of both airlines declined by 13%. Air Canada continued to reducedomestic seat capacity in the years following the merger up to 2003. In 2003, Air Canada wasoffering 21.8 million seats, almost identical to its 1999 total domestic seat capacity of 21.6 million. Inessence, Air Canada has shed all of the domestic seat capacity that Canadian was providing to themarket and is now back to its pre-merger size.

Domestic capacity down 25% since merger. Overall, the combined domestic seat capacity ofAir Canada, Canadian Airlines, and WestJet has declined 25% since 1999. In spite of WestJet’sstrong growth since 1999 (the airline has tripled its capacity), it has not made up for the loss ofdomestic capacity formerly offered by Canadian Airlines.

Canadian Major Carriers Annual Domestic Seat Capacity

Carrier 1999 2000 2001 2002 2003 As per 2004schedule

Air Canada 21,605,425 23,573,584 31,876,257 26,269,941 21,841,779 21,886,318

CanadianAirlines

18,776,574 11,579,936 - - - -

Subtotal(AC + CAI)

40,381,999 35,153,520 31,876,257 26,269,941 21,841,779 21,886,318

WestJet 3,516,060 4,392,150 6,334,415 8,010,805 9,663,300 10,976,020

TOTAL 43,898,059 39,545,670 38,210,672 34,280,746 31,505,079 32,862,338Source: BACK OAG Schedules. Annual domestic seat capacity presented.

Doris MakSenior Market Analyst


INCREASED USE OF THE INTERNETFOR AIRLINE TICKET PURCHASEMarch 2004

Rise in Internet Bookings in Canada The latest Ipsos-Reid Internet usage study, released in August 2003, reported that 36% of the 18million Canadian adults with Internet access use it to book some element of travel, this is up from31% in 2002 and up from 18% in 2000. An additional 20% use the Internet to research travel,bringing total Internet usage for trip planning and purchase to 56% of Canadian Internet users. Thestudy also reported that 35% of Canadians use the Internet as their primary source of travel planning,followed by travel agents and family/friends, each at 14%.

Current Canadian Carrier Direct Internet Bookings§ Air Canada – In a January 2003 press release, Air Canada reported that 50% of Air Canada’s

domestic ticket sales are now made online, half of which are made through its travel agencywebsite. Air Canada is currently trying to increase the use of the Internet for transborderbookings through the introduction of the same simplified fare structure as for the domestic sector.This includes adding its new web-only Tango fare class for transborder destinations.

§ WestJet – According to its latest “Renewal Annual Information Form”, 60% of WestJet’sbookings are made through its Internet site (including both consumer and travel agency sales). Afurther 28% are made through their call centre while the remaining 12% represent sales such asgroup bookings, Air Miles and Sabre.

§ Zip – The majority of Zip tickets continue to be booked via the Internet, with more than 75% ofpassengers purchasing their tickets online (Note that this excludes those connecting from AirCanada mainline routes).1

§ Jetsgo – Between 75% and 80% of all Jetsgo’s tickets are distributed via the Internet.2

Increased Internet Bookings in the United StatesA new study released by the U.S. Travel Industry Association of America reported that over 64 millionU.S. travellers used the Internet to research travel online in 2003, similar to volumes in 2002.However, the number actually booking travel grew by 8% to 42 million travellers. The amount thatuse the Internet to book all of their travel also grew from 23% in 2002 to 29% in 2003, as did theaverage annual online travel spending, up from $2,300 in 2002 to $2,600 in 2003. These figuresinclude not only airline tickets, but other aspects of travel such as accommodations and car rentals.

1 “Zip Air Sees Profit at End of First Year,” Globe and Mail, 10 October 2002.

2 “Jetsgo gets off to a bumpy beginning,” Peter Fitzpatrick, The National Post, June 19, 2002.

Angelica SparolinSenior Research Analyst


Top Online Travel Agencies 2003Canada

1. Expedia2. Travelocity

3. CAA**Canadian Automobile Association, includinglocal branches.

Airline Call Centres

26%

Online Travel

Agencies4%

Airline Websites

3%

Traditional Travel

Agencies67%

1999 2002

Airline Call Centres

24%

Online Travel

Agencies17%

Airline Websites

13%

Traditional Travel

Agencies46%

Source: U.S. General Accounting Office, “Airline Ticketing: Impact of Changes in theAirline Distribution Industry.”

INCREASED USE OF THE INTERNET– CONTINUED

A separate studyprepared by the U.S.General AccountingOffice (GAO), reportedthe market shares ofvarious booking channelsfor airline tickets. Whiletravel agents continued tomake up the largestshare of bookings, theirshare had droppedsignificantly from 67% in1999 to 46% in 2002.Internet usage hasabsorbed the majority ofthis shift, growing from acombined 7% for airlinesand online agencies in 1999 to 30% in 2003. Airline call centres remained relatively constant, downslightly from 26% to 24%.

Top Online Travel AgenciesAccording to the GAO study, Expedia, Travelocity, andOrbitz continue to dominate among online travelagencies in the U.S. Within Canada, the top non-airlinesites for travel were similar with Expedia, Travelocity,and the Canadian Automobile Association taking the toppositions (Ipsos-Reid Study 2003).


AIRLINE DATA - CANADATraffic and Load Factors on Canada’s Major Air Carriers - February 2004

Passenger TrafficRevenue Passenger Kilometres

CapacityAvailable Seat Kilometres

Load FactorAir Carrier % Change

over 2003% Changefrom 2002

% Changeover 2003

% Changefrom 2002

% Changeover 2003

% Changefrom 2002

Air Canada3 +7.8% -0.7% +9.4% +5.0% -1.1 pts(to 72.6%)

-4.2 pts

Domestic(Mainline) +8.5% -3.6% +10.4% +2.0%

-1.2 pts(to 74.0%) -4.2 pts

Jazz -0.8% +8.6% +5.5% +3.4%-3.8 pts

(to 59.4%) +2.8 pts

International& Charter

+7.4% +0.5% +9.1% +6.3%-1.1 pts

(to 72.1%)-4.1 pts

WestJet +44.1% +114.5% +39.3% +118.3%+2.3 pts

(to 67.4%) -1.1 pts

Jetsgo +220.9% N/A +186.0% N/A+8.8 pts

(to 80.8%)N/A

Analysis:§ Air Canada’s domestic traffic showed much

improved traffic growth of 8.5% in February2004 compared to the past 12 months.However, the load factor decreased ascapacity, which increased by 10.4% duringthe month, outpaced traffic growth.

§ The growth in international traffic was alsooutpaced by a corresponding capacityincrease, as Air Canada continues toexpand its services to Latin America andthe Caribbean.

§ WestJet’s growth in traffic exceeded theincrease in capacity for the fifth consecutivemonth; load factor for February 2004 was67.4%.

