CAIR Issue No. 45 - October 2006

CANADIAN AVIATIONINDUSTRY REVIEW

In this issue…

Features Columns: Regular Reports:• U.S. Travel to Canada (p.1)• EU and US Reach a New Deal on

Airline Passenger Data (p.2)• Air Canada’s International Seat

Capacity Fall/Winter 2006/2007 (p.3)• Harmonizing the Skies (p.14)

• Canadian Airline Data (p.7)• U.S. Airline Data (p.8)• Canadian Airport Data (p.9)• Industry News (p.10)• The Ottawa Report (p.16)• The Washington Report (p.17)• InterVISTAS News (p.18)

InterVISTAS’ Canadian Aviation Intelligence ReportOctober 2006 Copyright ©2005 InterVISTAS Consulting Inc., all rights reserved.Page 1

Eugene Chu

Senior Analyst

U.S. TRAVEL TO CANADA – WHEREHAVE THE AMERICANS GONE?October 2006

The U.S. is one of the largest outbound travel markets in the world, and the largest source of visitorsto Canada. This column examines the pattern of U.S. outbound travel over the last decade, andCanada’s relative performance in terms of U.S. visitor arrivals.

Growth of U.S. Outbound Travel. Between 1995-2005, the total volume of overnightU.S. outbound travellers (all modes) increased by nearly 24%, reaching a peak of 63.5 million in2005. Although most of this growth occurred prior to 2000, it is evident that the U.S. outbound travelmarket has recovered from the negative affects of September 11 in 2001 and SARS in 2003.

Slow Growth in Travel to Canada, Increase in Overseas Travel. Over thelast 10 years, the average annual growth of U.S. visitor travel to Canada has lagged behind that ofU.S. travel to overseas destinations. As a result of this, Canda’s share of the U.S. outbound markethas declined. This is significant as a 1% difference in U.S. travel represents roughly US$650 millionin potential tourism receipts for Canada.

Outbound Visitor Travel from the U.S.Destination 1995-2005 Average

Annual Growth1995

Share2005

Share2005 Visitors

(millions)Canada 1.2% 25% 23% 14.4

Mexico 0.8% 38% 32% 20.3Overseas 4.4% 37% 45% 28.8

Total 2.2% 100% 100% 63.5Source: U.S. Office of Travel and Tourism Industries (OTTI).Notes: Travel to Canada and Mexico includes all modes. Travel to Overseas destinations includes air only.

Shift in Travel Mode. Data from Statistics Canada (1995-2004) shows that during this time, U.S. travel to Canada byautomobile increased by 1.1%, while U.S. travel to Canada by airincreased by 4.2%. Between 1995-2004, the share of U.S.arrivals to Canada by aircraft has increased from 21% to 26% oftotal U.S. visitors.

Future Growth Prospects. The UNWTO forecasts thetotal number of U.S. outbound travellers to grow at an averageannual rate of 2.7% per year between 1995-2020, reaching 123million by 2020.


EU AND US REACH A NEW DEALON AIRLINE PASSENGER DATAOctober 2006

In early October, the US and European Union (EU) reached a new agreement on the handling of datacollected on airline passengers. An earlier deal was struck down by the European Court of Justice,requiring the resumption of transatlantic talks.

BackgroundIn May of 2004, the US and EU reached an agreement on the transfer of airline passenger data afterlong and difficult negotiations. The US insisted on the collection of a wide variety of data that someEuropean stakeholders considered sensitive. For their part, the EU was concerned that any dealallowing for data sharing should be compliant with the European Commission’s Data ProtectionDirective (widely seen as the strongest privacy regime in the world). Despite their disparate views, theparties were eventually able to hammer out a compromise. Some in the European Parliamentremained opposed to the deal, however, and took the Commission to the European Court of Justice.The Court decided in May of this year that the Commission did not have the appropriate legal basis tosign the agreement with the US, and ordered the negotiation of a new agreement. This decision hasthe potential to undermine the deal Canada struck with the EU on passenger data, which was similarto the EU-US agreement.

What’s New?The US and EU struggled to meet the Court’s September 2006 deadline for a new deal. On October 5the parties agreed on a new text, which will be valid until July of next year. The new deal differs fromthe old one in that US authorities will now have to request (“pull”) data from European based carriersrather than simply receiving it as a matter of course (having the data “pushed”). The deal also givesU.S. Customs and Border Protection the ability to share data with other federal agencies on a case bycase basis related to terrorist and related offenses (i.e., should there be a specific threat perceived forU.K.-U.S. flights, then passenger data on flights within that market could be shared with the FederalBureau of Investigation). Besides these changes in practice, much of the deal is the same as agreedin 2004, with the exception that a new “legal basis” has been found to allow the EU to satisfy its ownprivacy rules.

