CAIR Issue No. 57 - November 2007 by Leah Dupuis

CANADIAN AVIATION INDUSTRY REVIEW

In this issue… Features Columns: • U.S. Major Airlines Seeing Profitable Financial Results (p.1) • Economic Outlook (p.2) • Crude Oil Prices Establishes New Record High - $95 (p.3) • Aviation and Climate Change (p.11) • The Asia Report (p.13) • The Caribbean Report (p.14) • The Europe Report (p.15) • The Ottawa Report (p.16) • The Washington Report (p.17)

Regular Reports: • Airline Data - Canada (p.4) • Airline Data – U.S. (p.5) • Selected Canadian Airport Data (p.6) • Industry News (p.7) • InterVISTAS News (p.18)

U.S. MAJOR AIRLINES SEEING PROFITABLE FINANCIAL RESULTS November 2007

For the first time in five years, none of the ten major U.S. airlines operated under bankruptcy protection. This occurred alongside healthy financial results. The second quarter of 2007 saw gains for all ten air carriers, with a cumulative net profit of $5.4 billion, compared with a net loss of $1.1 billion for the same period in 2006. The industry’s profitability leaders were Northwest (NWA) and Delta (DL), with $2.1 and $1.8 billion net income results, respectively, which both reported net losses the year before. Both carriers emerged from Chapter 11 bankruptcy protection during Q2 2007. Even without the gains reported by NWA and DL, the remaining eight airlines reported a cumulative net income of $1.5 billion, compared with $1.4 billion the year prior.

Karen Payjack Project Analyst

The improvements in profitability for the industry could be attributed to controlling costs and capacity. Collective expenses increased minimally. CASM decreased by 0.7% and RASM increased by 0.9%. Air traffic volume increased 3.2% on capacity expansion of 1.9%, and load factors grew to 82.2%. U.S. Major Airlines Financial Results - Second Quarter ended 30 June 2007 ($millions) Operating Revenues

Operating Profit

Net Income

2006

2007

2006

2007

2006

2007

AirTran Holdings

$528

$614

$55

$70

$32

$42

Alaska Air Group

$873

$904

$80

$78

$56

$46

AMR Corp.

$5,975

$5,879

$476

$467

$291

$317

Continental

$3,507

$3,710

$244

$263

$198

$228

Delta

$4,741

$5,003

$369

$490

-$2,205

$1,768

$612

$730

$47

$73

$14

$21

Northwest

$3,291

$3,181

$295

$357

-$285

$2,149

Southwest

$2,449

$2,583

$402

$328

$333

$278

UAL Corp.

$5,113

$5,213

$260

$537

$119

$274

US Airways Group

$3,171

$3,155

$342

$289

$305

$263

Total

$30,260

$30,972

$2,570

$2,952

-$1,142

$5,386

JetBlue

Source: Air Transport World, September 2007.

Page 1 November 2007

ECONOMIC OUTLOOK November 2007

Consumer Confidence Measures of consumer confidence can be a useful indicator of consumer expenditures in the near future. While not necessarily accurate in predictions of economic performance as a whole, the relationship between consumer sentiment and spending means that changes in sentiment can nonetheless have an effect on the economy overall. A look at indicators for the U.S and Canada shows consumer confidence in the two countries has exhibited some differences in recent trends. The U.S. Several measures of consumer confidence in the U.S. are collected regularly, including the University of Michigan Consumer Sentiment Index. This index measures consumer sentiment monthly based on a survey of households including views of current conditions and U.S. Consumer Sentiment expectations. U.S. consumer confidence has shown a general decline throughout 2007, after reaching a twoyear high of 96.9 in January. The decline has been particularly pronounced over the past two months. The November level of the consumer sentiment index was 75.0, a drop from 80.9 in October and its lowest level since the aftermath of Hurricane Katrina in 2005. The index is now only marginally higher than the very low levels of sentiment immediately following the terrorist attacks of September 2001.

110 105 100 95 90 85 80 75 Jul-07

Jul-06

Jan-07

Jul-05

Jan-06

Jul-04

Jan-05

Jul-03

Jan-04

Jul-02

Jan-03

Jul-01

Jan-02

Jul-00

Jan-01

Jan-00

Source: University of Michigan Consumer

Canada. In Canada, consumer sentiment is measured using the Decima-Investor’s Group Index of Consumer Confidence. This index uses methodology closely based on the University of Michigan Index and is considered to provide a comparable measure. The index has been measured roughly quarterly since being introduced in September 2001.

Canadian Consumer Sentiment 115 110 105 100 95 90 85 80 75

Compared to the U.S., the Canadian index has been relatively steady over the past few years. The only exception Source: Decima-Investors Group Index of Consumer Confidence to this has been the notable drop in 2005 following Hurricane Katrina. This drop mirrored the reaction in the U.S., but since that time the index has rebounded and remained comparatively stable. Notably, Canadian confidence has not seen the decline shown by the U.S. in 2007, as sentiment remains at a similar level shown through 2006. It should be noted that the most recent measure of the index is September 2007, which showed a slight decline from June. It remains to be seen whether the sharp decline in U.S. confidence over the past two months will be reflected to any extent in Canada.

Page 2 November 2007

Sep-07

Mar-07

Aug-06

Feb-06

Sep-05

Feb-05

Feb-04

Aug-04

Aug-03

Feb-03

Aug-02

Feb-02

Senior Analyst

115

Sep-01

Josh Drury

CRUDE OIL PRICES ESTABLISH NEW RECORD HIGH - $95 November 2007

Crude oil prices rise to above $95… On 16 November 2007, crude oil prices rose to above $95 per barrel. This price level establishes a new price high since the commodity began trading in 1963. In recent weeks, crude oil prices have stayed above the $90 mark and continue to inch closer to the $100 per barrel threshold. Global factors affecting the price of crude oil include the perceived oil shortage due to OPEC nations holding back supply, the influx of price speculation by investors and the continued weakness in the U.S. dollar which is driving investment in commodities.

