Aviation Intelligence Report by Leah Dupuis

JANUARY 2013

IN THIS ISSUE: CEO’s Message – p 2 Feature Articles – p 4 Airport Planning Challenges – P.3

Regional Updates – p 7 Asia-Pacific  Canada  Latin America Europe  United States

Aviation News – p 13 Traffic Updates – p 19 Aviation & Social Media – P.4

InterVISTAS News – p 23

CEO’S MESSAGE Welcome to the January edition of the Aviation Intelligence Report. In addition to our regional reports, this month’s feature articles include:  Robert Beynon’s discussion of the implications when a carrier adds a new aircraft type, such as WestJet’s coming introduction of Encore regional service using turboprop aircraft.  Julia Green discusses the rise in use of social media outlets within the airline industry, both by airlines and their customers alike.

Gerry Bruno Group Chief Executive Officer

On a personal note, I am also taking this opportunity to advise you of my upcoming retirement from InterVISTAS. After almost 16 years as CEO, the time has come to start a new chapter in my life and I will officially be leaving the firm at the end of March. I have been involved in the airports industry for almost 40 years, beginning with Transport Canada in 1974, the Vancouver Airport Authority from 1992 to 1997, and then as CEO of InterVISTAS since 1997. It has been an honour, a privilege and a pleasure working with many of you as colleagues and clients, and I thank you for the trust you have placed in our consulting services over the years. But, as everyone involved in our industry knows, it’s not that easy to get completely out. So, I am pleased to advise that I have accepted a part-time, post-retirement role with the Vancouver Airport Authority as Vice President, Government Affairs, and will be spending a lot of time in Ottawa dealing with federal government policy issues. I look forward to seeing many of you again and continuing to work with you in my new capacity. But the real news is that our Board of Directors has appointed Deborah Meehan as our new InterVISTAS Group CEO and President, effective February 4, 2013. Deborah will be based primarily in our DC office but will be spending a week a month in Vancouver and much of her time on the road visiting and advising our key clients. I am extremely pleased to be able to hand over leadership of InterVISTAS to someone who such an exceptional breadth and depth of knowledge, experience and reputation for excellence in the aviation industry. I am confident that Deborah will not only ensure continued delivery of the highest quality services our clients have come to expect, but will also expand the range of service offerings we provide into brand new areas. A copy of the press release announcing Deborah’s appointment is provided on the next page. Deborah will be reaching out to many of you over the next few months. I hope you enjoy this month’s edition of the Aviation Intelligence Report. Thanks!

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INTERVISTAS APPOINTS DEBORAH MEEHAN AS CEO InterVISTAS is pleased to announce the appointment of Deborah Meehan as InterVISTAS CEO and President effective February 4, 2013. Deborah Meehan has over 30 years of experience in aviation consulting and has been a trusted advisor to senior management at airports and airlines due to her expertise in airport planning, demand forecasts and the strategies airlines employ to serve airports. She is the former President and Chief Operating Officer of SH&E (1999-2011), a leading aviation consulting firm, now ICF SH&E. Over the years, Ms. Meehan has worked closely with the U.S. airport community, advising senior management at many of the world’s major airports, including Boston, Miami, Los Angeles, New York, Philadelphia, Baltimore, Atlanta, Denver, San Diego, Dallas/Fort Worth, Calgary, Houston, Edmonton, Athens, Greece, London Luton and Hong Kong. Ms. Meehan’s strength is her knowledge of airports, the counsel she provides to senior level executives and her understanding of the global aviation industry. As a former President of the Airport Consultant Council (1989) and Associate Board Member of ACI (2008 to 2010), Ms. Meehan’s professional network extends to airports, airlines, consultants, financial institutions and suppliers. In her career Ms. Meehan directed large, complex airport projects, especially where the consulting team represented experts from multiple disciplines including systems developers, airport architects and engineers. She has a record of success working on high intensity, controversial projects where work quality is subject to outside scrutiny. Due to her extensive expertise, Ms. Meehan has served as an expert witness on a number of aviation related cases. She has also provided expert testimony to the United States Congress Aviation Sub-Committee regarding United States/Cuba relations and Airport Privatization, and to the United States Department of Transportation in the U.S. Japan Gateways case on the demand for air travel to Japan and Asia using Washington Dulles as the U.S. Gateway. Ms. Meehan has a BA in Economics from the University of Massachusetts and an MCRP, Urban Planning, from Harvard University. InterVISTAS Chairman, Roel Overakker, said, “We are delighted to have attracted someone of Deborah Meehan’s caliber to lead InterVISTAS to the next level as a global aviation consultancy.” As part of RoyalHaskoningDHV, InterVISTAS is a leading management consulting company with extensive expertise in aviation, transportation and tourism. With offices in Vancouver, Washington, London and The Hague, InterVISTAS’ 80 staff has delivered strategic solutions and successful results to hundreds of clients in over 70 countries around the world. For more information, contact Gerry Bruno at +1-604-717-1888 or at gerry.bruno@InterVISTAS.com

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CHANGING AIR CARRIER PLANS CREATE TERMINAL AND APRON PLANNING CHALLENGES Robert Beynon Vice President, Planning and Development Economics

Managing an airport’s terminal building and the adjoining aircraft apron is one of the key functions of airport management. Much of the customer’s experience occurs here, and a passenger’s satisfaction (or dissatisfaction) is largely based on experiences in this area. WestJet’s plan to introduce its new Encore regional service with turbo prop aircraft in Canada has many airport managers assessing the implications for their terminal buildings, gates, loading bridges and apron management and development. WestJet plans to introduce its new regional service of Bombardier Q400s in June, 2013. The difficulty for airport managers is that many airports have developed long-term plans around jet aircraft such as Boeing 737s. This assumption had implied developing appropriately sized seating areas within the terminal building, planning for loading bridges if traffic justified it, and allocating apron positions for ICAO Code C aircraft. If these airports are now going to see little or no jet service, the infrastructure and related operating requirements change and may have capital implications. The key question is whether to ground-load or bridge-load this type of aircraft. The introduction of ground loading operations at airports served by numerous bridges may be problematic. This may cause airport operators to rethink or reorganize their existing terminal layouts in order to accommodate the changing environments in aircraft operations to adequately utilize terminal space. The key difficulty for airport managers looking at this is managing risk and capital budgets. The shift in aircraft gauge may make infrastructure still being paid off redundant, or require the construction of new, unplanned, infrastructure. As WestJet plans and the competitive response of Air Canada and other carriers remain unclear, this adds up to a fair bit of planning uncertainty for many airport managers over the next few years.

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LETâ&#x20AC;&#x2122;S CONVERSE! ENGAGING CONSUMERS DIRECTLY VIA SOCIAL MEDIA Julia Green Project Analyst

Social Media provides a means of sharing information. With more than 1.5 billion consumers around the globe using social networking sites, marketing departments have shifted their attention to social media. Social media allows organizations to extend their reach and build meaningful relationships with consumers. Organizations are not just advertising, they are listening to unfiltered conversations and collecting large amounts of data on consumer behavior. This means of consumer engagement is impacting the way organizations create, deliver and capture value. Popular social media platforms include Twitter, Facebook and YouTube. Alternate platforms include Foursquare, Linkedin and Pinterest.

