cair issue no. 35 - november 2005

INTERVISTAS ’CANADIAN AVIATIONINTELLIGENCE REPORT

In this issue…

Features Columns: Regular Reports:• A Review of Transborder Seat Capacity

(p.1)• Crude Oil Prices Ease to US$60 (p.2)• Cargo Capers (p.10)• Bringing Registered Travellers to Reality

(p.11)• Passenger Rail and Transit Security

(p.13)• Perimeter Clearance Strategy (p.15)

• Airline Data-Canada (p.3)• Airline Data-U.S. (p.4)• Airport Data (p.5)• Industry News (p.6)• Ottawa Report (p.17)• Washington Report (p.18)• InterVISTAS News (p.19)

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

A REVIEW OF TRANSBORDERSEAT CAPACITY7 November 2005

In September 2004, WestJet launched scheduled services between Canada and the U.S. It has beenover a year since the low cost carrier started transborder flights. This column examines the change inthe share of transborder seat capacity and level of services offered by Canadian and U.S. carriersbetween November 2004 and November 2005.1

Level of Transborder Seat Capacity. In November 2005, totaltransborder seat capacity has increased by roughly 3% compared to the samemonth last year. As a group, Canadian carriers have decreased transborderseat capacity by 1%, while U.S. carriers have increased Canada-U.S. capacityby 6%. The bankruptcy of Jetsgo accounted for a large proportion of thedecrease in transborder capacity offered by Canadian carriers. Air Canadaincreased Canada-U.S. seat capacity by 6% while WestJet added 54% moreseat capacity in November 2005 compared to November 2004. Most of WestJet’s capacity increasewas to sun-spot and leisure markets such as Fort Lauderdale, Las Vegas, Orlando, Palm Springs andTampa.

Share of Transborder Seat Capacity. The share of transborder seat capacity offeredby domestic and U.S. air carriers is summarised in Table 1. Note that Air Canada has a largerproportion of Canada-U.S. seat capacity than any individual carrier.

Table 1 - Transborder Seat Capacity Comparison

Carrier Origin Nov 2004 Share of Total(Nov 2004)

Nov 2005 Share of Total(Nov 2005)

Canada 517,570 44% 510,981 43%

Air Canada 408,068 35% 431,423 36%

WestJet 28,016 2.4% 43,177 3.6%

Jetsgo 32,385 2.8% - -

U.S. 649,560 56% 686,802 57%

Total 1,167,130 100% 1,197,783 100%

Source: PLANET OAG November 2004 and 2005 data.

Although WestJet has added a large amount of transborder seat capacity over the last year, AirCanada remains the dominant carrier in the market. Combined, the U.S. carriers also offer asignificant proportion of transborder seat capacity. At the moment, the share of Canada-U.S. seatcapacity remains largely unchanged as WestJet’s transborder services have focused mostly on nicheleisure travel markets.

1 This analysis does not include fifth freedom services offered by foreign carriers.

Eugene ChuProject Analyst


Crude Oil Futures Prices

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Crude OilSpot Prices for

Near Term Delivery

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Sep 2005

Nov 2005

CRUDE OIL PRICES EASE TOUS$604 November 2005

Crude oil prices fall to below US$60 per barrel in October 2005…Crude oil prices fell below US$60 in late October, before closing at US$61.78 in early November.This is the first time that crude oil prices have dipped below the US$60 mark since late July 2005.Recent impacts such as Hurricanes Katrina and Rita on U.S. crude oil refineries have since stabilised,resulting in lower oil prices. Other global factors such as above season temperatures in the U.S.Northeast and spare OPEC capacity have played a role in recently declining oil prices.

OPEC Able to Meet Winter DemandThe 11 member country oil producer group indicated that there is spare capacity in the range of twomillion barrels that can be accessed should winter demand outstrip available supply. OPEC alsoexpects crude oil prices in 2006 to fall to the US$45 to US$55 price range as global supplies build.

Unseasonably Warm Temperatures in the U.S. Northeast Helps Build InventoryWith the start of November, temperatures in the U.S. Northeast have been warmer than usual. Everyweek of above seasonal temperatures allows U.S. refineries to stockpile inventory ahead of winterpeak demand. The U.S. is the world’s largest oil consumer.

…. Futures prices fall below US$60 per barrelA futures contract in November 2005 for delivery of crude oil in 2010 is priced at US$57, this is adecline of 6% for the same contract if purchased in September 2005. Since May 2003, eachsuccessive month has resulted in higher and higher overall crude oil price levels. However,November 2005 is the first month where futures prices have fallen below price levels established inprior months as illustrated below.

Doris MakSenior Project Manager


-10%

-5%

0%

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Nov Dec Jan-05

Feb Mar Apr May Jun Jul Aug Sep Oct

Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

0%

10%

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60%

Oct-04

Nov Dec Jan-05


RPK ASK

WestJetWestJet

Air Canada Domestic Mainline Air Canada Domestic Mainline

-15%

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Nov Dec Jan-05


Dom RPK Dom ASK

Jazz data is not includedin this graph

AIRLINE DATA – CANADATraffic and Load Factors on Canada’s Major Air CarriersOctober 2005

Passenger TrafficRevenue Passenger Kilometres

CapacityAvailable Seat Kilometres

Load FactorAir Carrier % Change

over 2004% Changefrom 2003

% Changeover 2004

% Changefrom 2003

Changeover 2004

Change from2003

Air Canada1 +4.9% +13.0% +4.7% +6.2% +0.2 pts(to 77.9%)

+4.7 pts(from 73.2%)

Domestic(Mainline) -3.6% -2.0% -5.4% -13.2% +1.5 pts +9.3 pts

Jazz +77.8% +85.5% +79.9% +49.2% -0.9 pts +14.0pts

International& Charter +9.0% +20.8% +9.3% +16.6% -0.2 pts +2.7 pts

WestJet +16.5% +44.4% +8.8% +43.1% +4.8 pts(to 73.5%)

+0.7 pts(from 72.8%)

Analysis:• Air Canada reported its 19th consecutive

month of record system and domesticload factors in October 2005. However,both domestic mainline traffic andcapacity declined during the month,reversing a previous trend.