Doris Mak Manager, Special Projects

At the OPEC summit in Riyadh, the heads of OPEC nations have denied that a fundamental shortage in crude oil supply is responsible for current high crude oil prices. OPEC is instead laying blame on the ramp up of prices due to price speculators which has been fuelled by the weakness in the U.S. dollar and short term disruptions in supply. The Oxford Institute of Energy Studies supports that OPEC does not have a strong influence on crude oil prices due to the more prevalent role that financial market tools are playing in the market place.

... Crude oil futures prices at $70 in the longterm

Crude Oil Futures Prices $100

$90 Nov 2007 $80

Oct 2007 2006 Sep 2007 2006 May 2007 2006 Nov 2006

$70 US$ Per Barrel

$60

Jan 2006 Dec 2005

$50

Apr 2005

Crude Oil Spot Prices Crude Oil Futures Prices -----

$40

$30 May 2003

Jul-12

Oct-12

Apr-12

Jan-12

Jul-11

Oct-11

Apr-11

Jan-11

Jul-10

Oct-10

Apr-10

Jan-10

Jul-09

Oct-09

Apr-09

Jan-09

Jul-08

Oct-08

Apr-08

Jan-08

Jul-07

Oct-07

Apr-07

Jan-07

Jul-06

Oct-06

Apr-06

Jan-06

Jul-05

Oct-05

Apr-05

Jan-05

Jul-04

Oct-04

Apr-04

Jan-04

Jul-03

Oct-03

Apr-03

$20 Jan-03

Spot Oil prices rise to $95, futures prices at $82 in 2012.

Futures prices in November 2007 are higher relative to futures prices established just two months ago in September 2007. A futures contract in November 2007 for delivery of crude oil in December 2012 is priced currently at $82; a 19% increase over the same contract if purchased in September 2007.

Month of Delivery

Page 3 November 2007

AIRLINE DATA – CANADA Traffic and Load Factors on Canada’s Major Air Carriers October 2007 Air Carrier

Passenger Traffic Revenue Passenger Kilometres % Change % Change over 2006 from 2005

Capacity Available Seat Kilometres

Load Factor

% Change over 2006

% Change from 2005

Change over 2006

Change from 2005

Air Canada1

+2.8%

+4.8%

+2.7%

+3.3%

-0.5pts (to 79.1%)

-1.3pts (from 80.4%)

Domestic (Mainline)

+1.8%

+1.4%

+3.2%

+3.5%

-1.4pts

-2.6pts

Jazz

+2.0%

+41.8%

-0.4%

+36.6%

+1.7pts

+2.7pts

International & Charter

+3.1%

+6.3%

+2.5%

+3.2%

+0.5pts

+2.3pts

+20.5%

+49.5%

+15.6%

+40.9%

+3.2pts (to 78.1%)

+4.6pts (from 73.5%)

WestJet

Analysis: •

•

Air Canada announced a record high October load factor of 78.6%, for Air Canada Mainline and Jazz combined. This is mostly due to the growth in Jazz’s reduced capacity and growth in load factor by 1.7 percentage points to 74.2%. Air Canada Mainline’s domestic load factor declined by 1.4 percentage points in October 2007 over 2006. Seat capacity expanded by 3.2%, outpacing traffic growth by 1.8%. Air Canada Mainline’s international passenger traffic increased by 3.1% in October 2007 over 2006. The largest contributor to international traffic growth is the “Latin America and Other” region, with passenger volumes increasing by 17.5% over the same period.

Air Canada Domestic Mainline

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

Jazz data is not included in this graph Aug- Sept Oct 06

Nov

Dec Jan- Feb 07

Mar

Dom RPK

Apr

May Jun

Jul

Aug

Sep

Oct

Jun

Jul

Aug

Sep

Oct

Apr May Jun

Jul

Aug Sep

Oct

Dom ASK

Air Canada International 6% 5% 4% 3% 2% 1% 0% -1% -2% Aug- Sept Oct 06

Nov

Dec

Jan- Feb 07

Mar

Int'l RPK

Apr

May

Int'l ASK

WestJet 35%

•

WestJet also reported a record high October load factor of 78.1%. This represents an increase in October’s load factor by 4.6 percentage points from 2005.

30% 25% 20% 15% 10% 5% 0% Aug- Sept Oct 06

Nov Dec Jan- Feb 07

M ar

RPK

ASK

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

Page 4 November 2007

AIRLINE DATA – U.S. U.S. Airlines Release October 2007 Traffic Figures

Notes:

(RPMs – millions)

(ASMs – millions)

Capacity

Load Factor

1,989 ↑7.0%

2,621 ↑11.1%

75.9% ↓2.9 pts

760 ↓1.2%

1,033 ↓0.5%

73.5% ↓0.6 pts

6,034 ↑5.9%

8,565 ↑5.3%

70.5% ↑0.4 pts

7,695 ↑6.0%

9,684 ↑5.7%

79.5% ↑0.2 pts

9,611 ↓0.6%

11,854 ↓1.1%

81.1% ↑0.5 pts

11,526 ↑3.6%

14,310 ↓0.2%

80.6% ↑3.0 pts

9,405 ↓2.3%

12,992 ↑0.0%

72.4% ↓1.7 pts

6,473 ↓0.2%

7,728 ↓1.3%

83.8% ↑1.0 pts

4,877 ↓1.5%

6,061 ↓5.5%

80.5% ↑3.3 pts

336 ↑2.9%

400 ↓2.4%

83.9% ↑4.3 pts

1,465 ↑34.5%

1,882 ↑16.4%

77.8% ↑10.5 pts

8,236 ↑16.4%

10,380 ↑13.3%

79.4% ↑2.1 pts

Traffic

Airline

1. Mainline operations only. 2. Load factor includes scheduled service only.

Sources: Carrier traffic reports.