Airlines & Social Media Most airlines have launched social media efforts in order to connect with passengers. With flight delays, lost baggage and tight connections, air travel can be a stressful experience and passengers are not afraid to share their frustrations on social networks. Given the current pressures facing the airline industry (high operating costs, competition, etc.), the importance of engaging with consumers is more apparent now than ever. Airlines are using social media to create value for consumers in the following ways: 1) News source: Social media is being used by airlines as a way to share information on promotional airfare offers, weather delays and corporate announcements. For instance, following the volcanic eruption in Iceland that created huge delays in the north Atlantic air system, many airlines took to social media to keep passengers informed about these delays. 2) Customer service: Airline industry players are also using social media platforms as customer service tools. Airlines are using platforms like Twitter and Facebook to field complaints, inquiries and compliments. 3) Brand awareness and engagement: Airlines are now able to engage with consumers in a more sincere and human way using social platforms. For instance, American Airlines has used social media as a way to re-align its brand positioning. As recently as October 2011, Amplicate's1 social media analytics report determined that American Airlines was the mosthated U.S. airline. According to the report, only 12% of the comments about American Airlines were positive. Since then, American Airlines has made social media engagement a priority and is garnering praise for its fresh, interactive and non-scripted approach to interacting with consumers.

Amplicate is a social media analytics service that began collating opinions from social media in August 2009. Amplicate now tracks 140 million public opinions from over 29 million social media users. Amplicate provides access to detailed data and analysis on consumer opinions in their social media analytics reports.

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The use of social media is creating value for airlines in the following ways: 1) Consumer behavior: With consumers interacting via multiple online interfaces and points along the value chain, there is an opportunity to collect large amounts of data on consumer behavior. Airlines are able collect and analyze consumer feedback and make improvements to their products and services. Airlines have always recognized the power of consumer data, but now more than ever, knowing passengers provides an invaluable competitive advantage. 2) Reach: With social platforms, airlines are able to reach a global audience and address consumer inquiries in both an intimate (personalized) and public (mass messaging) way. 3) Internal communications: Research from the McKinsey Global Institute, indicates that the use of social technologies for internal collaboration and communication may improve the productivity of employees. Unlike email, messages on social platforms are accessible to the entire team in real time. In addition, any communications on social platforms become content, forming a searchable archive that can be continually enriched with comments and additions by members of the online community. 4) PR management: There are several notable examples of airlines that have dealt with PR crises stemming from social media sharing. Airlines who recover quickly are those who use social media platforms to their advantage by addressing issues head-on. A good example is an incident Southwest Airlines dealt with in February 2011, when Hollywood Director Kevin Smith used Twitter to express his dissatisfaction with being escorted off a Southwest flight because of his weight. The tweet immediately reached Kevin Smith’s 1.5 million Twitter followers. Southwest reportedly responded in less than 20 minutes with an apologetic tweet and also contacted Kevin Smith personally, accommodated him on another flight and gave him a $100 travel voucher for his inconvenience. This incident demonstrates how customer relations and public relations are increasingly overlapping in the digital age, and how an airline can use social media to proactively address consumer complaints. In response to these benefits, airlines are dedicating more resources to social media. There are two resource allocation models: 1) dedicated model – employ staff that are solely dedicated to social media or 2) integrated model – train staff from various departments on social media. Airlines using the dedicated model include Virgin America and KLM, and airlines using the integrated model include JetBlue and Southwest. More and more, airlines are using social media to interact with consumers. The correlation between the most loved carriers and their strong social media presence is no coincidence. These airlines have been developing their social media presence and have committed to innovation in customer service and online community development. Below is a table that summarizes the social media presence of some of the world’s most “engaged” airlines (as of December 2, 2012). Facebook Likes AirAsia American Airlines British Airways Emirates JetBlue

Page 6 January 2013

Twitter Followers

Twitter Tweets

1.7 million

537,000

15,000

443,000

469,000

102,000 68,000

568,000

215,000

1.2 million

N/A

685,000

1.7 million

51,000

KLM

2.3 million

323,000

100,000

Southwest

3.3 million

1.4 million

10,000

Virgin America

282,000

369,000

18,000

WestJet

326,000

179,000

31,000

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ASIA-PACIFIC REPORT Singapore Airlines ends world’s longest commercial flights

Doris Mak Director, Special Projects

The 18-hour, 9,500-mile non-stop flight between Singapore and Newark is being cancelled. Singapore Airlines also announced late October that their non-stop commercial flights between Singapore and Los Angeles will cease. The Newark flight is the longest flight measured by distance, while the Los Angeles flight has the longest flight duration. The Los Angeles flight has a shorter distance at about 8,000 miles; however, due to the headwinds over the Pacific Ocean, the Newark flight path over the North Pole arrives within a shorter time frame. The Newark-Singapore flight lasts about 18 hours, while the Los Angeles-Singapore flight lasts about 18.5 hours. Both all-business-class flights were operated with Airbus A340-500s. The five A340-500s will be sold back to Airbus, and Singapore Airlines will order five more Airbus A380s and 20 A350s. The two longest flights in the world started in 2004, and will stop service at the end of 2013. Singapore Airlines will continue to fly to Newark and Los Angeles with stops via other cities. The Newark flight will continue on the existing A380 route with a connection to Frankfurt, while the current Los Angeles A380 flight through Tokyo will also continue its current service. The end of the long commercial flights is a result of higher fuel prices and a weaker demand for premium business travel. Compared to shorter routes, the added weight of the fuel needed to fly for more than 15 hours uses more fuel per mile. The airfare per mile does not increase, however. When the cost of fuel was lower and there were more business and luxury travelers, the costs were absorbed by the airline. With the economic downturn and fuel cost increases, fewer travelers were willing to pay premium fees leaving longer haul flights less profitable. At least three other ultra long-haul flights of more than 15 hours have been cancelled in the past year, including Thai Airways’ flight between Bangkok and Los Angeles, Delta Air Lines’ route from Detroit to Hong Kong and American Airlines’ service from Chicago to New Delhi. With the cancellation of Singapore Airlines’ flights, the world’s longest commercial flight will be Qantas Airways’ Dallas-Fort Worth to Sydney flight at about 8,500 miles. The longest duration flight will be Delta Air Lines’ service between Johannesburg and Atlanta at over 17 hours.

Virgin Australia agrees to acquire Skywest and Tiger Airways Virgin Australia has announced three major transactions in hopes of increasing growth and competition in the Australian market. Australia’s second largest carrier released its plans on entering a Share Purchase Agreement (SPA) to acquire 60% of the existing shares in Tiger Australia from Tiger Airways, and an in-principle agreement to acquire 100% of the shares of Skywest Airlines. As well, Singapore Airlines will own 10% of Virgin Australia’s interest. Subject to conditions and regulatory approvals by multiple parties, including the Australian Competition and Consumer Commission (ACCC), both Tiger and Skywest will continue to operate under their own management teams. While Tiger Australia will remain its own brand, Skywest will become a part of the Virgin Australia brand. The Skywest transaction was recently approved by the ACCC, and the ruling for the Tiger Australia transaction is set to come on February 7th, 2013. The Skywest transaction still requires approval from three parties: the Foreign Investment Review Board, Skywest shareholders and from the High Court of Singapore The recent transactions create the opportunity for Virgin to accelerate its growth, and expand its sources of revenue. Additionally, it will increase competition in various areas with access to a low cost carrier, Fly-in Fly-out (a method of employing people in remote areas) and regional markets. The new acquisitions allow Tiger and Skywest to compete with Qantas’ subsidiary JetStar and QantasLink respectively. Following the completion of the transactions, the Virgin Australia Group will employ over 9,000 persons and have a total of 139 aircraft in its fleet.

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CANADA REPORT Canada expands air bilateral air agreement with China. In a recent trade trip to China, Transport Minister Denis Lebel and Chinese Vice-Administrator Xia signed amendments to the existing bilateral air transport agreement. The expanded agreement will provide both countries with additional flexibility for airline routings and pricing and allows them to respond to market developments. China is one of Canada’s fastest growing in-bound travel markets, growing by 24.4% in 2011 compared with 2010, according to the Asia Pacific Foundation of Canada.

