CAIR Issue No. 75 - November 2009

CANADIAN AVIATION INTELLIGENCE REPORT

IN THIS ISSUE: CEO Update – page 1 Signs of Recovery from the US Market –

page 2 Improving Confidence in the International

Tourism Industry – page 4 The Environment Report – page 6 Principles Based Airport Governance – Are

You Ready for Changes? – page 14 The Caribbean Report – page 16 The Asia Report – page 17 The European Report – page 18 The Washington Report – page 19

NOVEMBER 2009

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

CEO UPDATE November 2009

Welcome to the November 2009 edition of InterVISTAS Consulting Inc.’s Canadian Aviation Intelligence Report (CAIR).

InterVISTAS Projects Update The InterVISTAS Group is pleased to provide an update on recent consulting assignments, in particular:

InterVISTAS Consulting to undertake study on Eliminating or Reducing the Need for Baggage Recheck for Arriving International Passengers for Transportation Research Board - Airport Cooperative Research Program

About the Transportation Research Board This study has been commissioned through the Airport Cooperative Research Program (ACRP) of the Transportation Research Board (TRB). The mission of the TRB is to promote innovation and progress in transportation through research. TRB facilitates the sharing of information on transportation practice and policy by researchers and practitioners; stimulates research and offers research management services that promote technical excellence; provides expert advice on transportation policy and programs; and disseminates research results broadly and encourages their implementation. ACRP carries out applied research on problems that are shared by airport operating agencies and are not being adequately addressed by existing federal research programs. Research and other technical activities are performed in a variety of airport subject areas including design, construction, maintenance, operations, safety, security, policy, planning, human resources, and administration.

About the Study The purpose of the study is to examine the potential to eliminate or reduce the need for baggage recheck for arriving international passengers. The connecting processes for international arrivals (including Precleared flights) for passengers and their baggage will be reviewed, documented and analyzed in detail. Alternative procedures will be developed and evaluated in the airport environment to determine the potential for improvement to operations and cost savings.

The objectives of this research are to: (1) identify potential alternative procedures that could be implemented to reduce or eliminate the need for the recheck of baggage for arriving international passengers connecting to subsequent flights at U.S. airports; (2) describe in detail the benefits and costs associated with these alternative procedures to airports, airlines, and federal agencies; and (3) compare and contrast potential alternative procedures with current practices.

Three airports have been selected by the ACRP oversight panel to perform a detailed study of the international connection process and to determine the feasibility of conducting alternative procedures at these airports. As a result, site visits to Dallas/Fort Worth International Airport, Hartsfield-Jackson Atlanta International Airport and San Francisco International Airport are being conducted by project team members in December and January.

Gerry Bruno CEO


CEO UPDATE – CON’T InterVISTAS and Transportation Research Board announce release of Passenger Air Service Development Techniques (ACRP Report 18) InterVISTAS Consulting and the Transportation Research Board (TRB) are pleased to announce the publication of Passenger Air Service Development Techniques (ACRP Report 18). The guidebook provides information on the air service development techniques, tools, and programs that smaller U.S. communities have used. The report is organized so that educated readers can focus on particular issues or topics, rather than needing to read it from cover to cover. It provides something of a benchmark for what other small communities’ airports are doing. It can be downloaded for free or purchased in hard copy through the following link: http://www.trb.org/Main/Blurbs/Passenger_Air_Service_Development_Techniques_162396.aspx.

InterVISTAS to prepare passenger and cargo forecasts for Bradley International Airport As part of a Masterplan update for the airport, InterVISTAS has been commissioned by STV Inc. to produce air traffic forecasts for New England’s second largest airport (after Boston Logan). The assignment includes long term forecast of annual passengers, aircraft movements and cargo volumes as well as peak hour and planning day schedules. The work will also incorporate risk analysis to determine the impact of economic, industry and external factors on traffic development at Bradley. The forecasts will be a critical input to the development of the airport masterplan.

InterVISTAS to undertake comprehensive route analysis for Chico Airport in California InterVISTAS has been commissioned by Chico Airport in California to undertake comprehensive route analysis for a proposed new domestic air service, and to prepare and present a compelling business case for the target airline. The assessment includes detailed forecasts of local and connecting market shares, load factors, flight revenues, codesharing implications and impact on competing carriers. In addition, InterVISTAS will undertake a cost/benefit analysis of potential holdroom expansion required to service a new airline.

The November CAIR Line-Up This month’s publication line-up includes columns on US outbound travel, international travel patterns and Principles Based Airport Governance. Our regular columns include:

▪ Caribbean Report ▪ Asia Report ▪ Europe Report

▪ Ottawa Report ▪ Washington Report

I hope you enjoy this month’s publication!


SIGNS OF RECOVERY FROM THE US OUTBOUND TRAVEL MARKET? 6 November 2009

Year to date, the tourism industry has been hit hard by the global economic recession. According to Statistics Canada, international travel to Canada has decreased by 8.4% in the period from January-July 2009, compared to the same time period last year. Likewise, data from the World Tourism Organisation (UNWTO) shows that international travel dropped 7% over the same period compared to 2008.

However, preliminary statistics from the Office of Travel & Tourism Industries (OTTI) in the U.S. suggests that outbound international air travel from the U.S. is showing signs of recovery. This column examines the results in more detail.

Total Monthly Outbound Travel from the U.S. According to statistics from OTTI, outbound international air travel from the U.S. reached 4.2 million passengers in the month of July 2009, a 1% increase over July 2008. Although the increase is small, it is significant in that this is the first monthly increase in 13 months.

