air oct 2012 2nov2012 1700 · on-site airport hotels have become widespread amongst airports in...

IN THIS ISSUE:

CEO’s Message – p 2

Feature Articles – p 3

Regional Updates – p 9

Asia-Pacific Canada Latin America

Europe United States

Aviation News – p 15

Traffic Updates – p 22

InterVISTAS News – p 26

OCTOBER 2012

Air Policy Change in Canada – Page 7

Airport Land Use Planning – Page 5

Airport Micro-Hotel Trend – Page 3

Aviation Intelligence Report Realizing the vision together Copyright © 2012 InterVISTAS Consulting Inc., all rights reserved.

October 2012

Gerry Bruno

Group Chief Executive Officer

CEO’S MESSAGE

Welcome to the October edition of the Aviation Intelligence Report.

This month, we offer three feature articles. Karla Petri provides a look at a new trend in airport overnight accommodation, the Micro-Hotel. This new concept is providing travellers with a cost-effective and convenient option for short-term or single-night stays.

Sam Sugita explains the concept of land-use planning around airports, and how both airports and their surrounding communities can make effective plans to minimize the impact of airport noise on residents.

Lastly, Robert Andriulaitis examines the ongoing discussions surrounding Canada’s aviation policy. With increasing leakage to nearby U.S. airports, Canadian airports are calling for the Government to eliminate the various taxes and charges that contribute to increased fare prices in Canada compared to those across the border.

Our Regional Reports cover top aviation issues:

Doris Mak updates us on Emirates and Qantas' global partnership and China's growing demand for aviation personnel in the Asia-Pacific Report,

Debra Ward summarises the top aviation issues being discussed at Canada's Parliament in the Canada Report,

Ian Kincaid highlights the European Emissions Trading Scheme developments and the Lufthansa cabin crew strike in the Europe Report,

Kenneth Currie looks at the latest quarterly results of Latin America's carriers in the Latin America Report,

Steve Martin reviews the changes undergone by the Transportation Security Administration following the 11th anniversary of the 9/11 terrorist attacks in the United States Report.

I would like to point out the European Aviation Conference on Re-inventing the Aviation Value Chain to be held in late November. This conference has an excellent agenda and our own Dr. Michael Tretheway will be a featured speaker at the conference. The conference has an all-star agenda, a who’s who in aviation economics.

We hope you enjoy this month’s edition.


October 2012

Yotel

Minute Suites

INNOVATIONS IN AIRPORT CONCESSIONS – THE MICRO HOTEL The Concept On-site airport hotels have become widespread amongst airports in North America and around the world. For weary travellers facing flight delays, cancellations or long layovers, the convenience of on-airport hotels is appealing. The latest innovation in the airport hotel business is the short-stay, affordable “micro hotel” concept. Offering amenities, enhanced flexibility in booking/timing and improved affordability (travellers only pay for the hours they need) this innovative hotel concept is now offered by a growing number of services providers globally. Micro hotels amenities vary by service provider, but typically include flat screen TV’s, recharging stations and services such as free internet access and Wi-Fi and 24/7 food service. Minimum stays vary by provider but can range as low as a 30 minute power nap. Several services providers have popped up in recent years with five main players offering this concept globally each with a slightly different offering.

Yotel, one of the first airport operators, brought the micro hotel concept to London airports Gatwick and Heathrow in 2007. Building on the success of these first sites, another site was opened at Schiphol in 2008. Since that time, the company has expanded outside of airports and has opened a 669-cabin hotel in New York City. Yotel is the only service provider to include en-suite bathroom facilities within the seven to ten square meter units and offers units that can accommodate up to four people. According to Yotel, these micro suites are inspired by luxury airline travel and Japanese design concepts and the company strives to create a 'First class experience at an affordable price'. Pricing varies by unit, starting at $39USD for a four hour stay and $93USD nightly. Source: www.yotel.com

Minute Suites, a U.S.-based service provider, has operated at Atlanta International Airport since 2009. In 2011, a second site was added at Philadelphia International Airport that includes 13 private suites and two workstation cubicles with access to the airport flight information display system (FIDS) to ensure passengers do not miss their flights. Founded by health care professionals, the company has taken a wellness-based approach to providing a retreat for travelers. Minute Suites is targeting business travelers with the slogan “Nap Relax Work”. Pricing starts at $32USD per hour. Source: www.minutesuites.com

Karla Petri

Manager, Economic & Financial Analysis


October 2012

Napcabs Napcabs has operated in Munich Airport since 2011, opening a second location in Terminal 2 in 2012. Known for their self-serve format and compact space requirement of less than four square meters, Napcabs has focused on expansion within the Munich Airport and will be expanding to other international airports. Napcabs has a minimum charge of approximately $38USD (approximately two hours at peak time) and charges to the minute. Source: www.napcabs.net

Sleepbox started operations in Moscow in 2012 at Sheremetyevo International Airport offering varied configurations from single to double and triple occupancy units that contain bunk beds.

Sleepbox is focused on expanding beyond the airport market to train stations, shopping malls, hotel chains, hostels, various employers (for employee use) and public locations in downtown Moscow. Sleepbox units can be modified to be placed outside, in warehouses and building basements, utilizing low value commercial space to generate incremental revenues. Sleepbox recommends that airports charge $15USD per hour or $50USD per night for the service. Source: www.sleepbox.com

SnoozeCube currently operates ten units in Dubai International Airport’s Terminal 1. SnoozeCube is known for their minimalist design with a focus on comfort and functionality. Their units are connected to the airport flight information display system (FIDS) to ensure that amidst the rest and relaxation, passengers do not miss their flights. The company reports that initial feedback indicates the units are a major attraction for travelers in Dubai. Pricing starts at $16USD per hour, depending on exchange rates. Source: www.snoozecube.com

Introduced to airports in 2007, the micro-hotel concept has grown significantly with five service providers and a growing global presence in 2012. Micro-hotels offer airports a new source of revenue and a means to enhance the passenger experience. The growth of this new concept is an indication that airport concessions innovations are top of mind as airports around the world strive to keep up with continually rising passenger expectations.