Debra Ward Executive Consultant

Senior appointments bring new experience to Transport Canada. In a move that may more closely align transport policies with key federal objectives, the government has named two individuals with extensive policy expertise to Transport Canada. Louis Lévesque, the new Deputy Minister, served as Deputy Minister, International Trade since 2008. Mr. Lévesque also boasts considerable depth in other key government departments, previously serving as Associate Deputy Minister of Finance and in the Privy Council Office. Scott Streiner, now Assistant Deputy Minister for Policy, replacing Kristine Burr, comes to this position fresh from his role as Executive Director of the Aerospace Review, working on the long-term competitiveness of Canada’s aerospace and space sectors.

In other appointment news… Mark B Laroche has been named as CEO of the Ottawa Airport Authority. Previously, Mr. Laroche served as President and Chief Executive Officer of Canada Lands Company CLC Limited. Martin Loken, former Canada’s Consul General in Minneapolis, has been named to the position of Chief Air Negotiator at the department of Foreign Affairs and International Trade. Mr. Loken is also Director General, Intellectual Property and Services Trade Policy Bureau.

Budget bill C-45 includes electronic travel authorization (ETA), other travel-related legislation. The government’s second 400-odd paged omnibus budget bill, C-45, contains a number of non-fiscal legislative actions that impact international travel to Canada. This includes the implementation of electronic travel authorization (ETA), a pre-screening system that requires all non-U.S. citizens who do not require visas to submit their information on-line before travelling to Canada. According to official documents, the ETA “will mirror measures taken in the United States through its Electronic System for Travel Authorization and Advance Passenger Information System Quick Query systems.” and is part of the Beyond the Border perimeter security agreement which calls for the establishment of a common North American approach to screening travellers. A related piece of legislation in C-45 is the Interactive Advance Passenger Information (IAPI) initiative which will allow the CBSA to take steps to prevent high-risk or improperly documented travellers from boarding a plane destined for Canada. The act also includes another Beyond the Border provision, the Advance Data Requirements for Pre-Screening Cargo which will harmonize the security requirements for cargo imports between both countries. These proposed amendments to the Customs Act will allow for regulatory changes requiring provision of cargo manifest information before loading at foreign ports. Portions of the bill are being reviewed by a number of House and Senate committees, including the Senate Committee on Transportation and Communications. This has led to a delay of the next report on Emerging Issues in the Canadian Airline Industry, now scheduled for the first quarter of 2013. Page 8 January 2013

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EUROPE REPORT EU suspends ETS airline emissions trading Due to international action on a global emissions deal, the European Union (EU) has suspended its trading rules that require airlines to pay for their carbon emissions when flying to and from airports in the EU.

Ian Kincaid Vice President, Economic Analysis

The European Union Emissions Trading System (EU ETS) began in 2005, initially covering factories and other land-based emitters, but extended coverage to airlines as of January 2012. The EU ETS requires airlines to pay a tax on aircraft emissions from all domestic and international flights that land or take off from an EU airport. The first installment under the system was due in April 2013. Airlines using the EU airports indicate that the tax will cost 17.5 billion euros over eight years, while the EU argued that it only increases the price of a long haul flight by four to 24 euros. The EU ETS airline suspension results from the United Nations International Civil Aviation Organization (ICAO)’s agreement to move towards a market-based mechanism for emissions trading, making progress on a global emissions deal that the EU has desired for years. However, the EU indicated that the ETS tax on airlines will be reintroduced by the fall of 2013 if ICAO did not continue toward a global accord. The year-long suspension only affects international flights, as the EU ETS still applies to internal flights within the 27 member-countries of the EU. The decision to postpone the tax has been positively welcomed by non-European countries who have been putting pressure on the EU to pursue a different system. The United States, China, India and Russia have strongly opposed the EU ETS, with India planning on not complying with the tax prior to the suspension. With the development of a new system, China has indicated that it will continue to work with the different parties involved with climate change.

Aegean Airlines agrees to purchase Olympic Air On October 22, Aegean Airlines reached a decision to buy Olympic Air for 72 million euros (US$94 million). The deal, which is subject to approval by competition authorities, would transfer full control of Olympic Air from Marfin Investment Fund to Aegean Airlines. Olympic Air will be listed as a subsidiary of Aegean, creating the biggest Greek carrier. The carriers will maintain their names, logos, fleet, staff and current operations. With a combined US$2 billion in new fleets, together the carriers will fly to 115 domestic and international destinations through a total of 50 aircrafts (29 for Aegean and 21 for Olympic), controlling more than 90% of the Greek domestic air transport market. Aegean has previously attempted to merge with Olympic Air in 2011; however, was prohibited by the European commission on the basis that the combined carriers would dominate the domestic air market, creating a quasi-monopoly in the country. However due to Greece’s economic recession, both firms have experienced a financial loss and shrink in market size. The merger brings hope that the Greek carrier will be able to compete with foreign carriers, thus improving Greek tourism.

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LATIN AMERICA REPORT Brazilian government announces second phase of airport concessions and modernization Brazilian President Dilma Rousseff announced on December 20th the Logistics Investment Program – Airports, a program to improve the infrastructure and quality of airport services and to increase access to air transportation for the Brazilian population. President Rousseff said, “I'm sure 2013 will be a year for growth and advancement in our economy. In 2013, we will reap the fruits of 2012, when we instituted a policy for logistics - now complete with today’s milestone for airports and aviation.”

Kenneth Currie Executive Vice President, Finance and Privatisation

Major elements of the Logistics Investment Program - Airports include: 



  

Concession of Tom Jobim Galeão International Airport serving the City of Rio de Janeiro, and Tancredo Neves Confins International Airport serving Belo Horizonte, Minas Gerais. Unlike the previous concessions, bidders must include an operator with experience in managing airports with over 35 million passengers per year, and the successful operator must retain a minimum of 25 percent shareholding in the bidding consortium. Creation of a new subsidiary of Brazil’s National Airport Infrastructure Company, INFRAERO. “INFRAERO Services,” in partnership with an international operator is envisioned to offer planning services, consulting, management, operations support, personnel training and other services related to the operation of airports in Brazil and abroad. Investments and incentives of BRL 7.3 billion (about USD 3.6 billion) to strengthen and expand regional aviation at 270 airports so that 96% of the population has access to commercial air service at an airport within 100 kilometers. Regulatory reform to improve arrival and departure time slots at airports already operating at full capacity. A decree to regulate the authorization of new airports dedicated to general aviation that shall include protocols for executive aviation, air taxi, training (flying clubs and flight schools), specialized services (agricultural, advertising, firefighting), test flights, as well as marketing and maintenance in order to increase the supply of airport infrastructure dedicated to these uses. According to the Brazilian Association of General Aviation (ABAG) the general aviation fleet registered in Brazil increased 6.3% annually in 2011 to a total of 13,094 aircraft.

American Airlines increases capacity to South America American Airlines (“American”) announced new services between Dallas/Fort Worth and Bogotá, Colombia and between Miami and Porto Alegre and Curitiba, Brazil along with new code-share agreements with TAM Linhas Aereas (“TAM”) and LAN Colombia. American has historically been the largest airline by seat capacity between North America and South America. American had a 35% capacity share in January 2013, which is larger than the next three largest airlines combined. In 2012, American increased seat capacity 8.9% per annum, while seat capacity on all airlines has increased an average 7.3% per annum. American’s code share agreements with TAM and LAN Colombia add ties with new LATAM Airlines Group members, and broaden and deepen the long-term relationship American has had with LAN Airlines. TAM will provide connecting services from nine gateways American serves in Brazil. LAN Colombia will provide connections from three gateways American serves in Colombia. American will provide LAN and TAM connecting services throughout the United States.