Monthly Outbound Travel from the U.S. to Canada. Although total international outbound travel from the U.S. posted a small increase in the month of July 2009, U.S. air travel to Canada decreased by 4.6% during this time – which follows a continuing trend of declining U.S. travel to Canada, although the declining trend is becoming less negative.

Monthly Outbound Travel from the U.S. to Overseas Destinations. In contrast, U.S. outbound travel to international overseas destinations increased by 4.2%. U.S. travel to every major world region (e.g., Europe, Asia, South America, Middle East, and Africa) increased with the exception of travel to the Caribbean, which dropped by 1.4%. Meanwhile, U.S. travel to Mexico decreased by nearly 11% during July 2009 compared to July 2008.

Issues and Implications. The improvement in overall outbound travel from the U.S. is based on one month of data – not enough to be considered a trend yet. More data is needed to determine if this is indeed a sustained recovery. However, this is a positive sign, and a glimmer of hope in what has been a tough year for the tourism industry.

Eugene Chu Senior Project Manager

-15%

-10%

-5%

0%

5%

Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09

Source: Office of Travel & Tourism Industries (OTTI).

Monthly Change (%)

Total U.S. Outbound Air Travel

-15%

-10%

-5%

0%

5%



Monthly Change (%)

Total U.S. Outbound Air Travel

-15%

-10%

-5%

0%

5%


Overseas Canada


Monthly Change (%)

U.S. Outbound Air Travel to Canada and Overseas

-15%

-10%

-5%

0%

5%


Overseas Canada


Monthly Change (%)

U.S. Outbound Air Travel to Canada and Overseas


IMPROVING CONFIDENCE IN THE INTERNATIONAL TOURISM INDUSTRY 9 November 2009

So far, 2009 has been a difficult year for the international tourism industry. The long list of challenges include the global economic crisis and credit crunch, political unrest and natural disasters in many parts of the world, and the world-wide influenza pandemic (H1N1) - even as governments are still trying to lift the global economy out of the worst economic recession since the Second World War. However, despite these challenges, many in the tourism industry are starting to become more confident of prospects for the industry in the months ahead and the year to come.

Improving Industry Confidence. The World Tourism Organisation conducts a regular survey of tourism industry confidence level through its UNWTO Panel of Experts, which includes over 330 experts from more than 100 destination countries around the world. The latest results show that although industry confidence is still below the levels seen in 2005-2007, an improvement in confidence is apparent. In particular, the proportion of experts that believe industry prospects will get worse has decreased, while those expecting an improvement has increased.

Negative Growth Expected for Full-Year 2009. Although an improvement in tourism industry performance is expected in the last quarter of 2009, the full year results are expected to be negative due to the poor performance in the first eight months of the year. Specifically, the UNWTO expects full year 2009 results to show a 4-6% decline of international tourist arrivals compared to 2008.

Eugene Chu Senior Project Manager

12%

50%

28%

9%

1%5%

37%

30%

24%

4%

0%

10%

20%

30%

40%

50%

60%

Much Worse Worse Equal Better Much Better

Prospects May-Aug 2009 Prospects Sep-Dec 2009

Source: World Tourism Organisation (UNWTO).

UNWTO Panel to Tourism Experts – Confidence Survey

12%

50%

28%

9%

1%5%

37%

30%

24%

4%

0%

10%

20%

30%

40%

50%

60%

Much Worse Worse Equal Better Much Better

Prospects May-Aug 2009 Prospects Sep-Dec 2009


UNWTO Panel to Tourism Experts – Confidence Survey

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

F20

10F


International Tourist Arrivals - World

Year-Over-Year Change (%)

Tourism 2020 VisionAverage Growth Rate

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

F20

10F


International Tourist Arrivals - World

Year-Over-Year Change (%)

Tourism 2020 VisionAverage Growth Rate


IMPROVING CONFIDENCE IN THE INTERNATIONAL TOURISM INDUSTRY – CON’T

Modest Growth Expected for 2010. The UNWTO expects a modest recovery in the tourism industry in 2010, with international tourist arrivals expected to grow by 1-3% - albeit from a relatively low base in 2009. Asia is expected to show the strongest rebound, while the Americas and Europe is expected to take longer to recover. Africa is expected to continue its resilient growth, with an extra boost from the FIFA World Cup in South Africa in 2010. This forecast is dependent on the economic recovery, which the International Monetary Fund (IMF) expects to begin in 2010. Longer term, the UNWTO maintains its Tourism 2020 Vision forecast of an average of 4.1% growth per year from 1995 to 1.6 billion international tourist arrivals world-wide by 2020.

The Way Ahead. The international tourism industry has been faced with a series of challenges in 2009, and as a result will likely post negative growth for the year. However, after several quarters of negative growth and sentiment, an improvement in the UNWTO’s Panel of Experts confidence survey shows that many believe that worst may be behind us. If so, the tourism industry can be expected to experience modest growth in the months and years ahead.


Stanley Tse Senior Project Manager

THE ENVIRONMENT REPORT November 2009

NAV CANADA projects millions of tonnes of greenhouse gas savings and other environmental benefits NAV CANADA is the air navigation service provider for Canada that is responsible for 11.7 million aircraft movements over 18 million square kilometres of airspace. In reporting its Collaborative Initiatives for Emissions Reductions on 27 October 2009, NAV CANADA outlined improved efficiencies from new technologies and procedures that will save 8.4 million metric tonnes of aviation-related greenhouse gas emissions between 2009 and 2016.

As shown in the figure above, the estimated annual savings will range from $300 million to $441 million a year based on fuel savings. NAV CANADA credits its initiatives to improve radar coverage, improve surveillance to reduce separation distances between aircraft and improve efficiencies around terminals.