It’s important to recognise that the EU and US no longer disagree about the collection of airlinepassenger data. Rather, they disagree on how the data should be collected, stored and manipulated.The European Commissioner for Justice and Home Affairs (Franco Frattini) is on record as asupporter of an EU system for airline passenger data collection. With the EU developing its ownsystem for airline passenger data collection, it is reasonable to expect that the long term trend will betoward multilateral efforts to adopt an international system of data collection. The EuropeanCommission is openly advocating such a system, while the US seems to prefer a network of bilateralarrangements.

So, what does all this mean?For airlines and airports, the signing of this new US-EU deal is good news in that it eliminatesuncertainty, at least in the short term. For an unacceptable period of close to a week, European basedcarriers faced US fines if they did not share passenger data, and sanctions in Europe if they did. Asthis new deal expires in just ten months, negotiators will have to be back at the table working on anew arrangement in the very near future. Hopefully this next deal will provide clarity for the industryand settle this long running dispute once and for all.

Christian Hansen

Manager,Security & Trade Policy


Angelica Sparolin

Senior Research SpecialistEconomic & Transportation

AIR CANADA’S INTERNATIONALSEAT CAPACITY FALL/WINTER2006/2007October 2006

When Air Canada emerged from bankruptcy protection over two years ago, it stated that it wouldplace a stronger focus on international services. However, while total international capacity hasgrown this year, it continues to grow at rates below other sectors, and currently represents a smallershare of total seat capacity than in previous years.

Air Canada’s Total Seat CapacityAir Canada’s total fall/winter seat capacity has been steadily increasingover the past few years, and currently stands at 9.2 million seats for thethree months ending January 2007. This is up from 8.2 million seatsduring the same period in 2006 and up from 7.6 million seats from thesame period in 2005. The largest growth is observed for the domesticsector, up close to 750,000 seats (+12%) for the three month period,compared to 2006. Transborder seats are up over 200,000 seats(+15%), while international seats are up by only 30,000 seats (+4%).

Individual overseas markets which have experienced growth versus the same three month period inthe previous year period include: Mexico City, London, Frankfurt, Tokyo and Nassau (Bahamas).Overseas markets which experienced declines in the period include: Sao Paulo, Barbados, Rome,Santo Domingo (Dominican Republic) and Israel.

Table 1: Air Canada’s Total Seat Capacity (Non-Stop Departures from Canada)

Volume of Total Seat Capacity

Destination

ThreeMonthsEndingJanuary

2007


2006


2005


2004

Change2007 vs

2006 ThreeMonthPeriod

Canada 6,724,319 5,980,853 5,470,712 5,917,510 + 743,466USA (incl. Hawaii) 1,601,020 1,389,756 1,351,427 1,521,065 +211,264 Asia 192,956 185,987 200,071 185,264 + 6,969 Europe 372,904 361,398 320,712 352,644 +11,506 Latin America 286,247 273,788 251,340 236,648 + 12,459 Middle East 11,236 12,720 12,508 13,992 -1,484International Overseas 863,343 833,893 784,631 788,548 +29,450Grand Total 9,188,682 8,204,502 7,606,770 8227,123 + 984,180

Source: OAG Max. Notes: Includes Air Canada mainline and Jazz.


AIR CANADA’S INTERNATIONALSEAT CAPACITY FALL/WINTER2006/2007 – CON’TInternational Overseas SeatCapacity ShareFor the past three years, Air Canada’s internationaloverseas seat capacity had held constant atapproximately 10% of total seats for the threemonth period ended January 31st. However, for thisperiod in 2007, total international capacity is downslightly to 9% of total seats. The capacity shares ofindividual regions (Asia, Europe, Latin America andMiddle East) have each declined slightly; however,the only region which experienced a decrease inabsolute seat capacity is the Middle East, down12% from last year.

Table 2: Air Canada’s Seat Capacity Share (Non-Stop Departures from Canada)

Share of Total Seat Capacity

Destination

Three MonthsEnding January

2007


2006


2005


2004Canada 73.2% 72.9% 71.9% 71.9%USA (incl. Hawaii) 17.4% 16.9% 17.8% 18.5% Asia 2.1% 2.3% 2.6% 2.3% Europe 4.1% 4.4% 4.2% 4.3% Latin America 3.1% 3.3% 3.3% 2.9% Middle East 0.1% 0.2% 0.2% 0.2%International Overseas 9.4% 10.2% 10.3% 9.7%Grand Total 100.0% 100.0% 100.0% 100.0%

Source: OAG Max. Notes: Includes Air Canada mainline and Jazz.