• Jazz continues to record double-digitincreases in traffic and capacity. Part ofthe increase in capacity could beattributed to a shift in domestic capacityfrom Air Canada mainline to Jazz. InOctober 2005, Jazz accounted forroughly 36% of Air Canada’s totaldomestic capacity, compared to 27% inOctober 2004.2

• WestJet continued to report trafficincreases and additional capacity inOctober 2005. However, the rate ofincrease has declined compared toprevious months. Traffic growthoutpaced the addition of capacity,resulting in an improved load factor.

1 Air Canada consists of all Air Canada operations with the exception of Jazz.2 PLANET OAG data for October 2004 and October 2005.

OTHER CARRIERS:LOAD FACTORS

CanJet: not reported


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

Traffic Data – October 2005

Airline Load FactorTraffic

(RPMs – millions)Capacity

(ASMs – millions)

77.1%

á2.2 pts

10,872

á1.5%

14,091

â1.5%

72.5%

á2.9 pts

720

á21.2%

994

á16.3%

73.2%

á1.8 pts

504

â49.1%

689

â50.3%

177.3%

â1.0 pts

6,632

á7.2%

8,578

á8.6%

72.4%

â1.7 pts

9,405

â2.3%

12,991

á0.0%

78.4%

â4.7 pts

1,599

á14.4%

2,039

á21.2%

82.9%

á2.6 pts

5,902

â4.0%

7,123

â6.9%

70.4%

á3.8 pts

5,146

á14.3%

7,316

á8.2%

280.6%

á2.8 pts

9,451

â1.1%

11,720

â4.6%

274.8%

â0.8 pts

2,940

â13.3%

3,932

â12.3%

Notes: 1. Mainline operations only.2. 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

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% +7.0% +4.7% +12.4% +17.7% +9.7% +11.9%

February +8.7% +4.5% +3.8% +10.2% +7.8% +5.5% +7.0% +4.8% +7.1% +15.8% +10.4% +8.5% +1.5%

March +10.2% +8.2% +5.5% +17.5% +12.5% +7.3% +9.7% +7.1% +15.4% +19.5% +19.1% +22.2% +19.6%

1st Quarter +11.2% +7.5% +7.7% +13.7% +10.0% +8.4% +10.0% +6.3% +9.3% +16.0% +15.6% +13.3% +11.5%

April +4.0% +3.9% +5.7% +3.5% +5.5% +0.1% +4.3% -0.2% +2.6% +18.8% +5.9% +3.8% +9.8%

May +6.7% +5.5% +3.7% +12.2% +12.0% +5.5% +8.0% -4.5% +5.8% +26.3% +13.4% +5.7% +8.5%

June +6.3% +4.0% +7.5% +10.1% +13.9% +3.4% +2.9% -0.5% +6.8% +22.7% +11.0% +12.4% 12.4%

2nd Quarter +5.7% +4.5% +5.7% +8.6% +10.4% +3.1% +5.0% -1.8% +5.1% +22.6% +10.2% +7.3% +10.3%

July +3.6% +3.4% +3.8% +11.2% +11.7% +4.8% +4.5% -9.7% +1.2% +15.9% +5.1% +10.9% +14.0%

2005

August -1.1% +2.7% +1.5% +12.7% +8.8% +4.4% +4.6% -6.4% +5.2% +26.4% +10.1% +2.4% +8.9%Source: Transport Canada and individual airports’ traffic reports.

If your airport is interested in providing InterVISTAS Consulting Inc. with its monthly passenger statistics, please email Doris Mak at [email protected].

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


NEWS ARTICLESAIR CANADA UPDATEACE POSTS CDN$270 MILLION INCOMEIN THIRD QUARTER

ACE Aviation Holdings Inc.,Air Canada’s parentcompany, announced a net

income of CDN$270 million for the third quarterof 2005, an improvement from the net loss ofCDN$81 million for the same period in 2004.

AIR CANADA RECEIVES ARBITRATIONDECISION TO PROCEED WITH ORDEROF B777 AND B787 AIRCRAFTAir Canada announced on 1 November that ithas received a binding arbitration decision thatresolves the issues of pilot costs and othermatters with the Air Canada Pilot’s Associationrelated to the carrier’s order of Boeing widebodyaircraft. The decision allows Air Canada toproceed with its acquisition of 18 B777 and 14B787 aircraft announced earlier this year.

AIR CANADA INCREASES SCHEDULEDTIME BETWEEN DOMESTIC ANDTRANSBORDER FLIGHTSBeginning 1 November, Air Canada isincreasing the amount of scheduled timebetween domestic and transborder flights toreduce the incidence of missed connections.Such connections at Toronto PearsonInternational Airport will now require 70 minutes,up from 60 minutes, while connections inMontreal will require 60 minutes, up from 50minutes.

