CAIR Issue No. 70 - April 2009

CANADIAN AVIATION INTELLIGENCE REPORT

In this issue…

Features Columns: Regular Reports: • CEO Update (p.1) • Another Epidemic Challenge for

International Tourism (p.3) • Caribbean Report (p.11) • Asia Report (p.12) • Europe Report (p.13) • Ottawa Report (p.14) • Washington Report (p.15)

• Airline Data - Canada (p.5) • Airline Data – U.S. (p.6) • Selected Canadian Airport

Data (p.7) • News (p.8) • InterVISTAS News (p.16)

InterVISTAS’ Canadian Aviation Intelligence Report April 2009 Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved. Page 1

Gerry Bruno President & CEO

CEO UPDATE April 2009

Welcome to InterVISTAS Consulting Inc.’s April 2009 edition of the Canadian Aviation Intelligence Report (CAIR). Following on last month’s announcement of Innova Aviation’s integration into the DHV Group, InterVISTAS and Innova Aviation have now merged.

InterVISTAS and Innova Aviation create a new global team in transportation and tourism consulting Two of the leading management consulting firms in the aviation, transportation and tourism industry, Innova Aviation Consulting and InterVISTAS, have merged.

In addition to InterVISTAS’ strengths in the transportation and tourism sectors, the combination of Innova and InterVISTAS creates one of the strongest teams in aviation forecasting, privatization, facilitation and air service development in the world. Innova Aviation Consulting’s expertise in airport privatization, finance, commercial and retail development united with InterVISTAS’ background in border facilitation, safety & security, gateway and tourism development, and environmental services create a diverse scope of services that the industry has never seen before. The new InterVISTAS Consulting Group will work closely with its partner NACO (Netherlands Airport Consultants BV), an internationally renowned airport planning, design and engineering consulting firm.

The Group is pleased to announce the following appointments: Gerry Bruno, Chief Executive Officer; Jim Miller, Group President and President of InterVISTAS Consulting LLC (U.S.), Dr. Mike Tretheway, President of InterVISTAS Consulting, Inc. (Canada) and Hans Mohrmann, Executive Vice President (Europe).

InterVISTAS Projects Update The InterVISTAS Group is currently working on a large number of consulting assignments for a broad range of clients throughout the world. Some recently awarded projects include:

• Travel Alberta Air Visitor Monitoring Information InterVISTAS has been commissioned by Travel Alberta to provide air visitor monitoring information from 2009 to 2011. InterVISTAS provides monthly and quarterly analysis of actual and forecast air visitors to Alberta from the United States, Eastern Canada, and key International markets. The monitor is designed to provide rapid updates on travel trends ahead of the customs entry statistics provided by Statistics Canada. InterVISTAS uses information collected from the Airline Reporting Corporation (ARC) air ticket clearing house which is used to settle all U.S. travel agency sales. Additionally, InterVISTAS incorporates customs entry data, airline schedule information, airport enplaned/deplaned passenger statistics, U.S. DOT onflight information, the ICAO traffic by flight stage report, the UKCAA onflight passenger report and the OAG. InterVISTAS is excited by the opportunity to continue to support Travel Alberta's tourism development initiatives.


CEO UPDATE – CON’T April 2009

InterVISTAS Projects Update – Continued

• Saskatoon Airport Pre-Board Screening Checkpoint Reconfiguration InterVISTAS has been commissioned by the Saskatoon Airport Authority to review and reconfigure the air terminal’s pre-board screening checkpoint. In a similar study that was conducted last year for the Regina Airport, the change in layout has resulted in an average increase in peak hour throughput, which has significantly improved the levels of service for departing passengers in the terminal building.

The April CAIR Line-Up The airline industry is continuing to face challenges in addition to the current global economic downturn, with the surfacing of Swine Flu. There are concerns that global air travel will be negatively impacted as discussed in the column – Another Epidemic for International Tourism.

Other columns in this month’s publication include:

▪ Caribbean Report

▪ Asia Report

▪ Europe Report

▪ Washington Report

I hope you enjoy this month’s publication!


Eugene Chu Senior Project Manager

ANOTHER EPIDEMIC CHALLENGE FOR INTERNATIONAL TOURISM April 2009

The global international tourism industry has been faced with numerous challenges over the last decade, including health and influenza pandemics (e.g., SARS), and has shown to be resilient in the past. This column examines the current influenza A (H1N1) outbreak, the impact of past influenza pandemics on the demand for travel, and an outlook.

What is an Influenza Pandemic? According to the World Health Organization (WHO), an influenza pandemic can be defined as the outbreak of a new influenza virus, against which the human population has no immunity, that results in widespread human infection including enormous numbers of death and illness. Influenza pandemics usually occur when a new strain of the influenza virus is transmitted from animals such as chickens and pigs to humans.