According to NAV CANADA Vice President of Operations, "The additional radar coverage improves traffic flow and provides better route and altitude assignments in the busy transition zone for aircraft en route to both Europe and Asia”.

NAV CANADA is not alone in pursuing improvements. Testing at Atlanta Hartsfield International Airport of continuous descent arrivals shows savings of 1,300 pounds of carbon dioxide equivalent for each and every flight, and levels of noise from 3 to 6 decibels lower within 25 miles of the airport. A comparable approach at Louisville Kentucky was reported by United Parcel Service to yield a 30% reduction in aircraft noise within 15 miles of the airport.


AIRLINE DATA – CANADA Traffic and Load Factors on Canada’s Major Air Carriers October 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 -1.3% -5.1% -0.5% -6.4% -0.6pts (to 79.6%)

+1.0pts (from 78.6%)

Domestic (Mainline) -1.8% -6.3% -1.9% -7.5% +0.1pts +1.1pts

International & Charter -1.0% -4.6% -0.2% -5.8% -1.0pts +1.0pts

WestJet +0.3% +9.8% -1.8% +10.8% +1.5pts (to 77.3%)

-0.8pts (from 78.1%)

Analysis: • Air Canada’s domestic traffic sector

declined 1.8% in October 2009 over October 2008. System-wide passenger traffic declined 1.3% in the same period. As a result, overall domestic load factor was down 0.6 pts to 79.6%.

• Air Canada Mainline’s international sector experienced declines in both traffic (-1.0%) and capacity (-4.6%) in October 2009 versus October 2008. Only Atlantic and Latin America traffic was up for the month while all other international regions were in decline. Traffic to both the Pacific and U.S. markets declined in excess of 7% for the month.

• WestJet reported a system-wide load factor of 77.3%, up 1.5 percentage points in the month of October. Passenger traffic was up marginally at 0.3% and available seat capacity was down 1.8%.

1 As of July 2009, Air Canada reports only consolidated results including Jazz.

-12%-10%-8%-6%-4%-2%0%2%4%

Sep-08

Oct Nov Dec Jan-09

Feb Mar Apr May Jun Jul Aug Sep Oct

Dom RPK Dom ASK

Air Canada Domestic Mainline Air Canada Domestic Mainline

-12%-10%-8%-6%-4%-2%0%2%4%

Sep-08

Oct Nov Dec Jan-09


Dom RPK Dom ASK

Air Canada Domestic Mainline Air Canada Domestic Mainline

-18%-16%-14%-12%-10%

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

Sep-08

Oct Nov Dec Jan-09


Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

-18%-16%-14%-12%-10%

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

Sep-08

Oct Nov Dec Jan-09


Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

-10%

-5%

0%

5%

10%

15%

20%

Sep-08

Oct Nov Dec Jan-09


RPK ASK

WestJetWestJet

-10%

-5%

0%

5%

10%

15%

20%

Sep-08

Oct Nov Dec Jan-09


RPK ASK

WestJetWestJet


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

Airline Traffic (RPMs – millions)

Capacity (ASMs – millions) Load Factor

2,017 ↑7.2%

2,496 ↑7.1%

80.8% ↑0.1 pts

680

↑6.0% 927

↑0.7% 73.3% ↑3.7 pts

6,325 ↑1.9%

7,987 ↓9.4%

79.2% ↑8.8 pts

1 7,256 ↑1.7%

8,798 ↓2.6%

82.5% ↑3.5 pts

2 9,677 ↓1.6%

11,643 ↓4.3%

83.1% ↑2.3 pts

10,239 ↓2.6%

12,328 ↓7.3%

83.1% ↑4.0 pts

15,300 ↓6.5%

18,181 ↓8.3%

84.2% ↑1.6 pts

2 4,668 ↓0.8%

5,651 ↓1.6%

82.6% ↑0.7 pts

1,505 ↑5.2%

1,901 ↑7.0%

79.2% ↓1.3 pts

Notes: 1. Mainline operations only. 2. Load factor includes scheduled service only. Sources: Carrier traffic reports.


AIRLINE DATA – INTERNATIONAL International Airlines Release October 2009 Traffic Figures

Airline Traffic (RPKs – millions)

Capacity (ASKs – millions) Load Factor

1 17,675 ↓4.1%

21,414 ↓5.6%

82.5% ↑1.3 pts

2 15,835 ↑17.3%

19,680 ↑14.9%

80.5% ↑1.7 pts

9,513 ↓1.9%

11,786 ↓6.4%

80.7% ↑3.7 pts

3 8,504 ↑2.7%

10,161 ↓2.0%

83.7% ↑3.9 pts

N/A N/A N/A

N/A N/A N/A

4 7,301 ↓2.0%

8,873 ↓10.1%

82.3% ↑6.8 pts

1. Includes Martinair. 2. Includes Lufthansa Passenger Airlines, SWISS from July 2009 onwards, British Midland from Sep 2009 onwards and Austrian Airlines. 3. Includes Qantas Domestic, QantasLink, Jetstar Domestic, Qantas International, Jetstar International, and Jetstar Asia. 4. Includes Cathay Pacific and Dragonair.

