INTERVISTAS MARKET INTELLIGENCE REPORT
WEAK AIRLINE STOCK PERFORMANCE 9 March 2005
The stock performance of airlines over the past 12 months has been weak with the majority of airline stocks declining in value.
The Dow Transport Index The Dow Jones Industrial average recently hit a 3½ year high almost reaching 11,000, a level not seen since June 2001. The Dow Transport Index has also performed well during the past 12 months, increasing in value by 28%. Similarly, NASDAQ’s Transport Index has shown an increase in the value of transport companies, up 30% over the past 12 months. However, gains in these market indices are not indicative of individual company performance. A closer look at the components of the Dow Transport Index reveals that the airlines (Southwest, Continental, AMR, Northwest and Delta) make up less than 6% of the index. The top three Dow Transport weighted companies are FedEx, UPS and Union Pacific Corporation; these three companies make up 28% of the index. The growth of the index is mainly due to the strong performance of the more heavily weighted companies.
Doris Mak Senior Project Manager
Cargo Integrators The major U.S. integrators, Federal Express and UPS, have performed well financially compared to their passenger airline counterparts. The positive results from these two firms and their heavy weighting in the Dow Transport index are the main reason for the positive returns in the index.
Network Carriers Despite the positive results of the performance of the Dow and NASDAQ Transport indices, the airlines have continued to struggle financially over the past 12 months. In general, the network airlines still have difficulties with their operations and are impacted by external factors, such as continued high fuel prices. Only a few select network carriers have shown improvement in their stock price. For example, Air Canada exited CCAA protection on September 30, 2004 and the airline’s stock price has risen 30% over the past five months since its reorganisation. All of the major U.S. airlines have reported poor stock performances over the past year, with American and Delta’s stock prices each losing over 40% of their values. United Airlines has been under Chapter 11 bankruptcy protection since December 2002; however, it may emerge from protection later in 2005.
Low Cost Carriers
% Change in Stock Price 27 Feb 2004 - 28 Feb 2005 100% 80% 60% 40% 20% 0% -20%
Network Carriers
Page 1 March 2005
UPS
Delta
FedEx
American
Northwest
Continental
British Airways
Alaska
KLM/Air France
Air Canada
ATA
Hawaiian
AirTran
Low Cost Carriers
America West
JetBlue
WestJet
Frontier
Ryanair
-80% -100%
Southwest
-40% -60%
The stock performance of the low cost carriers has also faltered during the past year. Only Ryanair and Southwest posted positive gains in their stock price during this time period. ATA (whose stock price is down 89%) filed for Chapter 11 bankruptcy protection in October 2004. Other low cost carriers have suffered declining stock prices falling more than 30%, as is the case for WestJet (down 35%), AirTran (down 36%), and America West (down 55%). Of course the LCCs may have been overvalued in the past with the sharp price adjustment bringing them to more reasonable price-earnings ratios.
Integrators
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AIR CANADA’S BOOKING FARE CODES: A SUMMARY OF RECENT CHANGES Between 2001 and 2004, Air Canada implemented a number of changes to its basic fare structure. Booking codes are now grouped together based on varying degrees of restrictions and fare levels to present a “simplified” fare structure to the general public and travel agency community. In May 2003, Air Canada announced this new fare structure for the domestic market with six fare classes: Tango, Fun, Econo, Latitude, Freedom and Executive. In the first quarter of 2004, Air Canada expanded its simplified fare structure to transborder destinations. In October 2004, Air Canada eliminated the Econo class and now offers only five fare categories. At the same time, Air Canada also removed all Saturday night stayover requirements for discounted domestic and transborder tickets and has made all these fares available for one-way purchase.