Sleepbox

SnoozeCube


October 2012

LAND USE PLANNING IN THE VICINITY OF AIRPORTS In the 21st century, airports are conduits for travel, business and the expedited movement of goods. We rely on them as a launch point to places both near and far, to keep us connected globally, and to reunite us with family and friends. They also enable professionals to travel and liaise face-to-face in order to facilitate business transactions, start new partnerships, and collaborate across industries and markets. Airports also serve as a port for goods and trade by transporting freight and cargo, as a military base for defense programs, and as a recreation facility for general aviation. It is no surprise why distribution centres, warehouses or certain industries locate near airports and other major transportation corridors (i.e., highway and rail). These businesses generate a significant amount of economic output into the community. However, there can also be opposing views in which the airport is seen as a nuisance to the community. Understandably, the airport can cause unwanted noise disturbances, increase road traffic, contribute unwanted carbon emissions, create air contaminants and generate light pollution during night operations. For some airports, noise management and abatement programs must be implemented to mitigate noise exposure onto nearby communities and neighborhoods.

Figure 1: Noise exposure levels for land south of Edmonton International Airport and their noise equivalent examples

Management of land use surrounding the airport is one other method for protecting the community from unwanted aircraft noise and other environmental impacts. Land use within a community is regulated at the state/provincial and municipal levels; with airports however, the federal government generally has authority over aviation and airport-related issues. In Canada, the federal jurisdiction that applies to land use and development around the airport stem from two guiding documents: the Aeronautics Act that deals with safety and airport operation issues, and Land Use in The Vicinity of Airports issued by Transport Canada, which addresses aircraft noise conflicts for land use areas.

The implications of poor land use planning around airports can greatly impact airport operations and potentially expose nearby residents to unwanted noise. Inadvertently, poor airport vicinity planning has the potential to dramatically curtail aviation activity and minimize the benefits that these activities offer to the community. Specifically, improper planning could result in the lack of land available for expanding airport operations. From another perspective, improper planning can expose the community and its residents to undesirable environmental impacts. The synergy between the airport and its community is required as part of the planning process to satisfy the needs of both parties. Examples where communities have collaborated with their airport to implement noise abatement and mitigation programs include international airports in Seattle, Amsterdam, San Francisco, and San Diego.

Sam Sugita

Senior Planner, Planning and Economic

Development


October 2012

An integrated planning process involves a two-way dialog between the community, airport and interested stakeholders. During this planning process, the goal is to understand the needs of each party interested in a particular land area and produce a vision and/or plan to guide future development over time. In particular, this integrated planning process was completed in Leduc (Alberta) for a large parcel of land adjacent to Edmonton International Airport (YEG, see Figure 2). The objective was to develop a vision and plan with compatible land uses to suit the economic needs of the region and future operations at Edmonton International Airport, while sustaining a desirable quality of life for its residents. The key factors in the integrated planning process completed for Leduc include:

Community engagement/dialog: Discussions between the city, airport, developers and general public were facilitated in order to address long-standing community issues related to noise impacts for nearby residential communities, compatible land uses and future developments.

Cumulative noise impact analysis: An integrated noise model that considered noise generated from the airport, proposed industrial development, and road noise generated by increased traffic was used to understand the cumulative noise impact to the particular land of interest.

Ultimate case scenario analysis: A full build-out scenario that looks 50 years into the future was completed to understand the long term vision for the airport and surrounding community and help achieve its long-term vision.

Key local and regional links: Stakeholders involved understood that land within the airport cannot be managed in isolation to adjacent community and the region. A review of local and provincial regulations, and federal guidelines associated with the land of interest was understood and discussed as per good land use planning practice.

Airport development strategy: Best practices in compatible land use planning around airports were received and specialized development opportunities surrounding the airport were considered.

Figure 2: Conceptual land uses compatible for land south of YEG

As cities evolve, airports will remain to be important for air travel, trade and commerce. The speed and convenience of air travel cannot be disputed. What used to require days of travel by sea, rail or road now takes appreciably less time by air. This motivates the exchange of knowledge, sharing of networks and creativity, and fosters better solutions in making the way we live within our communities better. In Leduc, the City understood the challenge and realized the opportunity for its community, region, and the airport. Realizing this long-term vision requires the collaboration between stakeholders and an integrated noise modelling exercise to understand the future noise impact.


October 2012

PRESSURE GROWS TO CHANGE CANADIAN AIR POLICY

The pressure to change at least some of Canada’s aviation and/or fiscal policies to improve the competitiveness of the Canadian aviation industry continues to grow to the point where the government appears ready to respond, according to media reports.

2008 Cost Competitiveness Study InterVISTAS conducted a study for Aéroports de Montréal, the Air Transport Association of Canada, the Greater Toronto Airports Authority and the Vancouver Airport Authority on the impact government policy has on the cost competitiveness of Canadian aviation. It considered not only additional costs imposed in Canada, but cost advantages U.S. aviation enjoys not replicated north of the border. The rationale for looking at both sides was that Canadian airports are in competition with U.S. airports as gateways and we need to understand the operating environment for both. As a result, we included fiscal penalties (e.g., ground rent, payments in lieu of taxes, the inability to issue tax-free bonds, fuel taxes, etc.) investment and operating penalties (e.g., excess interest paid as a result of deferred capital spending prior to devolution) and additional cost disadvantages that arose from U.S. subsidization of its aviation sector (e.g., Airport Improvement Program funding, Essential Air Services program, subsidization of air navigation services, etc.).

The findings were that differences in government policies in Canada and the U.S. added a burden on the Canadian industry that amounted to hundreds of millions of dollars. This amounted to between $21 and $26 per passenger in incremental costs at the three largest Canadian airports. The report noted that these costs were undermining the federal government’s gateway and competitiveness policies.

March 2012 Canadian Airports Council Analysis More recently, the members of the Canadian Aviation Council (CAC) conducted an internal assessment and estimated that about five million passengers a year elect to drive across the border to take advantage of less costlier flights out of nearby U.S. airports. This traffic volume is somewhat above that of Ottawa International Airport, which serves the nation’s capital and ranked 6th in the country in 2011 for passenger volume according to Statistics Canada. The estimates made by the CAC of the economic impact of losing this traffic are significant – almost 9,000 jobs, half a billion dollars in wages, over a billion dollars in GDP and over two billion dollars in economic output.