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

Page 10

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

John’s 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% -4.2% -1.7% -0.9% -1.0% -7.5% +1.1% -8.8% +10.5% +7.1% -0.1% February -5.9% -11.3% -7.0% -3.5% -3.2% -8.0% -3.5% -11.3% -2.8% -8.5% +6.5% +0.8% -5.9%

March -8.8% -11.3% -5.7% -7.7% -3.7% -4.1% -5.2% -14.3% -1.2% -5.5% -0.1% -5.1% -4.1% 1st Quarter -6.3% -10.7% -5.3% -5.2% -2.9% -4.4% -3.3% -11.5% -1.0% -7.6% +5.7% +0.9% -3.4%

April -6.7% -8.1% -6.4% -5.1% 1.5% -7.1% -3.2% -1.9% 0.1% -0.7% 11.8% 6.4% 3.3% May -11.9% -14.6% -10.4% -8.3% -8.5% -4.5% -8.1% -8.4% -3.4% -2.9% -2.0% -2.8% 2.0% June +12.3% -16.0% -7.8% -6.9% -9.9% -6.9% -8.3% -7.5% -4.1% 11.0% -1.9% 1.0% -4.4%

2nd Quarter -10.4% -13.1% -8.2% -6.8% -5.7% -6.2% -6.6% -5.9% -2.5% +2.4% +2.3% +1.4% +0.1% July -4.9% -11.7% -1.5% -2.5% -7.5% -5.5% -7.6% -3.0% -1.9% +2.0% +8.0% +1.2% +1.5%

2009

August -5.2% -9.6% -2.5% -2.4% -7.8% -4.9% -5.9% -3.7% -3.2% -1.2% n/a +5.9% +2.0% Source: Transport Canada and individual airports’ traffic reports. Note: Subject to revision.


NEWS AIR CANADA UPDATE Q3 NET INCOME REPORTED

Air Canada reported 2009

Q3 net income of $277 million. This compares favourably to a net loss of $132 million in 2008 Q3. Passenger revenues for the quarter were down 13% to $366 million compared to the same period in 2008, due to a decline in yield of 11%.

CALGARY-TOKYO NON-STOP SERVICE ANNOUNCED Air Canada will launch three times weekly non-stop air service between Calgary and Tokyo Narita International Airport. The air service will begin on March 27, 2010. The flight will be operated using a fully refurbished 211-seat B767-300ER.

REAL-TIME BLACKBERRY APPLICATION

On October 15, 2009, Air Canada released a free

BlackBerry application to provide passengers with real-time information including: • flight tracking information;

• notification of itinerary changes; and

• retrieving electronic boarding passes.

WESTJET UPDATE Q3 NET INCOME REPORTED

WestJet reported 2009 Q3 net income of $31.4

million. This is down 46% from 2008 Q3’s net income of $57.9 million. Passenger yield for the quarter was down 14% to 16.7 cents/RPM compared to 19.4 cents/RPM in 2008 Q3.

NEW SEASONAL SERVICES Between March 5 – April 30, 2010, WestJet will offer once weekly (Friday) service between Edmonton – Maui. Between March 6 – May 1, 2010, WestJet will offer once weekly (Saturday) service between Calgary – Maui. Between March 7 – April 25, 2010, WestJet will off once weekly (Sunday) service between Calgary – Honolulu. Between October 22 – January 1, 2010, WestJet will offer four times weekly service between Toronto – Atlantic City. Between January and April 2010, the service will be increased to once per day.

Between October 21 – December 19, 2009, WestJet will operate five times weekly air service between Toronto – Miami.

Between November 4 – May 1, 2010, WestJet will operate three times weekly air service between Toronto – Providenciales, Turks and Caicos.

Between November 3 – May 1, 2010, WestJet will operate twice weekly air service between Calgary – Ixtapa/Zihuatanejo, Mexico.

Between November 2 – April 30, 2010, WestJet will operate twice weekly air service between Toronto – Freeport, Bahamas.

Between November 1 – April 29, 2010, WestJet will operate three times weekly air service between Toronto – St. Maarten.

Between November 1 – April 29, 2010, WestJet will operate three times weekly air service between Toronto – Varedero, Cuba.

Between November 4 – May 1, 2010, WestJet will operate twice weekly air service between Toronto – Cayo Coco, Cuba.


NEWSWESTJET UPDATE – CON’T NEW SEASONAL SERVICES – CON’T Between November 6 – April 30, 2010, WestJet will operate once weekly air service between Toronto – Holguin, Cuba.

GREGG SARETSKY APPOINTMENT As of October 7, 2009, Gregg Saretsky is WestJet’s Executive Vice President, Operations. Mr. Saretsky initially joined the airline in June

2009 as Vice President of WestJet Vacations.

U.S. AIRLINES SOUTHWEST POSTS ANOTHER LOSS For the fourth time in the last five quarters, Southwest Airlines posted a deficit. During the third quarter of 2009, the airline reported a net loss of US$16 million.

DELTA AND ATLANTA LEASE DEAL REACHED

Subject to City and Board of Director approval, Delta Airways will extend its

lease with Hartsfield-Jackson International Airport until 2017. The City of Atlanta has stated that the new lease paves the way for completion of the airport’s new $1.3 billion terminal.

REPUBLIC AQUIRES AIRCRAFT FROM US AIRWAYS Republic Airways Holdings is acquiring 10 Embraer 190AR aircraft from US Airways. The additional aircraft will replace existing Boeing 717 aircraft and are expected to enter service in November and December 2009. The additional aircraft will give Republic Airways Holdings’ the largest fleet of EJets in the world, at 145.

INTERNATIONAL AIRLINES EMIRATES FINANCES $413.7 MILLION FOR NEW FLEET

In its first U.S. bond offering, Emirates has secured a $413.7 million loan for the purchase of

three 777-300ERs. The loan is guaranteed by the Export Import Bank of the United States. The secured notes are due on August 21, 2021 and are payable in quarterly instalments.

CARGO NEW VIETNAMESE ALL-CARGO CARRIER

Vietnam’s first all cargo carrier will begin flying in March 2010. Trai Trien Air Cargo will focus its

operations in Southeast and Northeast Asia. The company begins its operations with US$28 million in registered capital.