Page 5 November 2007

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

2006

Toronto

Vancouver

September

+2.2%

+2.1%

MontréalTrudeau +2.6%

2007

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

+10.0%

+13.1%

0.0%

+8.8%

+4.9%

+6.9%

+16.6%

+6.9%

+10.4%

St. John’s -0.5%

3rd

+3.8%

+3.7%

+2.7%

+9.2%

+15.1%

+0.1%

+7.3%

+6.9%

+8.6%

+14.3%

+6.2%

+11.1%

+8.7%

October

+2.6%

+2.3%

+3.9%

+9.9%

+18.4%

+2.3%

+7.7%

+6.2%

+8.9%

+13.7%

+7.1%

+6.2%

+1.7%

November

+3.9%

+3.7%

+8.6%

+14.1%

+15.4%

+3.0%

+8.3%

+0.6%

+2.7%

+14.5%

+2.7%

+3.7%

+0.2%

December

+6.4%

+6.2%

+8.7%

+11.4

+18.2%

+3.8%

+3.4%

-2.4%

-0.1%

+14.5%

+3.7%

+10.2%

-1.1%

4th Quarter

+4.3%

+4.1%

+7.0%

+11.7

+17.4%

+3.0%

+6.4%

+1.7%

+3.9%

+14.3%

+4.5%

+6.7%

+0.3%

Full Year January February March st 1 Quarter April May June 2nd Quarter July August September 3rd Quarter

+3.5% +3.0% +2.0% +1.5% +2.2% +0.7% +0.3 +1.3% +0.8% -0.4% +0.7% +1.5% +0.5%

+3.1% +5.5% +2.7% +3.6% +3.9% +4.2% +2.4% +1.8% +2.7% +0.2% +2.6% +3.6% +2.1%

+4.7% +10.2% +7.1% +8.9% +8.7% +8.9% +6.3% +8.6% +7.9% +10.9% +10.4% +8.9% +10.1%

+11.1 +11.7% +11.7% +9.5% +10.9% +11.9% +8.6% +7.6% +9.1% +5.4% +7.1% +7.9% +6.8%

+15.5% +18.3% +18.3% +17.1% +17.9% +18.8% +17.5% +22.2% +19.5% +17.8% +17.1% +12.4% +15.9%

+1.7% +5.9% +8.3% +4.9% +6.3% +8.0% +7.3% +7.6% +7.6% +9.0% +6.6% +3.7% +6.4%

+4.8% +3.2% +6.8% +5.4% +5.1% +12.2% +8.7% +7.5% +9.3% +3.9% +5.0% +1.9% +3.7%

+4.6% +2.3% +2.0% -1.2% +0.9% +0.5% -2.5% +3.4% +0.4% +4.4% +4.4% +4.2% +4.3%

+5.4% +4.7% +4.0% +7.9% +5.6% +9.6% +6.2% +1.9% +5.8% +6.7% +5.4% +6.1% +6.1%

+14.7% +15.2% +12.9% +15.6% +14.6% +20.8% +17.8% +14.7% +17.7% +7.4% +9.2% +9.6% +8.7%

+5.6% +6.7% +11.0% +5.7% +7.8% +12.1% +12.7% +11.6% +12.1% +4.6% +9.0% +7.9% +7.2%

+8.0% +18.8% +24.2% +8.2% +17.0% +7.4% +9.9% +8.0% +8.4% +13.6% 5.7% +10.5% +9.9%

+6.0% +4.6% +10.9% +9.1% +8.1% +2.1% -4.2% -1.0% -1.2% -6.5% -5.8% -0.6% -4.6%

Quarter

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

Page 6 November 2007

NEWS ARTICLES AIR CANADA INTRODUCES ‘WINTER GETAWAY PASS’

AIR CANADA UPDATE AIR CANADA TEAMS UP WITH LUFTHANSA TO EXPAND CANADAGERMANY SERVICES

Air Canada announced plans to expand Canada-Germany services, in collaboration with its Star Alliance partner, Lufthansa. Air Canada will begin daily Montréal -Frankfurt service on 1 April 2008 (using 274-seat A330-300) and daily non-stop Ottawa-Frankfurt service on 1 June 2008 (using 211-seat Boeing 767-300). Lufthansa will launch a second daily non-stop Calgary-Frankfurt flight on 14 April 2008 (using 221-seat Airbus A330-300) and seasonal nonstop Toronto-Dusseldorf service on 1 May 2008 (using 221-seat Airbus A340-300). Together, Air Canada and Lufthansa will offer a total of 154 non-stop weekly flights between Canada and Germany by Summer 2008.

JAZZ EXPANDS FLEET WITH ADDITION OF 16TH CRJ705 JET AIRCRAFT Air Canada Jazz has expanded its fleet, with the addition of another 75-seat CRJ705 aircraft on 14 November 2007. According to Joe Randell, President and Chief Executive Officer for Jazz, “The CRJ705 has proven to be a very popular aircraft with our customers and our employees and we are pleased to bring a 16th CRJ705 into our fleet.”

AIR CANADA EXPANDS SERVICE TO TRINIDAD AND TOBAGO Air Canada announced plans to increase its once-a-week service to Port of Spain to three times a week in Spring 2008, using 120-seat Airbus A319 aircraft.

AIR CANADA REPORTS RECORD OPERATING INCOME FOR 3RD QUARTER Air Canada announced a record operating income of $351 million in the third quarter of 2007, up 51.3% compared to the 2006 quarter. Passenger revenues had reportedly increased by 4.2% to $2,660 million in the third quarter of 2007 over 2006, mainly due to the 3.1% growth in passenger traffic. Page 7 November 2007

Air Canada announced the launch of its ‘Winter Getaway Pass’, a promotional Flight Pass that allows for unlimited travel on Tuesdays, Saturdays and Sundays, to destinations across Canada and between Canada and the U.S. Available for sale from 30 October to 2 December 2007, the pass can be purchased for either a one month or two month travel period during this winter season. The pass can be used in three North American geographic travel zones and can be purchased by single travellers or in a package for two travellers.

WESTJET UPDATE WESTJET OFFERS NON-STOP KELOWNA-LAS VEGAS SERVICE

WestJet announced new seasonal non-stop services between Kelowna and Las Vegas, starting 17 January 2008. With outbound flights from Kelowna offered on Thursdays and Sundays, and returning flights offered on Fridays and Mondays, the non-stop flight will be available for the winter season from January to April 2008.

WESTJET ANNOUNCES 3RD QUARTER NET EARNINGS UP 44%

WestJet announced that it had generated $614.1 million in total revenue during the third quarter of 2007. Net earnings had increased by 44.0% for the third quarter of 2007 over 2006, resulting in record net earnings of $76.1 million for the quarter.