Angelica Sparolin Research Manager
While the five fare categories presented to the customer provide a simplified user-interface, Air Canada’s more complex inventory management structure remains. Each of the simplified categories continues to be associated with a series of booking codes (e.g., Tango is associated with E, G, I, N, P, R and T booking codes). In fact, there are actually a greater number of active booking codes in 2004 than in 2001 (increase from 14 active codes to 20 active codes). Each booking code continues to be further differentiated into a series of fare bases and specific airfares (e.g., the G booking code in the Tango category is further differentiated into fare basis such as G7NRB, G7NRBW, etc.). The fare bases vary seasonally and are determined based on specific restrictions. While some of the individual booking codes appear to have seen some streamlining in the number of fare bases offered, others have actually seen an increase (e.g., the Y booking code for full economy fares has increased from typically one fare basis “Y1” to numerous fare basis such as YRB, YSTRB, etc.). Despite these internal complexities, the recent changes in booking code structure have provided consumers with a better understanding of Air Canada’s fares and restrictions. These changes, together with improvements to the fare displays on Air Canada’s website, are likely to help the carrier with its goal of increasing online carrier direct sales. Changes in Air Canada’s North American Booking Codes 2001 to Present 2001 (14 Fare Codes) Business: C, J Full Economy: Y Discount Economy: B, H, L, M, N, Q, V, X, Z Aeroplan Rewards: D, W
2001 to 2004 - New Brands & Simplified Fare Structure (20 Fare Codes) •Fares split between AC/Jazz, Tango and Zip, each with own fare codes •Tango operated October 2001 to September 2003 •Zip operated September 2002 to September 2004 •New simplified fare structure introduced in May 2003: Flash, Fun, Econo, Latitude & Freedom classes •“Tango” fare class added after Tango ceased operations as separate brand
October 2004 - Adjustments to Simplified Fare Structure (20 Fare Codes) Executive: C, J Freedom: Y Latitude: M, U Fun: A, B, H, L, Q, V Tango: E, G, I, N, P, R, T Aeroplan Rewards: D, W
Page 2 March 2005
Air Canada & Regionals
Air Canada & Jazz
Tango
Zip
Air Canada & Jazz
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AIRLINE DATA – CANADA TRAFFIC AND LOAD FACTORS ON CANADA’S MAJOR AIR CARRIERS FEBRUARY 2005 Passenger Traffic
Air Carrier
Revenue Passenger Kilometres
Capacity
Load Factor
Available Seat Kilometres
% Change over 2004
% Change from 2003
% Change over 2004
% Change from 2003
Change over 2004 +5.3 pts (to 77.9%)
Change from 2003
OTHER CARRIERS:
Air Canada 1
+1.6%
+9.5%
-5.2%
3.7%
LOAD FACTORS
Domestic (Mainline)
-2.0%
+6.3%
-6.6%
3.1%
+3.6 pts
+2.4 pts
Jazz
+14.3%
+13.4%
-4.7%
+0.5%
+11.9 pts (to 71.3%)
+8.1 pts
International & Charter
+3.1%
+10.7%
-4.7%
3.9%
+5.9 pts
+4.8 pts
WestJet
+39.9%
+101.6%
+29.3%
+80.2%
Jetsgo 2
N/A
N/A
N/A
N/A
CanJet: not reported
Analysis: • Air Canada recorded its 11th consecutive month of record load factor in February 2005. Although domestic traffic declined, capacity on domestic services continues to be reduced, resulting in the higher load factor. • In February 2005, Air Canada’s international traffic increased along with a reduction in seat capacity, resulting in an improved load factor. U.S. traffic and capacity declined by 5.6% and 14.3% respectively, while Asia Pacific traffic increased by 8.7%. • WestJet reported an improved load factor in February 2005 despite a capacity increase of 29.3%, traffic increased by about 40%.
+4.2 pts
+5.5 pts (to 72.9%) N/A
+7.8 pts N/A
Air Canada Domestic Mainline 20% 15% 10% 5% 0% -5% -10% -15%
Jazz data is not included in this graph
Feb- Mar April May Jun July Aug 04
Dom RPK
Sep
Oct
Nov
Dec Jan- Feb 05
Oct
Nov
Dec Jan- Feb 05
Oct
Nov
Dec Jan- Feb 05
Dom ASK
Air Canada International 40% 30% 20% 10% 0% -10% Feb- Mar April May Jun 04
July Aug
Int'l RPK
Sep
Int'l ASK
WestJet 50% 40% 30% 20% 10% 0% Feb- Mar April May Jun 04
July Aug Sep
RPK
1Air 2
ASK
Canada Mainline consists of all Air Canada with the exception of Jazz.