Robert Andriulaitis

Vice President, Transportation & Logistics


October 2012

June 2012 Senate Report After holding hearings to hear testimony of key stakeholders, which included an invited appearance by Dr. Michael W. Tretheway, Chief Economist of InterVISTAS, the Standing Senate Committee of Transport and Communications released the report The Future of Canadian Air Travel: Toll Booth or Spark Plug?. The title of the report clearly shows the concern this influential body has with the current direction of Canadian policy. The Committee concluded that:

“Canada needs a single, cohesive National Air Travel Strategy, including an updated National Airports System, to chart a new course towards increased air travel in Canada. The Government of Canada should stop treating airports as a source of public revenue and start treating them as economic spark plugs. To this end, it should stop charging airports ground rent and transfer Canada’s main airports to the authorities that already operate them. Finally, the federal government should use its influence to bring relevant stakeholders to the table to work out new policies and systems to address inefficiencies and continually improve the air travel experience in Canada.” (Executive Summary, p.1.)

October 2012 Conference Board of Canada Report The Conference Board of Canada is the latest to have taken up the call. Early in October it released an analysis that highlights what it calls the “perfect storm” that is sending increasing numbers of Canadians south of the border to access less costly flights. Issues identified in Driven Away: Why More Canadians Are Choosing Cross Border Airports include “wages, productivity, fuel prices and taxes, asset prices and airport and navigation fees.” The analysis included cost differentials driven by both Canadian and U.S. policies. The Conference Board estimates that there is a 30% cost advantage for carriers operating in the U.S. and that 40% of the air fare differences are caused by Canadian fees and taxes.

Importantly, the report stresses that even though there is no single element that dominates the cost differential, this does not mean addressing any single factor is pointless. We have heard the argument made, for example, that airport rent is a small part of the problem and thus addressing it will have limited impact. Indeed, the author points out that this is the attitude that has allowed individual items to collectively become a significant issue.

The report offers a number of recommendations worth consideration by Canadian government policy makers. The executive summary can be found at http://www.conferenceboard.ca/topics/energy-enviro/drivenaway.aspx . (The whole report can be ordered on-line for $625.)


October 2012

ASIA-PACIFIC REPORT China leads Asia-Pacific in demand for new aviation personnel According to the 2012 Boeing Pilot & Technician Outlook, the Asia-Pacific region will require 185,600 new commercial airline pilots and 243,500 maintenance personnel through 2030 to support fleet modernization and the rapid growth of air travel. China will have the largest demand in the Asia-Pacific, with an anticipated 71,300 pilots and 99,400 technicians required over the next 20 years.

Increasing demand for qualified talent is imminent in all markets, as airlines all over the world are already experiencing delays and operational interruptions due to a lack of qualified pilots. In an effort to meet anticipated demand, Boeing is working to establish a global network of flight schools with the aid of local partners. For instance, Boeing recently signed a Memorandum of Understanding with the Indonesian Ministry of Transportation to jointly establish aviation training programs. However, the aviation industry as a whole must also focus on attracting new talent to the field, as other attractive industries, like hi-tech and software, pull from the same talent pool.

Emirates and Qantas announce major global partnership On September 6, Qantas Airways and Emirates Airlines announced their new global aviation partnership. Under the agreement, Qantas will move its hub for European flights from Singapore Changi Airport to Dubai International Airport and enter an extensive commercial relationship with Emirates. The 10-year code-sharing partnership will be enhanced by integrated network collaboration with coordinated pricing, sales & scheduling, and a benefit sharing model. Neither airline will take an equity stake in the other. Subject to regulatory approval, it is anticipated that the partnership arrangements will take effect in April 2013.

The partnership announcement came as Qantas seeks to boost profitability on its ailing international routes, which have been plagued by high fuel costs, intense competition and labor disputes. Qantas recently exercised rights to cancel its order for 35 Boeing 787s, after posting its first annual loss in 17 years. The airline, Australia’s largest, reported a loss of $257 million in its last fiscal year. Incidentally, China Southern is now set to be the first airline to debut commercial flights of the revolutionary Boeing 787 Dreamliner in Australia.

The rising influence of Middle Eastern airlines in Australian aviation is continuing. In addition to the Qantas-Emirates announcement, Abu Dhabi-based Etihad Airways recently confirmed its equity stake in Virgin Australia has hit 10 percent. Etihad has been gradually increasing its stake in the airline since gaining Foreign Investment Review Board approval to lift its holding from 5 to 10 percent.

Doris Mak

Director, Special Projects


October 2012

Debra Ward

Executive Consultant

CANADA REPORT The Senate Committee on Transportation and Communications expands its enquiry into issues affecting the air sector; Parliament returns with an ambitious agenda; a long-time senior civil servant at Transport Canada retires; a grassroots tourism campaign supports international arrivals and Air Canada replaces its COO with a former Harper advisor.

Senate transport committee looks to expand mandate, focus on regional and small airports. The Senate committee on transportation and communications is expected to expand its current investigation into issues affecting the airline sector, with two new reports now slated to be released. Initially, only one more report was planned, but given the complexity of the issues facing the sector, the committee wishes to split the final report into two with the first focussing on regional and northern airports and the second on international aviation. The first report, issued in June, dealt primarily with airports costs and their impact on Canada’s competitive position.

Parliament’s ambitious fall agenda has implications for aviation. Trade will be a recurring theme as Parliament resumes this fall, with Canada immersed in several key bilateral and multilateral negotiations. The most significant is the Trans Pacific Partnership, whose members include the United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam, with Canada and Mexico both negotiating for a place at the table. At the same time, Canada’s long-standing trade talks with the EU are heading into their final phase, with the deal expected late this year.

With a second encyclopedic budget bill promised for the fall session, Canadians will once again be parsing the fine print for items that affect their businesses. The bill is likely to include corporate income tax amendments, given recent public comments by both the minister of finance and the head of the Bank of Canada regarding “dead money” – more neutrally known as corporate reserves.

