cair issue no. 28 - april 2005

INTERVISTASMARKET INTELLIGENCEREPORT

InterVISTAS Consulting Inc. Market Intelligence ReportApril 2005 ©InterVISTAS Consulting Inc.Page 1

CANADA APPROVED AS TRAVELDESTINATION BY CHINA15 April 2005

In January 2005, the government of the People’s Republic of China (PRC) completed a memorandumof understanding (MOU) to grant Canada approved destination status (ADS), the first step towardsofficially recognising Canada as an approved travel destination. The PRC and Canada are currentlyin discussions to finalise the operational details before an official agreement is signed.

Background of ADS. Approved destination status is a Chinese policy on tourismadministered by the China National Tourism Administration (CNTA), a branch of the PRCgovernment. The ADS allows mainland Chinese residents from select cities (usually this includesBeijing, Shanghai and Guangzhou) to travel to approved countries using a tourist exit visa. MainlandChinese residents are not allowed to travel to countries that lack ADS designation except forbusiness/academic study. ADS was first introduced in 1995, when Hong Kong and Macau wereofficially recognised as travel destinations by the government of the PRC. As of this year, over 60countries have been granted ADS. Each country’s ADS designation with China is unique, and setsthe guidelines, procedures and quotas for Chinese travel to the designated country.

China’s Outbound Travel Market. In 2003, there wereapproximately 20 million outbound travellers from China, a fourfoldincrease from 5.1 million in 1996. The World Tourism Organisationforecasts that by 2020, China will be the fourth largest outbound travelmarket worldwide (after Germany, Japan and the U.S.) with 100 milliontourists.1

Implications for Canada. ADS allows Canada to receive Chinese tourist groups throughoutbound travel agents that have been authorised by the CNTA. The designation also enablesCanada to market its tourism products in CNTA approved geographic regions of China. However, it isimportant to note that China has only completed a memorandum of understanding (MOU) forCanada’s ADS designation. It could be one-year before an official agreement is signed and the ADSbecomes operational.2

Challenges. Although ADS will facilitate the travel of mainlandChinese tourists to Canada, it will be a challenge to maximise thepotential of this market opportunity. ADS can be viewed as controlledtourism on China’s terms as the CNTA makes the final decision on theselection of tour operators that could market travel services from China to Canada, and may alsoinclude quotas on the number of travellers that could visit Canada under ADS. Furthermore, pastsurveys show that currently Canada is not a top destination that mainland Chinese want to visit.3 Alot of work will need to be done to strengthen the Canadian brand in China and ensure that theCanadian tourism industry benefits from this ADS designation.

1 China Program Update: Towards Tourism Growth from China, Canadian Tourism Commission.2 China: Emerging Market, Emerging Opportunity, Tourism Vancouver Forum (Judd Buchanan, P.C., O.C.).3 Top three destinations include France, U.S., Italy. Sourced from Tourism Vancouver presentation.

Eugene ChuProject Analyst


Doris Mak

Senior Project Manager

RECORD HIGH FUEL PRICES11 April 2005

The price of crude oil hits a record high of $58 per barrel in April2005…

The price of crude oil hit a record high of US$58 per barrel in early April 2005 before settling to belowUS$51 on 12 April 2005. The International Monetary Fund commented in its biannual assessment ofglobal economic projects that the volatility of world oil prices could impact global economic growth.Goldman Sachs, a global investment bank, recently released a research report stating that oil pricescould reach US$105 per barrel in the next few years, although current prices have cooled to theUS$50 range.

OPEC. On 16 March 2005, OPEC, Organization of the Petroleum Exporting Countries, agreed toincrease output by 500,000 barrels per day (bpd) in May 2005, the cartel also left room for anotherproduction increase of 500,000 bpd, if the price per barrel does not drop below $55. OPEC countriessupply over 40% of the world’s crude oil. Saudi Arabia, the world’s largest oil exporter, may boost itsproduction capacity by 33% over the next 15 years in an effort to avert shortages and to lower prices.The country’s current production capacity is 11 million barrels per day and could increase to 15 millionbarrels per day.

…. Continued higher futures prices

Futures prices have continued to climb through the first quarter of 2005. The price of a barrel of crudeoil contracted in April 2004 for delivery in December 2008 was US$29. If that same contract werepurchased today, it would cost US$48, an increase of 67% compared to a year ago. As the graphbelow shows, the market has been creeping toward a permanent expectation of higher fuel prices.