Figure 1: Air Canada Capacity by Market(Three Months Ending January 2007)

Canada73.2%United

States17.4%

Middle East0.1%Europe

4.1%

Asia2.1%

Latin America

3.1%

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AIRLINE DATA – CANADATraffic and Load Factors on Canada’s Major Air CarriersSeptember 2006

Passenger TrafficRevenue Passenger Kilometres

CapacityAvailable Seat Kilometres Load Factor

Air Carrier % Changeover 2005

% Changefrom 2004

% Changeover 2005

% Changefrom 2004

Changeover 2005

Change from2004

Air Canada -0.4% +8.3% +0.5% +7.8% -0.7%(to 79.7%)

+0.5%(from 79.2% )

Domestic(Mainline) -4.3% -0.4% -3.0% -1.1% -1.2% +0.5%

Jazz +45.5% +145.3% +40.0% +126.6% +2.6pts +5.4pts

International& Charter +1.2% +12.2% +1.9% +11.7% -0.6% +0.4%

WestJet +24.5% +46.3% +17.2% +38.7% +4.3pts(to 75.2%)

+3.9pts(from 71.3%)

Analysis: Air Canada Mainline’s domestic traffic

and capacity continued to slide during themonth of September, down 4.3% and3.0% respectively. With Air CanadaMainline continuing to transfer capacity toJazz, Jazz experienced a capacityexpansion of 40% for the month ofSeptember.

During the month of September, AirCanada’s international and charterservice traffic rose 1.2%. Due to strongU.S and Latin America capacity growth,Air Canada’s international capacity rose1.9% - leading to an overall decline inload factor of 0.6 points in September.

WestJet continues strong passengergrowth in September with an 18%expansion in traffic. As a result, WestJetmanaged to increase load factor by 4.3points, despite capacity growth of 17.2%over 2005.

OTHER CARRIERS:LOAD FACTORS

CanJet: not reported

Air Canada Domestic Mainline Air Canada Domestic Mainline

-10%-5%

0%5%

10%

Jul-05

Aug Sep Oct Nov Dec Jan-06

Feb Mar Apr May Jun July Aug Sept

Dom RPK Dom ASK

Jazz data is not included in this graph

Air Canada Domestic Mainline Air Canada Domestic Mainline

-10%-5%

0%5%

10%

Jul-05



Dom RPK Dom ASK

Jazz data is not included in this graph

-5%

0%

5%

10%

15%

Jul-05



Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

-5%

0%

5%

10%

15%

Jul-05



Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

0%5%

10%15%20%25%30%35%

Jul-05



RPK ASK

WestJetWestJet

0%5%

10%15%20%25%30%35%

Jul-05



RPK ASK

WestJetWestJet


AIRLINE DATA – U.S.U.S. Airlines Release September 2006 Traffic Figures

Traffic Data - September 2006

Airline Traffic(RPMs – millions)

Capacity(ASMs – millions) Load Factor

1,643

8.2%2,264

15.8%72.6%

5.1 pts

697

3.1%1,000

2.4%69.7%

0.5 pts

5,196

9.8%7,732

10.1%67.2%

0.2 pts

16,904

11.5%8,834

9.9%78.2%

1.2 pts

29,252

1.3 %11,637

2.3%79.5%

0.7 pts

10,595

1.4%14,029

0.5%75.5%

0.5 pts

9,077

3.4%12,170

5.4%74.6%

1.5 pts

6,169

5.5%7,584

7.1%81.3%

1.3 pts

24,763

4.8%6,595

4.2%72.2%

0.5 pts

297

37.6%399

40.6%74.5%

3.6 pts

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

Source: Carrier traffic reports.


Summary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian AirportsToronto Vancouver Montréal-

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

August -1.1% +2.7% +1.5% +12.7% +8.8% +4.4% +4.6% -6.4% +5.2% +26.4% +10.3% +2.4% +8.9%September +4.5% +2.6% +7.4% +7.9% +13.5% +7.1% +6.6% +0.3% +2.9% +16.1% +12.9% +13.9% +8.9%3rd Quarter +2.2% +2.9% +4.1% +10.7% +11.2% +5.4% +5.1% -5.6% +3.1% +19.6% +9.3% +8.8% +8.0%

October -0.1% +4.3% +3.7% +7.1% +16.7% -0.7% +6.4% -0.7% +3.1% +16.1% +11.8% +12.8% -0.9%November +0.6% +5.2% +4.1% +12.1% +10.7% -2.5% +6.2% +3.0% +8.5% +24.0% +18.0% +15.6% +5.0%December -0.6% +0.5% +4.3% +10.3% +4.9% -3.5% +5.4% +5.6% +3.8% +19.1% +12.2% +9.5% +7.9%4th Quarter +0.0% +3.2% +4.0% +9.8% +10.4% -2.2% +6.0% +2.4% +4.9% +19.6% +13.9% +12.5% +3.6%

2005

Full Year +4.6% +4.4% +5.4% +10.6% +10.5% +3.6% +6.5% -0.4% +5.5% +19.3% +12.3% +10.6% +8.2%January +1.1% -1.7% +1.4% +9.1% +10.7% +1.0% +2.8% +5.4% +6.2% +20.3% +10.1% +4.4% +9.7%February -0.5% +1.5% +2.1% +8.7% +10.5% +0.2% -0.6% +1.2% +1.4% +11.0% +3.0% -2.8% +7.0%

March +3.1% +3.5% +6.6% +9.0% +13.6% +3.9% +2.0% +4.8% -3.5% +15.4% +0.1% -3.8% -7.8%1st Quarter +1.3% +1.3% +3.6% +8.7% +11.8% +1.8% +1.4% +3.8% +0.9% +15.5% +4.4% -0.8% +2.0%