SRILANKAN CARGO TAKES OVER NEW TERMINAL

SriLankan Cargo has moved into Bengaluru International

Airport’s new cargo terminal. The company is planning to launch its export operations from their new location in January 2010. The terminal move is expected to double current handling capacity.

A330-200F BEGINS TEST FLIGHTS Airbus’s A330-200F will now begin 180 hours of flight testing to achieve certification. The first delivery is expected in summer 2010 to Etihad Crystal Cargo. Airbus has 67 firm orders from 9 customers for the new freighter aircraft.


NEWSCARGO – CON’T FAA RULES AGAINST BURBANK AIRPORT’S NIGHT TIME CURFEW The FAA has ruled against Burbank Airport’s proposed 22h00 to 06h59 curfew. Both TIACA (The International Air Cargo Association) and NBAA (National Business Aviation Association) support the FAA’s ruling. TIACA says that only all-cargo carriers fly during those hours and such a curfew would be discriminatory. The NBAA applauded the FAA’s decision saying that “access to the national network of community airports is the cornerstone of the mobility and efficiency that are the heart of business aviation”.

OTHER TORONTO PEARSON CUTS FEES For the third straight year, Toronto Pearson International is cutting airline fees. Effective January 1, 2010, landing fees and terminal charges will be reduced by 10%. The fee reductions are projected to save airlines that use Toronto Pearson an estimated $58.4 million per year.

PORTER AIRLINES ADDS ROUTES As of October 5, 2009, Porter Airlines has

added several new routes and services, including:

• Four daily roundtrip flights between St. John’s- Halifax;

• Four daily roundtrip flights between St. John’s- Ottawa;

• Three daily roundtrip flights between St. John’s- Toronto;

• Five daily roundtrip flights between Halifax-Ottawa; and

• Four daily roundtrip flights between Halifax- Toronto.

All flights are operated on Bombardier Q400 aircraft.

U.S. HOUSE PASSES PILOT BILL The U.S. House of Representatives passed the Airline Safety and Pilot Training Act 2009 on October 16, 2009. The legislation requires that all pilots hold an FAA Air Transport Pilot Licence, which will raise the minimum flying time for first time pilots from 250 to 1,500 hours.

2016 OLYMPICS DRIVE UPGRADES TO RIO’S AIRPORT After Rio won the bid to host the 2016 Summer Olympics, Infraero (state-owned operator of Brazilian airports) announced that it will invest $660 million into Rio de Janeiro’s International Airport. Projects will include terminal renovations, upgrading runways and expanded parking.

GLOBAL AIRLINE CAPACITY UP OAG has reported that global airline capacity for October 2009 increased by

1.0% over the same month last year. The world’s airlines combined for a total of nearly 300 million seats during October 2009.

ABU DHABI AND O’HARE TO BECOME SISTER AIRPORTS Chicago O’Hare and Abu Dhabi airports signed a Memorandum of Understanding to designate them ‘sister airports’. The MOU will facilitate the sharing of technical, environmental and commercial best practices. Abu Dhabi handled 9.0 million passengers in 2008 (up from 6.9 in 2007) while O’Hare handled 69 million travellers.

HEATHROW TO PROVIDE DEDICATED TERMINALS

As part of a major

reorganisation aimed at capitalizing on future growth, London Heathrow will provide airlines with a dedicated terminal. Terminal 2 (slatted to open in 2013) will serve Star Alliance airlines, while terminals 3 and 4 will serve One World and Sky Team carriers.


Chilwin Cheng Associate Consultant

PRINCIPLES-BASED AIRPORT GOVERNANCE – ARE YOU READY FOR CHANGES? November 2009

Chilwin Cheng is an associate of InterVISTAS and specializes in board governance, governance design, and effectiveness.

Canadian airport operators should monitor closely the proposed changes to the regulation of Canadian public company governance known as “National Policy 58-201” (NP 58-201) as many airport authorities have either adopted NP 58-201 as their governance standard, referred to the policy directly, incorporated it in part, or adopted its language.

In the United States, the Sarbanes-Oxley Act ushered in sweeping changes to corporate governance in response to major scandals (e.g. Enron, Arthur Andersen, etc.) The Canadian response to corporate governance reform was through the National Policy 58-201, developed by the Canadian Securities Administrators (CSA) in 2004. While some airports have implemented the 2004 version of 58-201, the time has come for this policy to change. In late 2008, the Canadian Securities Administrators released major proposed changes based on a philosophy they define as “principles-based regulation” (PBR). With PBR, regulators, rather than dictating specific operational rules, describe broad principles and behaviours that they expect the organizations that they regulate to achieve.

Just recently, the CSA announced that they would postpone implementation of these new proposals. However, securities regulators, and most notably the office planning the proposed national securities regulators, state explicitly a preference for PBR. Though the CSA has delayed implementation of these proposals, we believe that the regulation of public issuers will eventually move towards this philosophy.

What does this philosophy mean in practice? It does not mean a radical shift in governance practice. Such changes will be subtle – but with profound effect. For example, a traditional approach to governance regulation may require that a company’s Chief Executive Officer must not also serve as Chair of the Board. A PBR approach to this issue could require broadly that the corporation’s executive function (the CEO) must not unduly interfere with its legislative function (the board as representative of the shareholders and their interests). Under a PBR regime, the regulators delegate the design of organizations, processes and systems to the organizations themselves to ensure design their means of complying with the broad requirements in a way that makes sense for that organization. For example, companies could allow the CEO to serve as Board President, but appoint a lead director. In smaller companies, the company could fuse the two roles, but prevent the CEO from sitting on a board selection committee. And some companies, many larger ones for example, may choose to keep the roles entirely separate.