Airline Profitability. Recent comments by IATA’s Director General, Giovanni Bisignani , at theAirFinance Conference in New York, stated that the global airline industry could lose US$5.5 billion in2005 if crude oil prices average US$43 per barrel.


Josh Drury

Transportation Analyst

ECONOMIC OUTLOOK11 April 2005

Canada: slowinggrowth. After fourquarters of annualised growthnear or above 3%, theCanadian economy slowed inthe fourth quarter of 2004.Growth on an annualisedbasis was only 1.7%. Thislarger than expected declinein growth has been creditedlargely to the impact of thehigh Canadian dollar, whichnow appears to be causingdeclining exports and risinginventories.

Economic growth for 2005 isexpected to be lower thanpreviously predicted. Most forecasts now predict growth to be somewhat below 3% for the year, as aresult of the high dollar. The Economist now forecasts 2005 growth will be 2.8%, down from itsprevious estimate of 3.0%. The Conference Board of Canada recently released an even morepessimistic projection of only 2.3% annual growth. However, these estimates largely reflect lowergrowth in the first half of the year, with growth recovering in the second half of 2005 and continuinginto 2006.

The Canadian dollar: levelling off, but slowing exports. After a substantialincrease in the second halfof 2004, the dollar hasdeclined slightly from itspeak of nearly 85 cents U.S.in November. It nowappears to have settled inthe range of 80-83 cents andmost forecasts do not have itappreciating significantly inthe near future. The weakerthan expected economicgrowth, and expectationsthat the Bank of Canada willnot raise interest rates inearly 2005 (even as ratesrise in the U.S.), have for thetime being relieved upwardpressure on the dollar.

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34

36

38

40

Jan

-04

Feb

-04

Mar

-04

Ap

r-04

May

-04

Jun-

04

Jul-

04

Aug

-04

Sep

-04

Oct

-04

Nov

-04

Dec

-04

Jan

-05

Exp

ort

s an

d I

mp

ort

s

0

2

4

6

8

10

12

14

Tra

de

Bal

ance

Imports

Exports

Trade Balance

Exports decliningwith stronger dollar

Source: Statistics Canada

Imports, Exports, and Trade Balance($ Billions, Seasonally Adjusted)

-1%

0%

1%

2%

3%

4%

5%

6%

Q1

2001

Q1

2002

Q1

2003

Q1

2004

Q1

2005

HistoricalData

ForecastData

Real Canadian GDP (Annualised Quarterly %)

Source: Statistics Canada for Historical Data ; TD Economics for Forecast Data


-2%-1%0%

1%2%3%4%

5%6%7%8%

Q1

2001

Q1

2002

Q1

2003

Q1

2004

Q1

2005

HistoricalData

ForecastData

Real U.S. GDP (Annualised Quarterly % Change)

Source: U.S. Bureau of Economic Analysis for historical data; TD Economics forforecast data.

ECONOMIC OUTLOOK – CON’TNevertheless, the effects of thehigh dollar on trade are finallybecoming evident. On aseasonally adjusted basis,exports continued to growthrough mid-2004 despite thehigher dollar but have sincedeclined, while imports haverisen. The merchandise tradesurplus has fallen from a peak of$7.6 billion in June 2004, to $4.0billion in January 2005,representing the most significantdecline in the trade balancesince 2001, when a weak U.S.economy reduced Canadian exports.As a result of the decline inexports, inventories have risen,decreasing the demand for newproduction.1

The U.S. economy remains strong. While Canada’s economy slipped in the fourth quarter, theU.S. economy has remained on track for solid growth. On an annualised basis, quarterly growth hasaveraged just under 4% through 2004, and should remain slightly below this pace for 2005.Investment and housing demand are expected to maintain momentum, though the effects ofincreasing interest rates and high oil prices will have a cooling effect, with growth slowing to around3% in 2006. A healthy U.S. economy will be key to the Canadian economy recovering to the levels ofgrowth it enjoyed in 2004.