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

NEW CARRIERS:LOAD FACTORSJetsgo: 81% (Feb)

Zip: not reported

CanJet: not reported

-25%-20%-15%-10%-5%0%5%

10%15%

Feb-03

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-0 4

Feb

Dom RPK Dom ASK

Air Canada Domestic Mainline Air Canada Domestic Mainline

Jazz data is not includedin this graph

-40%

-30%

-20%

-10%

0%10%

20%

Feb-0 3

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-0 4

Feb

Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

0%

10%

20%

30%

40%

50%

60%

70%

Feb-03

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-04

Feb

RPK ASK

WestJetWestJet


AIRLINE DATA – U.S.U.S. Airlines Release February 2004 Traffic Figures

Traffic Data – February 2004

Airline Load Factor Traffic(RPMs – millions)

Capacity(ASMs – millions)

68.9 %

á 0.2 pts

9,376

á 12.2%

13,603

á 11.9%

63.9%

á 4.4pts

434

á 35.5%

679

á 26.2%

266.2 %

á 0.3 pts

1,113

á 9.5%

1,752

á 4.3%

170.2%

á 1.3pts

4,512

á 13.9%

5,430

á 11.7%

68.6%

0.0 pts

7,460

á 8.0%

10,877

á 8.1%

77.9%

â 1.6 pts

1,053

á 48.8%

1,352

á 51.7%

74.5%

á 1.2 pts

5,155

á 1.1%

6,923

â 0.5%

62.2%

â 0.3 pts

3,659

á 8.8%

5,881

á 9.3%

273.2%

á 3.0 pts

8,162

á 8.0%

11,092

á 3.7%

268.5%

á 1.4 pts

2,846

á 15.5%

4,159

á 13.2%

Notes: 1. Mainline

2. Load factor includes scheduled service only

Sources: Carrier traffic reports.


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

Toronto Vancouver Montréal-Trudeau

Calgary Edmonton Ottawa Winnipeg Halifax Victoria Kelowna Saskatoon Regina St. John’s

January +5.7% +2.8% +7.2% +6.3% +3.5% +6.2% +13.0% +4.5% +2.9% +4.0% +6.8% -0.3% -5.8%February +4.6% -0.6% +3.7% +5.6% +3.0% +3.9% +12.7% +13.8 +7.5% +2.0% +6.0% +8.8% -2.0%

March +0.4% -1.4% -1.8% +3.7% -0.4% +2.2% +5.1% N/A +0.2% +5.0% -3.7% -4.2% -3.1%1st Quarter +3.4% +0.2% +2.9% +5.2% +2.0% +4.0% +10.1% +10.0% +3.3% +3.7% +3.1% +1.3% -3.7%

April -15.1% -13.6% -10.2% +1.6% +1.1% -7.6% +4.4% +6.1% -0.9% -0.6% -3.9% -1.6% -1.7%May -17.3% -13.5% -7.4% -1.4% -5.3% -1.5% -0.5% -1.2% +0.4% -1.0% -5.3% -1.6% +4.5%June -9.0% -9.9% 0.0% +1.9% -0.4% +2.5% +5.0% +4.1% +0.6% -0.5% +1.4% +7.0% +17.8%

2nd Quarter -13.7% -12.2% -5.6% +0.7% -1.6% -2.1% +3.0% +2.9% +0.0% -0.7% -2.6% +1.3% +7.1%July -6.0% -4.5% +2.9% +4.7% +2.5% +3.0% +3.7% +5.7% +11.9% +5.0% +1.2% +4.7% +21.1%

August -7.6% -1.2% -1.0% +1.4% +0.3% -7.0% +0.4% +4.1% +9.8% +0.5% -4.8% -2.2% +22.5%September -5.9% -3.0% +1.7% -1.8% +8.6% +1.6% +1.5% -0.6% +10.8% -0.7% -2.4% -0.2% +12.3%3rd Quarter -6.6% -2.8% +1.1% +1.6% +3.4% -0.9% +1.8% +3.3% +10.8% +1.7% -2.0% +0.7% +19.0%

October -2.3% -3.1% +4.0% -0.7% +10.4% +1.4% +7.4% +2.5% +15.4% +1.1% -1.7% -1.3% +9.4%November +0.1% -2.2% +11.4% +8.0% +7.2% +6.5% +5.8% -0.05% +13.7% +9.6% -0.3% +19.8% +9.4%December +1.9% +2.7% N/A +5.4% +4.9% +6.0% +6.0% +2.9% +16.1% +9.1% +0.8% +2.0% +13.9%4th Quarter -0.1% -0.9% N/A +3.9% +7.4% +4.5% +6.4% +1.9% +15.6% +6.6% -0.4% +6.33% +10.8%

2003

Full Year -4.6% -4% N/A +2.7% +2.9% +1.3% +5.1% +4.2% +7.3% +2.9% -0.5% +2.4% +9.4%

2004 January +1.6% +1.5% +10.7% +4.2% +8.1% +3.5% +6.5% +3.2% +12.4% +5.9% -1.8% +8.3% +12.8%

CA

NA

DIA

N A

IRP

OR

TS


NEWS ARTICLESAIR CANADA UPDATEAIR CANADA PENSION DISPUTECONTINUESAir Canada hasreached a tentativeagreement with its unions to finance the carrier’sCDN$1.24 billion pension deficit over 10 years.However, the proposal from Air Canada’s equityinvestor, Trinity Time Investment, to change thecurrent pension program from a defined benefitplan to a defined contribution plan, has beenrejected by the unions. Trinity Time has revisedthe proposal to offer non-unionized employeesthe opportunity to choose between the twodifferent plans, but was prevented from makingthe same offer to unionized employees due toopposition from the unions.

AIR CANADA RECALLS FLIGHTATTENDANTSAir Canada has recalled 125 flight attendants aspart of its recruitment campaign. With the recall,all 400 flight attendants that were laid off in May2003 will have returned to work. The launch ofnew services to Delhi, India, combined with anexpanded schedule to Latin America and theCaribbean, have increased operationalrequirements. Air Canada has also introducednew non-stop flights between Hong Kong andToronto.

AIR CANADA AND JAZZ REACHAGREEMENT WITH PILOT UNIONS

Air Canada and its subsidiary Jazz,has reached a tentative agreement

with its two pilot unions, the Air Canada PilotsAssociation (ACPA), and the Airline PilotsAssociation (APA) respectively, over theallocation of regional aircraft between the carriers.Industry sources indicate that the deal willallocate the 50-74-seat Bombardier jets to Jazz,and the 93-seat Embraer 190 jets to Air Canadamainline. It is expected that the pilots will ratifythe agreement by 19 March, which also requiresapproval from the bankruptcy court appointedmonitor, Ernst and Young, and Justice JamesFarley.