April +1.2% +4.3% +6.2% +19.5% +20.4% +3.8% +0.7% +6.1% +4.2% +17.9% +9.5% +13.9% +13.1%May +4.8% +3.2% +7.6% +16.3% +20.3% +0.3% +6.4% +8.4% +10.3% +13.2% +7.7% +23.3% +15.2%June +2.8% +2.7% +4.5% +9.7% +12.9% +1.8% +4.1% +0.7% +8.6% +13.4% +5.3% +12.5% +3.7%

2nd Quarter +4.5% +3.3% +6.3% +14.6% +17.8% +1.9% +3.8% +5.2% +7.8% +14.7% +7.4% +16.3% +10.3%July +2.2% +4.8% +2.2% +7.0% +13.8% -2.1% +4.9% +8.5% +7.4% +14.4% +5.9% +7.1% +13.2%

2006

August +6.8% +3.9% +3.4% +10.0% +19.0% +2.2% +8.5% +7.1% +11.3% +12.2% +5.8% +15.9% +11.5%Source: Transport Canada and individual airports’ traffic reports.


NEWS ARTICLESAIR CANADA UPDATEAIR CANADA LAUNCHES ‘LONDONPLUS’ MULTI-TRIP PASSES

On 11 October2006, Air Canada

launched the ‘London Plus’ multi-trip passes.The passes, priced starting at $5,398 fromEastern Canada and $6,098 from WesternCanada, including all airport fees, taxes andsurcharges, are valid for 6 prepaid one-way tripswith a one-year usage period. The pass allowstravellers to fly between Canada and LondonHeathrow. The pass can be purchased via AirCanada’s web site or through travel agents.

AIR CANADA REPLACES RESERVATIONSYSTEMAir Canada has signed an agreement with ITAsoftware to replace its current RES IIIreservations system. The new system willinclude reservations, inventory control and seatavailability, check-in and airport operationsmodules. The new system will be in operationby the end of 2007 and it will continue to supportAir Canada’s participation in the Star Alliance.

AIR CANADA TAKES OVER ZOOM’SMAINTENANCE PROGRAM

Air Canada TechnicalServices has signed afive-year deal with ZoomAirlines to maintain

Zoom’s four Boeing 767-300s and to manageZoom’s total maintenance program includingfleet reliability, engine trend monitoring and airregulatory compliance issues.

TRANSPORT MINISTER CANNONDESIGNATES AIR CANADA TO FLY TOALGERIAOn 22 September 2006, the Federal Minister ofTransport, Infrastructure and Communitiesannounced the designation of Air Canada as ascheduled international carrier for Algeria. Thiswill be the first scheduled air service betweenthe two countries by a Canadian air carrier. AirCanada intends to offer code-share serviceswith Lufthansa to Algeria.

AIR CANADA PILOTS FAIL TO STOPACE PAY OUTAir Canada’s pilots have asked the court toblock ACE Aviation Holdings Inc., parentcompany of Air Canada, from paying out up toC$2 billion of distribution to shareholders. Thepilots, who became creditors of Air Canada dueto outstanding pension obligations, claim thatthe distribution could risk their pension funds.The Quebec Superior Court has ruled in favourof ACE. ACE expects the initial distribution toshareholders to be completed by the end of2006.

AIR CANADA LAUNCHES NON-STOPSEASONAL FLIGHTS BETWEENMONTREAL AND ROMEAir Canada will launch daily non-stop seasonalservice between Montreal and Rome beginningon 1 June, 2007 until 30 September, 2007. Theservice will be operated using 207-seat Boeing767-200ERs.

AEROPLAN LAUNCHES FLEXIBLECLASSICPLUS REWARD SEATS

On 16 October,Aeroplan introducedClassicPlus FlightRewards which allows

its members to gain unrestricted access to anyunsold seats across the Air Canada and AirCanada Jazz networks in both Economy andExecutive Class.

AEROPLAN’S NEW MILEAGE EXPIRYPOLICY ANGERS MEMBERSAeroplan members who have not accumulatedor redeemed any Aeroplan Miles in the 12months prior to 1 July 2007 will risk losing all oftheir accumulated Aeroplan Miles. Also,effective 1 January 2007, all accumulatedAeroplan Miles must be redeemed in sevenyears following the accumulation date. AeroplanMiles accumulated prior to 1 January 2007 are“date stamped” as 31 December 2006 and willexpire on 31 December 2013.


NEWS ARTICLESWESTJET UPDATEWESTJET INTRODUCES NON-STOPFLIGHTS BETWEEN EDMONTON ANDCOMOX THREE TIMES WEEKLY

WestJet willlaunch non-stopservice between

Edmonton and Comox three times weekly. Theservice will begin on 4 December. The servicewill be operated using Boeing 737 aircraft.