WESTJET CELEBRATES GRAND OPENING OF FLOW-THROUGH CHECK-IN AT EDMONTON AIRPORT

WestJet announced the grand opening of its flow-through check-in counters at Edmonton International Airport, with their ribbon cutting ceremony held on 1 November 2007. WestJet’s flow-through check-in service will allow guests to manually place their tagged baggage onto the baggage belt, reducing check-in congestion at Edmonton Airport.

NEWS ARTICLES OTHER CANADIAN AIRLINES NEWS AIR TRANSAT CELEBRATES ANNIVERSARY

20TH

Air Transat celebrated its 20th anniversary of inaugural flights on 14 November 2007, with the launch of its first flight between Montréal and Acapulco in 1987. Today, Air Transat is Canada's leading leisure travel airline, carrying 2.6 million passengers annually to nearly 60 destinations in 25 countries.

PORTER AIRLINES SEEKS PERMANENT INJUNCTION AGAINST AIR CANADA AND JAZZ

Porter Airlines Inc. has filed a Statement of Defence and Counterclaim in the Ontario Superior Court against Air Canada and Jazz Air LP, seeking to separate Jazz from Air Canada. Porter alleges that the existing relationship between Air Canada and Jazz reduces competition in the passenger air services market, violating the Competition Act, and is seeking $850 million worth of damages. In response to Porter’s allegations, Air Canada and Jazz responded with a public statement insisting that these statements were made without merit.

PORTER AIRLINES CELEBRATES FIRST ANNIVERSARY Porter Airlines celebrated its first anniversary of inaugural flights on 23 October. Porter Airlines is a regional passenger carrier based at Toronto City Centre Airport, with its first flight to Ottawa in October 2006, followed by service to Montréal in December 2006, and Halifax flights in June 2007. Porter Airlines achieved a total 9,100 flights in its first year.

Page 8 November 2007

CARGO NEWS UPS AND DHL EXPAND SERVICES FOR HOLIDAY SEASON UPS and DHL both announced plans to increase flights for the upcoming winter season. UPS expects to wetlease 32 additional aircraft in order to introduce 423 daily flights between Thanksgiving (U.S.) and Christmas. DHL plans to launch a total of 425 extra flights over the period from 20 November to 23 December.

AIR TRAN TO EXIT CARGO BUSINESS, CITES SECURITY COSTS Air Tran Airways announced its plan to put an end to its belly cargo business on 1 December 2007. This is due to high fuel costs, as well as the substantial investments required by the carrier to increase cargo security.

CATHAY PACIFIC INCREASES CARGO CAPACITY WITH 10 NEW BOEING 747-8S Cathay Pacific Airways announced an expansion in its cargo capacity, with its order of 10 new Boeing 747-8 cargo aircraft to replace the existing seven Boeing 747-200 aircraft. Cathay Pacific also placed an order for seven long-range 777 passenger jets. Scheduled for delivery between 2009 and 2012, the 17 new aircraft are worth US$5.2 billion at list prices.

NEW ADDITIONS TO CARGOJET FLEET

In addition to the 757-200ER that Cargojet previously announced they will be leasing, they are also planning on adding two 767-200-ERs to replace three of their 727-200s. When you take into consideration their acquisition of Georgian Express, this will move them from a single aircraft type to five: 727, 757, 767, Cessna Caravan, and Beech 1900

NEWS ARTICLES RAYMOND CHAN APPOINTED VP AT TOURISM BC

PEOPLE IN THE NEWS JIM CHERRY ELECTED AS CHAIR OF ACI WORLD The Canadian Airports Council (CAC) announced that Jim Cherry, the council’s chairman for the past two years, has been elected as chairman of Airport Council International (ACI) to extend his leadership to the international airport community. Mr. Cherry is President and CEO of Aéroports de Montréal.

IATA APPOINTS PAUL STEELE TO LEAD ENVIRONMENT INITIATIVES The International Air Transport Association (IATA) announced that it had appointed Paul Steel to direct its environment programme, beginning 1 December 2007. He previously held the position as Chief Operating Officer at World Wide Fund (WWF) International.

WESTJET APPOINTS SEAN DURFY TO BOARD OF DIRECTORS

WestJet announced that Sean Durfy, President and CEO of WestJet, has been appointed to its Board of Directors. Durfy first joined WestJet in 2004 as Executive Vice-President, Sales, Marketing. He was later appointed to President in September 2006 and then Chief Executive Officer in September 2007.

CATSA APPOINTS DORA KOOP TO BOARD OF DIRECTORS

The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, announced that Ms. Dora Koop has been appointed the Canadian Air Transport Security Authority’s (CATSA) board of directors. She currently serves as Director, Business Solutions at the McGill International Executive Institute in Montréal, and Manager of the Global Leadership Program. She is also a board member of the Mennonite Central Committee, Canada’s International Relief Organization. Page 9 November 2007

Tourism BC has announced that it has promoted Raymond Chan to Vice President, 2010 and Corporate Relations. He joined Tourism British Columbia in 1997, providing leadership on projects such as the creation of an industrygovernment lobby for improved air access and development of Tourism. He is also Chair of the 2010 Tourism Consortium, a partnership of the host tourism destinations of British Columbia, Vancouver, Whistler, and Canada to maximize the tourism benefits from 2010.

ATCA GRANTS AWARD TO NAV CANADA’S CLAUDE VANASSE

NAV CANADA announced that the Air Traffic Control Association (ATCA) has granted Claude Vanasse, a Senior Technologist at the Montréal Area Control Centre, with the “Airway Transportation Systems Specialist of the Year Award” on 30 October 2007. This award recognizes exemplary or extraordinary contributions to air traffic control in the U.S.

SUSAN STIENE RECEIVES ACI-NA’S PERSON OF THE YEAR AWARD

Airports Council International-North America (ACI-NA) announced that Susan Stiene, Director, Retail and Passenger Services at Vancouver Airport Authority, is the first “Person of the Year” recipient. This award is presented to “an individual who has enhanced the North American airport concession industry.”