AIR CANADA BEGINS CODE SHAREFLIGHTS WITH AIR JAMAICA

Air Canada andAir Jamaica

have begun selling seats on codeshare flightsbetween Toronto-Kingston, and Toronto-Montego Bay. Air Canada will increase itsToronto-Montego Bay flights from four timesweekly, to daily service beginning 4 April.Beginning 5 April, Air Jamaica will start dailyservice between Kingston and Toronto, while AirCanada will service the route twice weekly.

JAZZ TO DECREASE FORT ST. JOHNSERVICEStarting in June, Air Canada Jazz will cancel itsservice between Fort St. John and both FortNelson, B.C. and Grande Prairie, Alberta aspart of its restructuring. The carrier will alsosubstitute the Dash 8-300 in place of the BAE 146jet on its flights between Fort St. John andVancouver. The base in Fort Nelson will beclosed.

AIR CANADA RESUMES HAITI SERVICEAir Canada has resumed twice weekly non-stopservice between Montréal and Port-au-Prince.The carrier had suspended service to Haiti on 28Feb and 2 March due to political turmoil andinstability in the country.

AIR CANADA LAUNCHES ONBOARDCAFÉ SERVICE ON JAZZ FLIGHTS

Air Canada has launched anonboard café service programin co-operation with Cara

Operations to replace complimentary mealservice on Jazz flights. The café offerscustomers meals and snacks priced betweenCDN$1-$7. Non-alcoholic beverage and basicsnack service in Hospitality service, andmeal/beverage service in Executive Class willremain complimentary.

12 March 2004

SPOT OIL PRICES CONTINUETO INCREASEFUTURES PRICES INCREASE

Crude Oil Prices:

Spot – US$36.19(up 6.4% from February)

Futures• 6 month - $34.15

(July 2004 delivery)• 12 month -$31.61

(February 2004 delivery)• 2 year - $29.34

(February 2005 delivery)• 5 year - $27.90

(December 2009 delivery)

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

Apr-03

May Jun Jul Aug Sep Oct Nov Dec Jan-04

Feb Mar

US$

per

Bar

rel

Monthly Spot PricesMonthly Spot Prices


NEWS ARTICLESAIR CANADA TO LAUNCH NEWMONTRÉAL-NOVA SCOTIA SERVICEStarting 1 June, Air Canada will launch new non-stop daily service between Montréal andSydney, Nova Scotia. The flights will beoperated with 50-seat Canadair regional jets.

AIR CANADA INCREASES SUMMERMONTRÉAL-EUROPE SERVICEAir Canada will launch a second daily non-stopservice between Montréal and both London andFrankfurt on 1 June, and 1 July, respectively.These services are part of the carrier’s summerschedule and are in addition to its year rounddaily service between these cities. Twice dailynon-stop service between Montréal and Pariswill also be re-introduced starting 23 June. Inaddition, codeshare flights between Montréal andVienna non-stop will begin 31 March, operated byAustrian Airlines four times weekly, while non-stop codeshare flights between Montréal andMunich non-stop will begin 8 June, operated byLufthansa Airlines six times per week.

OTHER CANADIAN AIRLINESCANJET TO LAUNCH SERVICE FROMHAMILTON

Beginning 19 April, CanJet Airlineswill operate three non-stop roundtripflights each weekday between

Hamilton International Airport and Ottawa. Inaddition, daily flights between Hamilton andMontréal will be launched.

Starting 3 May, CanJet Airlines will also launchnon-stop service between St. John’s and DeerLake, with continuing service to Halifax fromDeer Lake, five times weekly.

CANJET ADDS CHICAGO MIDWAY ANDNEW YORK LAGUARDIA SERVICEStarting 4 June, CanJet Airlines will launch dailynon-stop service from Toronto PearsonInternational and Pierre Elliot TrudeauInternational Airport in Montréal, to New YorkLaGuardia Airport. In addition, non-stop servicebetween Toronto Pearson International andChicago Midway International Airport will beintroduced. The service to Chicago will beoffered 12 times per week, with daily flightconnections from Halifax, St. John’s, and DeerLake.

JETSGO INCREASING SERVICE TOWESTERN AND ATLANTIC CANADA –BOOSTS TORONTO SERVICE

Beginning April 2004, Jetsgo willincrease its service between

Halifax and Toronto to three per day, andincrease service from St. John’s, Nfld., toToronto to five flights per week, with non-stopservice on the route starting 18 April. Effective 19April, the carrier will increase its service betweenToronto and Ottawa by 50%, to 12 flights perday. In addition, year-round non-stop flights fromToronto to Vancouver, Calgary, and Winnipegwill be offered three times daily beginning 3 May2004.

Jetsgo’s summer schedule includes the return ofVictoria as a summer destination starting 25June, with non-stop service to Toronto threetimes weekly. Operations from Toronto toAbbotsford, B.C., will also be added three timesweekly. In Atlantic Canada, Fredericton, andSaint John, N.B., will each receive three timesweekly summer service beginning 24 June.Stephenville will return to the schedule on 30June with one flight per week, increasing to twoweekly flights starting 31 July. Jetsgo’s summerschedule will be effective through the Labour Dayweekend for most destinations.


NEWS ARTICLESJETSGO REINSTATES NAVCANSURCHARGE INTO ADVERTISED FARESJetsgo will re-instate the NavCan surcharge as aseparate item into its advertised fares, effectiveimmediately. On 21 January 2004, the carrierhad incorporated all surcharges into its fares, butAir Canada, WestJet, and CanJet has notfollowed. The charge ranges from $9-$20depending on the flight length.

WESTJET TO LAUNCH NEW LOYALTYPROGRAM WITH BMO AND AIR MILES

WestJet hascompleted an

agreement with BMO Bank of Montréal and TheLoyalty Group, founder of the Air Miles RewardProgram, to market a tri-branded MasterCard forpersonal and small business customers. Thecard will allow customers to earn and redeem AirMiles, in addition to unique WestJet relatedbenefits. Specific reward options will beannounced later in 2004, when the program isofficially launched.

US AND INTERNATIONALAIRLINESIATA PASSENGER AND FREIGHTTRAFFIC GROWS STRONGLY

According to International AirTransport Association (IATA)

figures, worldwide passenger and freight trafficincreased by 5.9% and 7.2% respectively, year-over-year in January 2004. In the Middle East,after a slow down due to the war in Iraq,passenger traffic increased by 30.3% during themonth. Traffic in the Asia Pacific and Africa alsoincreased, which can be partly attributed to theNew Year’s holiday in Asia. In North America andEurope, passenger traffic increased by 3.3% and3.8% respectively. Average load factor was73.3% for the month of January.