Jetsgo ceased operations on 11 March 2005. February 2005 data not published.
Page 3 March 2005
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AIRLINE DATA – U.S. U.S. Airlines Release February 2005 Traffic Figures Traffic Data – February 2005 Airline
1
2
2
Load Factor
Traffic (RPMs – millions)
(ASMs – millions )
72.2%
9,601
13,295
á3.3 pts
á2.4%
â2.3%
64.3%
527
820
á0.4pts
á21.4%
á20.7%
58.4%
525
899
â7.8 pts
â44.7%
â37.3%
74.4%
4,740
6,369
á4.2 pts
á5.1%
â1.0%
71.0%
8,180
11,522
á2.4pts
á9.7%
á5.9%
83.3%
1,345
1,615
á5.4pts
á27.8%
á19.6%
77.6%
5,498
7,088
á3.1pts
á6.6%
á2.4%
63.3%
3,997
6,310
á1.1 pts
á9.2%
á7.3%
74.8%
7,896
10,551
á1.6 pts
â1.8%
â4.0%
69.7%
2,931
4,208
á1.2 pts
á3.0%
á1.2%
Notes:
1. 2.
Sources:
Carrier traffic reports.
Page 4 March 2005
Capacity
Mainline Load factor includes scheduled service only
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Summary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian Airports
2004 2005
Calgary
Edmonton
Ottawa
Winnipeg
Halifax
Victoria
Kelowna
Saskatoon
Regina
+1.5%
MontréalTrudeau +10.0%
+3.9%
+7.7%
+3.5%
+6.4%
+3.2%
+12.4%
+5.9%
-2.2%
+8.3%
St. John’s +12.8%
+8.6%
+7.9%
+19.6%
+5.3%
+10.7%
+13.9%
+11.7%
+5.6%
+11.4%
+11.6%
+7.8%
+2.8%
+19.8%
March
+9.3%
+5.2%
+21.4%
+2.0%
+8.0%
+11.4%
+11.4%
+9.0%
+8.2%
+2.6%
+10.8%
+3.9%
+21.3%
1st Quarter
+6.8%
+4.8%
+17.1%
+3.7%
+8.8%
+9.7%
+9.9%
+6.1%
+10.5%
+ 6.5%
+5.3%
+5.0%
+18.0%
April
+30.6%
+20.5%
+31.7%
+11.5%
+8.6%
+20.8%
+11.2%
+16.9%
+12.7%
-0.3%
+10.9%
+2.6%
+20.1%
May
+30.8%
+20.4%
+26.3%
+5.5%
+7.5%
+7.6%
+9.0%
+19.4%
+8.0%
-1.3%
-0.3%
-5.5%
+15.2%
June
+18.5%
+16.1%
+18.1%
+8.0%
+2.8%
+12.1%
+9.2%
+7.8%
+8.6%
+3.0%
+1.7%
-4.3%
+15.9%
2nd Quarter
+26.2%
+18.8%
+24.9%
+8.3%
+6.2%
+13.2%
+9.7%
+14.5%
+9.7%
+0.5%
+3.8%
-2.5%
+16.9%
July
+17.1%
+10.4%
+18.7%
+5.0%
+0.8%
+5.7%
+8.6%
+10.5%
+4.7%
-0.5%
+5.5%
+1.4%
+10.6%
August
+16.0%
+4.9%
+18.1%
+1.9%
+2.2%
+6.2%
+7.4%
+6.9%
-2.0%
-5.9%
+5.4%
+1.5%
+10.1%
September
+16.1%
+11.5%
+13.2%
+13.0%
+6.3%
+7.9%
+8.8%
+8.6%
+8.3%
+12.1%
+5.3%
-0.6%
+13.4%
3rd Quarter
+16.4%
+8.7%
+16.7%
+6.2%
+2.9%
+6.6%
+8.2%
+8.6%
+3.3%
+1.1%
+5.4%
+0.8%
+11.2%
October
+14.3%
+7.0%
+10.7%
+10.7%
-4.0%
+11.9%
+1.1%
+3.7%
-1.4%
+9.1%
+7.9%
+1.9%
+18.2%
November
+13.3%
+6.2%
+17.6%
+9.6
+4.7%
+11.4%
+4.4%
+8.3%
+0.3
+5.1%
+8.0%
-11.1%
+9.9%
December
+14.2%
+6.8%
+20.9%
+8.9%
+8.4%
+11.0%
+5.1%
+8.0%
+2.1%
+3.9%
+8.1%
+3.6%
+6.8%
4th
+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%
Full Year
+15.7%
+9.6%
+18.6%
+7.0%
+5.1%
+10.2%
+7.7%
+9.1%
+5.7%
+3.6%
+5.6%
+0.3%
+14.0%
January
+15.0%
+9.8%
+14.4%
+13.2%
+9.6%
+12.9%
+13.6%
+6.6%