AIR CANADA SIMPLIFIES FARES TOSELECT SUN DESTINATIONSAir Canada announced that it is expanding itssimplified fare structure to select sundestinations. The carrier will offer fares toBermuda, Bahamas, Barbados, Antigua, St.Lucia, Trinidad, and Venezuela in fivecategories including: R&R (Relax and Return),Tango Plus, Latitude, Latitude Plus, andExecutive Class. The move follows theintroduction of similar fare structures fordomestic and transborder flights.

OTHER CANADIAN AIRLINENEWSWESTJET ANNOUNCES NEW SERVICESFOR 2006

On 2 November, WestJetannounced a number ofschedule enhancements

including several new non-stop services. Thenew routes, to commence in January 2006,include services between Calgary-FortMcMurray five times per week, Vancouver-LasVegas three times per week, and once weeklyservice between Winnipeg-Orlando andHamilton-Orlando. In addition, WestJet isincreasing frequencies on its Toronto-Orlando,Calgary-Phoenix, and Calgary-Palm Springsservices.

WESTJET EXPANDS BAGGAGE DROPCOUNTER SERVICESWestJet announced on 1 November that it isoffering baggage drop counter services at allCanadian airports where the carrier operates.The counters, which were previously availableonly at select domestic airports, allowpassengers to check in more quickly, andcomplement WestJet’s web check-in programlaunched in April 2005.

CANJET CANCELS TORONTO-VANCOUVER SERVICECiting insufficient passenger loads, CanJetAirlines has cancelled its daily Toronto-Vancouver service. The carrier indicated that itmay revive the service in April 2006.

ZOOM AND CANADIAN AFFAIR TOINCREASE TORONTO-GLASGOWSERVICE

Following a pull-out of AirCanada’s summer servicebetween Toronto and Glasgow,

two carriers announced that they will be addingservices on the route. Zoom Airlines willincrease its service next summer from two tothree flights per week, while Glasgow-basedCanadian Affair will offer chartered daily flightsoperated by Thomas Cook Airlines.


NEWS ARTICLESCANADIAN AIRPORTSKELOWNA AIRPORT INTRODUCESSELF-SERVICE KIOSKSKelowna International Airport has deployedsix self-service check-in kiosks, allowingpassengers to check in and select availableseats for their flights. The kiosks are beingoperated as part of a partnership with theVancouver International Airport, whichalready operates such kiosks and is providingthe hosting infrastructure.

TORONTO AIRPORT ANNOUNCESOPENING OF TEN NEW GATES

On 1 November, the GreaterToronto Airport Authority(GTAA) announced the opening often new gates at Toronto PearsonAirport’s Terminal 1. These new

gates represent the second major component ofthe new terminal. Air Canada has moved all ofits prime international flights to the new terminal,eliminating the need for ground transportation toand from the infield terminal for these services.

CARGO NEWSIATA UNVEILS PLAN FOR PAPERLESSCARGO PROCESSING

On 1 November, IATA unveiledplans for its e-freight program,the cargo component of its

Simplifying the Business initiative. The programhas a target of global paperless cargoprocessing by 2010, which is expected to saveUS$1.2 billion annually and reduce shippingtimes by up to 25%.

CARGOJET TO CREATE REGIONALNETWORKCargoJet Airways plans to create a regionalnetwork that would complement its existingnetwork covering major Canadian cities withB727-200F aircraft. Plans for the network arenot yet fully developed, but CargoJet indicatedthat it would consist of two feeder carriers, onein the east and one in the west, using one or twotypes of aircraft, with shared training, storageand parts inventories.

U.S. CARGO AIRLINES WIN ADDITIONALASIA FREQUENCIESFedEx, UPS and Polar Air Cargo have eachwon a weekly round-trip frequency on the U.S. –Hong Kong – Korea fifth freedom service.

NORTHWEST JOINS SKYTEAM CARGOALLIANCE

Northwest AirlinesCargo joined theSkyTeam Cargoalliance, joining

Aeroméxico Cargo, Air France Cargo, Delta AirLogistics, Korean Air Cargo, Alitalia Cargo, CSACargo, and KLM Cargo. The airline will adoptSkyTeam’s standardised product line, includingthe Equation express product and the Cohesion,Variation, and Dimension standards over thenext several months. Northwest operates a fleetof 14 Boeing 747 freighters, dedicated to pacificoperations, in addition to carrying freight andmail on its 600 passenger aircraft.

PEOPLE IN THE NEWSWestJet Airlinesannounced on 18 Octoberthat Thomas (Tim)

Morgan, Executive Vice President ofOperations, has resigned from the carrier, citingpersonal reasons. Mr. Morgan was one of thefour co-founders of the carrier in 1995.

Several other organisational changes have alsobeen made at WestJet. Chris Avery wasnamed Director of Schedule Planning, movingfrom his previous position as Senior Manager,Network Planning. Meanwhile, BrendaTrockstad has been named as GeneralManager of the company’s new subsidiary,WestJet Vacations. She was previously Directorof Revenue and Scheduling.Sean Durfy has beennamed Executive VicePresident for StrategyDevelopment and Marketing,after having served asExecutive VP of Sales andMarketing. Sean Durfy


NEWS ARTICLESPEOPLE IN THE NEWS - CON’TLarry Berg, CEO of theVancouver InternationalAirport Authority, has beenrecognised as director of theyear by Airport RevenueNews in the medium-smallairports category. YVR wasnoted for its operatingefficiency and costcompetitiveness, serving as a gateway on theWest Coast of North America.