Outbreak of Influenza A (H1N1) The WHO first reported confirmed cases of influenza A (H1N1) – also known as swine flu, in humans in the United States and Mexico on 24 April 2009. Since then, the number of reported cases has steadily risen, and has spread to other parts of the world including Canada, the U.K., Germany, Spain, Netherlands, Austria, Switzerland, Israel, and New Zealand. As of 30 April 2009, the WHO has reported 257 confirmed human cases of the influenza. Although the current outbreak is not yet considered a pandemic, the situation is evolving rapidly and the WHO has advised countries to prepare for the worst.

Travel Advisory The WHO utilizes a six phased approach to evaluate the different stages of an influenza outbreak and the corresponding recommended programs and response. Phases 1–3 correlate with preparedness, while Phases 4–6 signal advanced development of the outbreak and the need for more immediate response and mitigation efforts. On 29 April 2009, the Director-General of WHO raised the level of influenza pandemic alert to Phase 5 - which is characterized by human-to-human spread of the virus into at least two countries in one WHO region. According to the six phased WHO scale, the declaration of Phase 5 is a strong signal that a pandemic (Phase 6) may be imminent.

Given the widespread presence of the virus, the WHO considers that containment of the outbreak is not feasible, and is focusing on mitigation measures. As such, the world’s health organization advises no restriction of regular travel or closure of borders. However, several countries have issued their own travel advisories, with some advising against non-essential travel to Mexico, United States and Canada.


ANOTHER EPIDEMIC CHALLENGE FOR INTERNATIONAL TOURISM – CON’T April 2009

Impact of Past Health Pandemics In order to determine the potential impact that the current influenza A (H1N1) outbreak may have on the demand for international travel, it is useful to examine past cases. One example is the outbreak of avian flu (H5N1 virus) in 1997 and again in 2003. In 1997, the outbreak was limited to Asia and so the impact on total international travel was limited. However, it is important to note that human cases of avian flu still currently exist in China, Vietnam and Egypt. Another recent example is the outbreak of SARS (Severe Acute Respiratory Syndrome) in 2002/2003, which affected many more countries around the world, including Canada and the U.S. During this time period, international tourism arrivals decreased by 1.4% worldwide after several years of relatively strong growth (depicted in the figure below). Of note is that international travel has bounced back strongly since 2003, posting several years of strong growth before the global economic recession curbed demand in 2008.

(% Year Over Year Change)

-2%

0%

2%

4%

6%

8%

10%

12%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: World Tourism Organization (UNWTO).

International Tourism Arrivals - World

(% Year Over Year Change)

-2%

0%

2%

4%

6%

8%

10%

12%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: World Tourism Organization (UNWTO).

International Tourism Arrivals - World

Outlook The international tourism industry is currently facing multiple challenges, including a global economic recession, and now another influenza outbreak that is evolving daily, and with the potential to become a widespread global pandemic. However, history shows that the tourism industry has been resilient in the past in overcoming challenges and shocks to the industry – especially in the long-term, and there is no reason to believe that this time will be any different.


AIRLINE DATA – CANADA Traffic and Load Factors on Canada’s Major Air Carriers March 2009

Passenger Traffic Revenue Passenger

Kilometres Capacity

Available Seat Kilometres Load Factor Air Carrier

% Change over 2008

% Change from 2007

% Change over 2008

% Change from 2007

Change over 2008

Change from 2007

Air Canada1 -13.1% -10.0% -11.3% -7.9% -1.8pts (to 81.8%)

-1.9pts (from 83.7%)

Domestic (Mainline) -5.0% -3.6% -3.6% -0.7% -1.2pts -2.5pts

Jazz -17.5% -13.5% -9.1% -5.4% -7.0pts -6.5pts International & Charter -15.8% -12.2% -13.8% -10.3% -1.9pts -1.7pts

WestJet +0.6% +22.3% +6.3% +27.2% -4.7pts (to 81.9%)

-3.3pts (from 85.2%)

Analysis: • Air Canada Mainline’s domestic sector traffic

decreased 5.0% in March 2009 over March 2008, which contributed to a system-wide decline in passenger traffic of 13.1% in the same period. Domestic traffic decreased at a greater rate than domestic capacity, resulting in a decline in the carrier’s domestic load factor from 83.0% in March 2008 to 81.8% in March 2009.

• Air Canada Mainline’s international sector experienced declines in both traffic (-15.8%) and capacity (-13.8%) in March 2009 over March 2008. During the period, Pacific-region traffic and capacity decreased by 23.7% and 29.0%, respectively, while growth in the “Latin America and Other” region turned negative. Traffic and capacity in this region decreased by 5.5% and 0.7%, respectively, in year-over-year results.

• Compared to March 2008, WestJet reported a significant drop in its system-wide load factor of 4.7 percentage points to 81.9% in March 2009. The decreased load factor was due to capacity (+6.3%) growth outpacing passenger traffic (+0.6%) growth in March 2009 over March 2008.