+4.7%
+12.4%
+17.7%
+9.7%
+11.9%
Toronto
Vancouver
January
+2.3%
February
Quarter
Source: Transport Canada and individual airports’ traffic reports. Page 5 March 2005
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NEWS ARTICLES CANADIAN AIRLINE NEWS ACE AVIATION HOLDINGS INC. REPORTS CDN$15 MILLION NET INCOME IN FOURTH QUARTER 2004 ACE Aviation Holdings Inc., the parent company of Air Canada, reported net income of CDN$15 million in the fourth quarter of 2004, compared to a net loss of CDN$768 million (which included CDN$560 million in reorganisation/restructuring items) in the same quarter last year. Transportation revenues increased by 5% as a result of higher traffic. Operating expense per ASM increased by 3% to CDN$0.15.
AIR CANADA TO BOOST JAZZ FLEET Beginning in May 2005, Air Canada will add 15 CRJ-705 aircraft to its Jazz fleet, for a total of 65 regional jets. Jazz services will increase starting in the summer of 2005, along with the replacement of some Dash-8 turboprop services with jet aircraft.
AIR CANADA REALIGNS JAZZ NETWORK Effective 3 May 2005, Charlottetown, Fredericton, Saint John, Moncton, Quebec City and Thunder Bay will be served exclusively by Jazz. From 1 October 2005, Regina, Saskatoon and Whitehorse will be served only by Jazz.
AIR CANADA JAZZ TO LAUNCH QUEBEC CITY-BOSTON SUMMER SERVICES Beginning 1 June 2005, Air Canada Jazz will operate daily non-stop summer services between Quebec City and Boston. The flights will be operated with 37-seat Dash-8 aircraft.
Page 6 March 2005
AIR CANADA EXPANDS WEB CHECK-IN TO ALL OUTBOUND FLIGHTS Air Canada has expanded its web check-in services to include to all flights departing from Canada, including transborder and overseas services. The web check-in service allows customers to check-in and print boarding passes from the Air Canada website.
AIR CANADA CARGO TO EXPAND SERVICES TO CHINA Air Canada Cargo announced that it plans to expand cargo capacity to China by adding MD11 freighter services between Canada and Shanghai three times per week beginning May 2005. The service is subject to government approval and will triple the carrier’s weight capacity on the route. Air Canada has signed a two-year lease agreement with World Airways for the MD-11 freighter.
OTHER AIRLINE NEWS JETSGO CEASES OPERATIONS On 11 March, Jetsgo ceased operations and asked the Quebec Superior Court for protection from creditors under the Companies’ Creditors Arrangement Act. In its court documents, Jetsgo stated that it lost CDN$55 million over the last eight months, including CDN$12 million in January 2005 and CDN$10 million in February 2005.