Steven Grossman has beenelected as the 2006 Chairmanof Airports Council-NorthAmerica (ACI-NA). He is alsothe Director of Aviation for thePort of Oakland.

Chief Operating Officer WakeSmith resigned from his post atAtlas Air Worldwide Holdingseffective 31 October. JeffreyErickson, group President andCEO, will assume his duties inthe interim.

OTHERSKYWEST TO LAUNCH SALT LAKECITY–EDMONTON SERVICE

Beginning 15 December2005, SkyWest Airlineswill be operating twice

daily services between Salt Lake City andEdmonton. The route will be operated usingBombardier CRJ 200 aircraft.

UNITED EXPRESS TO STARTEDMONTON-SAN FRANCISCO SERVICE

Starting 8 February 2006,United Express will launchdaily services between

Edmonton and San Francisco.

ETIHAD AIRWAYS LAUNCHES SERVICETO TORONTO VIA BRUSSELS

Based in the United ArabEmirates, Etihad Airways haslaunched services to Toronto

via Brussels. The route is operated three timesper week. Etihad Airways indicated that it plansto start services to the U.S. in the summer of2006.

DELTA TO FOLD SONG INTO MAINLINEOPERATIONSDelta Air Lines will be folding its low-costoperation Song into the mainline carrier in thenext year, while keeping the name and keyattributes of the carrier for new long-distancetranscontinental services. Delta will add first-class seats to Song’s existing fleet, and keepSong’s leather seats, seatback televisions, andMP3 music programming. The Song productwill be introduced on select transcontinentalroutes beginning in Fall 2006, and eventually beextended to all routes over 1,750 nautical miles.

BOMBARDIER SUSPENDS CRJ-200PRODUCTIONBombardier announced that as of mid-January2006 it will temporarily suspend the productionof its 50-seat CRJ-200 aircraft. The aircraftmanufacturer said it is doing so to realign itsproduction to the current market outlook for 50-seat regional jets. Production of the Challenger-850 business aircraft, the corporate variant ofthe CRJ-200, will continue on the existingassembly line.

BOEING SELLS ARNPRIOR OPERATIONBoeing has completed the sale of itsmanufacturing operation in Arnprior, Ontario toone of it suppliers, Consolidated Industries. Thedeal includes a long-term single-source supplyagreement for all the parts currently made at theArnprior facility.

Larry Berg

.

InterVISTAS Consulting Inc.550-1200 West 73rd Avenue,

Vancouver, BC, V6P 6G5Canada

Telephone: 1-604-717-1800Facsimile: 1-604-717-1818

E-mail:[email protected]

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CARGO CAPERS7 November 2005

Talk about doom and gloom! You may have noticed some rather gloomy articles andnews items in the October 2005 issue of Air Cargo World:

• Shifting Supply Chains: New market realities suggest theclock is ticking on the Just-In-Time supply chain strategies.This column discusses the trend back towards havinginventories close to the customers and the use of slowerand less expensive modes of transport.

• Britain’s Broader View: With U.K. air cargo in decline,British airlines and forwarders look for new ways to lurefreight notes that with the migration of much of Britain’smanufacturing base to Asia, air cargo in the U.K. is in anose-dive – and isn’t ever likely to get better.

• The Breaking News items U.S. Airlines Report Slow CargoTraffic Growth and Airlines Hike Fuel Surcharges also arerather short on optimism.

Just-in-time (JIT) is not dead. The common view ofJIT has always seemed to encompass the concept of speed. In reality, JIT is focused on timelinessand consistency. It does not matter if the shipment left the supplier the day before and went by air ora week before and went by rail – what really matters is that the shipment is delivered when needed.Now while this might seem to work against air (if speed isn’t the key), when it comes to reliability, aircertainly performs very well compared to the other modes. Furthermore, while the pure transportportion of air is certainly more expensive, when you take into consideration the broader picture,including shorter product lifetimes, less product damage and theft, and higher reliability, air continuesto present a good business case. As JIT practices continue to evolve, the fundamentals suggest arole for air cargo will continue.

Shifts rather than declines. The problem cited for the U.K. is reflected to a greater orlesser degree elsewhere. While large portions of the western manufacturing base have undoubtedlymoved, significant manufacturing still takes place in the western economies. We obviously will notcompete with Latin America and Asia on the basis of labour costs – thus productivity, investment anda highly educated and motivated workforce will be keys for value-added activities here. While someof Canada’s historically key exports have declined in the last five years, there have been some stronggains in industries such as pharmaceuticals. Thus, while some manufacturing capacity will continueto be exported, other high value activities will continue to thrive in Canada and the U.S., generating ademand for outbound air cargo. If there is a trend to having inventories near the customers,Canadian airport communities can make a case for these inventories to reside in Canadian FTZs.

Boeing is still optimistic. Boeing, after assessing the steep decline in air cargo in 2001,the subsequent recovery, and the basic fundamentals driving air cargo, still comes up with a 6.2%growth rate projection for the next two decades-a tripling of the market over this timeframe.

Conclusion: challenges rather than doom. Now while there are certainlychallenges facing air cargo in Canada and globally, I think the prospects for air cargo growth forCanadian airports, air carriers, and the modes that feed air cargo, remain strong.