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

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

10%

Jan-08

Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan-09

Feb Mar

Dom RPK Dom ASK

Air Canada Domestic Mainline Air Canada Domestic Mainline

Jazz data is not included in this graph

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

10%

Jan-08


Feb Mar

Dom RPK Dom ASK

Air Canada Domestic Mainline Air Canada Domestic Mainline

Jazz data is not included in this graph

-20%

-15%

-10%

-5%

0%

5%

10%

Jan-08


Feb Mar

Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

-20%

-15%

-10%

-5%

0%

5%

10%

Jan-08


Feb Mar

Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

0%

5%

10%

15%

20%

25%

Jan-08


Feb Mar

RPK ASK

WestJetWestJet

0%

5%

10%

15%

20%

25%

Jan-08


Feb Mar

RPK ASK

WestJetWestJet


AIRLINE DATA – U.S. U.S. Airlines Release March 2009 Traffic Figures

Airline Traffic (RPMs – millions)

Capacity (ASMs – millions) Load Factor

2,246 ↓8.5%

2,834 ↓5.6%

79.3% ↓2.5 pts

643

↓6.1% 894

↓4.2% 71.9% ↓1.5 pts

6,651 ↓0.4%

8,607 ↓1.5%

77.3% ↑0.8 pts

1 7,483 ↓9.7%

9,425 ↓6.4%

79.4% ↓2.9 pts

2 9,581 ↓13.6%

12,180 ↓9.9%

78.7% ↓3.3 pts

10,321 ↓10.9%

13,039 ↓5.6%

79.2% ↓4.8 pts

3 15,601 ↓12.6%

19,386 ↓7.9%

80.5% ↓4.4 pts

2 4,913 ↓8.9%

5,996 ↓6.1%

81.9% ↓2.6 pts

1,586 ↓7.2%

1,966 ↓8.4%

80.7% ↑1.1 pts

716

↓24.0% 897

↓19.7% 79.8% ↓4.6 pts

Notes: 1. Mainline operations only. 2. Load factor includes scheduled service only. 3. Includes both Delta and Northwest operations. Sources: Carrier traffic reports.

InterVISTAS’ Canadian Aviation Intelligence Report April 2009 Copyright ©2009 InterVISTAS Consulting Inc., all rights reserved.

Page 7

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

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

Toronto Vancouver Montréal-Trudeau Calgary Edmonton Ottawa Winnipeg Halifax Victoria Kelowna Saskatoon Regina St.

John’s January +4.8% +9.2% +4.3% +4.9% +7.6% +6.4% +4.4% +2.2% +6.1% +4.5% +9.2% -0.3% -2.2% February +7.7% +12.8% +9.8% +7.7% +10.2% +8.3% +7.4% +8.6% +7.9% +10.3% +9.1% +8.3% +4.3%

March +6.2% +8.0% +2.2% +8.1% +8.2% +6.8% +4.7% +20.4% +2.5% +0.7% +19.0% +15.8% +5.8% 1st Quarter +6.2% +9.9% +5.3% +6.9% +8.6% +7.2% +5.5% +11.2% +5.4% +5.0% +12.2% +7.6% +2.7%

April +5.5% +6.2% +3.1% +3.6% +5.3% +10.0% +4.6% +9.2% +3.2% +0.1% +1.9% +3.4% +2.5% May +5.1% +6.7% +1.4% +3.1% +5.9% +7.6% -2.1% +12.1% +3.3% +1.0% +3.5% +5.3% +5.2% June +6.4% +5.1% -2.7% +2.4% +5.2% +8.5% -1.4% +6.6% +7.6% +0.5% +6.1% +2.2% +6.4%

2nd Quarter +5.7% +6.0% +0.5% +3.0% +5.5% +8.7% +0.2% +9.3% +4.7% +0.5% +3.9% +3.6% +4.8% July +3.0% +0.7% -2.1% +1.9% +7.2% +9.1% -1.4% -3.9% +5.6% +2.7% +8.8% -1.5% +0.3%

August +3.0% +0.3% -0.9% +1.2% +4.1% +9.9% -4.8% +2.0% +6.7% +4.8% +8.1% +6.9% +3.0% September -1.6% -6.0% -5.1% -5.7% +4.9% +6.9% -2.4% -4.1% +3.5% +2.0% +14.9% +4.7% +2.5% 3rd Quarter +1.6% -1.4% -2.6% -0.7% +5.4% +8.6% -2.9% -1.8% +5.4% +3.2% +10.5% +3.2% +1.9%

October -4.8% -3.2% -4.0% -3.2% +6.1% +1.0% -3.7% -1.0% +3.5% +2.4% +12.3% +10.3% +2.7% November -3.2% -5.9% -4.6% -0.1% +2.7% -5.6% -1.3% -8.5% +3.2% -1.1% +7.4% +0.6% +4.3% December -1.1% -6.7% -3.3% +0.8% +6.8% +3.5% -0.9% -4.9% -7.1% -3.1% +15.1% +5.3% +3.8% 4th Quarter -3.1% -5.3% -4.0% -0.9% +5.2% -0.3% -2.0% -4.5% -0.1% -0.7% +11.6% +5.4% +3.5%

2008

Full Year +2.6% +2.0% -0.1% +2.0% +6.1% +6.1% +0.1% +3.2% +3.8% +2.1% +9.6% +5.0% +3.2% January -4.0% -9.6% -2.7% -3.8% -1.7% -0.9% +2.4% -7.5% +1.1% -8.8% +10.5% +5.9% -0.6% 2009 February -5.9% -11.3% -7.0% -3.9% -3.2% -8.0% -3.5% -11.3% -2.8% -8.5% +6.5% +0.8% -5.9%


NEWS AIR CANADA VANCOUVER-PARIS SERVICE

Air Canada (AC) announced on

26 March 2009 that it will launch daily service between Vancouver and Paris. The seasonal service will operate between 1 July 2009 and 29 September 2009.