CANADIAN AFFAIR TO RESUMELONDON-EDMONTON SERVICE

Beginning 2 May, U.K. tour operatorCanadian Affair will resume weeklysummer charters between London

Gatwick and Edmonton International Airport.The service will increase to twice weekly in June,and will be operated by My Travel Airline withA330 aircraft.

AMERICA WEST EXPANDS SERVICEFROM LAS VEGAS

America WestAirlines has begun

new non-stop service between Las Vegas andAustin, El Paso, San Antonio, Cleveland,Edmonton, and Vancouver. Starting June 1st,the carrier will also initiate daily service betweenLas Vegas and Fresno, San Luis Obispo,Medford, and Calgary. In addition, servicebetween Las Vegas and Santa Barbara will beincreased from one per day to two daily.

AMERICA WEST EXPANDS EDMONTONSERVICEStarting June 4 th, America West Airlines willlaunch daily non-stop service between LosAngeles International Airport (LAX) andEdmonton, Canada. The new service will beprovided by America West Express usingCanadair regional jet aircraft.

AMERICA WEST EXPANDS VANCOUVERSERVICEAmerica West Airlines will introduce daily non-stop service between LAX and VancouverInternational Airport, Canada. America WestExpress will operate the new service withCanadair regional jet aircraft.


NEWS ARTICLESATA PLANS LAUNCH OF SCHEDULEDEUROPEAN FLIGHTS

ATA Holdings Corp., parentcompany of ATA Airlines,

plans to offer scheduled service to Europe withinthe next two years. Based in Chicago, the carriercurrently operates flights throughout the U.S. toMexico and the Caribbean, and also provides theU.S. military with charter service to worldwidedestinations. International destinations currentlymake up approximately 20% of ATA’s totalcapacity. The carrier indicated that it wouldoperate between popular tourist destinations,such as Florida and small European cities.

SPIRIT AIRLINES RECEIVES APPROVALTO EXPAND INTERNATIONAL ROUTES

Spirit Airlines has receivedapproval from the U.S.

Department of Transportation to operate to 11countries in North America, Central America, andthe Caribbean, including Canada. The carriercurrently has one international flight, from FortLauderdale to Cancun, Mexico. Spirit Airlines isexpected to announce its first internationaldestination from Detroit Metropolitan Airport bythe end of March 2004, while most of the otherinternational destinations will be operated fromFort Lauderdale-Hollywood InternationalAirport.

VALUAIR TO LAUNCH FROM SINGAPOREIN MAYSingapore’s first low cost carrier, ValuAir is set tolaunch in May 2004 with two leased A320s. Thecarrier will initially operate to Hong Kong,Jakarta, and Bangkok, with flights to India,Perth, and China likely to be introduced in thenext phase of expansion. ValuAir indicated thatits fares will be 40-50% lower than full-serviceairlines, but still offer basic meals and drinks forpassengers.

JETBLUE TAKES FIRST STEP TOWARDSCANADIAN EXPANSION

New York based JetBlueAirways has filed an application

with the U.S. Department of Transportation (DOT)for a certificate that would allow it to operatescheduled services between the U.S. and fivecountries, including: Canada, the Bahamas,Bermuda, the Dominican Republic andJamaica. It has also asked the DOT for anexemption to allow the carrier to launch threedaily flights to the Dominican Republic startingin June 2004. JetBlue currently operates to 23destinations in 11 U.S. states and Puerto Rico.

CATHAY PACIFIC TO LAUNCH NON-STOPHONG KONG-NEW YORK SERVICE

Cathay Pacific Airways willbecome the first carrier to launchdaily non-stop service between

Hong Kong and New York J.F.K. Airport on 1July. The flights will be operated with the ultra-long-haul A340-600. With the continuation of itsone-stop service via Vancouver, Cathay Pacificwill become the only carrier to operate doubledaily service between Hong Kong and New York.

LOW-COST OZJET PLANNED FORAUSTRALIAN DOMESTIC MARKETFormula One Minardi Team head, Paul Stoddart,plans to launch Ozjet in October 2004. The lowcost Australian carrier will fly to cities along theAustralian east coast using both primary andsecondary airports. Fares will average AUD $149one-way.


NEWS ARTICLESCANADIAN AIRPORTSYVR ANNOUNCES CDN$1.4 BILLIONCAPITAL PROGRAM

The Vancouver InternationalAirport Authority has announced aCDN$1.4 billion capital program to

upgrade the airport. This includes the addition ofnine new international gates, renovations todomestic terminal areas, upgrades to theparkade, airport roads, baggage systems,runways, taxiways, security, and also the AirportSpur portion of the Richmond-Airport-Vancouver(RAV) Transit Line. The upgrades are designedto accommodate the 23 million passengersexpected by 2013, as well as new and largeraircraft.

YVR INCREASES NORTH AMERICA AIFThe Vancouver International Airport (YVR) willuse the airport improvement fees (AIF) to financethe CDN$1.4 billion capital program. The AIF forpassengers travelling to destinations within NorthAmerica will increase from $10 to $15 effective 1January 2005. The AIF for passengers travellingwithin B.C. ($5) and to destinations outside NorthAmerica ($15) will remain unchanged. The AIFwill be incorporated into airline tickets and nolonger be collected at the terminal after 1 June2004.

GTAA APPEALS COURT DECISION ONGATE ALLOCATION

The Greater Toronto AirportsAuthority (GTAA) has applied for anappeal of the Ontario Superior Court’s

decision that gives Air Canada preferential rightsto 14 gates at the airport’s new terminal. Theairport had recently announced that it wouldallocate eight gates to Air Canada, and have thecarrier share the other six with WestJet.However, Air Canada claimed that it had reacheda deal with the GTAA earlier in January 2001 forpriority access to all 14 gates. The new terminalis set to open 6 April 2004.

AIRCRAFT MANUFACTURERSEMBRAER BEGINS DELIVERY OF 170MODEL

Brazil based Embraer hasbegun delivery of the Embraer

170. LOT Polish Airlines has taken delivery ofone jet, while U.S. Airways has taken delivery oftwo Embraer 170s. Embraer plans to deliver 53of the 170 model this year.

CARGOATA REPORTS MARGINAL RTK

INCREASEThe Air Transport Association(ATA) reported that 1.8 billion

revenue ton-miles were transported in the firstmonth of 2004, an increase of 0.6% over thesame month in 2003.

3 NEW AIRCRAFT FOR KLM CARGOKLM Cargo took delivery of 3Boeing 747-400Fs in February. Theaircraft will help KLM Cargo lower

unit costs by increasing the efficiency andflexibility of its fleet.