Robert AndriulaitisDirector, Transportation

& Logistics Studies


BRINGING REGISTEREDTRAVELLERS TO REALITY7 November 2005

The past eighteen months have seen considerable activity occur regarding the Registered Traveller(RT) initiative for airport pre-board screening (PBS). In the United States, the concept moved from itspost-9/11 embryonic state to a recent announcement towards deployment of a national RT program in2006. In Canada, CATSA has indicated some interest in establishing a program, but has not yetmade any formal commitment.

What is a PBS Registered Traveller Program?A PBS Registered Traveller program would allow pre-qualified participants to bypass regular queuesvia dedicated lines or queue jumping, and, if no alarms are triggered, be exempt from additionalsecondary screening such as pat-downs and bag searches. Applicants would first have to providebiometric data (e.g., fingerprints and iris scans) and submit themselves to government backgroundchecks before RT status is granted – a qualification process similar to that involved with other trustedtraveller programs for passengers and goods such as NEXUS Air and CANPASS. Once at a PBScheckpoint, the participant’s biometric information would be used to confirm identity and provideaccess to the expedited PBS process. Aside from providing qualified travellers opportunities forquicker PBS processing, an operational RT program would also improve overall PBS efficiencythrough more effective dedication of resources and higher passenger throughput.

Testing the ConceptIn spring 2004, the TSA initiated a pilot RT program to test the concept, with the ultimate objective ofassessing how biometric technologies and background security assessments can enhance securityand strengthen customer service at PBS checkpoints. The pilot was implemented at five largeairports (Boston Logan, Houston Bush, Los Angeles International, Minneapolis-St. Paul andWashington Reagan) and limited participation to 2,000 frequent travellers flying on specific airlines ateach airport. These pilots were concluded on 30 September of this year and were deemed a successby the TSA, airports, program participants and the media alike.

A sub-pilot was also developed and launched at the Orlando International Airport in July 2005 to testa public-private partnership model that would enable a RT program to operate without governmentfunding. Contracted to Verified Identity Pass, Inc. (VERIFIED ID) and baptised “Clear”, Orlando’s RTprogram operates in a manner similar to that implemented at the five pilot airports, but allows anunlimited number of participants and requires payment of a membership fee by program participants.With over 10,000 enrolments as of November 2005, Clear has proven to be a success.

Statistical analysis of Orlando program’s first weeks of operation indicate that processing times forprogram participants are significantly lower, with biometric verification and processing times at aClearLane taking roughly 14 seconds.

Marcel ChampagneSenior Planner


BRINGING REGISTEREDTRAVELLERS TO REALITY – CON’TWhat Next?In spite of favourable results, the lack of program interoperability between participating airports hasbeen criticised as a major flaw of the pilot programs, as traveller participation was only allowed at theairport of enrolment. It appears therefore that the next phase of program development would involveimplementation of an integrated RT system in which participants may access RT lanes at any airport.Although only currently in operation in Orlando, the Clear program was developed with interoperabilityin mind. Such an approach is already being advocated by the airport industry via the recently createdRegistered Traveller Interoperability Consortium (RTIC). With over 50 member airports and growing,the RTIC is increasingly becoming well positioned to put forward the interoperability standards anddevelop the marketing benefits necessary for successful RT deployment in the United States.

Although the current U.S. budget for the year beginning 1October 2005 contained no funds to keep Registered Travellergoing, TSA chief Kip Hawley indicated in early November thata national RT program will debut on 20 June 2006 based onthe Orlando model. Leading up to this announcement, the fiveoriginal pilot airports had already signalled that they wished tocontinue their own registered traveller programs based on thismodel, and more airports had positioned themselves to do soas well.

Unfortunately, none of these initiatives appear to adopt abroad approach that would also integrate other existing andfuture trusted traveller programs such as Nexus-Air, Nexus-Highway and Sentri, that also requireextensive participant background checks. Much like the debit card system adopted by the bankingindustry, the transportation industry would benefit significantly by the development of oneinteroperable program that recognises similar programs across all modes, much like that envisionedby Perimeter Clearance strategy. For more information, see Perimeter Clearance: Updating theStrategy, written by Gerry Bruno on page 15 of this publication.

The TSA experience in testing the RT model can serve as a strong foundation for the development ofa potential Canadian program. Development of a potential Canadian RT model will also need toconsider similar interoperability issues and involve a broad group of stakeholders such as TransportCanada, airports and air carriers. As Canada, the U.S. and Mexico continue to implement Securityand Prosperity Partnership (SPP) initiatives, however, the maturing of the RT concept will need toconverge with other trusted traveller programs to ensure its success in simplifying travel into andacross North America.

Given the multiplicity of trustedtraveller programs such as NEXUSAir and CANPASS, interoperability

between programs are keyconsiderations.


PASSENGER RAIL & TRANSITSECURITY: THE NEW EMPHASIS4 November 2005

July’s tragic attacks in London, and last year’s in Madrid highlight a disturbing reality: terrorism ismulti-modal in nature. Rail, sea, and other forms of transportation are potential targets for attacks, inaddition to aviation. The job to secure all forms of transportation is unenviable: the billions of dollarsspent in aviation and maritime security since 9/11 will pale in comparison to a comparable level ofeffort in other modes. As major airports in North America are building or contemplating linkages to railand transit systems, it is important to keep track of the advances in solutions for the new focus inpassenger rail and transit.

Magnitude of Problem: Annual Volume Eight times the number of AirPassengersEach year, approximately 90 million passengers are enplaned/deplaned from Canadian airports. Bycomparison the transit rail/metro systems in Canada carry roughly 750 million passengers annually.