CODESHARE WITH TAP On 15 April 2009, AC announced a codeshare agreement with

fellow Star Alliance member TAP Portugal that will permit more travel options and connections between Canada and Portugal. Services between Canadian cities Toronto, Montréal, Calgary, and Ottawa, and Portuguese cities Lisbon and Porto have already been added to the networks of both carriers. Benefits of the partnership include streamlined booking and travel reward accumulation on both carriers, among others.

DEE PROMOTED TO EXEC VP & COO Duncan Dee was appointed Executive Vice President and Chief Operating Officer on 3 April 2009, succeeding 36-year AC veteran Bill Bredt. Mr. Dee joined AC in 1997 and was appointed to Executive Vice President, Customer Experience and Chief Administrative Officer in 2007 prior to accepting his new responsibilities.

OTHER CANADIAN AIRLINES SUNWING CANCELS SERVICE On 17 April 2009, Sunwing Airlines announced that it will cancel the Toronto – Sydney, Cape Breton service scheduled for summer 2009. The Sydney Airport Authority refused Sunwing access on the premise that there is not enough business for three airlines to fly the same route. Both Air Canada and Westjet operate a similar

service. Sunwing Airlines announced its intention to challenge the decision and begin legal proceedings against Sydney Airport. The twice weekly service was scheduled to operate between 15 June 2009 and 10 September 2009.

CONQUEST VACATION CEASES TOUR OPERATION BUSINESS Conquest Vacations announced on 15 April 2009 that it has ceased operation of its tour business. Overcapacity, price wars with other Canadian carriers, and the economic downturn were reasons given by the tour operator for its failure. Both Skyservice Airlines and CanJet responded to this announcement by indicating that it will be operating some return flights for stranded Conquest customers.

U.S. AIRLINES SOUTHWEST TO OFFER NEW SERVICES

On 7 April 2009, Southwest announced new

Chicago Midway-New York LaGuardia and Baltimore/Washington – New York LaGuardia services. The non-stop Midway service will operate 5 times daily and the non-stop Baltimore/Washington service will operate 3 times per day. Both new services will commence 28 June 2009.

US AIRWAYS AND QATAR AIRWAYS ENTER CODESHARE US Airways announced a codeshare agreement with Qatar Airways on 2 April 2009. Under the agreement, US Airways customers will be able to travel to Doha and Qatar on Qatar Airways, and connect onward to Dubai, United Arab Emirates, and Kuwait City, Kuwait. Qatar Airways customers will have access to US Airways hub cities Charlotte, N.C., and Philadelphia, and connect to other destinations in the U.S., Canada, the Caribbean, and Latin America traveling aboard US Airways flights. The agreement, scheduled to begin in May, is subject to government approval.


NEWS – CON’TU.S. AIRLINES – CON’T ALASKA AIRLINES LAUNCHES BELLINGHAM-LAS VEGAS SERVICE

Alaska Airlines announced on 8 April 2009 that it

will launch new non-stop service between Bellingham and Las Vegas on 25 June 2009. The scheduled flights will operate daily on Thursdays, Fridays, and Sundays, and the carrier will continue to offer four times daily service between Bellingham and Las Vegas via Seattle.

CARGO CARGOLUX SERVES TORONTO

Luxembourg-based Cargolux began serving Toronto Pearson Airport on

20 April 2009. The new weekly air cargo service operates the B747-400F aircraft, providing the Canadian market with approximately 50,000 kilograms of freight capacity on each flight. Flights from Luxembourg serve Toronto directly, but make a call at Glasgow Prestwick airport on the return flight.

FEDEX GROUNDS 14 AIRCRAFT In a regulatory filing submitted during the week of 13 April 2009, FedEx revealed plans to remove 14 aircraft from its existing fleet. The cuts, expected to occur before FedEx’s fourth quarter ending 31 May 2009, are in response to excess air freight capacity in weak economic conditions. The cargo carrier is also scheduled to take receipt of several newer, more fuel-efficient aircraft in 2010, including a Boeing MD-11, 4 Boeing 777Fs, and 14 passenger-to-freighter 757s.