NEWS ARTICLES OTHER – CON’T EMIRATES ANNOUNCES OFFICIAL OPENING OF FIRST CANADA-DUBAI DIRECT LINK

Emirates launched the first direct link between Canada and Dubai on 29 October, with its first flight departing from Toronto. The new three per week TorontoDubai service is operated using Boeing 777300ER aircraft.

QANTAS AIRWAYS RE-INTRODUCES SAN FRANCISCO-VANCOUVER SEASONAL SERVICE

Qantas Airways announced that it will again be offering non-stop seasonal service between Sydney and Vancouver via San Francisco for the period from 16 December 2007 to 27 January 2008. This three per week flight will be operated using Boeing 747-400 aircraft.

AIR NEW ZEALAND EXPANDS AUCKLAND-VANCOUVER SERVICE

Air New Zealand announced that the originally scheduled seasonal service between Auckland and Vancouver has been increased to year-round service, as to meet strong customer demand. Beginning 2 November 2007, this three per week service will be operated using 777-200ER aircraft.

Page 10 November 2007

Addressing the climate impact of your business travel just got a whole lot easier.

Our Travel Industry Partners

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It’s a Changing Climate. Companies everywhere are grappling with the new business challenges presented by climate change. Offsetters offers solutions to these challenges. Offsetters is Canada’s premier provider of high quality carbon offsets. We invest in renewable energy and energy efficiency projects that would not have taken place without our involvement.

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These projects, located in Canada and around the world, include: Climate Friendly Corporate & Personal Travel Services

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Offsetters collaborates with a number of travel agents to help them provide their corporate and leisure clients with a climate friendly travel option. These partners include: • • •

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AVIATION AND CLIMATE CHANGE November 2007

The Intergovernmental Panel on Climate Change estimates that global air travel contributes approximately three per cent to all anthropogenic causes of climate change. This contribution is expected to grow as a result of the rapid growth in air travel relative to other sectors. As the climate impacts of aviation emissions continue to be recognized, the aviation industry will be expected to respond in an innovative and proactive way. With the demand for ‘green’ technology beginning to grow, the cost to transport providers to research, develop and purchase energy efficient equipment will be significant. However, these pressures could impact the passenger and cargo industries differently (since passengers are more likely to be influenced by a ‘moral conscience’). It is also expected that the greatest impacts will be felt first on Europe-North American operations, then on transborder flights, and lastly, on Asia-North America activities.

Figure 1: Passenger Miles and Total Fuel Consumption – U.S. 18 500

16 14

400

12 10

300

8 200

6 4

100

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

0 1982

Total Fuel Consumption - Billions of Gallons

600

1980

Trends in Air Travel and Fuel Consumption Air travel has grown rapidly over the last few decades, fundamentally changing the way we travel and conduct business. From 1980 to 2004, air travel in the U.S. increased from 219 billion to 558 billion passenger miles, an average increase of 4% per year. Similarly in Canada, air travel increased from 28 billion passenger miles in 1981 to 55 billion passenger miles in 2006, an average increase of 3% per year.

Passenger Miles (Billions)

Year Passenger Miles

Total Fuel Consumption

Source: Bureau of Transportation Statistics “National Transportation Statistics 2007”.

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Total Fuel Consumption - Billions of Gallons

Total fuel consumption has also increased over time. From 1980 to Figure 2: Passenger Miles and Total Fuel Consumption – Canada 2004, jet fuel consumption in the 2 60 U.S. increased from 8.5 billion gallons 1.8 50 to 13.6 billion gallons, an average 1.6 increase of 2% per year. In Canada, 1.4 40 1.2 from 1981 to 2006, jet fuel 1 30 consumption increased from 0.95 0.8 billion gallons to 1.1 billion gallons, an 20 0.6 average increase of 0.4% per year.

1980

Director, Environmental Services

Looking forward, it is anticipated that, as a high profile industry, air travel will continue to come under significant pressure from governments, driven by consumer concerns, to reduce its impact on climate change. As such, responding to climate change concerns will be one of the major issues facing the aviation industry over the next decade.

Passenger Miles (Billions)

Joe Kelly

Year Passenger Miles

Total Fuel Consumption

Source: Statistics Canada CANSIM Table 4010001.

Page 11 November 2007

AVIATION AND CLIMATE CHANGE – CON’T

Trends in Carbon Dioxide Emissions Technological improvements in engine and aircraft design, as well as higher load factors and more efficient operational practices, have led to significant gains in aviation fuel efficiency and lower emissions per passenger mile.

Page 12 November 2007

300

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Total CO 2 Emissions - Billions of Pounds

350

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Pounds

CO2 Emissions per Passenger Mile -

0.9

Year CO2 Emisssions per Passenger Mile

Total CO2 Emissions

Source: Bureau of Transportation Statistics “National Transportation Statistics 2007”.

Figure 4: CO2 Emissions – Canada

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Total CO 2 Emissions - Billions of Pounds

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Although efficiency improvements have been significant over the past few decades, the rapid growth of air travel has meant that total fuel consumption and emissions have continued to climb. From 1980 to 2004, total CO2 emissions from U.S. air travel increased by 107 billion pounds from 180 billion pounds to 287 billion pounds, an average increase of 2% per year. In Canada, from 1981 to 2006, total CO2 emissions increased by 2 billion pounds from 20 billion pounds to 22 billion pounds, an average increase of 0.4% per year.

Figure 3: CO2 Emissions – U.S.

CO2 Emissions per Passenger Mile -

In the U.S., from 1980 to 2004, CO2 emissions per passenger mile have de-creased from 0.82 pounds per passenger mile to 0.52 pounds per passenger mile, an average decrease of 2% per year. Similarly in Canada, CO2 emissions per passenger mile have decreased from 0.72 pounds per passenger mile in 1981 to 0.40 pounds per passenger mile in 2006, also an average decrease of 2% per year.

Year CO2 Emisssions per Passenger Mile

Total CO2 Emissions

Source: Statistics Canada Table 4010001.

THE ASIA REPORT November 2007

China Southern Formally Joins SkyTeam On 15 November 2007, China Southern became the first official Chinese air carrier to gain membership into global airline alliance by becoming the 11th official member of SkyTeam. With the addition of China Southern, the SkyTeam alliance will serve approximately 428 million passengers annually via 16,400 daily flights with coverage of 841 destinations in 162 countries. The Chairman of China Southern hopes that membership in SkyTeam will improve the airline’s brand value and enhance the airline’s competitiveness and the airline’s continued profitability.