Annual Rail Transit Trips (millions of riders)

Rail TransitType

Calgary Edmonton Vancouver Ottawa Toronto Montreal Total(millions)

Light 46.9 6.5 - 2.5 84.3 - 140.2

Heavy - - - - 257.6 - 257.6

Commuter - - 2.0 - 36.4 14.3 52.7

Automated/Other

- - 64.1 - 15.3 222.9 302.3

Total (M) 46.9 6.5 66.1 2.5 393.6 237.2 752.8

Source: American Passenger Transit Association, 2004 + Estimate for Montreal Metro; does not include buses

The large volumes, and multiple access points (stations) for each system presents a sizeablechallenge. For example, the busiest subway stations in Canada handle 90,000 passengers per day.This means that a single subway station processes the same number of passengers as the entireenplaned/deplaned traffic volume at Toronto Pearson International Airport.

Is Screening the Solution?In the 1970's a rash of hijackings and bombings prompted the development of pre-board screening ofpassengers, and now checked baggage. Screening for passengers boarding subways has proven tobe difficult due to the lack of space, as well as the dependency of mass transit on rapid flow-through.Nevertheless, recent experiences in London and NYC for targeted bag searches have introducedsome level of passenger screening, at least on a selective basis.

The slow speed of current screening machines is a technological that, over time, may prove togenerate a new market for rapid detection systems that may have a market for both airport and transitsystems. This may be at least a decade away in terms of development and commercial deployment.

Solomon WongDirector, Security & Planning


What Else is Being Advanced for Rail Transit Security?Other techniques for securing mass transit systems are still in their infancy. According to a UN study,measures included for securing rail transit security include:

• Perimeter barriers, high-tech fencing andlighting.

• Intrusion detection equipment.

• Alternative external communications capabilityfor continuity of operations.

• Increased number of uniformed andundercover patrols on light rail and subwaysystems.

• Hazmat training for personnel.

• Increased number of inspections of trash receptacles and other storage areas

• Increased number and frequency of bomb detecting canine teams.

• Continued broadcast of public announcements to alert riders and citizens to be aware of attacks(e.g., Madrid, London) and to watch their surroundings, and report any suspicious activities

• Increased video surveillance and review of such materials.

• Procurement of personal protective equipment for emergency responders.

• Systems have participated in exercises, protocols, and training for identifying the effects of achemical/biological attack and have developed system-wide

• Employee Awareness Campaigns as well as deployed chemical and biological detectionequipment.

In the U.S., the Transportation Security Administration has a Mass Transit Passenger Security group.The group also started to promote a "prohibited items" list, similar to the aviation mode. Certain itemssuch as firearms, ammunition, flammable materials, mace, knives and explosives may be prohibitedin or on mass transit vehicles and stations – depending on each system's operational criteria.

Due to the shared responsibility of security at different levels of government, each initiative that hasbeen tried is co-ordinated through multiple jurisdictions in the U.S. For example, a pilot program totest the feasibility of screening luggage and carry-on bags for explosives at rail stations and aboardtrains has involved a large number of different authorities.

Biological, chemical and high explosives countermeasures are also research efforts that are underway for improving the U.S. system.

Canadian ResponseAdditional security initiatives that aim to further reduce vulnerabilities to transit and rail systems andmake commuters and transit riders more secure may be forthcoming. This will invariably involve alarge number of stakeholders, as well as potential interaction with Canadian airports insofar asplanning for new transit facilities adjacent to terminal buildings proceed.


PERIMETER CLEARANCE:UPDATING THE STRATEGY3 November 2005

Founded in December 2000, the Perimeter Clearance Coalition (PCC) is a broad based bi-nationalindustry group dedicated to working with the Canadian and U.S. governments to move bordermanagement as much as possible away from our shared border to our common perimeters and off-shore. Much of the Coalition’s conceptual work found its way into the Smart Border Action Plan ofDecember 2001 and the report of the U.S. Congress’ Data Management Improvement Act Task Forceon entry/exit tracking, which manifested itself into the U.S.-VISIT program.

The Coalition’s concepts were documented in the May 2002 Perimeter Clearance Strategy, acomprehensive roadmap for re-designing border processes using information and biometrictechnologies to expedite the entry of low risk travellers and goods. Over the years, PCC membershave been active advocates of the Perimeter Strategy and provided hundreds of briefings andpresentations at industry conferences and private meetings with key government officials on bothsides of the border.

In order to enhance the effectiveness of its advocacy efforts, the Coalition recently agreed to alignitself with the Canadian-American Border Trade Alliance (Can-Am BTA). Under the new governancestructure, the PCC is now a major initiative of Can-Am BTA and will have an Advisory Board thatincludes select Can-Am BTA Executive Board members and key Coalition sponsors.

Recent DevelopmentsSmart Border Action Plan Implementation: While the PCC has been very supportive of the SmartBorder Action Plan, there have been concerns with the implementation of Smart Border initiatives.Issues include the lack of integration among various expedited programs such as Nexus-Air, Nexus-Land and Registered Traveller and insufficient co-ordination among departments and agenciesresponsible for border management and security. While action is being taken to address theseissues, the PCC needs to continue to advocate for “smart implementation” of the Smart Border Plan.