MORE CARGO CARRIERS PLEAD GUILTY TO PRICE FIXING Asiana Airlines, Cargolux International, and Nippon Cargo pleaded guilty to the U.S. Department of Justice (DOJ) and agreed to pay fines totalling US$214 million. All 3 carriers were charged with co-conspiring on cargo rates charged for certain routes, as well as engaging in activities that enforced the agreed-upon fixed rates. According to the DOJ, criminal activity began as early as January 2000 and continued through to February 2006. Moreover, Asiana was charged with discussing wholesale and passenger fares from the United States to Korea with co-conspirators, and enforcing agreed-upon rates. As a result of the DOJ’s ongoing antitrust investigation into air cargo pricing, 15 airlines have paid or agreed to pay criminal fines totalling US$1.6 billion.

PEOPLE IN THE NEWS AMBASSADOR DAVID WILKINS APPOINTED TO PORTER BOARD

Porter Airlines appointed Ambassador David H. Wilkins to its Board of Directors on 15 April 2009. Ambassador Wilkins currently serves as a partner at Nelson Mullins Riley & Scarborough LLP, in

Greenville, South Carolina, and chairs the Public Policy and International Law practice group, which represents U.S. and Canadian businesses and provides expertise on strategic bilateral issues.

TRANSAT TEMPORARILY APPOINTS NEW CFO Transat A.T. announced the interim appointment of Nelson Gentiletti as Chief Financial Officer (CFO) on 1 April 2009, following the departure of François Laurin. Mr. Gentiletti, currently Executive Vice-President, Tour Operators, and President, Transat Tours Canada, reassumes the position of CFO he held from 2002 and 2005.


NEWS – CON’TPEOPLE – CON’T JIM LITTLE JOINS PORTER BOARD

On 1 April 2009, James Little was appointed to the Board of Directors at Porter Airlines. Mr. Little is active Chief Brand and Communications Officer for Royal Bank of Canada (RBC), and served as Senior Vice

President of Corporate Marketing at Bell prior to joining RBC. Mr. Little has also held numerous senior executive positions at Bombardier Aerospace, Alcan Aluminum, and GPC - an Omnicom company.

AIRPORTS UPDATE SCHIPHOL AWARDED BEST AIRPORT AND CARGO TERMINAL IN EUROPE Schiphol was voted ‘Best Airport Europe’ and ‘Best Air Cargo Terminal Europe’ by readers of Cargonews Asia at the annual Asian Freight & Supply Chain Awards on 22 April 2009. The awards for best European airport and best European air cargo terminal mark the 16th and 11th time, respectively, that the airport received the honours.

MIDWAY PRIVATIZATION ON HOLD Chicago Midway’s plan to privatize the airport failed on 22 April 2009 after investors were unable to raise the needed US$2.52 billion for a long-term lease of the facility. The Midway Investment and Development Corporation, a consortium that included Vancouver Airport Services, Citi Infrastructure Investors, and John Hancock Life Insurance, made the successful bid back in October 2008. The city will keep the US$126 million down payment from the winning bidder.

SCHIPHOL INSTRUCTED TO REDUCE TARIFFS On 21 April 2009, Amsterdam’s Schiphol airport was ordered by the Netherlands Competition Authority to reduce unreasonable and

discriminatory fees. The Dutch competition authority determined that landing and handling fees established by the Schiphol Group unfairly passed several non-aviation costs to airlines. Some of the costs levied on airlines included those associated with building a sound barrier around a runway, accountancy controls, and training of baggage handling employees. The decision complies with rules introduced in 2006 that airport fees must reflect actual costs of operations.

OTHER SKYTEAM INVITES VIETNAM AIRLINES

On 16 April 2009, SkyTeam confirmed signing a preliminary agreement detailing Vietnam Airlines’ intentions to join the group. Vietnam Airlines would be

SkyTeam’s third Asian carrier, a move that would enhance the group’s Southeast Asia network by contributing 17 new destinations. The addition of Vietnam Airlines to SkyTeam would bring the group of carriers back to 10 members, as Continental Airlines left the alliance in October 2008.

CANADA EXPANDS BILATERAL AIR SERVICE AGREEMENT WITH JAPAN

On 9 April 2009, the Government of Canada announced an expansion of

the existing air bilateral agreement with Japan. The expanded agreement permits airlines to offer unlimited direct services between Canada and cities outside the Tokyo area, as well as access to Haneda Airport, Tokyo’s metropolitan airport, under certain conditions. Modernized aviation safety and security provisions, and mechanisms for the faster adaptation of airline prices to market fluctuations are also included in the updated agreement.


Jacqueline Clarke Manager,

Strategic Development

THE CARIBBEAN REPORT April 2009

Air Jamaica readies for divestment The deadline for Air Jamaica’s divestment has been pushed back from 31 March 2009 to the end of June 2009. An undisclosed international airline group has made an offer and negotiations are continuing. Expectations are that the Jamaican government will retain 20 per cent of the airline as a minority shareholder with majority ownership and full management control conferred to the private sector. Under the potential agreement, the government hopes to recapitalize the airline; retain Air Jamaica as the national carrier; and establish a structural or contractual linkage to a major global carrier. In the meantime, the carrier announced several changes to its schedule and inflight service in an effort to further streamline the business and reduce its losses. Effective 20 April 2009, Air Jamaica suspended the New York- Barbados service and increased services between New York and Grenada, from two to four weekly flights; Fort Lauderdale to Jamaica, from four to five daily flights; between New York and Jamaica, from three to four daily flights; and introduced a daily service between Toronto and Jamaica. Effective 1 May 2009, Air Jamaica will discontinue its hot meal service and complimentary champagne for economy class passengers in an effort to reduce costs. Effective 29 June 2009, Air Jamaica will offer seven weekly flights between Orlando and Jamaica. Last year, Air Jamaica lost US$170 million. The airline will require US$135 million to offset losses over the next six months.