Transport Canada has announced the retirement of Kristine Burr, Assistant Deputy Minister, Policy. In that role since 2002, Ms. Burr was well respected within the transportation community for her professionalism and expertise. It is expected that her permanent replacement will be named sometime this fall. Until then, Ms. Arlene Turner has been appointing as Acting Assistant Deputy Minister, Policy. Ms. Turner is Director General, International and Intergovernmental Relations.

Grassroots campaign supports competitive funding for Canadian Tourism Commission. Canada’s ranking in international tourism arrivals has slipped in recent years, going from the 7th most popular destination in 2002 to 18th in 2011, with implications for Canada’s entire aviation sector. At the same time, CTC’s budget is being reduced while key competitors like the U.S. and Australia have substantially increased marketing dollars. The Tourism Industry Association of Canada’s new grassroots campaign targets MPs across the country to support competitive funding for Canadian tourism within an increasingly aggressive world marketplace.

Former Harper advisor, Derek Vanstone, assumes Air Canada role. Following the early retirement of Air Canada’s COO, Duncan Dee, Air Canada announced that the newly created position of corporate strategy, industry and government affairs would be filled by Derek Vanstone, deputy chief of staff in the Prime Minister’s Office. Mr. Vanstone officially joined the airline on September 10, 2012. According to Air Canada, in addition to his role in helping shape corporate strategy and direction, Mr. Vanstone will have overall responsibility for federal, provincial, municipal and community relations as well as industry affairs. While his activities will be subject to some restrictions, Mr. Vanstone’s appointment has been approved by the federal Ethics Commissioner.


October 2012

Ian Kincaid

Vice President, Economic Analysis

EUROPE REPORT EU may back down on ETS airline emissions trading The threat of retaliatory action by some of the world’s economic superpowers, including China and the U.S., has caused EU officials to consider suspending the enforcement of the EU ETS airline fee.

Initiated in 2005, the EU Emissions Trading System (EU ETS) applies to all 27 EU members plus Iceland, Norway, and Liechtenstein. The goal of the system is to reduce carbon emissions, with a target of a 21% reduction by 2020. Initially the system covered factories and power stations; however, as of January 2012, emissions from all domestic and international flights that land or take off from an EU airport are to be included in the EU ETS.

The system has been denounced by various outside countries including United States, Russia, China and India, who argue that requirements of the system infringe on the sovereignty of non-EU nations. China and India have already prohibited their airlines from participating in the system altogether, while the U.S. is contemplating a similar tactic. Many European carriers also feel the ETS is discriminatory and distorts competition as it forces European carriers to pay more simply because they are based in the EU. Countries like Australia and Brazil are pushing for a global agreement to curb carbon emissions rather than an EU law that extends to non-EU countries.

In an extreme move, Beijing has threatened to block the purchase of European aircraft by its national carriers if the airline component of the ETS is enforced next year. Airbus, a major European employer, warned EU officials that geopolitical conflict and the threat of retaliatory action could have serious commercial consequences for the manufacturer, and could result in significantly reduced orders.

Due to the concerns of stakeholders both inside and outside the EU, European officials have signaled they may consider the suspension of the EU ETS program for airlines in order to avoid a trade war with major economic players, namely the U.S. and China. As it stands, carbon emissions trading for airlines are set to come into effect in April 2013. Suspending the airline component of the ETS would allow time for a global solution to be discussed during the United Nations International Civil Aviation Organization (ICAO) meeting in September 2013.

Lufthansa cabin crew strike On August 31, roughly 1,000 Lufthansa flight attendants walked off the job for eight hours at Frankfurt Airport. Germany’s largest carrier was forced to cancel more than 220 short-and-medium haul flights and a small number of long-haul flights to and from Frankfurt. This first day of labor action cost Lufthansa millions of Euros, and brought Europe’s third busiest airport to a standstill. The Lufthansa flight attendants escalated the bitter pay dispute by striking again on September 4th – this time at three German airports: Frankfurt, Munich and Berlin. As a result, Lufthansa cancelled close to 300 flights, including about a third of its intercontinental flights. The strikes had a spill-over effect on other airlines, as the German airports ran short of parking spots due to grounded Lufthansa planes.

Lufthansa has been grappling with rising fuel costs, tough competition and a weakening economy. In response, the airline implemented a three year cost-cutting program to boost margins and finance investment. The Unabhaengige Flugbegleiter Organisation (UFO) union, which represents around 18,000 Lufthansa flight attendants, is looking for a 5% pay raise after a 3-year pay freeze, better profit sharing and guarantees on employment conditions. Union and airline discussions broke down on August 27th after 13 months of negotiation.

Lufthansa currently operates 1,850 flights per day, mostly from Frankfurt and Munich. The cost of a drawn-out service stoppage would quickly mount for the airline. In addition to the threat of more UFO strikes, Lufthansa is facing more negotiations with other personnel about pay, as the tariff agreement with the pilot union is ending in the coming months.


October 2012

LATIN AMERICA REPORT Latin American airlines reported lower Q2 earnings in the wake of significant industry consolidation in the region. Collectively, airlines are reporting higher passenger yields, and some are reporting higher load factors, which are driving higher unit revenues across the group. LATAM Airlines Group reported that the airline had experienced reduced cargo demand. Unit costs are up largely in-line with increases in capacity excluding fuel, indicating that cost synergies as a result of consolidation have not yet been achieved. The earnings of Brazilian airlines TAM and Gol were negatively impacted by the devaluation of the Real to the Dollar; the earnings of Mexican airline AeroMexico were negatively impacted by the devaluation of the Peso to the Dollar.

AeroMexico reported second-quarter net income of MXN 153 million, down 73.8% from MXN 584 million in the year-ago period. Revenues increased 15.2% to MXN 9,919. EBITDAR decreased 2.8% to MXN 1,789 million from MXN 1,841 million in the prior-year quarter. Traffic increased 4.0% to 5,700 million revenue passenger kilometers (RPKs) on a 7% increase in capacity to 7,458 million available seat kilometers (ASKs). The load factor decreased 2.5 points to 76.6%.

Yield per passenger kilometer (YPK) increased 5.7% to 1.6 Mexican cents per km, which was driven by a 7.4% increase in revenue per available seat kilometer (RASK) to 1.3 Mexican cents per seat kilometer despite the lower load factor. Cost per available seat kilometer (CASK) decreased 3.2%.