WESTJET REPORTS CDN$17 MILLION NET LOSS FOR 2004 WestJet reported a net loss of CDN$17.2 million for the year ended 31 December 2004. Revenues increased by 23% to CDN$1.1 billion but expenses also increased to CDN$1.1 billion from CDN$749 million last year. WestJet also incurred a write-down of CDN$47.6 million for the early replacement of its fleet of 18 B737200s.
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NEWS ARTICLES OTHER AIRLINE NEWS – CON’T
CANADIAN AIRPORT NEWS
WESTJET TO START SEASONAL SERVICES BETWEEN CALGARY AND SAN DIEGO
NAV CANADA TO INSTALL INSTRUMENT LANDING SYSTEM AT HAMILTON INTERNATIONAL AIRPORT
WestJet announced that it will offer seasonal non-stop services between Calgary and San Diego from 2 June to 11 October 2005. The flights will be operated three times per week.
NAV CANADA has announced plans to install a $1.5 million instrument landing system (ILS) at Hamilton International Airport to reduce landing limits and improve airport accessibility in poor weather conditions. Construction will begin in the spring and the ILS is expected to be operational by late fall.
SKYSERVICE APPROVED TO START SCHEDULED TORONTO-MOSCOW SERVICES Skyservice Airlines has received approval from the Minister of Transport to operate scheduled services to Russia. The carrier already has a license to fly non-scheduled international charter services. Skyservice plans to offer year-round flights between Toronto and Moscow three times per week starting in the spring.
REGIONAL 1 TO LAUNCH SERVICES BETWEEN VICTORIA AND KELOWNA, RED DEER AND LETHBRIDGE Alberta based Regional 1 will launch services between Victoria and Kelowna, Red Deer and Lethbridge starting 21 March. The flights will be operated with Dash-8 aircraft four times per week on each route.
AMERICA WEST STARTS VANCOUVERSAN DIEGO SERVICES America West Airlines has launched daily non-stop services between Vancouver and San Diego. The America West Express flights are operated by Mesa Airlines with 86-seat Canadair Regional Jet aircraft.
Page 7 March 2005
THE PROVINCE OF BC AND THE CITY OF ABBOTSFORD INVEST $6.8 MILLION IN YXX The Province of BC and the City of Abbotsford will invest $6.8 million in the expansion of Abbotsford International Airport. The Province is contributing $4.25 million which will be spent on several infrastructure upgrades, including a runway extension, expansion of the runway apron, building a new terminal loading bridge which will serve wide-body aircraft and expansion of the international arrivals building. The City of Abbotsford will contribute $2.55 million to the airport expansion.
OTHER NEWS FAA CONSIDERS CLOSING AIR TRAFFIC CONTROL TOWERS OVERNIGHT The U.S. FAA is considering a cost saving move that would close 42 air control towers during the overnight hours. Among airports being considered is Bangor, Maine.
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NEWS ARTICLES OTHER NEWS – CON’T AMERICAN AIRLINES INSTALLS SELFSERVE KIOSKS AT VANCOUVER AND CALGARY Passengers returning to the United States on American Airlines will now be able to check-in, print and reprint boarding passes and check baggage at Vancouver and Calgary international airports. Kiosks will become available at Toronto and Montreal international airports in the next few months.
PEOPLE IN THE NEWS Josée Goulet has been appointed to the board of directors of the Canadian Air Transport Security Authority. Mrs. Goulet is currently the Chief of Marketing Services for Bell Canada in Montreal, Quebec. ATA Holdings Corp. announced the promotion of Co-Chief Restructuring Officer John Denison to CEO of ATA Airlines, reporting directly to ATA Holdings Corp Chairman and CEO George Mikelsons. Denison joined ATA in January and previously held senior management positions at Southwest Airlines.