WESTJET LAUNCHES ONCE WEEKLYNON-STOP HALIFAX-ORLANDOFLIGHTSWestJet has announced the introduction of non-stop services between Halifax and Orlando.The new once weekly service will begin on 14February. This is WestJet’s eleventhtransborder city.

OTHER CANADIAN AIRLINENEWSPORTER GETS OPERATORCERTIFICATE

Porter Airlines hasreceived its air operatorcertificate from the

Canadian Transportation Agency to operatedomestic and non-scheduled internationalservices using medium size aircraft. The airlinehas ordered ten Bombardier Q400s and four ofthe aircraft will be used to operate air servicesto/from the Toronto City Centre Airport.

CANJET TO FLY CHARTERSAlthough CanJetAirlines hasdiscontinued all its

scheduled operations since 10 September, thecarrier will focus instead on offering charter airservices this fall and winter from variousCanadian cities to Cuba, Mexico, the DominicanRepublic, the Bahamas and Jamaica.

CARGO NEWSEMIRATES ORDERS TEN 747-8FREIGHTERS

Emirates announced that it hasordered ten Boeing 747-8Fs andhas secured purchase rights for ten

similar aircraft. The new order is valued atapproximately $2.8 billion and the carrier is toreceive the first delivery in 2010. Together withthe ten 747-8F that Emirates ordered at theFarnborough Air Show, the total value of thetwenty aircraft is approximately $5.6 billion.

FEDEX OPENS FACILITY IN WINNIPEGOn 27 September, themayor Sam Katzannounced that FedEx

will construct a new package handling andshipping facility at Winnipeg. The facility willcost approximately $5 million and it will beFedEx’s second facility in Winnipeg.Construction for the 3,000 square metre facilityis expected to start immediately and to beopened in July 2007. Federal Express currentlyhas a 3,250 square metre facility at theWinnipeg International Airport.

FEDEX REPLACES 727 FLEET WITHMORE EFFICIENT 757-200SFedEx announced that it will invest $2.6 billionto replace its fleet of 727-200 freighters with757-200s. Relative to the 727 aircraft, the 757has approximately 20% more payload capacitybut 25% less in operation cost per pound.FedEx plans to acquire or modify up to ninety757-200s. The new aircraft is expected to beginoperations over the 2008-2016 periods. Thisfleet renewal program only applies to U.S.based aircraft. The Canadian 727 fleet operatedby Morningstar Airlines are unaffected.


NEWS ARTICLESPEOPLE IN THE NEWSNAV CANADA WINS PERSON OF THEYEAR

The Minister of Transport,Infrastructure andCommunities has announcedthe President and CEO of NavCanada, Mr. John W.Crichton, as the 2006Transportation Person of theYear. Mr. Crichton has

contributed to the expansion of air travel bothnationally and internationally through his career.Mr. Crichton spent 24 years in commercialaviation and was the Executive Vice Presidentof First Air prior to joining ATAC.

BOEING COMMERCIAL APPOINTS CEOBoeing CommercialAirplanes has named Mr.Scott Carson its newPresident and CEO. Theposition was previously heldby Mr. Alan Mulally whorecently joing the FordMotor Company as its new

CEO. Mr. Carson remains as an executive vice-president with the Boeing Company.

ATAC ANNOUNCES NEW PRESIDENTAND CEO

The ATAC has announcedthe appointment of Mr. SamBarone as the newPresident and CEO. Mr.Barone has over 25 years ofexperience in transportationworking in the public,private and not-for-profitsector. Mr. Barone formerly

held the position as Regional Vice President atInterVISTAS Consulting Inc. Mr. Barone’sposition is in effect 16 October, 2006.

AIRBUS NAMES LOUIS GALLOIS THENEW CEO

Airbus has namedMr. Louis Gallois asthe new CEO for thecompany effective 10October following theresignation of Mr.

Christian Streiff. Mr. Gallois will remain asEADS co-CEO for Airbus in addition toassuming his new CEO responsibilities. Mr.Gallois was formerly the chairman and CEO forSnecma.

OTHER NEWSMY WAY ORDERS NINETEENBOMBARDIER CRJ-900S

Italy’s My Way Airlineshas ordered nineteenCRJ-900s from

Bombardier. The carrier plans to use the aircraftfor domestic operations. The value of the orderis in the range of US$700 million. This deal hasincreased Bombardier’s CRJ-900s orders from52 to 71 for the year.

EGYPTAIR ORDERS SIX EMBRAER 170SFOR REGIONAL SUBSIDIARY

EgyptAir Holding,parent company ofEgyptAir, has ordered

six 76-seat Embraer 170s for the launch of itsRegional subsidiary EgyptAir Express. The firstaircraft will be delivered in April 2007, prior tothe launch of EgyptAir Express operations insecond quarter 2007.

JAL INTERNATIONAL AND JALDOMESTIC MERGERJAL International and JAL Domestic willmerge to become Japan Airlines Internationaleffective 1 October 2006. The carrier hopes themerger will result in greater efficiency and costreduction, as well as better internalcommunications for the company.