UPS DENIES BID TO CANCEL AIRBUSORDERSUPS has denied reports that it was in talks withAirbus to cancel more than US$1.6 billion inA300-600 aircraft orders. Ninety of the aircraftwere ordered in 1998 and 2001, with 32 of theplanes delivered in January and 8 more expectedthis year. The Wall Street Journal reported thatUPS wanted to cancel 20 of its remaining 50orders but because some of the planes arealready in production, UPS had been told that nomore than 16 could be cancelled. Airbuscommented that they were discussing deliveryrescheduling with UPS for some aircraft.


NEWS ARTICLESABX AIR REPORTS FIRST PROFIT ASINDEPENDENT COMPANYABX Air, the former cargo airline unit of AirborneExpress now an independent airline following theacquisition of Airborne’s ground services by DHL,reported that in their 4 th quarter the airline earnedUS$274 million in revenue and net earnings of$7.6 million or $0.13 per diluted share. ABX Airended 2003 with US$1.16 billion in revenues anda net loss of $447 million. The loss resulted froma $466 million impairment charge, net of taxes,taken during the third quarter of 2003. Withoutthe charge, net earnings were $19.2 million, or$0.33 per diluted share.

AIR CHINA TO PLAN COUNTRY’S THIRDCARGO AIRLINEAir China, in a joint venturewith CITIC Pacific of Hong

Kong and Beijing Capital International Airport,has committed CNY3.5 billion (CDN$566 million)for the carrier’s new international cargo airline.Air China’s four Boeing 747-200Fs have beenacquired for the airline’s fleet and will besupported by the carrier’s eight 747-400Cs andfour 747-400s. The cargo airline will fly to 36major provincial capitals and cities domesticallyand to 27 international destinations. Air China’smain cargo competitors are China SouthernAirlines and China Cargo Airlines.

REGULATORY/GOVERNMENTEUROPEAN COMMISSION APPROVESAF/KLM MERGERThe European Commission gave conditionalapproval to the Air France – KLM merger on 11February 2004. The two airlines agreed tosurrender 47 pairs of slots per day at their mainhubs in order to comply with competition rules.The merger will see KLM join the SkyTeamAlliance.

EUROPEAN UNION TO IMPOSE DUTIESON SUBSIDIZED FOREIGN CARRIERSThe European Parliament has passed legislationthat will enable the European Commission toimpose duties on foreign carriers that receivedgovernment subsidies and have used them forcompetitive advantage. European airlines haveclaimed that the subsidies granted by the U.S.government to U.S. airlines have distorted thetransatlantic market in the U.S. carriers’ favour.

EUROPEAN COMMISSION TO PROPOSEAIRPORT FEE RULESFollowing its Ryanair-Charleroi decision, theEuropean Commission has confirmed that it isworking on a set of guidelines for airport fees.The guidelines will cover many types ofarrangements, including those between state-owned airports and airlines as well as privatelyowned airports.

EUROPEAN COMMISSION SINGLE SKYRULES BY YEAR-ENDFollowing the passage of Single Sky frameworklegislation, the European Commission expectsto implement the first rules supporting thelegislation by year-end. The rules will requirenations to set up air traffic management (ATM)supervisory bodies to certify and monitor ATMorganizations, require transparent chargingprocedures for user fees, flexible access tomilitary airspace, and harmonization of airspacecategories, as well as the development ofequipment standards, including flight dataprocessing.


NEWS ARTICLESUS DEVELOPING OVERSEAS INSPECTORPLAN

The US Department ofHomeland Security (DHS) is

developing a plan to station American inspectionsofficers in major airports overseas. Sevenspecific cities are being considered, includingLondon, Tokyo, Paris, Frankfurt, and Mexico City.The inspections officers would screen passengerlists for people on security alert lists. The DHSsays the plan could save airlines andgovernments money that would be spent onprocessing fines and returning rejectedpassengers to their point of origin. Currently, anairline pays a US$10,000 fine for every suchpassenger it brings into the U.S. U.S. Customsofficials said that officers would have no legalauthority and that the airlines would decidewhether to let a passenger board or not. U.S.Customs also said that each country would havethe freedom to choose to participate or not.

CANADA AND RUSSIA REACH NEW AIRSERVICES AGREEMENTCanada and Russia have agreed to a new airservices agreement that will allow each nation'srespective carriers to increase services betweenthe two countries. The agreement also includesspecified rights for over-flights into each other'sairspace. In November 2003, the twogovernments had reached a temporaryarrangement that allowed Air Canada to fly overRussian airspace on route from Toronto to India.

PEOPLEATLAS AIR WORLDWIDE NAMESJEFFREY H. ERICKSON NEW CEO

In addition to his current role aspresident, Jeffrey H. Ericksonhas been named chief

executive officer of Atlas Air Worldwide. As of30 January 2004, he replaces John Blue whoserved as acting CEO since March 2003 whenthe board of directors replaced Richard Shuyler.Atlas Air Worldwide is in a restructuring processand intends to emerge from Chapter 11 later thisyear.

World Airways Chairman and CEO Hollis Harriswill retire this spring. Gen. Ronald Fogleman(Ret.) will replace him as non-executivechairman, and by Randy Martinez, who willbecome president and CEO.

FREDERICK REID LEAVES DELTA FORVIRGIN USA

Delta’s President and COO,Frederick Reid, will leave Delta AirLines in April to become chiefexecutive of Virgin Group’s new low-cost U.S. airline, Virgin USA. The

new carrier is scheduled to launch in early 2005.Delta’s Chief Executive Gerald Grinstein intendsto fill Reid’s position internally.


ECONOMIC OUTLOOK 10 March 2004

Japan. Lost in Deflation? Japan’s economyhas been in a slump since the early 1990s,sparked by a stock market crash in 1989. Part ofthe reason for the prolonged stagnation isdeflation – falling prices, the opposite of inflation.Deflation discourages both consumer spendingand business investment, and it lowers wages.However, recent data suggests that Japan isturning a corner. In the last quarter of 2003,Japan’s real GDP grew by 7% - its fastest growthsince 1990 and the 4 th consecutive quarter ofpositive growth. Real GDP growth for the wholeof 2003 is expected to be around 2.7%.

There is good reason to believe that Japan’s economic expansion can continue. Domesticconsumption is on the rise, and business profits and investment are booming (business investmentincreased by 8.8% in 2003), largely due to increased exports. Many analysts expect deflation to turnto “healthy” inflation this year or the next, so long as the Bank of Japan sticks to its expansionistmonetary policy. There are still major problems to overcome - Japan’s public debt stands at over160% of GDP and many industries need major reform, particularly banking. However, the outlook isbrighter than it has been for considerable time.