Page 8 March 2005
British Airways CEO Rod Eddington will step down at the end of September. Former Aer Lingus CEO Willie Walsh, who will begin work as CEOdesignate on 3 May, will replace him. Both executives are credited with restoring their respective airlines to profitability Boeing CEO Harry Stonecipher resigned on 6 March 2005. The Board of Directors appointed CFO James A. Bell as president and CEO on an interim basis, and Board Chairman Lew Platt has assumed an expanded role in his capacity as non-executive chairman. James A. Bell Wayne Heller has been appointed executive vice president and COO of Republic Airways Holdings, parent company of Chautauqua Airlines and Republic Airlines. He will be responsible for all operational areas within the company.
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PASSENGER WIRELESS TECHNOLOGIES & AIRPORTS 6 March 2005
The explosive growth of wireless devices in phones, PDAs and laptops are opening up new possibilities to revolutionise passenger processing in airports. But will these tools ever replace the universality and practicality of paper systems? This column reviews the leading platforms that have applications for passenger processing.
WiFi (802.11b, g, a, n and other variants)
Solomon Wong Director Security & Planning
Invented at a Canadian auto plant to span large distances for data transmission, WiFi is the leading protocol to allow business and leisure travelers to catch up on last minute emails and surf the web before flights. The large majority of new laptops since 2002 have WiFi built in. Increasingly, it is a standard for PDAs as well as higher end cellular/smartphones. However, integration of this technology in airport processes is in its infancy. Check-in for transit passengers without boarding passes and other protocols can be facilitated with WiFi. Furthermore, the Most major airports in Canada adoption of in-flight WiFi by some air carriers will allow and the U.S. have WiFi stations laptop and PDA users to surf and use Internet services for free or through a per-use (web, e-mail, voice, messenger) while on the aircraft. Lastcharge. minute itinerary changes and hotel bookings, for example, are some of the travel applications in-flight WiFi could provide. The latter could be of value for missed flight connections.
Text Messages Though lagging behind our Asian and European friends, Canadians are leading adopters of text messaging in North America. Also known as short message service (SMS), flight status information and news alerts are some of the more common tools for this 150-character text-only communication. Relatively inexpensive (1 cent to 10 cents per message), there remains a significant potential for users to pre-register for services with an airport. For example, traffic advisories for travel routes into airports have been implemented at leading hubs to help manage ground transportation routing choices.
Mobile Internet
Text messages for travel advisories are relatively undeveloped in Canada, but can assist in providing real-time information on flight delays.
The adoption of direct cellphone web surfing through “Wireless Application Protocol” (WAP) has languished in Canada, particularly due to the exorbitant pricing schemes that Canadian cellular phone service providers charge their customers. At about 5-10 times the cost for similar transactions for U.S. service providers, this remains the most inhibiting factor for adoption. Given that most of the handsets since 2000 include mobile internet, there remains some potential for “pull” content retrieval of flight status and check-in that carriers such as Alaska Airlines have successfully implemented.
Page 9 March 2005
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PASSENGER WIRELESS TECHNOLOGIES & AIRPORTS – CON’T Cellphone Data At 2-5 times the cost of what U.S. cellphone carriers charge, cellphone data in Canada is not anticipated to grow unless pricing moves into the range of our friends south of the border. Cellphone data packages (e.g. GPRS, EDGE) provide the ability for laptops and To address the unavailability of smartphones to access regular internet services. The WiFi in some locations, mobile advantage is that cellphone data is available at near Internet applications are broadband speeds from anywhere. WiFi, on the other hand, is available within most cellphones limited by proximity to broadcast stations. For example, since 2000. Connections to cellphone data would be available on board aircraft, while WiFi is not available unless the aircraft has it installed. laptops from cellphones through “3G” or “GPRS” networks are Bluetooth carrier-dependent. Bluetooth itself is analogous to USB ports, serial ports and infrared. On its own, it does not provide a data service, but acts as relatively secure conduit for cellphone data and specific applications. With greater adoption in Europe and Asia, Bluetooth devices (e.g. cellphones and PDA’s) have been tested in order to provide preliminary credentialling for check-in processes. Users would “wave” their pre-registered cellphone at airline check-in in order to pass through preliminary stages. Security is pre-authorised and locked between recipient and transmitting device; however approval for its use in Canada is subject to further evaluation. Check-in and authentication of individuals through bluetooth Drivers for New Adoption technologies are anticipated to WiFi, text messages, wireless data and Bluetooth are but grow, though challenged by some of the many emerging technologies that have yet-to-bestandards and compatibility defined relevance to airport processing. With still a small issues. proportion of passengers carrying such devices, developing a standard set of new processes requires greater maturation of both technologies and the passenger travel market. Moreover, the different platforms (Palm, Windows, PocketPC, Java) present challenges for implementing agencies (airlines, security, airport, border control) to troubleshoot the myriad of technological pitfalls for novice users. Sizable market growth in personal technologies will lead to field trials of new methods and practices for passenger processing. The possibilities for integrating these devices to airport processes depends on the simplicity of the wireless process, as well as new security requirements. For example, paper boarding passes provide a simple and portable means of showing gate/seat information. Without the difficulties of battery outages, paper boarding passes printed from kiosks or home printers provide easy integration to barcode readers. Yet as new security requirements for authentication passenger ID as well as routing information emerge, a greater demand for greater security and potential interaction with wireless personal information devices will continue to grow.