The impact of the revised policy will be modest; but, it will allow airport authorities an opportunity to reconsider their governance practice. We believe that NP 58-201 can have a positive impact on Canadian airport governance practice in one significant way. Under a PBR regime, airport authority boards must, much more explicitly than they have in the past, define high-level quality standards for their airport, specifically defining their standards to manage risk and resources and to develop strategic intent.


PRINCIPLES-BASED AIRPORT GOVERNANCE – ARE YOU READY FOR CHANGES? – CON’T

Currently at InterVISTAS, for example, we see many airport authority boards who state, quite simply, that management must “manage finances prudently” or “avoid material risks to the organization”, or some variation on that phrase. However, this phrase, or its equivalent, provides little guidance to management: Just what does “prudently” mean? And what does “material risk” mean to an organization? It is not good enough for boards to simply defer to internal or external experts to define such standards. Boards, as the notional owners of the organizations, must make clear decisions on these issues and communicate them to management. This means, following the previous examples, that boards may wish to define the specific average quick or current ratios as a function of the liquidity they are prepared to have the airport authority accept. Or they can establish revenue diversification targets to ensure that no one customer revenue dominates others unduly. No matter which measurements they pick, setting these specific parameters engages the board to discuss risk tolerances and performance expectations more explicitly and provides clearer objective guidance to management about stakeholder intentions.

Specifically, we recommend Canadian airport operators undertake the following actions:

• Consider the extent to which you reference NP 58-201 directly or indirectly in your board governance manuals and procedures. The amendments may require consequential changes to your materials, even if they are only formal citation changes.

• Discuss the extent to which the board has established standards of quality for the organization and, if they exist, whether such standards are appropriate.

• Where those quality standards are not defined, the board may wish to define those standards in areas such as safety, financial risk, operational effectiveness, growth, customer service, board governance and resource management.

Managing regulatory change is always difficult. However, when managed properly, such change represents excellent opportunities for airport authorities to re-evaluate their industry position, internal efficiency, external effectiveness, and organizational governance. Changes to NP 58-201 represent an opportunity to review improvements to all these areas.


Jacqueline Clarke Director,

Strategic & Tourism Development

THE CARIBBEAN REPORT November 2009

New air service for the region Regional Jet Express will introduce daily jet service to five Caribbean destinations commencing in November 2009. The carrier will operate Dornier 328 32-seater jets between Dominica, Puerto Rico, Santo Domingo, St. Croix and St. Thomas and Tortola. Service will be expanded to Cuba and Haiti using non-U.S. registered aircraft. The Wyoming-based Regional Jet Express will open a satellite office in St. Croix.

LIAT plans fleet upgrades Caribbean regional air carrier, LIAT, announced plans to replace its three 37-seater Dash-8 100s with newer 50-seater aircraft. The airline’s shareholder governments, Antigua and Barbuda, Barbados and St Vincent and the Grenadines, are considering an offer from a Chinese manufacturer to supply the required aircraft at “commercially favorable rates”. The government shareholders will also consider aircraft options from Embraer and Bombardier and are exploring funding options for the estimated US$54 million price tag.

Barbados upgrades airport security A recently-signed joint venture between the Inter-American Development Bank and the Barbados Government valued at over US$1.5 million launched the ‘Strengthening of Airport Security Project' at the Grantley Adams International Airport. Under the program, training modules will be offered to 225 participants from Government departments, including Customs, Immigration, Postal Service and the Royal Barbados Police Force, as well as private security agencies. The modules will cover cargo, aviation and check-point security; hostage negotiation; emergency response and bomb disposal. Assistance will also be provided to update the island's security manual.

Caribbean Airlines announces new CEO Captain Ian Brunton will replace Philip Saunders as Caribbean Airlines’ Chief Executive Officer, effective 15 October 2009. Captain Brunton served in the British Royal Air Force and has held senior positions within Trinidad’s national aviation system. He has been the Executive Vice-President and Chief Operating Officer of Caribbean Airlines since the airline's inception in January 2007. He also is a former Board Director of BWIA and a former Chairman of the Trinidad and Tobago Airline Pilots’ Association.

Airlift enhancements British Airways will increase service to Barbados to 10 weekly flights from London, Gatwick effective October 28, 2009. Sunwing Airlines will commence operations to Grenada with twice weekly seasonal services commencing 23 November 2009. Under a new code share agreement with Insel Air, US Airways will offer passengers daily service from Miami to Curacao. American Airlines will reintroduce Washington-San Juan service effective 19 November 2009.

Air Jamaica enters repayment plan for return of aircraft Air Jamaica began repaying a US$38.3-million loan under a five-year agreement with U.S. based International Lease Finance Corporation (ILFC) for the return of six aircraft to its fleet. The airline returned the planes in February when eight routes were cut as part of its restructuring efforts.


Doris Mak Director,

Special Projects

THE ASIA REPORT November 2009

JAL troubles continue The Japanese Government has indicated that it will step in to prevent JAL from collapsing. On October 20, 2009, Japan’s Finance and Transport Ministers met to discuss a potential bailout package for the struggling airline. JAL is approximately US$10 billion in debt and has been unprofitable in four of the past six years.

The meeting – and acceleration of bailout discussions – came in response to the rejection of JAL’s initial restructuring plan. JAL has been undergoing restructuring since June 2009 when it received a US$1 billion government-backed loan. The proposed restructuring plan asked creditors for a combined US$3.3 billion in debt forgiveness and debt-for-equity swaps. It also included cutting 14% of its workforce and nearly 50 routes (primarily international). A revised restructuring plan, under supervision of a government appointed task force, is expected imminently.