Risks to recovery. The impact of the Canadian dollar will continue to keep Canadian growth lower,even as its value remains relatively stable. As growth resumes, the Bank of Canada will eventuallystart to raise interest rates, and dollar appreciation may again be a concern. Some analysts are stillpredicting parity with the US dollar in the next few years, citing the U.S.’ large trade and fiscal deficitswhich will devalue their currency, and the increasing demands for Canada’s natural resources,particularly from China.

Rising oil prices are also a concern for the economy as a whole as well as for the transportationindustry. The U.S. Energy Information Administration has stated that they expect oil prices to remainabove US$50 per barrel through 2005 and 2006. If oil prices spike as some analysts fear, the U.S.will feel the impact in slower growth. Canada would see a tradeoff between higher revenues from oilexports and negative impacts both from higher oil prices domestically and from the indirect effects ofa slowdown in the U.S.

1 The Ivey Purchasing Manager Index (jointly sponsored by the Purchasing Management Association of Canada(PMAC) and the Richard Ivey School of Business) for inventories was 57.2 in March, up from 52 in February.An index of over 50 indicates inventories are rising.


-15%-10%

-5%0%5%

10%15%20%

Mar-04

April May Jun July Aug Sep Oct Nov Dec Jan-05

Feb Mar

Dom RPK Dom ASK

Air Canada Domestic Mainline Air Canada Domestic Mainline

Jazz data is not includedin this graph

0%

10%

20%

30%

40%

50%

60%

Mar-04


Feb Mar

RPK ASK

WestJetWestJet

AIRLINE DATA – CANADATRAFFIC AND LOAD FACTORS ON CANADA’S MAJOR AIR CARRIERSMARCH 2005

Passenger TrafficRevenue Passenger Kilometres

CapacityAvailable Seat Kilometres Load Factor

Air Carrier % Changeover 2004

% Changefrom 2003

% Changeover 2004

% Changefrom 2003

Changeover 2004

Changefrom 2003

Air Canada1 +6.4% +13.3% +1.7% +5.5% +3.5 pts(to 79.8%) +5.5 pts

Domestic(Mainline)

+3.3% +10.5% -1.1% +0.6% +3.4 pts +7.1 pts

Jazz +11.8% +21.1% -3.0% +2.3% +9.4 pts +11.0 pts

International& Charter

+7.6% +14.5% +2.8% +7.6% +3.5 pts +4.8 pts

WestJet +54.7% +103.5% +34.7% +74.8% +10.1 pts(to 77.8%)

+11.0 pts

Jetsgo2 N/A N/A N/A N/A N/A N/A

Analysis:

• The strong growth in domestic loadfactors of WestJet and Air Canadais due to the cessation of operationsby Jetsgo on 11 March 2005.

• Air Canada reported one full year ofrecord domestic and system loadfactors in March 2005. Following anearlier pattern, the carrier continuesto reduce domestic capacity.

• In March 2005, Air Canada’s growthin international traffic outpaced theaddition of capacity, resulting in animproved load factor. Traffic to/fromthe U.S., Atlantic and Pacificregions all increased, with Pacifictraffic posting double digit growth.

• WestJet posted an increased loadfactor in March 2005 as trafficcontinues to grow faster than thecarrier’s addition of capacity. Thecarrier continues to increase U.S.services, adding 42 Toronto-Floridaflights in March 2005.

1 Air Canada Mainline consists of all Air Canada with the exception of Jazz.2 Jetsgo ceased operations on 11 March 2005. February 2005 data not published.

OTHER CARRIERS:

LOAD FACTORS

CanJet: not reported

-10%

0%

10%

20%

30%

40%

Mar-04


Feb Mar

Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International


AIRLINE DATA – U.S.U.S. Airlines Release March 2005 Traffic Figures

Traffic Data – March 2005

Airline Load FactorTraffic

(RPMs – millions)Capacity

(ASMs – millions)

80.2%

á5.1 pts

12,074

á9.1%

15,042

á2.1%

69.8%

á2.0 pts

647

á28.6%

927

á24.9%

74.5%

á0.4 pts

681

â40.8%

914

â41.0%

181.3%

á5.5 pts

6,171

á13.5%

7,591

á5.8%

80.1%

á4.6pts

10,358

á14.4%

12,927

á7.8%

90.0%

á6.6pts

1,657

á33.7%

1,842

á24.1%

84.6%

á3.0 pts

6,850

á8.6%

8,096

á4.7%

73.7%

á0.1 pts

5,236

á12.0%

7,105

á11.9%

283.1%

á3.0 pts

9,813

á2.4%

11,807

â1.3%

280.7%

á3.2 pts

3,807

á9.6%

4,719

á5.2%

Notes: 1. Mainline2. Load factor includes scheduled service only

Sources: Carrier traffic reports.