Page 10 March 2005
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THE OTTAWA REPORT 9 March 2005
Federal Budget 2005 On 23 February, the Liberal minority government presented the 2005 Federal Budget. The Budget aims to improve the well-being of Canadians with the key drivers being a robust economy, a secure social foundation, a sustainable environment and a sound fiscal framework.
Sam Barone Regional Vice President Ottawa, ON
In the area of transportation and security, the Budget provides for additional funds to address terrorist threats, improve the security of Canadians and to allow for the safe movement of goods and people across borders. The 2005 Budget has allocated an additional $1 billion towards the implementation of the National Security Policy which was previously announced in April 2004. The funding will be used to support security for diplomatic missions abroad, emergency planning and response, transportation, and border security. The funds will also be used to combat organised crime in Canada. Other security initiatives announced in the Budget include: •
Air Traveller Security Charge (ATSC). The Budget announced the third consecutive reduction in the ATSC. For domestic travel, the ATSC has been reduced to $5 for oneway travel from $6. On a roundtrip basis the ATSC is $10 for return travel compared to $12 previously. For transborder travel, the ATSC has been reduced to $8.50 from $10 and the ATSC for international travel has been reduced to $17 from $20.
•
Marine Security. Budget 2005 has allocated an additional $222 million over a five year time period to further improve Canada’s marine transportation system. Some of the marine security initiatives include the purchase of new mid-shore patrol vessels for the Great Lakes and St. Lawrence Seaway, increased regulatory inspections, the creation of Emergency Response teams for the Great Lakes and St. Lawrence Seaway and also increased police presence at the country’s ports.
•
Border Security. The 2005 Budget provides $433 million over the next five years to further strengthen the Government’s ability to deliver secure and efficient services for the Canada – U.S. border.
Transport Minister Meets U.S. Counterpart at CAC Open Skies Forum Transport Minister Lapierre had the opportunity to meet with U.S. Transportation Secretary, Norman Mineta, at the recent Canadian Airports Council Open Skies Forum. The Forum marked the 10th anniversary of the Open Skies Agreement between Canada and the U.S. signed in 1995. A joint statement released after the meeting indicated that officials from Canada and the U.S. will begin exploratory discussions to further build on the air agreement signed between the two countries in 1995.
Transport Canada to Strengthen Aviation Safety Management System Transport Minister Lapierre announced proposals to further improve the safety performance of Canadian air operators. The proposed changes would require air operators to implement safety management systems in their organisations. The Minister proposes changes to the Civil Aviation Regulations that will require aviation organisations to appoint company executives who would be accountable for safety and the implementation of safety management systems.