American Eagle increases gateway services from San Juan American Eagle announced the addition of 109 weekly flights from San Juan to eight Caribbean destinations for Summer 2009. The enhanced schedule calls for three daily flights to St. Maarten, up from one; seven daily flights to Tortola, St. Croix and St. Thomas, up from three daily flights each; a daily flight to Guadeloupe, up from four a week; a daily flight to Martinique, up from three a week; a daily flight to Trinidad, up from four a week, and four weekly flights to Grenada, up from three. Last year, the airline cut its schedule of flights from San Juan by 50 per cent, citing higher fuel prices and a worsening economy.

JetBlue to offer new service to the Dominican Republic Effective 19 June 2009, JetBlue will offer year-round service, three days per week from Boston to Santo Domingo, Dominican Republic subject to receipt of foreign government approval. The carrier intends to expand to daily service over the peak winter season.

Cayman Islands benefits from air transport discussions in Cuba Cayman Airways (CAL) initiated a daily service to Havana under the recently updated Air Service Agreement between Cuba and the United Kingdom (and Overseas Territories). Under the updated agreement, CAL was granted seven frequencies into Havana, an increase from three scheduled operations. The airline was also granted the rights for additional charter flights into other cities/gateways in Cuba with the option of seeking confirmed scheduled operations.

Aircraft maintenance school to open in Jamaica Singapore Air Transport Training College (ATTC) has partnered with a local construction firm to open a satellite branch of its training school at the Vernamfield airbase in Clarendon. The Caribbean Aerospace College will open in June 2009 to provide training in aircraft engineering. The venture evolved from talks initiated by the Jamaican delegation to the Asian Airport Summit held in 2008 and came to fruition through public/private sector co-operation. The college, which will also operate as a private school, is registered with the Singapore Ministry of Education and accredited by the University Council of Jamaica to grant diploma and degree-level qualifications. The college's curriculum has been approved by the Jamaica Civil Aviation Authority.


Doris Mak Director,

Special Projects

THE ASIA REPORT April 2009

China, FAA cooperate on environment The U.S.-China Aviation Symposium in Beijing held on 7-9 April 2009 produced an agreement between the Civil Aviation Administration of China (CAAC) and the U.S. Federal Aviation Administration to share environmental best practices at airports in the two countries. While the Memorandum of Understanding signed by the U.S. and China focuses on the environment, aviation officials from both countries also look to cooperate on air traffic and safety initiatives such as modernizing China’s air traffic system and rules related to flight safety.

Beijing flying school closes Beijing Pan Am International Academy in China temporarily ceased operations due to a lack of funding. American International Group (AIG), Beijing Pan Am’s majority owner with a 69% stake, is unwilling to inject the US$15 million needed to keep the school’s doors open. Although AIG received financial bail-outs totalling US$ 170 billion from the U.S. government, the insurance giant has not funnelled money to Beijing Pan Am because it is not part of AIG’s core business. The flying academy is currently seeking strategic investors, such as aviation companies, to invest the needed funds in order to resume operation. The Beijing Pan Am International Academy caters primarily to training pilots for Chinese airlines at campuses in Baotou, Handan, and Shijiazhuang.

Qantas takes measures to weather economic storm On 15 April 2009, Australia’s Qantas Airways released a comprehensive plan to reduce its exposure to the global economic crisis that includes deferring aircraft deliveries, cutting capacity, and reducing its workforce. Effective immediately, Qantas is deferring the delivery of 4 Airbus A380s by 10-12 months, as well as delaying the delivery of 12 Boeing 737-800s for 14 months, and has entered discussions with Boeing to reduce the delivery of 15 787-8 aircraft scheduled in the near-term. Of its existing fleet, Qantas plans to ground a total of 10 aircraft and put them up for sale. As a result of fleet corrections, system-wide capacity for domestic and international services is being reduced by 5%. Qantas also plans to shed 500 management jobs, in addition to the 90 senior executive jobs already announced, and may have to eliminate another 1,250 full-time-equivalent positions over the long-term. Qantas’ currently employs 34,000 people worldwide. All three measures are an effort to cut capital expenditure by US$144 million in the 2008/09 fiscal year and by US$574 million in the subsequent fiscal year.