Toronto Vancouver Montréal-Trudeau

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

February +8.6% +7.9% +19.6% +5.3% +10.7% +13.9% +11.7% +5.6% +11.4% +11.6% +7.8% +2.8% +19.8%

March +9.3% +5.2% +21.4% +2.0% +8.0% +11.4% +11.4% +9.0% +8.2% +2.6% +10.8% +3.9% +21.3%

1st Quarter +6.8% +4.8% +17.1% +3.7% +8.8% +9.7% +9.9% +6.1% +10.5% + 6.5% +5.3% +5.0% +18.0%

April +30.6% +20.5% +31.7% +11.5% +8.6% +20.8% +11.2% +16.9% +12.7% -0.3% +10.9% +2.6% +20.1%

May +30.8% +20.4% +26.3% +5.5% +7.5% +7.6% +9.0% +19.4% +8.0% -1.3% -0.3% -5.5% +15.2%

June +18.5% +16.1% +18.1% +8.0% +2.8% +12.1% +9.2% +7.8% +8.6% +3.0% +1.7% -4.3% +15.9%

2nd Quarter +26.2% +18.8% +24.9% +8.3% +6.2% +13.2% +9.7% +14.5% +9.7% +0.5% +3.8% -2.5% +16.9%

July +17.1% +10.4% +18.7% +5.0% +0.8% +5.7% +8.6% +10.5% +4.7% -0.5% +5.5% +1.4% +10.6%

August +16.0% +4.9% +18.1% +1.9% +2.2% +6.2% +7.4% +6.9% -2.0% -5.9% +5.4% +1.5% +10.1%

September +16.1% +11.5% +13.2% +13.0% +6.3% +7.9% +8.8% +8.6% +8.3% +12.1% +5.3% -0.6% +13.4%

3rd Quarter +16.4% +8.7% +16.7% +6.2% +2.9% +6.6% +8.2% +8.6% +3.3% +1.1% +5.4% +0.8% +11.2%

October +14.3% +7.0% +10.7% +10.7% -4.0% +11.9% +1.1% +3.7% -1.4% +9.1% +7.9% +1.9% +18.2%

November +13.3% +6.2% +17.6% +9.6 +4.7% +11.4% +4.4% +8.3% +0.3 +5.1% +8.0% -11.1% +9.9%

December +14.2% +6.8% +20.9% +8.9% +8.4% +11.0% +5.1% +8.0% +2.1% +3.9% +8.1% +3.6% +6.8%

4th Quarter +14.0% +6.7% +16.1% +9.7% +3.1% +11.4% +3.5% +6.4% +0.3% +5.9% +8.0% -2.1% +11.9%

2004

Full Year +15.7% +9.6% +18.6% +7.0% +5.1% +10.2% +7.7% +9.1% +5.7% +3.6% +5.6% +0.3% +14.0%

January +15.0% +9.8% +14.4% +13.2% +9.6% +12.9% +13.6% +6.6% +4.7% +12.4% +17.7% +9.7% +11.9%2005

February +8.7% +4.5% +4.0% +10.2% +7.8% +5.5% +7.0% +4.5% +7.1% +15.8% +10.4% +8.5% +1.5%

Source: Transport Canada and individual airports’ traffic reports.

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


NEWS ARTICLESAIR CANADA NEWSACE AVIATION HOLDINGS COMPLETESCDN$792M EQUITY AND CONVERTIBLESENIOR NOTES OFFERING, REPAYS GEEXIT CREDIT FACILITY DEBT

ACE AviationHoldings Inc., parent

company of Air Canada, has completed thepublic offering of 11.4 million Class A VariableVoting and Class B Voting Shares for proceedsof about CDN$420 million, along with CDN$300million of 4.25% Convertible Senior Notes. Inaddition, underwriters exercised their over-allotment options in full, purchasing anadditional 1.1 million shares and $30 million ofconvertible senior notes, adding $72 million tothe proceeds. ACE used CDN$553 million ofthe proceeds to repay all of its outstanding debtunder the exit credit facility with GE CapitalCorporation.