Qantas Orders Up to 188 Single-Aisle Aircraft for Jetstar

Doris Mak Manager, Special Projects

The Qantas Group has announced that it will order up to 188 single-aisle aircraft for operation in both Australia and Asia by Qantas Airways and its low-cost subsidiary airline, Jetstar. The order will consist of 68 A320/A321s with 40 options and purchase rights and a total of 31 B737-800s and 49 options and purchase rights. The firm order will be delivered over a six year time period while options would be delivered through to 2017. This new order of narrow body aircraft comes on the heels of a firm order of 20 A380s and 65 B787 aircraft which will replace the airlines fleet of B747s and B767 aircraft.

New Era Begins with A380 Flight On 25 October 2007, the inaugural commercial A380 operation for Singapore Airlines took flight from Singapore to Sydney, Australia. The seats on the first flights were auctioned off on eBay and raised US $1.4 million ($2 million Singapore dollars) for charity.

Air New Zealand Expands Auckland-Vancouver Service Air New Zealand announced that the originally scheduled seasonal service between Auckland and Vancouver has been increased to year-round service, as to meet strong customer demand. Beginning 2 November 2007, this three per week service will be operated using 777-200ER aircraft.

Qantas Airways Re-Introduces San Francisco-Vancouver Seasonal Service Qantas Airways announced that it will again be offering non-stop seasonal service between Sydney and Vancouver via San Francisco for the period from 16 December 2007 to 27 January 2008. This three per week flight will be operated using Boeing 747-400 aircraft.

Scandinavian Airlines Increase Flights to Thailand Scandinavian Airlines (SAS) launched a three flights weekly operation between Stockholm and Bangkok to supplement existing service between Copenhagen and Bangkok. The route will be operated using A340 aircraft. Scandinavian countries remain a strong travel market for Thailand which accounted for 651,000 tourists in 2006, or 19% of all European arrivals in Thailand for the year.

Page 13 November 2007

THE CARIBBEAN REPORT November 2007

Caribbean Moves Towards Open Skies

Jacqueline Clarke Senior Project Manager Strategic Planning

Ministers with responsibility for aviation and tourism matters of the member countries of the Caribbean Tourism Organization endorsed an agreement for the creation of a single Caribbean air space at the recently concluded 30th Caribbean Tourism Conference held in Puerto Rico. The intention of the agreement, referred to as the San Juan Accord, is to reinvigorate the stalled open skies debate and instead focus on the creation of a single regional airspace, with a single civil aviation regime to replace the numerous civil aviation authorities and aviation air spaces within the Caribbean region. The San Juan Accord calls for harmonization of air safety and navigational procedures in the region and aims to improve the management of international and intra-regional air services. According to the agreement, the next steps in the process include accelerating the revision of the CARICOM Multilateral Air Services Agreement with a view to completion and implementation by 30 September 2008; preparation of a Working Paper by a Technical Group for presentation to a Forum of Tourism Ministers on 15 February 2008; establishment of a CTO-wide umbrella policy for air transport; formation of a single regional air space within sub-regional group by 30 September 2008 and undertaking a study on the competitiveness of the Caribbean air transport sector to be completed by 31 May 2008.

Delta Expands Service to the Caribbean Delta is poised to cash-in on the success of its two-year old route expansion into the Caribbean for the 2007-08 winter season. The airline’s presence in the region has enabled it to gather on-theground intelligence to identify under-served markets and gauge demand for additional services to the destinations it currently serves. Delta will be adding services to Curacao and Bermuda and will begin service from Atlanta to Port of Spain (Trinidad), Tobago, St. Kitts and Bonaire. For the new destinations, the Atlanta service will provide direct access to new source markets within the southeastern U.S. and add connecting service from an additional major hub. The new service is especially critical for Tobago which, though well-served to Europe, has been reliant on connections via Port of Spain for access to the U.S. market.

Sunwing Designated to Serve Antigua and Barbuda, and St. Lucia Minister Cannon also announced that Sunwing Airlines has been designated to operate scheduled air services between Canada and two Caribbean cities, Antigua and Barbuda, and St. Lucia. Sunwing Airlines is not only allowed to schedule flights between the countries, but there are no restrictions placed on the frequency of flights that the carrier is permitted to operate.

Partner Being Sought for Air Jamaica Antigua-based Texan billionaire, Sir Allen Stanford, previous owner of Caribbean Star Airlines, is one of a number of potential investors that are being courted for a possible partnership with national carrier, Air Jamaica. Government officials have also made overtures to air carriers LanChile and Hawaiian Airlines to enter into a partnership with Air Jamaica as part of a plan to place the airline into private sector ownership as early as possible.

Air Caraibes Begins Service to Costa Rica Beginning in December 2007, the French Caribbean airline Air Caraibes will begin flying to Costa Rica from France and the Antilles. The airline will depart from Juan Santamaría International Airport, just northwest of San José, stopover in Panama and continue to Guadeloupe in the French Antilles, where passengers can connect onwards to Paris, France.

Page 14 November 2007

THE EUROPE REPORT November 2007

EU Unveils Passenger Data Collection Plan Under a draft anti-terrorism proposal, the European Union has indicated its intention to collect personal data on air passengers traveling to or from the member countries. Up to 19 pieces of data will be collected for each passenger, including phone numbers, email addresses, methods of payment and others. The proposal suggests that the data would be stored for 13 years, although this is subject to review. Airlines would be required to provide the relevant data for their passengers to the first EU country of arrival. Curiously, the data would not be compiled into a Europe-wide database. Rather, each country would store its own data, and share with other member states when required. The proposed plan would not apply to passengers traveling on flights within the EU. In order for the proposal to become law, it will require the unanimous consent of all 27 EU member countries.