On November 25, 2009, the airline inked a deal with state-owned Development Bank of Japan to receive a pool of US$1.1 billion in emergency bridge loans to prevent the airline from grounding flights.

Proposed changes at Tokyo Haneda Airport Seiji Maehara, Japan’s Transport Minister, has indicated that his government is considering turning Haneda Airport into a hub for international traffic. Currently, Haneda only handles domestic traffic. The Minister hopes to transform the airport into a 24 hour operation so that it can compete with South Korea’s Incheon Airport (from which many regional passengers currently fly out of for international travel). Haneda’s airport has expanded quickly, with its fourth runway set to be operational by October 2010.

Shanghai and Hong Kong Airport Authorities collaborate The Shanghai and Hong King Airport Authorities have agreed to establish a joint-venture company. The Shanghai Hong Kong Airport Management Co Ltd. will institutionalize the principles found in the LOI agreement (2003) which promotes collaboration on training, development and business initiatives.

Chinese airlines post $896.7 million in profit During the first nine months of 2009, Chinese airlines posted a collective net income of US$896.7 million. This marks an impressive improvement from last year’s nearly US$800 million deficit. Airline representatives credit the reduction in fuel costs and economic recovery for the financial turnaround.


Ian Kincaid Director,

Economic Analysis UK Office

THE EUROPEAN REPORT November 2009

Phase 2 of Open Skies talks between the U.S.-EU The fourth round of U.S. - EU Open Skies discussions concluded with an agreement to speed up negotiations. Negotiators agreed on setting a November 2010 deadline to reach an Open Skies agreement. Failure to do so will enable either party from withdrawing the air rights agreed upon during the first phase of negotiations. The first phase agreement allows for any U.S. airline to fly between any EU destination and vice versa.

Brussels will host another round of discussions in November 2009, during which time negotiators are expected to focus on cabotage, foreign ownership and environmental issues. Foreign ownership negotiations have been challenging, as the EU is committed to liberalized requirements, while the U.S. currently caps foreign ownership at 25%.

EU and Georgia negotiate for a common aviation agreement In October, the EU and Georgia held negotiations for a Common Aviation Area (CAA) agreement. The discussions coincided with the EU's strategy to expand its Common Aviation Area to include non-EU nations. Similar CAA agreements have been signed with western Balkan countries and Morocco. The EU is holding simultaneous negotiations with the Ukraine, Jordan and Israel. If negotiated, an EU-Georgia CAA agreement would require Georgia to harmonize its aviation laws with those of the EU. Aviation security recommendation to remove ban on liquids Antonio Tajani, Vice President of Transportation for the European Commission (EC), publicly announced that the EU is seeking to remove the ban on air passengers carrying liquids and gels. Mr. Tajani stated that the EC is considering a requirement for all major EU airports to install specialized screening equipment that can detect explosives within liquids and gels by 2012. His hopes are that the current restrictions can be phased out by 2014.

Irish airlines want tourism tax eliminated The executives of Ireland’s three largest airlines, Aer Lingus, Cityjet and Ryanair are lobbying government to eliminate the country’s €10 tourism tax. The airlines are citing significant declines in tourism since the tax was introduced and further note that Belgian and Dutch governments have abolished their tax as a means to stimulate tourism.


Steve Martin Senior Vice President

Washington D.C. Office

THE WASHINGTON REPORT November 2009

Odds of Congress Passing FAA Bill Improving The Congress provided FAA with a three-month extension for its program and funding authority in late September. This gives FAA the legal authority to operate until the end of December. It is the seventh such extension since the last full authorization expired in 2007.

Senate insiders now believe there is a good chance that the full Senate will take up the bill during the fall, particularly since the key committees have approved legislation for health care reform (which must still be debated on the Senate floor). The Senate Committee on Commerce, Science, and Transportation had already handled its part of the bill; progressing the legislation depends now on action from the Senate Finance Committee, which holds authority over all tax issues – including the passenger ticket tax, which provides the bulk of FAA’s funding.

Before any legislation could be forwarded to the President to be signed into law, differences between the House and Senate versions would still need to be reconciled during conference. Those differences are not insignificant – the House bill extends the existing tax and fee system, but the Senate version replaces those taxes with user charges to fund air traffic control operations and modernization. The Senate would need to pass its bill in early November to leave enough time for conference action. Senate leadership has indicated that the FAA bill would need relatively little time for debate, so it could be fit into the schedule if health care reform and other appropriations activities allow.

FAA Extends Limits on New York-Area Airports FAA extended its peak-hour flight limitations at New York Kennedy, LaGuardia and Newark airports for another two years, until October 29, 2011. The agency had originally proposed a one-year extension. Carriers complained that that would make long-term planning difficult, so FAA opted instead for a two-year program.

In another action related to operations at New York JFK, FAA announced that it was temporarily waiving minimum slot usage requirements, citing runway and airfield construction that will require airlines to reduce their schedules to avoid excessive delays. The airport is resurfacing the runway with long-lasting concrete and widening it to accommodate larger aircraft, and also installing new lighting and electrical infrastructure. The waiver of the use-it-or-lose-it rule will run from March 1 to November 14, 2010.

FAA Proposes $9 Million Penalties against US Airways, United FAA announced that it was levying $9.2 million in civil penalties against US Airways and United for operating eight aircraft that were not in compliance with airworthiness directives and for violating its maintenance procedures. FAA announced that US Airways was not in compliance with airworthiness directives (e.g., operating an Embraer 190 aircraft on 19 flights although it had not undergone inspections to prevent inflight opening of a cargo door) and violating its own maintenance requirements (e.g., engine checks). FAA proposed a $3.8 civil penalty against United for making more than 200 flights with a 737 after the carrier violated its own engine maintenance procedures.