The Western Hemisphere Travel Initiative (WHTI): The Intelligence Reform and TerrorismPrevention Act of 2004 requires that by January 2008, entry into the U.S. from Western Hemispherenations including Canada require a passport or “secure travel document”. This requirement appliesnot only to visitors from Western Hemisphere nations but also to returning American citizens andresidents. More recently, the U.S. has proposed a phase-in for WHTI that would advance the newdocument requirements for entry into the U.S. by air or sea to 1 January 2007, while entry by landwould be effective 1 January 2008. This new requirement has significant implications for the air traveland cruise ship industries, and the PCC is advocating for delaying implementation for air and sea to2008 in line with the legislative deadline so as to provide more time to develop practical andaffordable alternatives to “secure travel documents” for Canadian and U.S. travellers.

Security and Prosperity Partnership : The Security and Prosperity Partnership (SPP) of NorthAmerica was announced on 23 March 2005 by Prime Minister Paul Martin of Canada, PresidentGeorge Bush of the U.S. and President Fox of Mexico. The June 2005 Report to Leaders on SPPincluded over 300 hundred initiatives, a number of which are relevant to the Perimeter ClearanceStrategy. The SPP includes objectives such as expanding air transportation relations, streamlining

Gerry BrunoPresident & CEO

InterVISTAS Consulting Inc.

And

Executive Director,Perimeter Clearance Coalition


PERIMETER CLEARANCE:UPDATING THE STRATEGY –CON’Tborder facilitation for low-risk traffic, and securing shared borders in North America from externalthreats by establishing comparable security standards for travellers and cargo. The PCC can play animportant role in this tri-national effort by ensuring that the key concepts of the Perimeter ClearanceStrategy are integrated in the implementation of SPP initiatives.

Strategy UpdateIt has been almost five years since the originalconcepts and strategy for Perimeter Clearancewere developed by the PCC. While significantprogress has been made by the U.S. andCanadian governments in implementing jointexpedited programs for low risk trade andtravel, there is still much work to be done torealise the full potential for a more seamlessand secure border regime. The challenge is toconvert the large volume of unknown-risk tradeand travel to known and low-risk, to implementa practical Western Hemisphere TravelInitiative that minimises damage to the tourismindustries of both countries, and to takeadvantage of opportunities under the Securityand Prosperity Partnership to improve borderand security processes.

In light of these developments, the Coalition sees a need to update the Perimeter Clearance Strategynot only to deal with these current challenges and opportunities but also to ensure continued evolutionof the vision for achieving Perimeter Clearance for Canada and the U.S. over the next five to tenyears. The current plan is to develop new border clearance and security process maps for peopleand goods over the next two months and publish an updated Perimeter Clearance Strategy by theSpring of 2006.

For further information and updates, contact the PCC at http://perimeterclearance.org/. To join thePCC, contact Gerry Bruno at 604-717-1800.


OTTAWA REPORT7 November 2005

Government of Canada Announces Pacific GatewayStrategyOn 20 October, Transportation Minister Jean-C. Lapierre introduced in theHouse of Commons the proposed Pacific Gateway Act. The Act outlinesnational interest in development of the Pacific Gateway, establishing principlesfor federal government action, and commits the Government to a clearstrategy. The Government of Canada has since released details on thePacific Gateway Strategy, which includes investments in transportationinfrastructure, improvements in border services and security, and stronger tieswith the Asia-Pacific region. The strategy includes up to CDN$590 million in specific measures,including CDN$190 million in immediate investments. The initial CDN$190 million investmentincludes CDN$125 million in transportation infrastructure, CDN$20 million over two years to theCanada Border Services Agency to accommodate increased passenger and container volumes,CDN$10 million over five years for measures led by the Standards Council of Canada to deepen linkswith the Asia-Pacific region, and CDN$35 million over five years to fund the secretariat for the PacificGateway Council and supporting federal departments. The strategy is intended to strengthenCanada’s position in international trade, recognising the growing importance of the Asia-Pacificregion, and in particular, the rise of China, and building on British Columbia’s location advantage inthe Asia-Pacific-North America trade corridor.

Canada Completes New Bilateral Agreement with GreeceCanada signed a new, although restrictive bilateral agreement with Greece which allows each countryto designate two carriers and allows up to eight flights per week in total by Canadian carriers. Thenew agreement improves the opportunity for Air Transat's services and increases Air Canada's codeshare capacity via Frankfurt.

Lapierre Announces Appointment to Transportation Appeal TribunalOn 25 October, Transport Minister Jean-C Lapierre announced the appointment of Evariste Cormierof Moncton to the Transportation Appeal Tribunal of Canada. Mr. Cormier brings extensiveexperience in the rail sector to the Tribunal, having served 37 years with the Canadian NationalRailway, including eight years as supervisor of the Moncton Main Car Shop.

Rail Rate Final Offer Arbitration Challenged Under the CharterThe Canada Transportation Act has a provision for shippers to apply to the Canadian TransportationAgency for final offer arbitration (FOA) to settle rate disputes with rail carriers. On 5 October 2005,CN filed a challenge of the FOA provisions of the Act as being in contravention of the Canadian Bill ofRights. CN’s basis is that the Act does not provide criteria to be used by the arbitrator and that thearbitrator is not required to provide reasons for his/her decision. The appeal rose out of a coal ratedispute where an arbitrator ruled in favour of Western Canadian Coal Corporation and against CN.

NAV CANADA Announces Traffic for August 2005 and Fiscal Year 2005NAV CANADA announced its traffic figures for August 2005, as well as for the fiscal year 2005.Traffic for August was up 4.8% over August 2004, while overall traffic for fiscal year 2005 increasedby 5.0% over the last fiscal year. Traffic is measures in weighted charging units, a measure thatreflects the number of flights, aircraft size, and distance flown in Canadian airspace.