John Weatherill Regional Vice President, InterVISTAS-E.U. UK Office

MEPs Vote for More Stringent Aviation Emissions Trading Members of European Parliament have voted to implement an emissions cap-and-trade system for the aviation industry in Europe which is more stringent than the EC’s original plan. Under the Commission’s plan, internal European flights would have been subject to the emissions trading scheme (ETS) from 2011, with external EU flights included from 2012. Airlines were to be allocated their average emissions for the period 2004-2006, and would need to purchase credits for emissions above these levels. MEPs have supported a plan which includes all internal and external flights beginning in 2011, and which sets each airline’s emissions allocation at 90% of their average 2004-2006 levels. The plan has been criticized by environmentalists as being inadequate, and by the aviation industry as being ineffective and unilateral. While the precise details are still to be resolved, it seems inevitable that aviation will indeed be include in the ETS, though different airlines will be exposed to different degrees. Europe’s aggressivelyexpanding LCCs, many of which have relatively young and fuel efficient fleets, will be faced with having to purchase credits for a large proportion of their future emissions due to growth. By comparison, many legacy carriers, with slower growth plans and potential fleet replacement, will find that their emissions allocations (based on 2004-2006 averages) will account for a greater proportion of their future emissions requirements. This may result in a competitive disadvantage to the LCCs.

EC Investigation Finds Airline Website Irregularities An investigation undertaken by the European Commission has found that over 50% of airline websites in Europe contain potentially illegal “irregularities”. The issues related to pricing (such as fares not being quoted inclusive of taxes and fees, which is required in Europe) and unclear or absent conditions of sale, as well as other concerns. The offending airlines will be required to change their practices, or risk penalties ranging from fines to closure of the websites.

UK Considers Easing Carry-on Restrictions The United Kingdom government will consider allowing passengers to take multiple carry on items through security beginning in January 2008. The regulation, which limits departing and connecting passengers to just one carry on item (purse or computer bag included!), has been in place since authorities discovered a plot to bring liquid explosives onboard US-bound aircraft in August 2006. From January 7, airports may seek permission from the government to allow additional hand baggage, provided they can prove their ability to maintain security levels. The UK is the only European country to limit passengers to a single cabin bag.

Page 15 November 2007

THE OTTAWA REPORT November 2007

Canada Signs Restrictive Air Transport Agreement with Singapore The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, and the Honourable David Emerson, Minister of International Trade and Minister of the Pacific Gateway and the Vancouver-Whistler Olympics, announced that a bilateral air transport agreement had been signed between Canada and the Republic of Singapore, to replace the temporary arrangement that governed air services between the two countries since the early 1990’s. Under the new air bilateral agreement, any number of air carriers from either country is allowed to operate non-stop passenger and all-cargo scheduled services between any city in Canada and Singapore, without limitations on flight frequencies. The agreement permits open code-sharing services. Fifth freedom services at intermediate stops are not included, a challenge for this route.

Martin Copeland Senior Vice President, Aviation

In response to this air bilateral announcement, the Canadian Airports Council (CAC) expressed that although Canadian airports are encouraged by the progress between the two countries and believe that the agreement will lead to future air service opportunities, Canadian airports are disappointed that an Open Skies agreement was not achieved with the Republic of Singapore. Jim Facette, CAC President and Chief Executive Officer, stated that "Canada's airports urge the government to continue its pace for reform by seeking no less that an Open Aviation Agreement across the North Atlantic similar to the one concluded between the EU and the U.S."

Canada’s Cargo Airports Unveil “Cargo Canada” The Canadian Airports Council (CAC) and 13 cargo airport members launched their “Cargo Canada” campaign at the Air Cargo Americas trade show in Miami during 7-9 November 2007. The mandate of Cargo Canada is to raise awareness of Canada as a “fast, reliable and cost-effective conduit for air cargo between North America and the rest of the world”. Airport members of Cargo Canada include Vancouver, Prince George, Calgary, Edmonton, Regina, Winnipeg, Hamilton, Toronto, Ottawa, Montréal, Halifax, Gander, and St. John’s, with two additional members expected to join in 2008.

ATAC Releases Independent Review of Greenhouse Gas Emissions The Air Transport Association of Canada (ATAC) released the first comprehensive and independent review of greenhouse gas emissions from commercial aviation operations in Canada, during its Annual General Meeting on 5 November 2007. The report shows that domestic aviation produces 1.2% of greenhouse gases in Canada and that Canadian commercial aviation contributes 0.04% of global greenhouse gases in 2005. The full report, Canadian Aviation and Greenhouse Gases Literature Review, is available on ATAC’s website.

Canada Funds Safety Programs at Whitehorse International Airport The Honourable Chuck Strahl, Minister of Indian Affairs and Northern Development and Federal Interlocutor for Métis and Non-Status Indians, on behalf of Minister Cannon, announced that the Canadian government provided nearly $1.1 million in funding towards the Airports Capital Assistance Program for Whitehorse International Airport. The funding allows for the purchase of an on-site aircraft rescue and fire fighting vehicle, related safety equipment, and modifications to the existing firehall at the airport.

Class Action for Airport Noise Denied On 26 September 2007, the Québec court of appeal upheld a lower court decision that refused to certify a class action law suit against Aéroport de Montréal on airport noise. For further information, see November 2007 article in Transportation Notes at http://www.lexcanada.com/transportation_notes.html.

Page 16 November 2007

THE WASHINGTON REPORT November 2007

AirTran Airways Launches New Service to San Juan, Puerto Rico AirTran Airways will begin non-stop service between its hub at Hartsfield-Jackson Atlanta International Airport and San Juan Luis Munoz Marin International Airport on 5 March 2008 and will begin daily, nonstop flights between Orlando International Airport and San Juan on the same day with the addition of a second daily, nonstop flight on 9 April 2008. The route will be operated by the airline’s Boeing 737-700 aircraft.

Continental Flies to London Heathrow

Jon Ash President InterVISTAS-ga2 Consulting Inc. Washington, D.C.

Continental Airlines announced plans to implement twice daily flights to London Heathrow Airport from Newark Liberty International Airport and Houston George Bush Intercontinental Airport, beginning 29 March 2008. This announcement is made possible by the open skies agreement signed between the U.S. and the European Union earlier this year and is currently subject to government and slot approval. The carrier will continue to fly to London/Gatwick from New York, Houston and Cleveland.