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THE WASHINGTON REPORT March 2005
DOT Announces FY 2006 Budget The Department of Transportation recently announced its fiscal year 2006 budget. The total DOT budget is $56.5 billion of which the FAA has requested a budget allocation of $13.8 billion. A total of $7.7 billion or 56% of the FAA allocation is to be used for safety initiatives including aircraft inspections and ensuring the safety of flight procedures. The budget allocation for aviation in 2006 is lower than expected.
DHS Plans to Increase Security Fees
Charles Chambers Senior Vice President InterVISTAS-ga2 Consulting Inc. Washington, D.C.
The annual budget proposal by the Bush Administration for the Department of Homeland Security includes $5 billion for aviation security and also proposes to consolidate some programs such as U.S. Visit into the Office of Screening Co-ordination and Operations. The DHS budget proposal also includes increases to the passenger security fee. The passenger security fee in the U.S. would rise from $2.50 to $5.50 per one-leg ticket. Passengers travelling on multiple legs would see a fee increase from $5.00 to $8.00. The total tax burden has risen from 7%, 20 years ago to 26% today on a typical $200 air ticket.
Senators Plan to Introduce Bill to Refocus DHS Priorities Senators Ted Stevens (R-Alaska) and Daniel Inouye (D-Hawaii) plan to introduce a bill that will refocus the priorities of the Department of Homeland Security. The two senators believe that the government is spending too much money on screening airline passengers and on seizing potentially dangerous items and not enough money on addressing port, rail, motor carrier, hazardous material shipment and pipeline security. Currently, aviation security has received over 90% of Transportation Security Administration (TSA) funds and virtually all of TSA’s attention. TSA administrator, Tom Stone plans to submit a security plan for all modes on 1 April.
Guidelines for Commercial Space Travel Proposed In February 2005, the FAA has proposed federal guidelines for commercial space travel that could include requiring a passenger to have a physical exam and also sign consent forms stating that they understand the risks associated with participating in space travel. Guidelines for participating flight crew requires that the pilot possess a FAA pilot certificate and flight crew should possess valid FAA 2nd class medical certificates.
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WHAT’S HAPPENING:
THE ORIGINS OF AIRPORT RETAIL 13 March 2005
This month, I deal with a lighter topic. Recently, I was in London and purchased a book on the history (and politics) of the London Underground, or the Tube as Londoners like to call it. 3 The first line was the Metropolitan line, which opened in 1863, the first urban underground railway in the world. For those familiar with London, this line roughly ran from Paddington Station to Kings Cross Station.
Michael Tretheway Vice President & Chief Economist
There is an interesting passage in the book (Underground to Everywhere, by Stephen Halliday) which caught my attention. It described how the board of the Metropolitan Railway (the underground began as a private operation) ‘showed some enterprise in securing revenue from sources other than fees.’ Two months after the line opened, the company sold the right to sell books and advertising in the stations. The concession fee was £1,150. While today that is roughly the cost of return ticket from Canada to the UK, in those days it was a considerable sum, given that a trip cost the passenger only three pence. In 1866, the original concessionaire (James Willing) renewed the contract for seven years for £34,000. Willing renewed the contract every seven years thereafter until 1907. 4 In 1907 the concession passed to a new company, W.H. Smith. The latter, of course, is the global operator of bookstores in airports, train stations and on the street. W.H. Smith opened in 1792 as a small news vendor in London, close to what is now the Canadian embassy. In 1848 it opened its first bookstall in a railway station (Euston Station). The in-terminal retail and advertising concession had a humble beginning in railway stations, but now it generates a significant portion of airport non-aeronautical revenues, which globally accounts for almost 50% of the revenue base.
This 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 materialize. Prepared by InterVISTAS Consulting Inc.
Among purists, there is a distinction between the original underground railways, which were subsurface cut and cover railways, and the ‘tubes’ constructed 30 years later, which are deep tunnels. The tubes were only possible after the invention of the electric dynamo and electric locomotives. The tubes were lower cost, since they were constructed deep enough to avoid the need to re-route sewers, water and other utilities and to not cause undermining and failure of existing buildings. 3
4
This is the same Willing who published Willings’ Press Guide, the global guide to publishers on titles in print.
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