Sam BaroneRegional Vice President

Ottawa, ON


WASHINGTON REPORT4 November 2005

US$66 billion Transportation Bill Passedby SenateIn October, the U.S. Senate passed the FY 2006transportation bill, worth US$66 billion (CDN$78 billion).The discretionary spending bill includes US$14.3 billion forthe FAA, US$8.2 billion for Operations, and US$3.5 billionfor the Airport Improvement Program. The bill also includesa provision that extends protection to airline passengersholding tickets on bankrupt airlines for one year to 30 November 2006. In June, the DOT ruled thatpassengers holding tickets on bankrupt or insolvent airlines have a right to transportation on analternate carrier on a space-available basis.

U.S. DOT Proposal Would Facilitate Airlines in Raising MoneyThe Department of Transportation (DOT) put forth a proposal that would allow U.S. airlines moreopportunities to obtain financing from foreign investors without increasing the foreign ownershiplevels. Under the new proposal, international investors could have more say in the marketing, routeplanning and fleet structure aspects of airline operations, but actual control over safety and securitydecisions, and oversight of U.S. Department of Defense contracts will remain in U.S. hands. Therequirement for 75% ownership by U.S. citizens will not change, and the proposal would only apply toinvestors from countries with Open-Skies aviation agreements with the U.S.

FAA Completes Installation of West Coast Trans-Oceanic FlightManagement CenterInstallation has been completed on the Advanced Technologies and Oceanic Procedures (ATOP)system at Oakland Air Route Traffic Control Center (Oakland Center, CA), which will allow air trafficcontrollers to better manage flights across the Pacific Ocean. The ATOP system will efficiently allowcontrollers to manage flights electronically rather than relying on the labour-intensive manual methodof tracking trans-oceanic flights on paper strips which has been in use for decades. In June, the FAAbegan using ATOP for transatlantic flights, handled by York Center in Ronkonkoma, N.Y. Anothercenter is expected to open at Anchorage Center for transarctic flights in the spring of 2006. The FAAcurrently provides up to 80% of the world’s air traffic services for controlled trans-oceanic flights.

U.S. and Russia Expand Airspace AgreementThe U.S. and Russia have agreed to expand code-share-only points between the two countries asAeroflot prepares to join the SkyTeam Alliance. The agreement also strengthens the rights of U.S.airlines to fly over Russian airspace on flights to Asian countries, including trans-polar routes. For thefirst time, U.S. airlines will be able to transit Russian airspace on non-stop flights to India.

U.S. and China to Co-ordinate Aviation Safety RegulationsThe Federal Aviation Administration (FAA) and the General Administration of Civil Aviation of China(CAAC) signed a Bilateral Aviation Safety Agreement on 20 October 2005. The Agreement willreduce redundancy in safety oversight of both countries’ airlines and facilitate co-operation in aviationsafety. Airlines in both countries will see a reduction in regulatory burden as U.S. and Chinese safetyprograms are co-ordinated and streamlined.

Charles Chambers

Senior Vice PresidentInterVISTAS-ga2 Consulting Inc.

Washington, D.C.


INTERVISTAS NEWSNovember 2005

Nigel Brownlow joins InterVISTAS Consulting, Inc. as ExecutiveConsultantInterVISTAS Consulting Inc. is pleased to announce that Nigel Brownlow hasjoined the firm as Executive Consultant. Mr. Brownlow has 20 years of airlineexperience including financial control, fleet and network planning, market andschedule development, revenue management, and information systemsdevelopment. He has been instrumental in the design of advanced airlineand airport business models and revenue management systems.

Mr. Brownlow started his airline career in financial planning at Air Canadabefore becoming product manager and then manager new product development. He joinedAeronomics Incorporated where he worked as Senior Revenue Management Consultant. For the lasteight years, he has been President of Sherpa Decision Systems Incorporated, providing consultingand customised software development for the airline and aviation industry.

Yesawich, Pepperdine, Brown & Russell, InterVISTAS Consulting Inc.Combine to Uncover New Insights about Canadian Leisure TravellersCanadians seek new and unique travel experiences according to a comprehensive new studyanalysing the lifestyles, motivations and future vacation plans of Canadian leisure travellers. Morethan six in 10 of these travellers said it is extremely important to experience new things do to onvacation and to discover new and different destinations.

The 2005 Portrait of Canadian Leisure Travellers, a joint undertaking between Yesawich, Pepperdine,Brown and Russell (YPB&R), Orlando, FL., and InterVISTAS Consulting Inc., headquartered inVancouver, B.C., explores the travel habits, preferences and future trip intentions of Canadian leisuretravellers. The study’s results are based on a nationally projectable panel of 1,350 pre-qualifiedCanadian leisure travellers. For more information, please contact Paul Clark, InterVISTAS ConsultingInc., at 604-717-1837.

InterVISTAS Upcoming Speaking Engagements§ 23 February 2006: 9th Annual Hamburg Aviation Conference, Hamburg, Germany

Dr. Mike Tretheway, Executive Vice-President, InterVISTAS Consulting Inc., has been honouredby being selected to give the Martin Kunz Memorial Lecture.

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 thestreet. Thus some of the information is speculative and may not materialise.

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

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

Prepared by InterVISTAS Consulting Inc.

cair issue no. 35 - november 2005

Documents

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