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UNITED STATES REPORT GAO: Incumbent Airlines Are Babysitting Slots The congressional audit and evaluation agency, the Government Accountability Office (GAO), reported that airlines are effectively taking advantage of FAA’s existing slot rules and oversight to babysit coveted slots with small aircraft. The effect of this is to underutilize scarce capacity and perhaps to exclude new entrants. [See GAO report number GAO-12-902].

Steve Martin Senior Vice President

FAA’s existing slot control rules, intended to help manage congestion at the nation’s four slotcontrolled airports (Washington Reagan National, New York Kennedy, New York LaGuardia, and Newark Liberty), effectively allow slots to go unused. Existing slot-holders are not required to schedule a flight for each of their slots, but instead are only required to use their slots 80 percent of the time. Moreover, FAA’s recordkeeping and its process for reviewing airlines’ self-reported slot utilization data do not provide sufficient assurance that FAA can identify instances when airlines do not meet the 80 percent utilization requirement or determine how much capacity is going unused. In addition to some existing capacity going unused, flights at the slot-controlled airports, even when operated, tend to be scheduled in such a way that available capacity is used more inefficiently than at like-sized airports that are not slot-controlled. This limits passenger growth and access by newentrant airlines that could offer new service or lower fares. For example, GAO found that flights operated at slot-controlled airports tend to be scheduled with smaller aircraft. Using statistical analyses, GAO found that scheduled passenger flights at slot-controlled airports are 75 percent more likely to be scheduled by airlines using an aircraft with fewer than 100 seats than flights at other likesized airports that are not slot-controlled. GAO’s analysis found that the greatest use of smaller aircraft occurs at LaGuardia, where airlines were more than twice as likely to use aircraft with fewer than 100 or 80 seats as carriers operating at the average large airport. At JFK, the usage was 63% more likely at the 100-seat cutoff and 22% more likely at 80 seats. At Newark Liberty, the usage was 22% higher at 100 seats and 26% at 80 seats, and at Washington Reagan, it was 72% higher at 100 seats and 41% at 80 seats.

White House Unveils Impacts of Sequestration; Aviation-related Cuts Approach $2.5 Billion The White House Office and Management and Budget released a 394-page report that details how defense and nondefense spending would be cut effective January 2. Unless Congress agrees on a plan to reduce federal spending or postpone action, the Budget Control Act of 2011 calls for $1.2 trillion in spending cuts to take place over the next nine years. Of that amount, $492 billion would come from defense and an equal amount from non-defense programs. The proposed cuts would slash spending by $109 billion in fiscal year 2013. The White House report outlines cuts of over $2 billion for the budgets of the FAA, TSA, and CBP. The report says that the, “Federal Aviation Administration’s ability to oversee and manage the Nation’s airspace and air traffic control would be reduced.” Cuts anticipated for FAA total $1,021 million:  FAA Operations would be reduced by $377 million.  “FAA activities” paid for from the Airport and Airway Trust Fund would be cut by $415 million.  Facilities and Equipment would be cut by another $229 million. For TSA, funding for aviation security would also be reduced by 8.2 percent — or approximately $429 million. It also says that the number of Customs and Border Patrol agents “would be slashed.” Total reductions to CBP’s budget approach $950 million. Page 11 January 2013

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The cuts are the result of the bipartisan agreement made last year that accompanied the need to raise the nation’s debt ceiling. As part of the Budget Control Act, Congress appointed a 12-member “supercommittee” to reduce the deficit by $1.2 trillion over the next 10 years. Because the committee failed to reach agreement, the act set automatic cuts to both domestic and defense programs. The Congressional Budget Office has reported that the cuts would push the economy back into a recession. The sequester can be avoided if Congress passes another budget that would achieve at least $1.2 trillion in deficit reduction. A “stopgap” spending measure that would postpone the effective date of the Budget Control Act by a few months is also possible, and would allow the Congress more time to reach a compromise. Since the election, the President and House Republicans have restarted their talks to avert the need for these cuts to take place (the “fiscal cliff,” in which both spending cuts and tax increases would kick in simultaneously). Agency Budget account FAA

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FY 2012 Appropriation

Request

FY 2013 House Senate Sequester

Operations ATO Air Safety Other Facilities and Equipment Grants to Airports (AIP) Research & Development TOTAL

9,653 7,443 1,253 958 2,731 3,435 168 15,987

9,718 7,514 1,255 949 2,850 3,400 180 16,148

CBP

Headquarters Mgmt & Admin Border Security Inspections & Trade Facilitation Border Security between POEs Air and Marine Operations (Salaries) TOTAL

1,869 2,904 3,620 288 8,681

1,882 1,431 1879 2,960 3,044 2977 3,626 3,606 3626 281 285 288 8,749 8,366 8,770

‐823

TSA

Aviation Security Surface Transportation Security Transportation Threat Assessment Transportation Security Support Federal Air Marshals TOTAL

5,254 135 200 1,032 966 7,587

5,098 124 192 970 929 7,390

‐448 ‐11 ‐20 ‐85 ‐79 ‐643

9,718 7,514 1,255 949 2,750 3,400 175 16,043

5,041 126 192 929 880 7,168

9,698 7,496 1,255 947 2,750 3,350 160 15,958

5087 124 192 970 929 7302

‐792

‐229 ‐14 ‐1021

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AVIATION NEWS ASIA-PACIFIC UPDATE CATHAY PACIFIC SETS SIGHTS ON GROWTH IN INDIA Cathay Pacific has identified India as a strong growth market despite world aviation being at a low point. It became the first airline to provide service between Hyderabad and Hong Kong, offering four flights per week. The airline has noted strong corporate and student traffic and sees a potential for leisure traffic as well. An influx of IT and pharmaceutical companies into the city of Hyperabad has contributed extensively to the region’s potential market growth. INCHEON AIRPORT CONSIDERS BUILDING ANOTHER TERMINAL Due to a sevenfold increase in passengers traveling on lowcost carriers through Korea’s Incheon Airport, the airport management team is considering building a dedicated low-cost carrier terminal. Around 12 budget carriers currently offer flights to the airport, including AirAsia and Peach Aviation. Passengers of these low-cost carriers will account for about 8 percent of the 39 million travelers expected to come through Incheon Airport this year. BOEING EXPANDS FOCUS IN ASIA-PACIFIC Boeing Flight Services, the training arm of the U.S. aircraft maker, is increasing its presence in the Asia-Pacific region amidst worries that airlines in the region will be unable to provide the necessary number of skilled workers to match fleet growth. Specifically, Singapore’s Aerospace industry is competing for educated talent with the high paying finance industry. Many of Boeing’s largest customers are based in Southeast Asia, including Singapore Airlines and Indonesia’s Lion Air.