AIR CANADA TO RE-LAUNCHTORONTO-ROME SERVICES

Air Canada has started daily services betweenToronto and Rome with B767-300ER aircraft.The carrier will also offer code-share servicesvia Rome to Lamezia Terme, Catania, Palermo,Turin and Venice in cooperation with Air One, aLufthansa partner.

AIR CANADA TO ADD NEW PASSENGERAND CARGO SERVICES TO CHINA

Air Canada plans to increase its passenger andcargo services to China under the new Canada-China bilateral air services agreement. Thisincludes increasing its Toronto-Beijing service todaily flights by 2006, and the launch of dailynon-stop Toronto-Shanghai and Vancouver-Guangzhou service in the summer of 2006 and2007 respectively. Air Canada’s new cargoservice between Toronto and Shanghai will beincreased to daily services by 2006, along withthe addition of a second daily flight (viaVancouver) on the route. Daily freighterservices between Toronto-Guangzhou will beginin 2007. Air Canada also plans to serve Tianjin(northern China) with cargo flights in the future.

AIR CANADA TECHNICAL SERVICESREACHES USD$300 MAINTENANCEAGREEMENT WITH DELTA AIR LINES

Air Canada Technical Services (ACTS), alimited partnership of ACE Aviation HoldingsInc., has secured an agreement for themaintenance, repair and overhaul (MRO) ofDelta Air Lines’ fleet of Boeing 757-200, 767-300 and 767-300ER aircraft. The contractcovers a period of five years, representingpotential revenue of USD$300 million for ACTS.

MENZIES AWARDED AIR CANADACONTRACT

Talma Menzies, a Menzies Aviation partner, hasbeen awarded a contract to handle import andexport cargo for Air Canada in Lima, Peru. AirCanada operates three flights per day betweenToronto and Lima using Boeing 767-300 aircraft.

OTHER CANADIAN AIRLINENEWSWESTJET ACCEPTS B737-800AIRCRAFT DELIVERY, CONVERTS B737-600 OPTIONS INTO FIRM ORDERS

WestJet has taken delivery of its first B737-800aircraft. The carrier will receive a total of fiveB737-800s, seven B737-700s (three havealready been delivered to date), and three B737-600s in 2005. WestJet has also converted threeB737-600 purchase options into firm deliveriesfor 2006.

WESTJET STARTS WEB CHECK-INSERVICE

WestJet has launched web check-in services onits website at www.westjet.com. The service willallow travellers to check-in for the carrier' sdomestic flights via the website up to 12 hoursprior to departure time. WestJet currently hasself-serve check-in kiosks at Calgary,Edmonton, Montreal, Ottawa, Toronto,Vancouver, and Winnipeg airports.


NEWS ARTICLESOTHER CANADIAN AIRLINENEWS – CON’TCANJET LAUNCHES IN-FLIGHTENTERTAINMENT SYSTEM

CanJet Airlines announced that it will introducethe digEplayer portable audio/videoentertainment systems on select long-haul andFlorida flights. The digEplayer entertainmentsystem will be offered on a rental basis tocustomers.

AIRPORT NEWSGTAA EXPENSES EXCEED REVENUESBY CDN$112M IN 2004

The Greater Toronto AirportsAuthority (GTAA), operator of theToronto Pearson International

Airport, reported total revenues of CDN$832million for the fiscal year ended 31 December2004. Total operating expenses were CDN$488million, including CDN$130 million in groundrent paid to the Federal Government. Afterinterest/financing costs and amortisation, theairport’s total expenses exceeded revenues byCDN$112 million.

VANCOUVER AIRPORT INSTALLSCISCO IP SYSTEM

The Vancouver InternationalAirport has completed theinstallation of Cisco Internet

Protocol (IP) Communications Systemthroughout the airport. The system is designedto accommodate passenger needs, increaseoperational efficiency and create new revenueopportunities. Some of the new features includecommon-use check-in kiosks, WiFi access forbusiness travellers, and wireless baggagereconciliation for post-X-ray baggage searches.The Airport has also planned to install check-inkiosks at Olympic Games sites to easecongestion during and after the 2010 OlympicWinter Games.