Elsewhere in Asia… China, Hong Kong, Taiwan and South KoreaChina’s economy continues its impressive performance, growing by 8.5% in 2003. This follows overfive years of GDP growth in the range of 7-8% per annum. The Economist Intelligence Unit forecaststhat China’s economy will grow by 8.4% in 2004, and by 7.8% in 2005. At present, there is noevidence that China’s economy is over heating – inflation remains below 5%.

Hong Kong has been suffering from deflation which, like Japan, put a major drag on the economy.Real GDP growth in 2001 and 2002 was in the range of 0.5-2% per annum. GDP growth in 2003 iswas also around 2%, but this is fairly impressive given that Hong Kong bared the brunt of the SARSoutbreak. The Hong Kong economy is expected to pick up over the next few years due, in part, tocloser ties to China’s economy. Real GDP is forecast to grow by 6.5% in 2004, and by 4.0% in 2005.Deflation is expected to come to an end in 2005.

Strong economic growth is forecast for Taiwan in the next few years. GDP growth is expected to be5.4% in 2004 and 4.9% in 2005 (GDP growth in 2003 was 2.7%), boosted by closer ties with China’seconomy and increased exports.

South Korea’s economy grew by 2.7%, somewhat slower than previous years – South Koreaaveraged 7.5% annual growth between 1999 and 2002. The economy is expected to pick up in 2004,growing by 5.1% followed by 4.2% growth in 2005.

More tourism for Canada? As these Asian economies grow, there is potential for increasedtourism to Canada. This will depend on effective marketing by government and businesses. Oneimportant step is for Canada to obtain Approved Destination Status (ADS) from China. ADSdesignation reduces the amount of bureaucracy Chinese citizens must go through to visit a countryand allows that country to market itself in China as a tourist destination. Canada does not yet haveADS designation but the Chinese government has indicated Canada is its next priority. Australiaobtained ADS in 1997 and has seen tourist traffic from China quadruple in five years.

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Source: Statistics Bureau of Japan

Japan’s Real GDP (% Change)

Ian KincaidManager,

Economic Analysis


Low cost carriers have typicallyoperated planes in the 120-160 seatrange, but many markets are simply toosmall to support this size of aircraft.LCCs with one fleet type ignorepotentially profitable routes, and facelimits to growth.

REGIONAL JETS AT LOW COSTCARRIERS?March 2004

In June 2003, JetBlue announced that it had placed an order for up to 200 Embraer 190 jet aircraft. Itwas the first significant move by a low cost carrier (LCC) away from a single fleet type, and the firsttime a major LCC had ordered regional jets. Subsequently, both Southwest Airlines and WestJetAirlines confirmed that they too are considering adding smaller aircraft to their fleets.

Critics note that adding a second aircraft type increases the costs of crew training and scheduling,maintenance and spare parts inventories. Furthermore, the higher unit cost of smaller jets has beenconsidered inconsistent with running a low cost operation. So why has JetBlue made this move?

In order to operate aircraft large enough to minimise unit costs, but small enough to turn quickly at thegate, LCCs have historically selected planes in the 120-160 seat range. For any type of aircraft, thereare a fixed number of routes which have the market size to support the corresponding level ofcapacity. With the exceptional growth posted by low cost carriers in recent years, the number ofroutes which can support additional narrowbodyflights becomes continually reduced.

While LCCs generally stimulate new traffic with theirlow fares, some markets are simply too small tosupport large jet service. In such cases, LCCs will beforced to ignore (or abandon) these routes in favourof larger markets. The introduction of smaller aircraftby JetBlue, and possibly others, has the potential tofuel continued growth by LCCs.

Economics of Smaller Aircraft – Better Than ExpectedSmaller aircraft can offer both cost advantages and revenue advantages to an airline in certaincircumstances.

Cost Advantages: Low Trip Costs for Low Traffic Routes

Smaller aircraft generally have lower trip costs than larger aircraft, and will therefore have lowerpassenger costs, up to the aircraft's capacity. Beyond the smaller jet's capacity, however, there ispotential for the larger plane’s higher trip costs to be spread over more passengers, which may resultin a lower passenger cost than the RJ can achieve. However, where passenger demand is less thanthe regional jet's traffic spill level, the smaller aircraft (with the lower trip cost) will always be moreprofitable.

Revenue Advantages: Smaller Capacity Increases Yields

Introducing smaller aircraft reduces available capacity in the market, which can improve yields. Withless capacity, airlines need to sell fewer deeply discounted seats in order to fill their flights, resulting ina greater proportion of higher yield traffic and improving average passenger revenue.

The combination of both cost and revenue advantages means that smaller aircraft can providepositive contribution at significantly lower levels of demand than larger aircraft.

John WeatherillSenior Airline Analyst


Smaller aircraft result in less marketstimulation…but with lower trip costsand higher yields, small jets such as theEmbraer 190 can be viable in marketsthat are about 30% smaller than thoserequired to support an A320.

REGIONAL JETS AT LOW COSTCARRIERS? - CONTINUEDCharacteristics of Appropriate MarketsLow cost carriers often stimulate new traffic by offering additional capacity at low fares. The degree oftraffic stimulation depends on the relative price discount offered after the LCC enters the market.However, the pricing in the market is indirectly dependent on the level of available capacity, which inturn depends on the type of aircraft in use. Smaller aircraft provide less capacity, generating higheryields and stimulating less new traffic.

With this combination of lower trip costs and higherfares, but less traffic, it is estimated that an Embraer190 can be viable in markets that are approximately30% smaller than those required to support an A320.This difference would allow an A320 operator suchas JetBlue to offer direct service between at least350 additional city pair markets in the United Statesalone.

Which Aircraft is Best for Low Cost Carriers?The choice of small aircraft depends on a number of variables, many of which are airline-specific.However, the smaller narrowbodies offered by Boeing and Airbus have relatively high trip costs, asthey carry many of the same expenses (and weight) as the other family members. Smaller regionaljets, such as the EMB 175 and CRJ 700, have relatively high unit costs, making their introduction intoLCC fleets less likely in the short term.

As a result, LCC fleet expansion is expected to occur inthe 85-105 seat range, with the EMB 190 and CRJ 900as the two main options. While the CRJ offers a lowertrip cost, the combination of lower unit costs, higherrevenue generating capacity and greater passengercomfort may lead a number of LCCs to the EMB 190.

Industry Implications: Winners and LosersThe addition of smaller aircraft to low cost carrier fleets will have significant impacts on the aviationindustry. LCCs will continue aggressive expansion to additional markets, while legacy carriers willface additional competitive pressures. Airports of all sizes will enjoy additional LCC service, both interms of new markets and additional frequencies. However, legacy carrier hubs may be negativelyaffected as LCC non-stops divert connecting traffic from network feeder markets, and congestedairports and air traffic regions will face even greater capacity pressures as new regional jets aredeployed.