Page 13 January 2013

PHILIPPINE AIRLINES FLIES TO TORONTO Philippine Airlines (PAL) launched a non-stop, 17hour flight to Toronto at the end of November. The change precedes the cancellation of PAL’s Las Vegas service in early January 2013. While the flight will be non-stop from Manila to Toronto, the return flight from Toronto to Manila will have one stop in Vancouver. The new service from Manila to Toronto will operate three times a week, while the current daily service from Manila to Vancouver will decrease to four times a week. The service will be operated with PAL’s new Boeing 777-300ER aircraft. HONG KONG NAMED TOP AIR CARGO AIRPORT The Hong Kong International Airport (HKIA)’s annual freight volume of about 3.7 million tons has earned the airport a place as the busiest cargo airport in the world. With a US$274 million throughput value, it accounts for one third of Hong Kong’s total trade volume. HKIA’s two air cargo terminals, including Super Terminal, the world’s second-largest stand-alone air handling facility, increased the airport’s opportunity for growth. FIRST DIRECT SERVICE BETWEEN SAN DIEGO AND ASIA On December 2, 2012, Japan Airlines (JAL) commenced the first direct, non-stop flight between Asia and San Diego with the 787 Dreamliner. The four weekly flights between Tokyo Narita and San Diego will increase to daily service beginning March 2013. JAL will be offering an exclusive in-flight menu to celebrate the launch for about two months after the initial flight.

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KINGFISHER AIRLINES OPERATOR PERMIT NOT RENEWED FOR 2013 Debt-ridden Kingfisher Airlines' operators permit was not renewed at the end of 2012. The airline ceased flights in October following passenger safety issues and financial difficulty. Unable to develop a suitable revival plan, Kingfisher must now wait two years before reapplying for renewal of its permit.

MAJOR CANADIAN AIRLINES ANNOUNCE YEAR- END LOAD FACTOR NUMBERS Air Canada, WestJet and Porter reported favourable load factor results for the month of December 2012. Air Canada reported a load factor of 82.1 percent, an increase of 1.1 percentage points compared to the airline’s 2011 results. WestJet reported a record load factor of 81.9 percent. Porter Airlines reported a 64.3 percent load factor, an increase of 0.5 percentage points from last year.

CANADA UPDATE

VANCOUVER AIRPORT AUTHORITY’S PRESIDENT/CEO RETIRES Announced in late October 2012, Larry Berg, the President and CEO of the Vancouver Airport Authority will be retiring in 2013. Having been with the Vancouver Airport Authority for 20 years, 15 years as President and CEO, Mr. Berg led Vancouver International Airport (YVR)‘s accomplishments such as handling high passenger volumes during the 2010 Winter Olympic and Paralympic Games, the Canada Line and making YVR one of the best airports in the world. Mr. Berg will continue serving as President and CEO until the Airport Authority’s international search for a successor is complete. The Vancouver Airport Authority hopes to fill the position by the end of the first quarter of 2013.

CANADA-SAUDI ARABIA AIR BILATERAL AMENDED FOR GREATER FREEDOMS Airlines in Canada and Saudi Arabia will gain new freedoms to fly between the two countries with a newly-expanded air bilateral agreement. Amendments negotiated during the ICAO Air Services Negotiation Conference in Jeddah allow airlines from either country greater freedom in determining routes and pricing WESTJET EXPECTS BOOST FROM PREMIUM ECONOMY SEATING WestJet is anticipating an increase to its bottom line with the introduction of both premium economy seating and a new in-flight entertainment system. The Airline will provide 24 premium economy seats on each of its aircraft. Premium seat ticket holders will have priority boarding and will be able to refund their tickets. The new in-flight entertainment system will allow passengers to connect their own device and receive internet content. AIR CANADA ANNOUNCES NAME OF NEW LOW COST CARRIER Air Canada’s new low cost carrier is to be named “Rouge”. Services to the Caribbean as well as Europe will be offered beginning in July 2013. More routes are expected to open up in winter 2013. The airline plans to reach 50 aircraft in three to five years. Air Canada’s new airline will compete directly with Transat, WestJet Vacations and Sunwing Travel Group for the growing leisure segment in Canada.

Page 14 January 2013

WINNIPEG AIRPORT AUTHORITY ANNOUNCES NEW CHAIR AND VICE-CHAIR Winnipeg Airports Authority (WAA) has announced the election of Garth Smorang as chair and Tom Payne Jr. as vice-chair of the airport authority’s board of directors. Mr. Smorang is a partner at the Myers Weinberg LLP law firm with areas of practice in employment and labour. Mr. Payne Jr. is CEO and president of Payne Transportation LP and was a director on WAA’s board before being elected vice-chair.

Realizing the vision together

1 CANADIAN AIR DIVISION HEADQUARTERS APPOINTS HONORARY COLONEL The 1 Canadian Air Division appointed Barry Rempel, president and CEO of the Winnipeg Airports Authority, as their first-ever honorary colonel. Over the past 37 years, HCol Rempel has worked at two airport authorities and two Canadian airline operating divisions. He is also a director of the Canadian Airports Council, Centreport Canada and many other organizations. The Air Force honorary colonel program promotes community support and connects Canadians with their Air Force. CANADIAN GOVERNMENT ANNOUNCES NEW DEPUTY MINISTER OF TRANSPORT The Canadian Federal Government shuffled the country’s economic top civil servants. One of the changes includes the appointment of Louis Lévesque as Deputy Minister of Transport, Infrastructure and Communities, who replaces former deputy minister Yaprak Baltacioglu. Prior to Mr. Lévesque’s new appointment, he served as deputy minister in other departments, including international trade and intergovernmental affairs in the Privy Council Office. THE CANADIAN AIRPORTS COUNCIL APPOINTS NEW BOARD MEMBERS Lloyd McCoomb, former president and CEO of the Greater Toronto Airports Authority, has been selected as the new chairperson of the Canadian Air Transport Security Authority (CATSA), replacing former chair Ian Glen. Dr. McCoomb has also served on the board of directors of the Canadian Airports Council (CAC), bringing more than 35 years of experience in transportation and engineering management. In addition, the CAC appointed Peter Wallis to CATSA’s board of directors. Mr. Wallis is the Van Horne Institute President and CEO, and serves on the board of directors of Fort McMurray Airport.

Page 15 January 2013

EUROPE UPDATE IBERIA PILOTS ENTER NEGOTIATION DISCUSSIONS Iberia has entered into discussions with its pilots over its radical productivity and costcutting proposals. International Airlines Group, the airline’s parent company, reported that the airline had a €262 million operating loss in the first nine months of 2012. An Iberia spokesman noted that they continue to lose around €1 million a day. A restructuring plan has been initiated although more cuts are imminent if an agreement with employees is not reached by the end of January. EASTJET’S DIVIDENDS DOUBLE AS COMPETITORS STRUGGLE EasyJet has doubled its dividends amidst the looming Eurozone crisis that forced several of its competitors out of business. Increasing fuel costs and lowered consumer confidence have also made it hard on competition. The British low-cost carrier reported a pre-tax profit of 28 percent for the year up until September 2012. NEW FOUR POINTS BY SHERATON HOTEL TO BE BUILT BY BERLIN AIRPORT The still-under-construction Berlin Brandenburg International Airport will have a Four Points by Sheraton hotel a few kilometers away. Scheduled to open in 2014, the Four Points by Sheraton Berlin Airport is hoping to attract business travelers looking for moderate accommodation prices. The Berlin Brandenburg International Airport is scheduled to open at the end of 2013, and is projected to be the third busiest airport in Germany.

Realizing the vision together

NEW FLIGHTS FROM KENT TO AMSTERDAM KLM Royal Dutch Airline is offering a twice daily service from the Manston Airport in Kent to Schiphol Airport in Amsterdam. The 55-minute direct flight will link Kent to more than 130 destinations from Amsterdam. The introduction of the new service is the result of a survey conducted by Manston Airport, at the request of KLM. The majority of survey respondents specified that they preferred Manston Airport to other airports in the area. 80% of the survey respondents indicated they would use a direct service to from Kent to Amsterdam.