AviancaTaca Holdings reported a second-quarter net profit of COP$8.8 billion, more than triple its year-ago profit. Second-quarter operating revenue increased 12.9% to COP$1.8 trillion. RPKs increased 11.6%, while ASKs increased 9.6% as a result of the ongoing operating strategy of consolidating four main hubs respectively in Bogotá, Lima, San Salvador, and San José. Load factor remained flat at 77.7% year-over-year.

Copa Holdings reported second-quarter net income of US$32 million, down 22.4% from $41.2 million in the year-ago period. Revenues increased 20.6% to $515.8 million while expenses increased 25.5% to $443.2 million. Operating profit decreased 2.7% to $72.6 million from $74.6 million in the prior-year quarter. Traffic increased 20.3% to 2.9 billion RPMs on a 24.8% increase in capacity to 3.9 billion ASMs. The load factor decreased 2.8 points to 73.5%.

Yield per passenger mile increased 1.2% to 17.2 cents per mile, which drove a 3.3% increase in RASM to 13.1 cents despite the lower load factor. CASM increased a modest 0.6% to 11.3 cents. CASM excluding fuel was flat at 6.9 cents.

Gol Linhas Aereas Inteligentes reported a second-quarter net loss of BRL$715.1 million, an increase from a loss of BRL$358.7 million in the year-ago period. The airline said the results were a result of unfavorable macroeconomic conditions including high fuel costs and the depreciation of the Brazilian Real against the U.S. Dollar. The Real-Dollar exchange rate has a direct impact on 55% of the company’s operating expenses.

Net revenue increased 16.9% to BRL$1.8 billion, while expenses increased 19% to BRL$2.1 billion, producing a consolidated operating loss (EBIT) of BRL$354.6 million, an increase of nearly 31% from a BRL$270.8 million operating loss in the prior-year quarter. Traffic increased 15.3% to 8.7 billion RPKs on a 10% increase in capacity to 12.5 billion ASKs. Load factor increased 3.2 points to 69.5%.

YPK increased 0.8% to BRL18.43 cents. Along with higher load factors, higher yield drove RASK up 5.7% to BRL12.81 cents. CASK increased 8.2% to BRL17.48 cents. CASK, excluding fuel, was BRL10.12 cents, up 4%.

Kenneth Currie

Executive Vice President, Finance and Privatisation


October 2012

LATAM Airlines Group reported a second-quarter net income of $49.7 million and an operating income of $23.2 million, its first consolidated results since LAN Airlines and TAM merged June 22. These results include the eight days of consolidation in June, which produced a net income of $46.3 million, but an operating loss of $13.9 million. The non-operating results in the June 23-30 consolidated period are due to a $57.4 million foreign exchange gain produced by an appreciation of the Brazilian Real and a positive mark-to-market of fuel hedging derivatives in the amount of $26.7 million.

In separate numbers excluding the consolidation, LAN posted a second-quarter net income of $5.2 million, a decrease of 67.5% compared to the year-ago period. Operating income decreased 33.5%, but reached $37.1 million. TAM reported a separated BRL$928 million ($459 million) second-quarter net loss, compared to a BRL$60.3 million net income last year. It reported an operating loss of BRL$284 million, compared to a BRL$8.8 million profit in the year-ago period. A 23.2% depreciation of the Brazilian Real heavily impacted the results. The transaction costs related to the merger reached BRL$9.2 million.

LATAM reported a 7.9% increase in system-wide RPKs for July, and 2.9% increase in ASKs. Passenger load factor increased 3.9 points to 83.6%.


October 2012

Steve Martin

Senior Vice President

UNITED STATES REPORT Eleven Years Later: Congress Remains Intent on Reforming TSA The House Subcommittee on Transportation Security released a report on the 11th anniversary of 9/11 detailing the Subcommittee’s findings and recommendations to help the Transportation Security Administration (TSA) evolve to become a more effective and efficient agency.

The report -- “Rebuilding TSA into a Smarter, Leaner Organization” – represents the Subcommittee’s findings following what it called “a thorough examination of TSA’s operations, rules, and regulations and their impact on job-creating transportation industry stakeholders, as well as the traveling public.” Written by the Republican sub-committee staff, the 23-page report says, “Despite the reality that we have not endured another successful terrorist attack since 2001, TSA is failing to meet taxpayers’ expectations. Its operations are in many cases costly, counterintuitive, and poorly executed.”

The report’s recommendations to revise the organization include the following:

Advance risk-based security by prioritizing the harmonization of aviation security standards worldwide, adopting a comprehensive plan to mitigate evolving threats, and expanding the use of canine explosives detection assets;

Strengthen privacy protections by enlisting the private sector to modernize and, to the extent possible, automate the passenger screening process to reduce pat-downs and implementing privacy software on all Advanced Imaging Technology machines;

Limit spending by reducing the size of the TSA workforce, conducting cost-benefit analyses for all major programs and purchases, and communicating with industry to avoid setting technology requirements that are unattainable;

Create jobs by contracting with the private sector to perform screening and establishing a five-year procurement plan to guide future investments in aviation security technology research and development; and

Cut red tape by working with stakeholders to streamline existing security regulations and reforming the Prohibited Items List to better reflect evolving threats.

At a hearing held on September 11th, TSA Deputy Administrator John Halinski testified regarding improvements in the agency’s risk-based security. “Risk-based screening strengthens security while significantly enhancing the travel experience for passengers whenever possible,” he said. Halinski noted that since TSA launched its Pre™ program, over 2 million passengers at 23 airports have experienced its benefits. Halinski also testified about the success of TSA’s programs for handling “Known Crew Members,” the elderly, some children, and uniformed military.

Other witnesses at the hearing offered various recommendations for extending eligibility for Pre™. For example, TSA should facilitate interoperability among carriers so that a traveler identified as “low risk” by one airline can also be recognized as a low risk traveler on all other airlines. TSA should also offer Pre™ eligibility to international members of Global Entry.