Understanding the Issues and the Opportunity: Order the Full ReportInterVISTAS has undertaken a study which evaluates the economics of regional jets in a low costbusiness model, and which identifies the significant implications of this development for both airlinesand airports. Industry stakeholders that can recognise this potential trend, and airports that candemonstrate their ability to support RJ services, stand to benefit the most.


REGIONAL JETS AT LOW COSTCARRIERS? - CONTINUEDThis report will be of great value to airports seeking to attract low cost carrier service to theircommunities. Tourism organisations will also find it useful, as deployment of these aircraft haveimplications for the price of air access as well as for network connectivity. Financial analysts andgovernment officials will want to understand the emerging economics of this segment of the industry.

The full report on the economics of Regional Jets at Low Cost Carriers is available for $250 fromInterVISTAS Consulting Inc. To obtain copies, please contact:

John Weatherill, Manager Airline Planning, InterVISTAS ConsultingPhone: 1 (604) 717-1865Fax: 1 (604) 717-1818Email: [email protected]

Reports can be obtained in print or in electronic formats, and unlimited copies are authorised forcirculation within your organisation.


CANADA’S RJ REVOLUTION -COMING SOON TO AN AIRPORT NEAR YOU9 March 2004

Canada’s skies are changing. Air Canada recently ordered 90new regional aircraft from Bombardier and Embraer – 45 fromeach manufacturer. Potentially following the lead taken byJetBlue in the U.S., WestJet has also shown some interest inadding aircraft to its fleet. At first glance, these acquisitions maynot create much of a stir for airport operators, but they will havesubtle yet notable impacts to Canadian airport facility planningand development.

How important is this acquisition? Although details of Air Canada’s new Business Plan haveyet to be released, the new aircraft orders will significantly shift the carrier’s fleet mix, and likelydownsize the average size of aircraft deployed on the mainline carrier’s domestic and transborderroutes. Once these aircraft deliveries are completed over the next few years, regional jets couldcomprise between one third to one half of Air Canada’s fleet – depending on whether the carrierdownsizes or maintains its current aircraft inventory, and what proportion of RJs will be transferred toAC Jazz. 4

Where will these aircraft be deployed? At present, all bets are on as to the strategy Air Canadawill adopt for RJ deployment. However, scenarios could include use of RJs for one or a combinationof the following:

§ Increased flight frequencies to hub airports such Toronto, Montréal, Calgary and Vancouver,including from medium size Canadian Airports;

§ New point-to-point services between medium size markets; and/or

§ Down-gauging of aircraft size on many routes.

Regardless of the strategy adopted, most medium and larger Canadian airports will see increasing RJtraffic over the coming years.

What does this mean for airport facilities? Increased RJ traffic could generate a number ofnew operational demands on existing or planned facilities.

Aircraft Bridge Capabilities. Aircraft bridge clearances are afunction of the aircraft they are designed to serve. Regional jetshave very low ground clearances and as a result areincompatible with most existing fixed aircraft bridges. Whilemany smaller airports already possess apron drive bridges, orare replacing older fixed bridges with apron drives that could beadapted to RJ operations, these do not always enable the lowerreach required to attain the doors of regional aircraft.

4 Air Canada and its pilots unions reached a tentative agreement on March 4, 2004 on the allocation of aircraftbetween the mainline carrier and AC Jazz. Details of the agreement have yet to be released, but it is believedthat CRF aircraft will be flown by Jazz and the large ERJ fleet will be flown by mainline pilots.

Air Canada has recently ordered 45Embraer 190 aircraft.

The drive base that serves as acantilever to apron drives does notalways enable the bridge to descend toRJ aircraft doors.

Marcel ChampagneSenior Planner


CANADA’S RJ REVOLUTION- CONTINUEDApron drives use a system similar to that of a cantilever that enables the head of the bridge to rise ordescend to reach aircraft doors.

The higher the connection point to the terminal building, the lower the ability the bridge has todescend to the height of an RJ given the position and the design of the drive base that serves as thecantilever. These characteristics can present challenges at airports where passenger holdrooms aresituated on the second level of the terminal. Manufacturers such as Dewbridge and Jetwaymanufacture aircraft bridges specifically suited for regional aircraft.

Apron Layouts. Increased RJ traffic will generate different apron management demands. In anattempt to maximize the efficiency of RJ operations, air carriers will prefer power-out operations overuse of tractors for push-back. A number of airports already constrained for space have electedhowever to maximize apron space through layouts that prevent power-out movements. Airportoperators could increasingly come under pressure from air carriers to reconfigure apron layouts toaccommodate more independent operations. In some cases however, minor adjustments to aircraftparking stand alignments can enable existing stands to accommodate RJ power-out movements whileat the same time continue to provide for movements of larger aircraft (such as the A-320 or B-737) inpush-out mode.

Terminal Traffic. RJ operations could increasingly occur at times when demand is thinner, or toincrease frequency on routes also served at other times by larger single aisle jets. At airports wherethis scheduling will occur, hourly passenger traffic peaks will fluctuate and could generally flattenthroughout the day. Theoretical facility sizing requirements could be driven down, while shifts in aircarrier, concession and security staffing models could occur.

What should airport operators be doing today? Different RJ deployment models will likelyemerge in different markets. Regardless of the extent of RJ traffic to occur at individual airports,Canadian airports need to plan for and develop airport facilities that will meet the operationalrequirements of an increasing share of RJ traffic. Meanwhile, preserving the flexibility to eventuallyaccommodate slightly larger aircraft when market conditions once again change will also be requiredto minimise potentially costly capital expenditures on facility redevelopment.


CANADA’S NEW RESTRICTEDAREA IDENTIFICATION CARDS9 March 2004

The Canadian Air Transport Security Authority was given additional responsibilities in November2002, on top of those outlined in the April 2002 CATSA Act. These include the screening of non-passengers, launched last month, and enhancing the Restricted Area Pass program.

Unlike the United States, Canada has screened and fingerprinted workers requiring access tosecured areas through the Restricted Area Pass (RAP) program since 1987. CATSA is now ready toaugment the credentialing capabilities of RAP through a new “Restricted Area Identification Card(RAIC)” program for 150,000 airport employees coast to coast. Starting with pilot projects inVancouver, Montréal-Trudeau, Charlottetown, and Kelowna, biometrics (finger and potentially iris),and new smart cards will be used every day to authenticate individual identities and authorities toenter restricted areas. CATSA is targeting to roll out RAIC at 29 major airports in 2004.

Key AdvantagesThe biometrics selected for RAIC (Bioscrypt finger, LG Iris cameras) and the smartcards (HID) willsignificantly augment the fidelity of the restricted areas. The probability of an individual not authorizedto enter a restricted area would be significantly diminished. Furthermore, the use of a central CATSAdatabase will allow for a “national pass” system capability.