NEWS ARTICLESOTHER NEWS – CON’TNORTHWEST ORDERS 72 REGIONALAIRCRAFT FOR COMPASS

Northwest Airlines hasordered 36 CRJ-900sand 36 Embraer 175s

for its regional subsidiary Compass Airlines.Compass will operate the 175s as NorthwestAirlink. Northwest has not announced theoperator of the CRJ-900s.

AIRBUS A380 DELAYAirbus announced that it would postponedeliveries of the A380. This is the third delayannouncement in 16 months for the aircraft.Airbus has not received new A380 orders formore than a year. Emirates and SingaporeAirlines are reviewing their options and seekingcompensation for the delays respectively. It isbelieved that Boeing has been benefiting fromAirbus’ delay announcements. The Boeing 747-8 has been considered an alternative to theA380. Boeing claims its 747-8 costs 21% lessto operate and it is priced approximately $10million less than the A380.

TORONTO PEARSON ANNOUNCES AIFCHANGE

On 26 September, the GreaterToronto Airports Authorityapproved raising the AirportImprovement Fee (AIF) atToronto Pearson effective 1

January 2007. The fee for departingpassengers will increase from the current $15per passengers to $20. The fee for connectingpassengers will remain at $8.

DELTA LAUNCHES NON-STOP SERVICEBETWEEN SALT LAKE CITY ANDWINNIPEG

Delta Air Lines willlaunch twice daily non-stop service between

Salt Lake City and Winnipeg. The service willbegin on 8 January 2007. The service will beoperated Delta’s connection carrier SkyWestAirlines.

EMBRAER LOWERS DELIVERYFORECAST FOR 2006Embraer lowered its delivery forecast for theyear from 145 to 135 airplanes. The revisedforecast stems from supply problems for itsE170 and E190 Jetliners. However, Embraerexpects its delivery forecast for 2007 to increaseby 10 units to at least 160 aircraft tocompensate delays in 2006. Excluding an orderof 36 airplanes by Northwest Airlines, Embraerhas an order for backlog of 414 commercialaircraft as of the 30 September 2006.


The ban on liquids and gels put intoeffect considerably extend Pre-Board

Screening queues at airports inCanada, the US and the UK.

Marcel Champagne

Manager,Operations Planning

HARMONISING THE SKIESLIQUIDS, GELS AND AEROSOLS ANDTHE NEW AVIATION REALITYOctober 2006

The restrictions placed on carry-on items put into effect following the events that took place in the UKon 10 August 2006 had immediate impacts on air carrier and airport operations on both sides of theAtlantic. While the full ban on carry-on items created havoc in UK airports, the ban on liquids, gelsand aerosols from carry-on items in North America also created similar problems in Canada and theUS, albeit on a smaller scale.

Regardless of the point of origin, in North America or theUK, the new restrictions contributed to significantlyextending queues at check-in and Pre-Board Screeningcheckpoints, and greatly increasing the volume of checkedbaggage being processed by airport baggage systems andtransported by air carriers. (Initial estimates indicateaverage increases in the volume of checked baggage haveranged between 20 and 30%.) For airport operators,considerable reductions in retail revenues in secure areasof airport terminals were also reported immediately followingthe adoption of the new restrictions.

For the travelling public, the lack of consistency betweenvarious national regulations was often difficult to grasp. Forexample, while carry-on items were permitted in North America, they were not on connecting flightsthrough UK airports, creating significant challenges for passengers originating in North America andtransiting through a UK airport en-route to their final destination. Even more confusing was theabsence of measures against liquids and gels in a large number of European and Asian countries1,as well as in Australia, with the exception of additional screening of passengers bound for the US insome countries. For airport operators and international air carriers, the disparities also provedchallenging to manage.

Moving Towards HarmonisationWhile the UK continued to prohibit liquids and gels in carry-on items2, an initial move towardsharmonisation was made on 25 September when TSA and CATSA officials announced that a partialrelaxation of the ban on liquids and gels would take effect the following day. The new regulations nowenable the carriage of limited quantities of certain liquids, gels and aerosols as long as individualcontainers do not exceed 90 ml and that the containers easily fit in a separate clear plastic re-sealablebag no more than 1 L in volume. These new regulations also re-authorised the sales of liquids, gelsand aerosols in secure areas of air terminal buildings, along with their transport onto commercialflights.

1 In Europe, only France, Greece, Italy and Switzerland imposed full restrictions on liquids, gels andaerosols from carry-on baggage.2 The UK government has however eased the limitations on the size of carry-on items to permit oneitem per passenger the size of a standard small roller suitcase.


Transport Canada’s flyer aimed atexplaining the ‘yes’ and ‘no’s’ ofliquids on commercial aircraft.