October 2012

AVIATION NEWS ASIA-PACIFIC UPDATE PHILIPPINE AIRLINES BUYS 54 AIRBUS JETS

Philippine Airlines (PAL) signed a US$7 billion deal to buy 54 Airbus jets as part

of a plan to overhaul its fleet. This acquisition is the largest aircraft order ever made by a Philippine carrier and will more than double the airline’s passenger and cargo handling capacity. PAL also plans to buy another 46 aircraft from Airbus and other manufacturers, including Boeing. The revitalization of PAL will help the airline meet growing demand, as well as support growing tourism and trade in Asia.

CATHAY PACIFIC BANS SHARK FINS Hong Kong airline, Cathay Pacific, says it will stop carrying shark fins

as cargo. Shark fin soup, a high-end dish, is becoming more popular as the incomes in China rise. Cathay Pacific is conceding to pressure from various environmental groups in Asia who are concerned about animal cruelty and the possible extinction of shark species. Cathay Pacific is the largest airline in Hong Kong and its operations account for about half of the global trade of shark fins.

SINGAPORE AIRLINES SET TO REDEFINE AIRPORT LOUNGE EXPERIENCE

Singapore Airlines has appointed

architectural and design firm ONG&ONG to develop a new design concept to be applied to all the airline’s airport lounges worldwide. This recent development is part of a US$20 million investment program in SilverKris Lounges for the next five years. The new lounge design concept will be rolled out by the middle of next year.

VIRGIN AUSTRALIA RETURNS TO PROFITABILITY

Australia’s second largest airline, Virgin

Australia, says it returned to profitability in the last fiscal year due to growth in the corporate travel sector. Virgin Australia posted a net profit of AU$22.8 million last year, compared to a loss of AU$67.8 million in the year prior. The corporate travel segment now makes up 20% of Virgin Australia’s domestic revenue. Virgin Airlines’ domestic competitor, Qantas Airlines, recently reported an AU$245 million annual loss in profits due to rising fuel prices, employee strikes and its struggling international division.

LION AIR TO START LCC Indonesia’s Lion Air announced

plans to set up a low-cost airline in Malaysia. According to Lion Air representatives, the new low-cost carrier will begin running in May 2013 as part of the airline’s rapid regional expansion. Lion Air will own 49 percent of the new airline, named Malindo Airways, while Malaysia’s National Aerospace and Defense Industries will own the remaining 51 percent. Lion Air (including Wings Air) currently controls half of the domestic travel market in Indonesia (51 percent), while Garuda (includes Citilink) control 27 percent. Domestically, Indonesia AirAsia is the smallest of these four carriers as it is the only carrier in Indonesia with more international than domestic capacity.


October 2012

AIRBUS LAUNCHES CHINESE BIOFUEL STUDY

Airbus and China’s Tsinghua University have agreed to jointly investigate biofuel feedstock in the

country. The agreement is designed to identify the best options for sustainable commercialization of alternative fuel supply for aviation. This latest project will add Asia to Airbus’ prospective network of biofuel “value chains”.

CANADA UPDATE NEW CEO AT SAINT JOHN AIRPORT

David Allen has been named Chief Executive Officer by the Saint

John Airport board of directors on October 16th. Allen has 35 years’ experience in the airline industry, having worked as a pilot, a sales and marketing executive and as a consultant. His duties at YSJ include managing and marketing the airport, with a focus on attracting new airlines and routes and strengthening the airport's relationships with its current airline partners.

MARRIOT HOTEL TO BE BUILT ON THE WINNIPEG AIRPORT CAMPUS

Winnipeg’s first Courtyard by Marriot

hotel is set to be built on the Winnipeg James Armstrong International Airport campus. This will be the third hotel on the airport campus. The six-story, 120-room Courtyard property is being developed by two independent development companies, Brock Hotels and Belmont Equity Partners. This new hotel will be built on the eastern side of the airport grounds and is set to be complete by spring/summer 2014. This latest hotel development project is a by-product of a major economic boom taking place in the region. Not including the just-opened Holiday Inn, there are now five new hotels under construction or in the works in the airport/Polo Park region.

COMPETITION BUREAU CLEARS JOINT VENTURE

After a detailed study, launched in 2011, the Canadian Competition Bureau has given the OK to Air Canada and United Airlines for a joint venture on five transborder routes. The carriers had originally wanted the joint venture to cover 19 routes. The Bureau's study determined that competition on five of those routes is unlikely to be harmed but prohibited the two airlines from coordinating on the remaining fourteen. An independent monitor will be appointed by the Bureau to ensure the airlines are complying with the rules laid out in the agreement between the Bureau and the two airlines.

AIR CANADA TO LAUNCH LOW-COST CARRIER

Air Canada intends to reveal details about its new discount airline before November of

this year. The new low-cost carrier will be wholly owned by Air Canada, but it will have a separate management team in order to foster a more authentic low-cost culture. Despite the differentiation, the new carrier will have close ties to Air Canada, as a number of Air Canada aircraft will be reallocated to the new carrier. The new carrier is expected to launch in 2013. FIVE NEW CANADIAN AIRPORTS TO ACCEPT NEXUS CARDS

The federal government is increasing the number of airports that accept NEXUS

in an attempt to speed the passenger border clearance process. NEXUS card holders are now able to use the passes at five new airports including: St. John’s International Airport, Greater Moncton International Airport, Quebec City Jean Lesage International Airport, Kelowna Airport and Toronto’s Billy Bishop Airport.


October 2012

HSBC’S LATEST AD CAMPAIGN DEBUTS AT CALGARY AIRPORT

Calgary International Airport is the first

airport in North America to host HSBC’s new “In the Future” ad campaign. The campaign is one of the most extensive branding campaigns to take place at the airport. HSBC Canada has exclusive rights to brand the exterior and interior of 34 jet bridges and interior space in the U.S. transborder areas across the entire Calgary Airport. Currently 43 airports in 21 countries worldwide feature jet bridge advertising pioneered by HSBC.

SASKATOON AIRPORT AUTHORITY HAS A NEW PRESIDENT/CEO

Stephen Maybury has

been named the next President and CEO of the Saskatoon Airport Authority. Mr. Maybury replaces Bill Restall who has held the position since 1985. Mr. Maybury, who is currently serving as CEO of Southport Aerospace Centre in Winnipeg, will be taking over in early December of this year.