Major Deployment ConsiderationsThe deployment of RAIC in 2004 will face key challenges. Clear communications with airport workersand change management strategies are needed to successfully deploy RAIC to the Canadian airportsenvironment. For instance, there continues to be a misconception amongst Canadians about thesignificance of biometrics cards and the privacy of biometric templates. Moreover, the deployment ofa system that is a condition of employment may have implications for labour relations.

One of the critical operational considerations is the speed for which someone accessing the restrictedarea can be cleared to proceed. In larger airports, for example, a 5 second transaction time couldcreate a queue of nearly 10 minutes during morning peak periods. Furthermore, solutions andstandards for anti-piggybacking have yet to be advanced to prevent 1 cardholder from allowingpassage of multiple individuals into a restricted area.

What about Perimeter Fence Security?Airport operators are still responsible for maintaining the primary security line. CATSA’s RAICprogram simply provides an advanced set of tools that are deployed nationally. Some of thepossibilities include the deployment of readers at the perimeter fence for larger airports; however thechoice of finger biometric may need to be modified in order to deal with freezing temperatures.

Integration with other initiatives?CATSA is not the only agency deploying biometric card systems. In past issues of the IndustryReview, these have been detailed as Nexus-Air, Canpass-Air, and the potential national identity card.Of direct relevance to airport workers is the new Transportation Worker Identification Credential(TWIC) being advanced by the TSA. Whether RAIC will be interoperable with the TWIC card remainsto be seen. This integration would be a positive step in streamlining the passage of flight crews fromairports in the U.S. and Canada alike.

Solomon WongDirector,

Security & Planning


THE OTTAWA SCENE9 March 2004

Transport Minister Valeri Wins NominationOn 6 March 2004, the Honourable Tony Valeri, the Federal Minister of Transportwon a hard fought nomination battle against Sheila Copps, for the right to representthe Liberal party in the next Federal election in the newly created riding of HamiltonEast-Stoney Creek.

With the nomination process now over, Minister Valeri will be focusing onsubstantive transportation policy issues leading up to the election, which isexpected to be called for late spring 2004.

Transport Minister Issues Call For Proposals For Transportation Planning And ModalIntegration ProjectsA call for proposals for projects that advance transportation planning andenhance integration and connections between modes of transport wasannounced by Transport Minister Tony Valeri on 26 February 2004.

"The Government of Canada recognizes that a strong and efficienttransportation system is vital to Canada's continued economic success.Improved transportation planning and modal integration will better positionus to meet the challenges of the 21st century," said Mr. Valeri. "Today's callfor proposals demonstrates our commitment to supporting innovativeapproaches that enhance the sustainability of the transportation system."

The types of proposals eligible for funding include:§ research studies that provide greater understanding of urban and multimodal transportation;§ planning and feasibility studies and projects;§ development and dissemination of information management tools, including traffic demand

management;§ infrastructure and technologies to improve connections between modes or modal integration;§ initiatives to facilitate modal partnerships or cross modal/shipper partnerships; and§ development of organizations to plan and manage passenger and freight transportation activities

in urban areas.

Provinces, municipalities, First Nations, registered not-for-profit organizations, private enterprises,public or private transportation authorities/agencies and academia may apply. Partnerships betweentwo or more of these entities are encouraged.

Transport Minister Announces Updated Standards For Training Of Flight CrewsOn 24 February 2004, Transport Minister Tony Valeri announced new aviation security trainingstandards, designed to assist flight crews in managing on-board security threats. In the fall of 2003,Transport Canada updated security guidance material for flight crewmember training. Thisconfidential guidance material has now been formally adopted. It describes new procedures andtraining requirements for flight crewmembers to deal with, among other things, hijackers,chemical/biological threats, and the presence of aircraft protective officers on board aircraft.

Sam BaroneRegional Vice President,

Ottawa


THE WASHINGTON REPORT10 March 2004

This month’s report has a European flavour…

European Commission and U.S. Department of Justiceapprove Air France/KLM “Merger”The European Commission and the U.S. Department of Justiceauthorized the merger between Air France and KLM. As acondition of the approval, the airlines were required to address concerns about competition on theParis – Amsterdam and other routes, and between Europe and the United States. Forty-seven dailyslot pairs will be surrendered by the airlines to be made available to rivals in order to maintaincompetition. The Dutch and French governments are required to refrain from regulating prices onlong-haul routes where other carriers offer competing, indirect services. They are also required togive traffic rights to other carriers wishing to stopover in Amsterdam or Paris enroute to the UnitedStates. The merger opens 90 new routes to KLM and 40 to Air France.

European Union Passports to Contain Biometrics by 2005European Union passports will have digital machine-readable photographs and contain chips withbiometric data. Including fingerprints will be up to the individual E.U. states to decide. A database willalso be established to store photos of all E.U. passport applicants. The United States will requirebiometric passports by 26 October 2004 for entry without a visa. The E.U. is seeking to extend thevisa waiver to 2005.

European Airports: A Generator of JobsA study by Airports Council International (ACI) finds that for every 1 million passengers passingthrough European airports, nearly 6,500 people are supported in air travel related jobs at a national,regional, or local level. The study found that airports create jobs, generate inward investment, andincrease prosperity for the regions they serve. ACI Europe’s 450 member airports registered 1 billionpassengers, amounting to 6.5 million jobs. The study also found that regional and local airportsplayed a similar role in their areas as do major airports acting as key drivers of national economies.

Senate Panel finds TSA had Role in Data-Mining ProjectA Department of Homeland Security (DHS) audit found that 6 Transportation Security Administration(TSA) employees persuaded jetBlue airways to share personal passenger data with a Department ofDefense (DOD) experimental anti-terrorism screening project, but did not violate privacy rules underthe Privacy Act of 1974. The DHS has announced that it will set up clear rules for voluntary andcompulsory data sharing with private sector companies to make sure the practice complies with thePrivacy Act. The TSA has also instituted a plan to ensure the Agency complies with the Privacy Act.

U.S. Airline 2003 Losses Half of 2002 LossesUS$5.5 billion was lost by the ten major U.S. airlines in 2003, compared to $11 billion in 2002.Revenue totalled $81.8 billion, up 1.1% from 2002. Operating expenses declined 7% to $ 84.6 billionin 2003.

This 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 andmay not materialize. Information contained herein is provided for the use of InterVISTAS Consulting Inc. only, andmay not be distributed beyond the Airport.

Prepared by InterVISTAS Consulting Inc.

Charles ChambersSenior Vice President

GA2

AND

Regional Vice PresidentInterVISTAS Consulting Inc.

Washington, D.C.

CAIR Issue No. 15 - March 2004

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Transcript of CAIR Issue No. 15 - March 2004