HARMONISING THE SKIESLIQUIDS, GELS AND AEROSOLS ANDTHE NEW AVIATION REALITY – CON’TThat same week, in a move to standardise regulations across the European aviation system, EUmember States agreed to follow suit and for the first time announced similar restrictions. The newmeasures also govern the maximum size of carry-on baggagepermitted on aircraft departing EU airports, requiring them toconform to IATA’s maximum size of 56 cm X 45 cm X 25 cm,and matching the newly permitted size in the UK along with thatof most North American air carriers. With the new regulationstaking effect on 6 November, the TSA, the EU and Canada haveagreed towards a harmonized approach to liquids and gels.

Managing the ChallengesDuring the few days following announcement of the newmeasures in North America, CATSA, TSA, airport operators andair carriers were proactive in facilitating implementation throughset-up of ‘liquids and gels tables’ and distribution of plastic bagsprior to screening checkpoint entrances. While it is still too earlyto determine the effects the new measures have had onimproving check-in and Pre-Board Screening throughput, on-siteobservations indicate that the initiatives put in place during theearly days of implementation likely minimised further disruptionsto operations, beyond those impacts from the originalrestrictions.

It remains clear however that operational challenges will continue to persist, notably due to theincreased volumes of hold baggage and increased passenger screening requirements. This newoperational reality will, in a manner similar to the operational and technological shifts that haveoccurred since 2001, likely result in new requirements for facility standards and guidelines that willprovide the necessary framework for future airport development planning and operationalmanagement. Key to this process will be the ability of aviation bodies on both sides of the Atlantic tofurther harmonise existing measures, and for those outside the Americas and Europe to adopt greaterharmonised and standardised processes that will be necessary to ensuring the overall efficiency ofthe commercial aviation system and the effectiveness of related processing infrastructure.


Martin Copeland

Senior Vice PresidentAviation

THE OTTAWA REPORTOctober 2006

Prime Minister Announces Asia-Pacific Gateway and Corridor InitiativeOn 11 October 2006, Prime Minister Harper announced that the federal government will provide $591million in funding toward the Asia-Pacific Gateway and Corridor Initiative in support of Canada’seconomic growth. The funds will be allocated over a dozen Pacific Gateway projects and $321 millionhas been committed to infrastructure, transportation technology and border security projects inWestern Canada. The private sector has committed an additional $3 billion in capital investment inAsia-Pacific Gateway and Corridor-related projects for the year 2004 to 2010.

Carry-On Rules Eased at Canadian AirportsOn 25 September, the Minister of Transport, Infrastructure and Communities, announced that inaddition to prescription medicine and baby formula, baby food or milk for travelling children aged twoor under, passengers at Canadian airports will be permitted to bring liquids, gels and aerosols that are90 millilitres/90 grams or less. The total amount of liquids, gels and aerosols carried per passengermust be less than the capacity of a 1-litre bag (see Harmonising the Skies article on page 1).

Transport Minister Cannon Designates Sunwing to Fly to the DominicRepublicOn 26 September, the Federal Minister of Transport, Infrastructure and Communities announced thedesignation of Sunwing as a scheduled international carrier for the Dominican Republic. The newdesignation allows the carrier to operate between Canada and the Dominican Republic with no limiton flight frequency.

NAV CANADA Announces 4.9% July Traffic IncreaseNAV CANADA announced that traffic for the month of July has increased by an average of 4.9%compared to July 2005. Fiscal year-to-date (1 September to 31 July), traffic has increased 3.4%compared to the same period last year.

Transport Canada Amends Airport Emergency ResponseTransport Canada has proposed amending the requirements for all certified Canadian airports for thedevelopment and evaluation of emergency response plans. The proposed amendments wouldrequire all certified Canadian airports to outline potential emergency scenarios and how emergencieswill be handled, as well as to identify assisting organisations for different emergency situations.Airports would also be required to make aircraft crash charts available for each aircraft type thatoperates at the airport. The proposed amendments are published in the Canada Gazette, Part I on 7October, 2006. The Canada Gazette is the “official newspaper” of the Government of Canada whichincludes new statutes and regulations, proposed regulations, decisions of administrative boards andan assortment of government notices.

Transport Canada Upgrades its FleetTransport Canada has awarded an $8 million contract to Mid-Canada Mod Centre for avionicssystems upgrades to the nine Cessna Citations in Transport Canada’s fleet and simulator. Theupgrades include airborne collision avoidance systems and terrain awareness warning systems to thefleet and reconfiguration cockpit of the Cessna Citation simulator. The airborne collision avoidancesystems alert flights crews when the aircraft is on a course to collide with another aircraft while theterrain awareness warning systems alert flight crews when the path of the aircraft may collide withterrain. This contract supports Transport Canada’s mandate to support safe and secure airtransportation. The upgrades will be completed in two years.


THE WASHINGTON REPORTOctober 2006

U.S.-E.U. Reach Passenger Name RecordAgreementThe Department of Homeland Security (DHS) and theEuropean Union (EU) have reached an agreement that allowsPassenger Name Record data (PNR) to be shared betweenthe U.S. and the E.U. for the purpose of counter-terrorism.The U.S. Secretary of Homeland Security, Michael Chertoff,claims that the sharing of PNR data could result in moreprecise targeted screening which in turn reduces the questioning and searches of innocent travellersand improves privacy. The PNR data will be available to agencies within DHS as well as to theDepartment of Justice, the FBI, and other agencies with counter-terrorism responsibilities.