PORTER AIRLINES OPENS NEWARK PASSENGER LOUNGE

Porter Airlines officially opened its new passenger

lounge at Newark Liberty International Airport. The lounge is beside Porter’s primary gate in Terminal B, providing easy access to departing flights. Porter lounges are complimentary to all passengers and include comfortable seating, Wi-Fi, snacks and beverages. Newark joins Toronto and Ottawa as Porter destinations with complimentary lounge access.

EUROPE UPDATE BETTER PLACE CONSORTIUM TO OPEN AT AMSTERDAM AIRPORT

Better Place announced it is

bringing its award-winning electric car

network to Amsterdam Airport Schiphol. The Schiphol-Amsterdam corridor is one of the most in-demand routes in the world with more than 700,000 taxi trips originating from Schiphol each year. Applying this battery switch technology to electric taxis will allow them to operate around the clock without the need to stop, plug in and charge. The goal of the project is to show that with the right solution, high usage vehicles like taxis can make the switch to electric. Better Place owns and operates a network of battery switch stations and public/personal charge spots, as well as a supply of batteries for cars.

KEFLAVIK AIRPORT NAMED BEST IN EUROPE UNDER 2M PASSENGERS

Iceland’s Keflavik International Airport has been named the “Best

Airport in Europe 2011” in the 2 million passengers or less category as part of the Airports Service Quality (ASQ) Awards. The prestigious title is based on an extensive airport survey conducted by Airports Council International (ACI). The ACI survey is published quarterly and annually with 186 major airports worldwide taking part, 54 of which are in Europe.

RYANAIR’S CEO HAS IT OUT WITH CUSTOMERS

Ryanair’s CEO, Michael O’Leary

is facing backlash after denouncing customers’ complaints regarding additional airline fees. Mr. O’Leary’s comments were spurred by a specific customer complaint made in the social media sphere regarding the airline’s 60-euro boarding pass printing fee. This is not the first time Ryanair has been criticized for its additional fees, including an airline fee for extra bags and exit row seat preference.


October 2012

AIRLINE INDUSTY WOES CHIP AWAY AT PASSENGER CHOICES

Air passengers face higher fares, fewer

flight choices and crowded aircraft as European carriers reduce seating capacity growth and/or cut routes altogether, in a battle to manage high fuel prices and shrinking margins. According to the Association of European Airlines, capacity among its member airlines declined by 4.6 percent in the first half of this year. This decline comes after an increase of almost 23 percent between 2004 and 2011. Many airlines are focusing on axing some of their less profitable routes, especially short-haul routes to secondary cities in Europe. For instance, Ryanair stopped service from Leicester to Nantes late last year.

MANCHESTER AIRPORT TO ABANDON BACKSCATTER SECURITY SCANNERS

Manchester Airport is abandoning the use of

controversial backscatter scanners, which produce body images that appear to be naked. The airport must cease using the scanners after the European Commission failed to provide permission for the three year trial to be made permanent. The scanners have proven to be controversial, amid claims they are an invasion of passengers’ privacy. Manchester is the only airport in Europe to use the scanners. The security scanners will be replaced with machines using radio-wave technology, similar to safety systems in the United States.

LATIN AMERICA UPDATE ETIHAD AIRWAYS SET TO EXPAND IN SOUTH AMERICA

Etihad Airways is set to launch its first route to South America in June 2013, with daily non-stop flights between Sao Paulo, Brazil and its home base of Abu Dhabi,

United Arab Emirates. The airline is also in discussions with South American-based carriers about potential commercial code-sharing partnerships. Etihad Airways currently has 38 codeshare partnerships with airlines around the world, resulting in network of 323 destinations.

AMERICAN AIRLINES ADDS NON-STOP BETWEEN MIAMI AND ROATAN

American Airlines (AA) announced it will offer non-

stop service between Miami International Airport (MIA) and Juan Manuel Galvez International Airport (RTB) in Roatan, Honduras beginning on November 17 of this year. The new service will operate once a week using a Boeing 737 aircraft. Roatan will be AA’s third destination in Honduras and 10th in Central America. AA currently offers seven flights a week between Miami and Tegucigalpa and 13 flights a week between Miami and San Pedro Sula.

MIDDLE EAST / AFRICA UPDATE SOUTH SUDAN SEEKS INTERNATIONAL FIRM TO RUN NEW AIRLINE

South Sudan is looking for an international company to help run its national airline

in a public-private partnership. South Sudan split from Sudan a year ago, after decades of civil war, which left the nation with little to no industry or infrastructure outside the oil sector. Given the country’s landlocked position, the development of a new national airline is a major priority as it will help connect the region with the outside world. The government plans to take a 20% stake in the airline, sell 31% to the domestic private sector and 49% to international investors. The government is eager to allow for foreign investment, but has struggled due to issues such as instability, inflation, corruption and lack of infrastructure and laws in the war-torn country.


October 2012

NIGERIA LIFTS BAN ON DANA AIR Nigerian Federal Aviation

Authorities lifted Dana Air’s operation license suspension; three months after one of the airline’s jets crashed into a heavily populated Lagos suburb killing159 people. While little is publically known about the cause of the crash, authorities are allowing Dana to resume commercial flights after completing a satisfactory technical, operational and financial audit.

DUBAI AIRPORT’S PASSNGER TRAFFIC JUMPS 20 PERCENT

Dubai International Airport handled 4.85 million passengers in August of this

year – a 20 percent jump compared to last year’s August passenger numbers. In the first eight months of this year, passenger traffic rose 13.4 percent from a year earlier to 37.78 million. Freight volume also rose compared to last year – 3 percent to 1.48 million tons. According to Dubai Airports, the airport operator, the rise was mainly due to a lower base caused by variable travel patterns during Ramadan in August 2011.

AIR NIGERIA COLLAPSES AS INDUSTRY STRUGGLES

Nigeria’s second largest airline, Air

Nigeria, has pulled half its aircraft out of service and has fired almost all of its employees. The collapse and firing of 800 workers at Air Nigeria comes after six of the country’s nine airlines shut down earlier this year. The dramatic decrease in air services highlights the current turmoil of the nation’s troubled aviation sector. Air Nigeria was once the darling of the country after Richard Branson started the airline’s predecessor, Virgin Nigeria, in 2005. The airline was then taken over and renamed by Nigerian businessman, Jimoh Ibrahim in 2010.