LATIN AMERICA UPDATE ALTA PUSHES FOR SMALL AIRLINE SAFETY STANDARDS The International Air Transport Association (IATA) is called upon by the Latin American and Caribbean Air Transport Association (ALTA) to pursue a set of safety standards for airlines not qualified for the IATA Operational Safety Audit (IOSA) program. Despite declining accident rates in Latin America, the non-IOSA airlines still have four-times the accident rate than the program members. NonIOSA airlines do not qualify for the program because of their size or the type of aircraft they fly. IATA indicated that they are hoping to partner with other organizations that specialize in smaller aircraft. By 2014, ALTA aims to reduce the accident of their member airlines to match that of the USA. JETBLUE LAUNCHES SIXTH DESTINATION TO THE DOMINICAN REPUBLIC With more flights in and out of the Dominican Republic than any other carrier, JetBlue Airways announced Samana will be its newest destination. The Samana service will be JetBlue’s sixth destination in the Dominican Republic. The airline will offer twice weekly flights between John F. Kennedy International Airport (JFK) in New York and Samana’s President Juan Bosch International Airport (AZS). This JetBlue flight is currently the only service between the United States and Samana. Page 16 January 2013

NEW OPEN SKIES AGREEMENT BETWEEN COSTA RICA AND QATAR Qatar now joins Brazil, Canada, the United States and Mexico on the list of countries with which Costa Rica has Open Skies agreements. Through minimized government intervention in air transport, Open Skies agreements hope to liberalize the rules and regulations of international aviation, creating a free market environment for the airlines. Costa Rica and Qatar aim to see a growth in the number of flights, as well as an increase in tourism between the countries. The agreement allows Costa Rica to operate routes and perform layovers in Qatar. The same privileges apply to Qatar at Costa Rican airports. Costa Rica is presently negotiating Open Skies agreements with Chile, China and Belgium.

MIDDLE EAST / AFRICA UPDATE ABU DHABI TO LAUNCH NEW AIRPORT TERMINAL BY 2017 Abu Dhabi Airport announced it will commence operations at its new airport terminal by the second quarter of 2017. The airports fourth terminal will add capacity for an additional 30 million passengers to move through the airport annually. Abu Dhabi airport, home to Etihad Airways, has emerged in the past two years as a significant competitor to the larger airport in neighbouring Dubai, where Emirates Airways is based. QATAR AIRWAYS TO SELL STAKE IN CARGOLUX Qatar Airways has decided to sell its 35 percent stake in Cargolux, Luxembourg’s all-cargo airline, after a disagreement with shareholders over the airlines future.

Realizing the vision together

ETIHAD NAMED LEADING AIRLINE For the 4th year in a row, Etihad Airways received the title of “World’s Leading Airline” at the World Travel Awards in New Delhi, India. The awards are decided through a voting process of industry professionals. EMIRATES LOOKS TO OBTAIN 30 MORE A380S Tim Clark, President of Emirates Airways, is looking to add another 30 Airbus A380 superjumbos to the airline’s existing order of 90 aircraft. Emirates, the world’s largest airline by international traffic, and the biggest A380 customer to date, added 15 new international destinations last year and boosted existing routes. As a result, there is a strong demand for additional A380 superjumbo aircraft. Emirates Airways does face growth constraints due to limited terminal space in Dubai and limited airport opening hours elsewhere. ETIHAD AND EMIRATES AIRWAYS EXPAND FLIGHTS TO THE PHILIPPINES With an anticipated large number of tourists from the Middle East to the Philippines, the major airlines in the Middle East already have their preparations under way with increased flight services. Etihad and Emirates Airways will begin daily direct flights from Dubai to Manila starting in December 2012 and January 2013, respectively. The new services were agreed upon at the 18th World Routes Development forum, in the wake of the first Middle East-Philippine Travel Exchange.

UNITED STATES UPDATE GROWTH OF THE U.S. AEROSPACE INDUSTRY The Aerospace Industries Association (AIA) has released a preliminary report estimating that the U.S. aerospace industry will see sales growth of 3.4 percent to $218 billion. The industry will celebrate its 9th consecutive year of growth. AIA predicts that overall projections for 2013 are positive, excluding domestic military sales. Page 17 January 2013

MICHAEL HUERTA CONFIRMED AS FAA ADMINISTRATOR Michael Huerta, acting administrator of the FAA, has been confirmed to head the agency by the US Senate. Huerta was promoted to acting administrator in December 2011, following the resignation of Randy Babbitt, and was nominated by US president Barack Obama in March 2012 to lead the agency. Huerta will serve a five-year term with the FAA and has been stressing the importance of upgrading the U.S. air traffic control system. AMERICAN AIRLINES ANNOUNCES NEW INTERNATIONAL FLIGHTS American Airlines (AA) plans to launch new international services to Asia, Europe and Latin America. The new routes, which are subject to regulatory approval, were developed to strengthen AA’s hub markets and meet customer demand. Flying from AA’s largest hub at the Dallas-Fort Worth International Airport (DFW), a direct daily service operated with a Boeing 777-200 aircraft to Seoul, South Korea will begin in May 2013. Also from DFW, a daily nonstop service to Lima, Peru will be added. Passengers will be able to connect to other flights within Peru and many destinations in South America via LATAM Airlines. In Europe, AA will add a service between John F. Kennedy International Airport and Dublin, Ireland. A daily nonstop flight between Chicago O’Hare International Airport and Dusseldorf, Germany will also be added. In addition, partner flights to destinations throughout Europe and Asia will be available to passengers via Air Berlin. DELTA AIR LINES IS #1 IN U.S. AIR CARGO Delta Air Lines’ strategy of flying air cargo on passenger jets has proven to be successful. In the past five months, Delta’s air cargo traffic has produced US$1 billion in sales equating to over 50% of the airline’s profit margin. As a result, Delta has surpassed its largest U.S. competitor, United Airlines, in cargo tonnage profitability.

Realizing the vision together

AMERICAN AIRLINES TO HIRE 2,500 PILOTS Over the next five years, American Airlines (AA) expects to hire 2,500 pilots to accommodate an anticipated increase in international flights. The hiring plan includes a combination of new hires, about 650 furloughed pilots and also 500-600 pilots who are expected to reach the mandatory retirement age of 65 by 2020. The Allied Pilots Association welcomes AA’s plans for growth, especially since the jobs would be on higherpaid international routes. Currently, AA employs an estimated 8,000 active pilots.

OTHER NEWS BOEING IS THE WORLD’S LARGEST AIRCRAFT MAKER Largely due to an increase in deliveries of its much anticipated 787 Dreamliner aircraft, Boeing has grabbed the top spot as the world’s largest plane maker. Last year, 46 Dreamliners were shipped contributing to a total commercial jet delivery for Boeing of 601 aircraft. By November 2012, Airbus delivered 516 jets with a target of 580 for the year. Airbus has yet to report final aircraft delivery figures.

GE AVIATION TO HIRE WORKERS FOR NEW COMPOSITES FACTORY About 250 employees are expected to be hired for GE Aviation’s new composites factory in Ellisville, Mississippi. The hiring process will begin in March 2013 and will carry over for the next five years. The factory workers will make composite parts for aircraft engines and systems. The new facility is nearly complete, and was built to help meet growing demand in aerospace industry. BOEING 787 DREAMLINER DELIVERY UPDATE Boeing’s newest aircraft, the 787 Dreamliner has been delivered to various airlines around the world. While Japan’s All Nippon Airways has been using the 787 for its commercial air service for over a year, various airlines around the world are just receiving their 787 Dreamliner aircraft. The first carriers to use the 787 Dreamliner in North America will be United Airlines and Air Canada. In the Middle East, Qatar Airways will be the first to use the new Boeing aircraft. LOT, Poland’s national airline, was the first European carrier to receive the 787 Dreamliner. LAN became the first airline in South America and Ethiopian Airlines was the first African carrier.