FAA Caps Flights at LaGuardiaThe Federal Aviation Administration (FAA) has proposed to limit the number of aircraft operations atNew York LaGuardia at the current level of 75 flights per hour to combat delays at the airport.LaGuardia currently handles approximately 1,300 flights per day and approximately one-third of theflights are delayed due to congestion. The FAA would also like major carriers to increase their aircraftsize at LaGuardia to help reduce the number of daily flights at the airport. Currently, approximatelyhalf of the flights at LaGuardia are operated using 50-seat regional airplanes.

U.S.-Kuwait Sign Open-Skies AgreementThe U.S. and Kuwait have reached an open skies agreement that permits both countries to designateairlines to operate commercial flights between the two countries. United Airlines has receivedapproval to offer non-stop service between Washington Dulles and Kuwait City starting October 2006using Boeing 777 combi aircraft.

Senate Lifts Cap on Airport ScreenersThe Senate voted to remove the cap on the number of security screeners at federal airports, currentlyset at 45,000. The appropriate number of screeners needed at federal airports will be determined bythe TSA. The Chairman of the Senate Commerce Committee does not expect the amendment to theport security legislation to have a negative effect since screener employment is approximately 4,000below the 45,000 limit. The screener provision is not yet included in the port security bill.

DOT Rejects Changes to the Fare Advertising RuleThe Department of Transportation (DOT) has rejected the Air Transport Association of America’sproposal to permit airlines to exclude fuel charges when advertising fares. DOT insists that thecurrent practice helps consumers to compare prices. Currently, airlines may only excludegovernment imposed taxes, fees and other charges that are collected on a per-passenger basis,rather than on a percentage of the ticket price basis, in their advertisements.

Jon Ash

PresidentInterVISTAS-ga2 Consulting Inc.

Washington, D.C.


INTERVISTAS NEWSOctober 2006

Rob Beynon Appointed as Vice President, Development EconomicsInterVISTAS is pleased to announce that Rob Beynon has been appointed asVice President, Development Economics. Mr. Beynon has worked in China andJapan and has experience in establishing Canada’s first foreign trade zone priorto joining IVC in 2000. Mr. Beynon plays a key role in business development inthe areas of marketing services to airport clients, airport planning projects,market research, strategic planning and regional economic developmentinitiatives.

Karen Payjack Joins InterVISTAS’ Winnipeg OfficeInterVISTAS is pleased to announce that Karen Payjack has joinedInterVISTAS’ Winnipeg office as a Project Analyst. Karen has a Bachelor ofCommerce (Hons.) degree at the University of Manitoba, where she wasawarded with the Trans X Leadership Award in Logistics and Supply ChainManagement. Karen is responsible for providing research support on economicdevelopment projects and in the transportation and tourism sectors.

InterVISTAS Launches REVUP – Revenue Management for Today’sAirlines!InterVISTAS Consulting Inc. is please to announce the launch of REVUP, a full function revenuemanagement system designed to address today’s revenue management challenges. InterVISTASREVUP fulfils an urgent industry need for affordable and effective revenue management that candeliver results in the current dynamic market. To learn more about REVUP or arrange a productdemonstration contact: Nigel Brownlow, Vice President, Airline Business Development by phone at1-604-717-1840, by fax at 1-604-717-1818, or by email at [email protected].


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

To inquire about advertising opportunities or to provide comments/feedback on the InterVISTAS’Canadian Aviation Intelligence Report, please contact Rob Beynon at [email protected] 1-604-717-1864.

To subscribe, please send an email to [email protected] unsubscribe, please send an email to [email protected]

INTERVISTAS NEWS – CON’TOctober 2006

InterVISTAS Upcoming Speaking Engagements Dr. Mike Tretheway, Executive Vice President

CD Howe Institute Conference: Competition Policy in Regulated Industries:Toronto, ON – 6 November 2006Dr. Tretheway will be a discussant on the topic of competition policy for the airlineindustry.

Mr. Solomon Wong, Vice President, Security & PlanningPassenger Terminal EXPO 2006 USA Conference, Fort Lauderdale, FL – 6-8December 2006Mr. Wong will be delivering a presentation titled, “Open and Secure Skies.”

Mr. John Weatherill, Director, Airline PlanningAfrica Airports 2007: Johannesburg, South Africa – 27-28 February 2007Mr. Weatherill will be delivering a presentation titled, “Effectively Marketing Africa’sAirports.”World Regional Airports Congress: London, United Kingdom – 16-17 April 2007Mr. Weatherill will be delivering a presentation titled, “Understanding and ApplyingE.U. Guidelines on Start-up Aid for Airlines at Regional Airports.”

CAIR Issue No. 45 - October 2006

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Transcript of CAIR Issue No. 45 - October 2006