New York Governor Provides $16.6 Million Funds to 42 U.S. Airports The Governor of New York recently announced over $16.6 million in funding to 42 airports across the state to support infrastructure (including taxiway reconstruction and navigation aids), security and economic development projects. This is part of a comprehensive transportation plan that seeks opportunities to strengthen the aviation industry.

Department of Defence and FAA to Improve Air Travel U.S. Transportation Secretary Mary E. Peters and President Bush announced plans to minimise air travel delays for the upcoming holiday season. The proposal includes opening military airspace to commercial flights through the cooperation of the Department of Defence and the Federal Aviation Administration (FAA). Other operational changes implemented include increasing the number of aircraft that can land at airports such as JFK and Newark in poor weather conditions, as well as establishing a moratorium on non-essential maintenance and operations. The Department of Defence also proposed to increase passenger rights and protections for the upcoming travel season by making it mandatory for carriers “to create legally binding contingency plans for extended tarmac delays, respond to all consumer complaints within 30 days, publish complaint information online, and provide on-time performance information for their international flights in addition to their domestic flights.” Airlines will also begin to record all cancelled flights and tarmac delays in their monthly delay reports and increase the required financial compensation for “bumped” passengers.

FAA Program Extends Through December 2007 The U.S. House of Representatives mandated a bill on 6 November that extended the authorisation of most FAA programs through December 2007. According to Congressman Tom Petri of Wisconsin, the bill “simply continues aviation programs under the same terms and conditions as were in effect” when the last full authorization expired, on September 30, 2007.

Page 17 November 2007

INTERVISTAS NEWS InterVISTAS Develops Tools for Whistler to Offset Climate Change Impacts A recent article in the Pique Newsmagazine described steps being taken by the Resort Municipality of Whistler, co-host of the 2010 Winter Olympics, to develop web based tools to calculate and offset greenhouse gas emissions associated with inbound tourism. The article refers to services being provided by InterVISTAS in support of Whistler's climate change mitigation strategies. InterVISTAS conducts greenhouse gas and environmental audits of tourism and transportation businesses, develops web based carbon calculators, assists in developing carbon reduction strategies and facilitates sales of carbon offsets using Offsetters.ca.

Howard Mann Appointed Director, Policy and Market Analysis InterVISTAS is pleased to announce that Howard Mann has been appointed to the position of Director, Policy and Market Analysis, effective 1 December 2007. Prior to joining InterVISTAS’ Washington office 2005, Howard served with Airports Council International-North America (ACI-NA), where he worked extensively with U.S. and Canadian airport members on a wide variety of issues including bilateral air service policy, domestic air service and passenger facilitation. Howard will be responsible for managing air service development for a number of airport clients, marketing this product line through out the US, providing strategic advice and intelligence on the aviation industry, and assisting other client representatives in route analysis and business case development. He will also continue to support projects on government policy and facilitation.

Donovan Woollard Joins InterVISTAS’ Climate Change Practice InterVISTAS is pleased to announce that Donovan Woollard has joined the Environmental Services practice as Manager, Sustainability Solutions effective 1 October 2007. Donovan is a specialist in the development and application of climate change solutions. He has 10 years of experience leading sustainability initiatives with firms in the utility and real estate development sectors and has worked with sustainability oriented start-up ventures. His experience includes development and implementation of voluntary, market-based environmental quality and branding standards. He holds an MBA and a Diploma in Community Economic Development. As part of his duties, Donovan will manage marketing and business development for Offsetters Climate Neutral Society, as part of the service agreement between Offsetters and InterVISTAS Consulting.

InterVISTAS Upcoming Speaking Engagements Dr. Joe Kelly, Director, Environmental Services • BC Aviation Council Annual Conference on Aviation and Global Sustainability: Richmond, BC – 25-27 November 2007 Mr. Kelly will be delivering a presentation titled, “Aviation Greenhouse Gas Emissions: Issues, Trends and Solutions.” • German Aviation Research Society Conference 2007 – Workshop on Aviation and the Environment: Cologne, Germany – 28-29 November 2007 Mr. Kelly will be delivering a presentation titled, “Consumer Attitudes Toward Carbon Offsetting in Tourism.”

Page 18 November 2007

INTERVISTAS NEWS – CON’T Dr. Mike Tretheway, Executive Vice President and Chief Economist • German Aviation Research Society Conference on Assessing competition in the Airline Industry: Manheim, Germany – 26 & 27 November 2007 Dr. Tretheway will be speaking on the role of price discrimination in assessments of airline mergers and trade priorities. Solomon Wong, Senior Vice President, Security and Planning • 2007 ACI-NA International Aviation Issues Seminar: Washington, DC – 29 November 2007 Mr. Wong will be delivering a presentation titled, “Smart and Secure Border.” Steve Martin, Senior Vice President , Government Relations and Policy Analysis • Air Service Symposium: Washington, DC – 30 November 2007 Mr. Martin will be delivering a presentation titled, “Small Community Air Service – Issues and Challenges.” Mark Haneke, Vice President, Network and Strategic Planning • AAAE/Great Lakes National Air Service Conference: San Antonio, Texas – 24-26 February 2008 Mr. Haneke has been invited to participate on an air service development forum panel. Solomon Wong, Senior Vice President, Security and Planning, Stanley Tse, Senior Project Manager, Security and Planning • 9th Annual Border Regions in Transition: Victoria, BC / Bellingham, WA – 12-15 January 2008 Mr. Wong and Mr. Tse will be delivering a presentation titled, “Security Gateways and Corridors: Policy Implications for Emerging Gateways.”

Solomon Wong

Stanley Tse

InterVISTAS’ Canadian Aviation Intelligence Report is a collection of information gathered from public sources, such as press releases, media articles, etc., information from confidential sources, and items heard on the street. Thus, some of the information is speculative and may not materialise. To inquire about advertising opportunities or to provide comments/feedback on the InterVISTAS’ Canadian Aviation Intelligence Report, please contact Rob Beynon at rob_beynon@InterVISTAS.com or 1-604-717-1864. To subscribe, please send an email to subscribe@InterVISTAS.com To unsubscribe, please send an email to unsubscribe@InterVISTAS.com Page 19 November 2007