OTHER NEWSCANADA AND CHINA REACHES NEWBILATERAL AIR SERVICES AGREEMENT

Canada and the People’s Republic of Chinahave reached a new bilateral air servicesagreement. The new agreement increases thenumber of permitted passenger/cargo flightsbetween the countries by threefold, includesnew city pairs and additional airlines that couldoperate between the two countries, and alsoaviation safety and security provisions.


Source: Boeing Website.

Source: Airbus Website.

Source: Great Circle Mapper.

CARGO CAPERS4 April 2005

Air Cargo Aircraft developments. A while back, we looked at the implications forCanadian airports of A380 bellyhold capacity, the resumption of AN-124 construction and IL-76 re-engining. This month we look at developments at Boeing.

The 747 “Large Cargo Freighter.” InFebruary, Boeing gave the go-ahead for its “747 LargeCargo Freighter.” Now most would agree that any 747F is alarge cargo freighter. So what does Boeing mean by this?Simply a specialised version of the 747-400F that will havean enlarged upper and rear fuselage to accommodatemovement of large composite structures of the 787Dreamliner for assembly. This will be Boeing’s variation ofAirbus’ “Beluga” which the European aerospace manufacturer uses in its production process. With acapacity of 1,840 m3, the Boeing aircraft will dwarf the volumetric capacity of the standard 747-400F,which has a little over 600 m3 of main deck capacity. It will also offer considerably more space thanthe Beluga, which is built on the frame of the A300-600 and provides about 1,500 m3 of capacity. Atpresent, Boeing states that its focus is strictly on the aircraft from the perspective of its role in theproduction of the 787. It should be recalled, however, that the Beluga was developed to support theAirbus production process, but has been, and continues to be, utilised for commercial use. Boeing’splans call for the conversion of three aircraft (two at the outset), which would suggest limited

opportunity for commercial service (Airbus has five Belugas), butthis may change. The performance characteristics of this aircraftare not yet known, but if the performance of the Beluga is anyindication (900 nm fully loaded, and only a bit over 2,500 nm witha 26 tonne load) this bodes well for potential Canadian tech stopactivity for services between Europe/Asia and the U.S. We’llkeep an eye on this one.

The 777F. Boeing is touting its new twin-engined 777F as the world’s longest-rangefreighter. With a full payload of about 100 tonnes(about 20 tonnes less than the 747-400F), thisaircraft will have a range of 5,200 nautical miles(about 900 nm further than the 747-400F). Notonly does that put much of Asia within non-stoprange of North America’s west coast (Vancouver-Taipei is 5,189 nm), it puts all of Europe inrange as well! From the east coast, the 777Fcould reach most of Africa, all of Europe andthe Middle East, and even into Asia. From an interior North American point such as Winnipeg, the777F will be able to reach Japan, Europe, parts of the Middle East, and most of South America non-stop as the map shows.

Robert Andriulaitis

Director Transportation& Logistics Studies


CARGO CAPERS - CON’TWith its superior operating economics and range, this aircraft will continue the trend towards decliningfreighter tech stop activity. More than ever, Canada needs to make air cargo policy changes to openup 5th and 7th freedom cargo traffic rights to provide air carriers with revenue opportunities in Canadaand enable Canadian airports to further develop their role as gateways to the NAFTA marketplace.

With the House of Commons Standing Committee on Transport currently in consultation withstakeholders, now is a good time for all those with a stake in facilitating international freighter servicesvia Canada to make their views known.


THE WASHINGTON REPORTApril 2005

Passports To Be Required for Entering U.S.From Canada

In its continued effort to reduce the threat of terrorism, the U.S. isrequiring that all American, Canadian and Mexican citizenspresent a passport at U.S. entry points by 2008. The U.S.currently only requires citizens from these countries to presentvalid ID such as a driver’s license. The new rule will beintroduced in stages. By the end of 2005, all U.S. citizenstravelling by air or sea to or from the Caribbean, Central or South America will be required to presentpassports upon re-entering the United States. By the end of 2006, the same will be required for thosereturning from Canada and Mexico. Lastly, the requirement will apply to all land, air and sea bordercrossings with Mexico and Canada by 31 December 2007.