Expanded cross-strait deal for Chinese/Taiwanese airlines The number of flights permitted across the Taiwan Strait may double as the Taipei-based Strait Exchange Foundation and the Beijing-based Association for Relations Across the Taiwan Strait are both expected to expand an existing agreement. If successful, direct flights across the Strait will increase from the current rate of 108 per week to 270, with an anticipated start date of July 2009. In addition to an increase in flight permits, Taiwanese carriers will be given access to six new cities (Hefei, Harbin, Nanchang, Guiyang, Ningbo and Jinan), bringing the total to 27 mainland destinations, while airlines servicing Taiwan from Guangzhou, Shenzhen and Xiamen would be permitted to bypass Hong Kong. In terms of air cargo, the expanded agreement will allow airlines to carry belly freight for the first time and will increase cargo flights from 60 per month to 112.


Ian Kincaid Director,

Economic Analysis InterVISTAS – EU

UK Office

THE EUROPE REPORT April 2009

Groups target emissions by recommending CDA Aviation groups ACI Europe, the Civil Air Navigation Services Organisation, Eurocontrol, and the International Air Transport Association recently launched a joint effort to reduce carbon dioxide emissions in Europe by 500,000 tonnes a year. Introduced at the Aviation and Environment Summit in Geneva, the plan’s initiative outlines the implementation of continuous descent approaches (CDA) at 100 airports throughout Europe by the end of 2013. CDA, an airport approach method where an aircraft descends smoothly for landing rather than taking the typical stepped approach, can reduce fuel burn by 50-150kg on a short- to medium-haul aircraft. This reduction in fuel burn decreases carbon dioxide emissions by 160-470kg per flight and lessens the noise impact around the airport by 1 to 5 decibels. By implementing CDA at all 100 airports, aviation groups aim to save airlines 150,000 tonnes of fuel per year at a cost of approximately US$132 million, resulting in a net reduction of 500,000 tonnes.

EC investigates alliances The European Commission (EC) opened two formal antitrust investigations on 20 April 2009 to determine if agreements among 4 Star Alliance members and 3 oneworld carriers breached European Union (EU) rules. The EC contends that the level of cooperation among airlines in both alliances is more extensive than most other alliances, particularly with respect to jointly managing schedules, capacity, and pricing and revenue management on transatlantic routes. One of the EC’s inquiries evaluates the cooperation among American Airlines, British Airways, and Iberia, while another looks into current transatlantic cooperation between both Lufthansa and United Airlines and Lufthansa and Air Canada, in addition to the four-party agreement to add Continental Airlines in October 2009. However, the U.S. Department of Transportation has tentatively approved Continental’s entrance into the Star Alliance and has granted the alliance antitrust immunity.

Ryanair considers ‘fat tax’ Never one to shy away from controversial ideas, low cost carrier Ryanair has indicated that it is contemplating the implementation of a tax on large passengers that invade the personal space of neighbouring passengers, dubbed by the airline as the “fat tax”. According Ryanair, consumers preferred the fat tax in an online vote orchestrated by Ryanair in an effort to solicit new revenue ideas. Of the 100,000 passengers that participated in the Internet vote, nearly a third (29%) indicated an interest in charging a fee for overweight passengers (the second placed idea was to charge for toilet paper!). Because of the overwhelming preference for a “fat tax”, Ryanair seems to be now seriously considering its feasibility. However, one of the hurdles in charging the fat tax is figuring out how to charge it effectively. Seeking additional input from its customer base, Ryanair has offered the following options:

• A per kg charge over 130kg for males and 100kg for females. • A per inch charge for every waist inch over 45 inches for males and 40 inches for females. • A per point charge for every point over 40 points on the Body Mass Index. • A second seat charge for passengers’ whose waist touches both armrests simultaneously. Whether this is simply an attempt to generate publicity (in which case, it worked) or a serious measure by the airline remains to be seen. They are certainly not the first carrier to consider this option: United Airlines has recently announced that it is planning on requiring overweight passengers to pay for a second seat in certain circumstances. In fact Southwest Airlines has had a policy since the 1980s of requiring overweight passengers to purchase a second seat if two empty adjoining seats cannot be found.


Fred Gaspar Regional Vice President,

InterVISTAS Ottawa Office

THE OTTAWA REPORT April 2009

Bill S-2: Amendments to the Customs Act As reported previously in this space, this important bill is once again making its way through the legislative process. Importantly – and unlike its predecessor Bills – Bill S-2 is making rapid progress and could soon be passed by the early autumn, making way for meaningful work on its associated regulations.

This Bill seeks to amend the Customs Act in a number of important ways:

• formalizing requirements in customs controlled areas;

• amending provisions respecting the determination of value for duty; and,

• modifying advance commercial reporting requirements. Of these, the Customs Controlled Area regulations offer the most substantive development for Canadian airports. Once promulgated, the Act and the regulations to follow will ostensibly empower CBSA officers to intercept individuals in designated areas of the airport environment who may be participating in conspiracies related to their area of responsibility.

The Bill was first introduced in the Senate of Canada on 29 January 2009 and completed its 3rd reading on 23 April 2009. It now begins a similar journey through the House of Commons, possibly leading to Royal Assent in the autumn

Should the Bill pass, It is expected to help enable many passenger processing innovations related to traffic flows as well as air service and ancillary economic development tools such as transfer departure facilities and a possible Arrivals Duty Free regime.