AIRBUS TO DECIDE ON MATERIALS FOR NEW A30X Airbus is currently looking into potential materials for use in the A30X, a model designed to replace the A320NEO in 2022. It is expected that the new model will contain a balance of metals and composites. Alloys are likely to be used in fuselage production while composites are more suitable for the wings. Airbus is looking at the use of thermoplastics for the nose section as the benefits of damage tolerance and easier manufacturing are expected to offset the costs.

Page 18 January 2013

Realizing the vision together

AIRLINE DATA – ASIA PACIFIC Asia-Pacific Airlines Release Traffic Figures for December 2012 Airline

Traffic (RPKs – millions)

Capacity (ASKs – millions)

Load Factor

9,137 1.3%

11,424 0.7%

80.0% 0.5 pts

8,362 6.1%

10,176 2.8%

82.2% 2.6 pts

4,812 9.0%

6,560 0.8%

73.3% 6.1 pts

8,725 3.1%

10,808 4.5%

80.7% 1.1 pts

1, 2

Notes:

1. Includes Qantas Domestic, QantasLink, Jetstar Domestic, Qantas International, Jetstar International, and Jetstar Asia. 2. Results are from September 2012 as October 2012 not available at the time of report issue. 3. Includes Cathay Pacific and Dragonair.

Source:

Carrier traffic reports

AIRLINE DATA – EUROPE European Airlines Release Traffic Figures for October 2012 Traffic (RPKs – millions)

Capacity (ASKs – millions)

Load Factor

17,970 0.0%

21,964 0.4%

81.8% 0.3 pts

14,536 4.7%

18,825 6.3%

77.2% 1.3 pts

13,591 0.3%

17,398 0.4%

78.1% 0.5 pts

Airline

Page 19 January 2013

Notes:

1. Includes Martinair. 2. Includes Lufthansa Passenger Airlines, SWISS, Austrian Airlines. 3. Performance comprises British Airways (including bmi Mainline, excluding bmi Regional and bmibaby) and Iberia (including Iberia Express).

Source:

Carrier traffic reports

Realizing the vision together

AIRLINE DATA – NORTH AMERICA North American Carriers Release Traffic Figures for December 2012 Traffic (RPMs – millions)

Airline

Capacity (ASMs – millions)

Load Factor

CANADA 4,394 3.2%

5,349 1.8%

82.1% 1.1 pts

1,642 7.2%

2,006 6.0%

81.9% 1.0 pts

77.8 3.3%

121.0 2.8%

64.3% 0.3 pts

2,867 6.1%

3,578 6.1%

80.1% 0.1 pts

16,205 4.0%

19,664 5.4%

82.4% 1.2 pts

11,294 2.1%

14,085 2.0%

80.2% 0.1 pts

14,755 0.5%

17,840 1.7%

82.7% 1.8 pts

4,972 1.3%

5,985 0.2%

83.1% 1.2 pts

8,174 0.2%

10,479 0.2%

78.0% 0.4 pts

UNITED STATES

Page 20 January 2013

Notes:

1. Consolidated results for United Continental Holdings. 2. Results are for US Airways Group consisting of mainline-operated flights including US Airways Express flights operated by wholly owned subsidiaries PSA Airlines and Piedmont Airlines. 3. Results are for American Airlines Inc., and its wholly owned subsidiary AMR Eagle Holding Corporation. 4. Results are combined traffic results for Southwest Airlines and AirTran.

Source:

Carrier traffic reports.

Realizing the vision together

Page 21 January 2013 2012

2011

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

Vancouver

Montréal

Calgary

Edmonton

Ottawa

Winnipeg

Halifax

Victoria

Kelowna

Saskatoon

Regina

December 4th Quarter

+2.0% +2.3%

+3.9% +2.0%

+2.0% +2.5%

+1.7% +0.5%

+4.2% +5.1%

+4.4% +5.5%

+3.8% +3.6%

+2.9% +2.9%

+2.3% +0.6%

+1.0% +0.9%

+3.4% +5.8%

+2.3% +1.5%

Full Year

+1.5% +5.6% +6.9% +2.9%

+5.3% -0.4% +4.9% +5.6%

+1.1% +7.7% +8.1% +4.1%

+3.1% +8.7% +10.1% +5.7%

+3.4% +7.8% +9.4% +6.3%

+0.6%

January February March

+4.7% +5.2% +7.5% +4.4%

+2.5% +3.1% +2.0% +5.8%

-1.0% -0.7% +4.2% +0.0%

-0.1% +1.5% +6.8% +6.3%

+2.5% +7.1% +8.4% +6.8%

+1.9% +2.2% +5.3% +3.8%

1st Quarter April May June 2nd Quarter July August September 3rd Quarter October November

+5.6% +5.3% +1.8% +3.8% +3.6% +1.8% +4.9% +3.7% +3.5% +5.4% +6.0%

+5.1% +4.8% +2.8% +2.2% +3.2% +2.7% +3.6% +2.8% +3.1% +3.5% +3.8%

+3.4% +2.3% -1.9% +0.0% +0.1% -3.0% +0.7% +0.0% -0.8% -0.2% +1.8%

+6.5% +6.8% +4.0% +6.0% +5.6% +6.1% +7.5% +5.1% +6.3% +7.3% +8.4%

+8.1% +6.6% +5.8% +3.8% +5.4% +5.5% +8.0% +5.2% +6.3% +6.6% +7.0%

+7.8% +6.0% +0.1% +0.3% +2.1% -1.3% +3.1% -4.0% -0.7% -3.2% -4.3%

+3.8% +5.2%

+1.0% +2.1% -1.9% +0.6% +0.2% -2.1% +2.4% +0.4% +0.3% +0.8% +0.7%

+4.8% +3.3% +1.3% +3.0% +2.5% +3.2% +5.9% +2.4% +3.9% +4.5% +6.3%

+7.4% +9.6% +5.8% +7.2% +7.5% +3.7% +8.7% +6.5% +6.3% +4.1% N/A

+3.8% +2.9% +1.5% +7.4% +3.9% +2.9% +6.8% -0.1% +3.2% +5.6% N/A

+8.5% +9.9% +5.5% +7.9% +6.4% +4.9% +4.1% +5.1% +2.3% +4.6% +1.9% +3.0% N/A N/A

-1.2% -2.5% +0.6% -2.7% +1.3% -2.2% -1.1% 0.0% +0.8%

Source: Individual airports’ traffic reports. Note: Subject to revision.