THE WASHINGTON REPORT – CON’T Pressure Turning Up on AA/BA Antitrust Immunity Proposal After the US and EU reached agreement on Open Skies in 2008, American Airlines and British Airways launched their third attempt to gain antitrust immunity from regulators on both sides of the Atlantic. Iberia is also included in this proposal. Neither U.S. nor EU regulators have announced their decisions, but pressure is building for resolution. DOT faces a deadline of October 31 to complete its review.

In the EU, the European Commission sent a formal Statement of Objections regarding their planned trilateral antitrust-immunized alliance, noting that the agreement may violate European rules on restrictive business practices. In the U.S., senior members of the Senate Committee on the Judiciary wrote to the Dept of Transportation that it should “pay substantial heed” to recommendations from the Dept of Justice’s Antitrust Division. Clearly unhappy at how DOT appeared to give insufficient consideration to DOJ’s recommendations when reviewing the recent Star Alliance application, the senators said DOT should not act on the oneworld ATI application until DOJ has had an opportunity to assess its effects. “DOT should only grant antitrust immunity sparingly and only upon determination that [it] will not harm competition,” they wrote, adding that the oneworld proposal “raises significant competition issues,” and that DOT should “act cautiously”.

In a speech before the International Aviation Club in Washington D.C., British Airways CEO Willie Walsh said that he expects the decision to be made on time, and that it will be favorable to BA, American, and Iberia. Previous U.S. holdings on AA/BA objected, in large part because London’s Heathrow Airport was closed to new U.S. carrier entry – a situation that the Open Skies agreement resolved.


INTERVISTAS NEWS InterVISTAS Upcoming and Recent Speaking Engagements Steve Martin, Senior Vice President • Transportation Research Board Annual Research Conference: Washington,

D.C. – 11 January 2010. Mr. Martin will be moderating a panel of speakers.

Dr. Mike Tretheway, President and Chief Operating Officer • Canadian Aviation Maintenance Council: Halifax, NS – 22 October 2009.

Dr. Tretheway was a keynote speaker and delivered a presentation entitled “Economic Outlook”.

• IATA, Agenda for Freedom, 2nd Summit: Montreal – 15 November 2009. Dr. Tretheway delivered a presentation on the liberalization of air transport.

Barney Parrella, Executive Vice-President • America/Caribbean Annual Conference: Salvador de Bahia, Brazil,

17 November 2009. Mr. Parrella gave a presentation entitled “Airport Privatization in Latin America”.

George Novak, Director, Safety, Borders and Security • AVSEC World 2009 IATA/ACI Aviation Security Conference: Cape Town, South

Africa – 10-12 November 2009. Mr. Novak was a panel member during the plenary session #2 discussing “How to Set up a One-Stop Security System: Methodology and Best Practices”.

John Weatherill, Vice-President, Route Development • 4th Annual Airport Marketing & Business Development Conference: Munich,

Germany – 15/16 October, 2009. Mr. Weatherill gave a presentation entitled “Airport Revenue Recovery: Action Plan for Generating Revenue and Funding Marketing in a Difficult Economy”.

Rob Beynon, Vice-President, Development Economics • NCDC: Prince George- 7 October 2009.

Mr. Beynon delivered the presentation “Identifying Economic Opportunities along Transport Corridors”.

Recent Appointments Dr. Michael Tretheway Appointed to Minister’s Roundtable

The Honourable Diane Ablonczy, Canada’s Minister of State for Small Business and Trade, has invited Dr. Michael Tretheway to join a roundtable on tourism strategy.


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.

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INTERVISTAS NEWS – CON’T New Executive Consultants at InterVISTAS Paul Vallee

With over 20 years destination management experience, Mr. Vallee specializes in developing and negotiating long-term strategic plans with private and public sector stakeholders. His specialty is in performance measurement and benchmarking, digital marketing, membership marketing and visitor services. He is a part-time instructor in international destination marketing, tourism policy and planning at Capilano University. Mr. Vallee holds an MBA from the University of Waterloo. Paul is currently working with InterVISTAS on the Puerto Rico Tourism Company Strategic Plan.

Lorraine Headley Ms. Headley is a tourism economist with over 18 years experience in tourism and destination development. The former Director General of Tourism Antigua and Barbuda was instrumental in rebranding the destination and establishing a new Tourism Authority. Ms. Headley has a degree in Mathematics and Economics from Cambridge University and an MBA from the University of the West Indies. Lorraine is assisting InterVISTAS with business development in the Caribbean.

Chilwin Cheng Mr. Cheng advises businesses in heavily regulated industries and helps them to transform compliance and governance challenges into business opportunities. As a lawyer, he structures for-profit, non-profit, and quasi-governmental organizations, advises on re-organizations and designs corporate compliance systems. The former Chief Counsel and General Manager of Canada’s stock exchange regulator helps clients to solve their most complex governance and compliance issues. Chilwin is working with InterVISTAS on a corporate governance review for the Regina Airport Authority.

Paul Fitzgerald Mr. Fitzgerald is an expert in government relations and has worked on transportation files from a business, legal and public policy perspective for roughly 20 years. He has been instrumental in modernizing Canada’s international air policy and in securing Open Skies agreements with various countries including the European Union. He has played a key role in updating the Canada Transportation Act and the Canada Marine Act as well as federal regulations affecting automobile imports.

CAIR Issue No. 75 - November 2009

Documents

Transcript of CAIR Issue No. 75 - November 2009