Arrivals Duty Free: Public consultations expire As promised in the federal budget of earlier this year, the federal government launched formal public consultations in March of this year with a closing date of 5 May 2009. Both the number of variety of submissions are unclear but the Arrivals Duty Free Coalition, supported by InterVISTAS Consulting is optimistic about its own submission into this process.

Based on the experiences of existing ADF operations globally, the following benefits have been identified as the primary benefits of an ADF regime for Canada:

• Opportunity to repatriate duty free purchases (CDN$60-70 million);

• Increase in non-aeronautical revenues for airports (which in turn help keep airline fees competitive); and

• Economic impacts (400 jobs, CDN$13 million in associated wages, and CDN$3.7 million in annual federal tax revenues).

Indeed, for a government looking to stimulate the Canadian economy, ADF is a simple, direct and meaningful initiative that supports Canadian jobs and our economy.

We look forward to good news on the results of the consultations exercise shortly.


Steve Martin Senior Vice President,

InterVISTAS – ga2 Consulting Inc. Washington, D.C.

THE WASHINGTON REPORT April 2009

Proposed climate change legislation, draft regulations will affect airports, airlines Environmental issues in general and climate change in particular remain subjects of discussion within the Washington aviation community. The draft climate bill unveiled by representatives Waxman and Markey would create a cap-and-trade system in the U.S. to reduce and mitigate carbon dioxide emissions and would require the U.S. Environmental Protection Agency (EPA) to create greenhouse gas (GHG) emissions standards for aircraft and aircraft engines by the end of 2012. Industry observers note that the Waxman-Markey bill is similar in many respects to the Lieberman-Warner bill that stalled last year in the Senate.

The industry is formulating a position on the concept. An IATA spokesman notes that it wants to be supportive of emissions targets for aviation, but did not feel that they were consulted in the bill’s drafting. IATA argues that the bill will effectively create a charge that will be passed from producers through airlines to passengers. The bill would require oil producers to purchase emission credits for the fuel they produce and supply. To the extent that airlines have pricing power, they will pass that fee to consumers. IATA claimed that the added cost would constitute an effective fuel tax on airlines, and that ICAO rules and some U.S. bilateral agreements prohibit taxing fuel for international flights.

On 10 April 2009, the EPA published a proposed rule that would create a national reporting system for GHG emissions produced by major sources. The rule would require suppliers of fossil fuels or industrial GHG, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG emissions (CO2 equivalents) to submit annual reports to EPA. The first reports would be due in March 2011 and cover 2010 emissions. The requirement will affect many larger airports that have their own power generation, or those that supply natural resources. Aircraft and aircraft engine manufacturers would also be required to produce such reports. Comments on the rule are due 9 June 2009.

DOT tentatively approves Continental entrance, Star Alliance antitrust immunity.

The U.S. Department of Transportation tentatively approved Continental Airlines’ entry into the Star Alliance as well as a transatlantic joint venture with three other Star Alliance carriers. The joint venture allows Continental, United, Lufthansa and Air Canada to arrange capacity, market and sell tickets, as well as share revenue with each other.

The application of the Star Alliance members came under strong criticism from airlines and members of Congress, notably James Oberstar, the influential chairman of the House Committee on Transportation and Infrastructure. Oberstar believes that DOT’s granting antitrust immunity to alliances like this have penalized consumers by resulting in less competition, particularly in the transatlantic market. Oberstar has introduced legislation that could require such alliances to sunset without an affirmative order from DOT to the contrary.

The final order from DOT is expected by 31 May 2009. Barring some significant and unexpected changes, that order will require restrictions to be kept in place to protect competition on routes from Chicago and San Francisco to Toronto.


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

To inquire about advertising opportunities or to provide comments/feedback on the InterVISTAS’ Canadian Aviation Intelligence Report, please contact Robert Andriulaitis at [email protected] or 1-604-717-1807.

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INTERVISTAS NEWS InterVISTAS Upcoming Speaking Engagements Steve Martin, Senior Vice President • 2009 ACI-NA Marketing and Communications Conference: Montréal, QC – 1-

2 June 2009. Mr. Martin will participate in a panel discussion on air service development at small communities, with a focus on the TRB Air Service Development Guidebook.

Kevin Schorr, Vice President, Air Service Development • 2009 ACI-NA Marketing and Communications Conference: Montréal, QC – 1-

2 June 2009. Mr. Schorr will moderate a session with representatives from oneworld, SkyTeam and Star Alliance.

Nigel Brownlow, Vice President, Commercial Intelligence • Airline Information – Ancillary Revenue and Frequent Flier Programs: Los

Angeles, CA – 22-23 October 2009. Mr. Brownlow will be delivering a presentation titled “Integrating Ancillary Revenue and Revenue Management” and will be participating in a panel discussion on the integration of Frequent Flyer Programs and Ancillary Revenue objectives.

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CAIR Issue No. 70 - April 2009

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