Realizing the vision together

Page 22 January 2013

Summary of Total Year-Over-Year Passenger Traffic Performance at Selected U.S. & International Airports

2012

2011

United States

December 4th Quarter Full Year January February March st 1 Quarter April May June nd 2 Quarter July August September 3rd Quarter October November

Atlanta

Chicago

+1.2% +2.2% +3.6% +7.3% +7.7% +4.0% +6.1% +4.1% +1.4% +3.3% +2.9% +0.4% +2.1% +1.5% +1.3% +2.8% +3.7%

+2.0% -0.3% -0.4% +1.0% +11.3% +0.6% +3.8% +1.2% +0.6% +0.9% +0.9% -1.7% -0.2% -2.9% -1.6% -2.4% -0.9%

Los Angeles -0.4% +2.0% +4.6% +5.4% +8.2% +6.1% +6.5% +2.6% -1.2% +2.0% +1.1% +2.0% +3.0% +1.5% +2.2% +1.3% -1.2%

International

Dallas

Denver

-1.6% 0.0% +1.6% +0.4% +9.7% +2.6% +4.0% +0.3% +6.2% -0.8% +1.8% -2.1% +1.0% -3.9% -1.6% -0.7% +2.5%

+2.1% +0.3% +1.7% -0.6% +2.5% -1.0% +0.2% +0.4% -0.1% -0.9% -0.2% -0.1% +0.9% +0.8% +0.5% +3.3% +2.2%

New York JFK +3.7% +1.1% +2.5% +7.2% +12.5% +8.5% +9.2% +7.3% +3.5% +9.8% +6.9% +4.3% +12.8% +6.2% +7.7% -1.0% +4.1%

London Heathrow +14.7% +3.8% +5.5% +2.3% +3.8% +6.9% +4.4% +0.0% -0.6% +1.6% +0.4% -4.4% -1.9% +0.6% -2.0% -0.1% +3.1%

Paris CDG +9.0% +4.0% +4.8% +3.3% +3.6% +5.9% +4.3% +2.9% -0.1% +2.3% +1.7% -0.8% +0.3% -0.4% -0.3% -2.1% +1.1%

Frankfurt

Beijing

+12.2% +5.9% +6.5% +5.5% +0.7% +4.1% +3.5% +2.8% +1.4% +5.4% +3.2% +3.7% +4.6% +1.0% +3.1% +1.4% -2.7%

+2.7% +4.5% +6.4% +5.0% +8.2% +4.2% +5.7% +1.6% +1.8% +4.5% +2.6% +6.2% +4.8% +4.3% +5.1% +1.2% +3.1%

Tokyo Narita +0.4% -6.8% -17.1% +1.4% +3.8% +30.3% +11.1% +51.3% +29.4% +23.1% +33.4% +17.2% +17.3% +12.7% +15.7% +8.9% +11.2%

Mexico City +23.4% +21.3% +9.3% +22.5% +24.0% +19.7% +21.9% +12.2% +6.9% +13.3% +10.7% +10.9% +9.9% +8.3% +9.7% +7.7% +7.7%

Realizing the vision together

INTERVISTAS NEWS The InterVISTAS Group continues to be active in delivering a diverse range of consulting projects around the world and some of the new projects we are working on are listed below:

Israel Airports Authority Commercial Consultancy Services 

Provide commercial consultancy services for Israel Airports Authority for 3 years, which includes non-aviation commercial airports projects such as tendering the large duty-free contract for LTPC (liquor, tobacco, perfumers, cosmetics) at Ben Gurion Airport, tendering the advertising (indoor and outdoor media) at Ben Gurion Airport and concession planning for the new Timna Airport near Eilat in the south of Israel.

Lisbon Airport Route Forecasts and Business Case for Long Haul Air Service 

Provide detailed route forecasts and develop a business case for new long haul air service. Analysis to include forecasts of airline market share, load factor, revenue, traffic stimulation and share steal/cannibalization.

Metropolitan Airport of Peoria (MAAP) Air Service Development Contract 

Analyze the economic, demographic, passenger and fare data from Peoria and the surrounding region. This analysis will assist MAAP in assessing the market of international flights to a number of leisure destinations in Mexico and the Caribbean. This project will also assist in justifying to the U.S. Customs and Border Protection organization, the placement of Customs officers in a new FIS facility.

Port of Prescott New Bulk Terminal 

The terminal was completed in fall 2012, following a business case for the port prepared in 2008, which was used to obtain over $20 million in matching federal and provincial funding.

Princess Juliana International Airport Concession Plan and Tender Support 

Provide a major concession plan including an overhaul of the existing program. The new concession program will be publicly tendered in a two-phase process. An Expression of Interest phase will run from January 8-24, 2013. A Request for Proposal phase with shortlisted candidates will follow from February 5 to March 25, 2013 with details to be confirmed.

Queen Alia International Airport Contract Extension 

Extension to 2014 of the current consultancy services contract.

Sault Ste. Marie Airport Corporation Strategic Planning Support 

Provide a presentation on major developments in the air industry and facilitate a Board retreat.

Shenzhen Municipal Plan and Land Resource Development Research Center 

Page 23 January 2013

Provide an Airport City benchmark study for Shenzhen Municipal Government (China).

Realizing the vision together

Viracopos International Airport New Terminal Commercial Concession Plan 

Develop a commercial concession plan for the new terminal of Viracopos International Airport (VCP) in Campinas, Brazil. This project involves concepts, choices and logistics of commercial concessions.

SPEAKING ENGAGEMENTS Mike Tretheway, Executive Vice President 

CAC Biannual Conference: Montreal, Quebec – 11 – 12 April 2013. Dr. Tretheway presents “Canada’s Aviation Sector in the World Context: by the Numbers”.

Emre Serpen, Executive Vice President 

1st International Sustainable Airline Management Conference: Istanbul, Turkey – 30 August 2013. Dr. Serpen will chair the Airline Business Strategy session.

Page 24 January 2013

Realizing the vision together

STAFF ANNOUNCEMENTS The InterVISTAS Group is pleased to announce the following promotions and achievements of InterVISTAS staff members:

Janice Bruno is promoted to Director, Corporate Services We are pleased to announce the promotion of Janice Bruno to Director of Corporate Services for the InterVISTAS Consulting Group. With an extensive background in corporate administration and high level human resource experience, Janice brings a wealth of knowledge and understanding to the complexities of a dynamic and growing international company. Her past exemplary service, along with her expertise in human resource support and corporate legal affairs, played a major role in her appointment. Janice’s other roles include secretary for the InterVISTAS Board and the CEO; administrator of Group insurances; contract administration and support on the finance side for Group banking requirements. Her pro-active approach to corporate administration, sophisticated organizational skills and an ability to independently manage her responsibilities make her a vital part of our corporate team. Congratulations, Janice on a well-deserved promotion!

Jody Kositsky joins InterVISTAS as Economic Analyst We are pleased to announce that Jody Kositsky has joined our Economics and Strategic Services Practice Group as Economics Analyst in the Vancouver office. Jody recently graduated with distinction from the Department of Economics at the University of Victoria. She holds a Bachelor of Science degree with a Combined Major in Financial Mathematics and Economics and a number of academic awards and scholarships, including Dana Kingstone Scholarship in Economics which she received in 2010. Jody’s solid knowledge of theoretical foundations of econometrics and mathematics is complemented with a practical experience in applied econometrics, which she gained while working on a research project during her senior university years. Jody’s knowledge of financial mathematics and economics and strong programming skills will be invaluable in supporting various economicsrelated projects.

Eddy Bordignon Promoted to Consultant We are pleased to announce the promotion of Eddy Bordignon to Consultant with InterVISTAS Consulting, Vancouver office. Eddy joined the company on a volunteer basis in 2004 while studying at BCIT and became a full-time employee in 2007. He is a key team member of our planning and borders and security practices. Eddy has shown increased responsibility and skill and has represented IVC with clients such as Air New Zealand and CATSA . He has developed new technical skills and become more active in developing opportunities. In his new role, Eddy will have increased responsibility for proposal development and will work directly with clients and managing projects. Congratulations Eddy!

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Realizing the vision together

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*Registered as a Branch Office under the laws of the Registrar of Companies for England & Wales, Company No. FC027160 Branch No. BR, of InterVISTAS-EU Consulting Inc., a Canadian company incorporated under the laws of the Province of British Columbia Business Corporations Act No. BC0771664. InterVISTAS’ 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 provide comments/feedback on the InterVISTAS’ Aviation Intelligence Report, please contact Paul Ouimet at paul.ouimet@intervistas.com or 1-604-717-1800. To subscribe, please send an email to subscribe@InterVISTAS.com To unsubscribe, please send an email to unsubscribe@InterVISTAS.com