TSA Director Stone to Resign in June

David Stone, Head of the Transportation Security Administration (TSA) and Assistant Secretary ofHomeland Security, has announced his resignation. The TSA has asked that he extend his term untilJune and assist with the transition of his successor. Stone is the third director in three years to resignfrom the post. Rear Admiral Stone had served as Acting Administrator of TSA since 4 December 2003and was unanimously confirmed by the United States Senate on 22 July 2004.

Boeing-Airbus Dispute Deadline Passes Without Resolution

The deadline for the U.S. and the European Union agreement in the Boeing and Airbus disputepassed on 11 April without resolution, but both governments are still interested in continuingnegotiations. The deadline also marked the end of a three-month standstill on fresh aid to the aircraftcompanies. The U.S. has stated that it would not return to the World Trade Organization (WTO)dispute settlement as long as Europe does not go forward with new subsidies to Airbus. Both theU.S. and the E.U. have indicated interest in continuing the negotiations in the subsidy dispute.

DOT Reports Decrease in January 2005 Airline Performance

The DOT Air Travel Consumer Report shows that airline performance is down in all areas for January2005 compared to January 2004. The on-time arrival rate decreased by 3.5 points to 71.4%,cancellations increased by 1.2 points to 4.2%, and mishandled baggage increased to by 7.9 reportsper 1,000 passengers. Consumer complaints doubled between 2004 and 2005, with the majority(96%) related to airline service.

FAA Proposes Aircraft Insulation Safety Upgrade

The Federal Aviation Administration (FAA) has proposed that the insulation blankets in over 800 U.S.registered Boeing aircraft be replaced or modified to meet fire-protection standards. Testing hasshown that the material currently in use impedes the spread of fire, but does not meet safetyrequirements in a consistent manner. An alternative to replacing the blankets is being developed byBoeing as a spray-on barrier that should cost one third less than replacing the blankets. Affectedaircraft types include the 727, 737, 747, 757 and 767.

Charles Chambers

Senior Vice PresidentInterVISTAS-ga2 Consulting Inc.

Washington, D.C.


This is a collection of information gathered from public sources, such as pressreleases, media articles, etc., information from Confidential sources, and items heardon the street. Thus some of the information is speculative and may not materialise.

Prepared by InterVISTAS Consulting Inc.

THE OTTAWA REPORT8 April 2005

Amendments to the Canada Transportation Act Tabledin Parliament

On 24 March 2005, Minister of Transport, Jean Lapierre, tabled amendments tothe Canada Transportation Act, which came into effect in 1996 in the House ofCommons. The Minister commented that the amendments would address keytransportation issues for Canada.

The proposed amendments include the following:

• A new and simplified National Transportation Policy Statement.

• A new provision that authorises the Canadian Transportation Agency (CTA) , on therecommendation of the Minister, to require greater transparency in advertisement of airfares.

• A reduction in the size of the CTA, and the integration of the air travel complaint functions intobusiness practices.

• The addition of security to the list of purposes for which transportation data can be collected, theidentification of transportation stakeholders and parties from whom data can be collected.

Airport Divestiture Program Extended

On 31 March 2005, the Minister of Transport announced the extension of the Regional and SmallAirport Divestiture Program until 31 March 2007. Eight airports remain to be divested from TransportCanada to local airport authorities. The remaining airports are at various stages of the transferprocess which include two airports in British Columbia (Penticton and Port Hardy), one airport inOntario (Bonnechere), three airports in Quebec (Havre Saint-Pierre, Natashquan and Sept Illes) andtwo airports in Newfoundland and Labrador (St. Anthony and Wabush).

Projects Announced for the 2005/2006 Airports Capital AssistanceProgram (ACAP)

On 7 April 2005, the Transport Minister announced 61 projects for 2005/2006 to enhance safety atCanadian Airports. The total proposed program funding for the new projects is estimated to beCDN$51.4 million. Between April 2005 and March 2010, the total ACAP program funding will beCDN$190 million (or an average of CDN$38 million per year).

NAV CANADA Reports January Traffic Results

NAV CANADA announced traffic figures for January 2005. Traffic for January was 6.7% higher thanthe same month last year. Fiscal year-to-date, traffic increased 5.7% compared to the same periodlast year. NAV CANADA’s fiscal year runs from September 1 to August 31.

Sam Barone

Regional Vice PresidentOttawa, ON

cair issue no. 28 - april 2005

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