SAUDI AIRLINE PLANS GROUND SERVICES IPO

Saudi Ground Services, a

business unit of national carrier Saudi Arabian Airlines, has hired HSBC Holdings to advise it on a planned initial public offering (IPO) of 30 percent of its shares. This unit would be the second of six, including catering, cargo, maintenance, airlines and flight academy, to pursue a stock market listing following Saudi Arabian Airline’s decision to privatize the units in 2006. The first of the units to be sold publicly, Saudi Airlines Catering Co, raised $347 million after completing a 30-percent IPO in July 2012. Its shares have risen 14.5 percent since then.

ETHIOPIAN AIRLINES PLANS TO EXPAND MAINTENANCE OPERATIONS

Ethiopian Airlines is set to begin construction of two

additional hangars at Addis Ababa’s Bole International Airport as part of its effort to double capacity for heavy aircraft maintenance. The new facilities, which are expected to be complete in two years, will be able to accommodate one Boeing 747, two Boeing 767s and four Boeing 737s each. The plans are part of Ethiopian’s Vision 2025, which aims to triple total revenues to around $10 billion in the next 13 years, of which $500 million is expected to be generated from the airline’s maintenance, repair and overhaul (MRO) operations. With the new capacity, Ethiopian expects to increase MRO service to other carriers as well.


October 2012

UNITED STATES UPDATE ALASKA AIRLINES TO BEGIN DAILY SERVICE BETWEEN PORTLAND AND WASHINGTON D.C.

Alaska Airlines and the Port of

Portland inaugurated new non-stop service between Portland, OR, and Ronald Reagan Washington National Airport in Washington. D.C. The flights are being operated with Boeing 737-800 aircraft, accommodating 16 passengers in first class and 141 in the main cabin

NEW GPS SYSTEMS TO BE INSTALLED BY AIRLINES

As part of a $42 billion upgrade of the U.S. air-traffic control system, the Federal Aviation Administration

(FAA) is requiring airlines to install new GPS systems. At the moment, a traffic controllers use radar to track planes. This technology works well over land where there are radar stations, but there is no radar over undeveloped mountain ranges or the oceans. By 2020 commercial airlines will have to begin using GPS systems that send out a plane’s location once a second, compared with once every 4 to 12 seconds, which will help controllers guide traffic with more precision.

UNITED AIRLINES TO FLY TO SHANGHAI WITH BOEING 787

United Airlines announced that it

will operate daily flights between Los Angeles and Shanghai with Boeing 787 Dreamliner aircraft for the first time. The major U.S. passenger carrier will start the service from March 31, 2013. United Airlines will operate several other flights with the 787 from 2013, including flights between Denver and Tokyo, Los Angeles and Tokyo, as well as between Houston and Lagos, Nigeria.

DELTA AIR LINES BRINGS PORSHE SHUTTLE SERVICE TO ATLANTA

Delta Air Lines is using Porsches

(donated by Porsche) to surprise top-level frequent fliers making tight connections at Atlanta’s Hartsfield-Jackson International Airport. Delta is not advertising the new service, but intends to provide a dozen lucky passengers with the Porsche connection experience every hour. Delta is following in the footsteps of Lufthansa and Air France, who have already been offering first-class car service to select passengers at their biggest hubs in Europe. Delta’s new luxury car service will entice competition between airlines for high-value customers in the U.S.

SOUTHWEST AIRLINES ANNOUNCES BRANSON AIRPORT DETAILS

Southwest Airlines recently announced its 2013 flight plans to and from Branson Airport in Missouri. Beginning on March 9 of next year, Southwest will

operate daily nonstop flights to Dallas-Love, Chicago-Midway and Houston-Hobby from Branson Airport. In addition, Southwest will also offer weekly Saturday service between Branson and Orlando airports. The recent flight announcement only covers flights through April 12th of next year. Branson Airport had previously been served by AirTran Airlines. When Southwest first acquired AirTran Airlines in 2011 it was unclear whether Southwest would continue to serve the Branson, Missouri market.


October 2012

GLOBAL ENTRY KIOSKS AVAILABLE AT SAN ANTONIO AIRPORT

Global Entry kiosks became available at San Antonio International Airport on August 29. Passengers registered in the Global Entry program are now able to bypass lines at customs

by using the two kiosks. The kiosks can read passengers' passports, scan their faces and accept customs cards. The Dallas/Fort Worth International Airport and the Houston Intercontinental Airport are the only other Texas airports participating in the Global Entry program. About 20 other U.S. airports operate Global Entry kiosks. More than one million travelers are enrolled in the program.

OTHER NEWS BOEING CELEBRATES FIRST ANNIVERSARY OF 787 DREAMLINER

It has now been a year since Boeing

received certification for its 787 Dreamliner. This time last year, the Federal Aviation Administration (FAA) added the 787 Dreamliner to the Boeing production certificate. Certification meant that the aircraft met all requirements for commercial operations. Boeing has delivered 17 787 Dreamliners to airlines to date. Boeing has more than 800 orders from 58 customers.

BOMBARDIER COULD OFFER 160-SEAT C-SERIES

Bombardier Commercial Aircraft

is considering a high-density version of its largest C-Series, the CS300, to meet growing demand from airlines for an aircraft with 160 seats. This aircraft would not only be attractive to low-cost carriers, it would also put Bombardier in direct competition with Airbus and Boeing. Several changes would need to be made

to the new aircraft including potentially adding another exit, narrowing seats and a reduction in the number of lavatories on board.

AIRBUS TALKS AVIATION SUSTAINABILITY

While Airbus released its vision of what a passenger jet will look like in 2050, the

aircraft manufacturer says that around 9 million tons of fuel and 28 million tons of CO2 emissions could be saved every year in Europe and the U.S. by optimizing aircraft systems. Though the aviation industry as a whole has reduced fuel burn and emissions by 70 percent in the last 30 years, the total number of passenger aircraft is predicted to double from around 15,550 to 32,550 by 2031 according to the latest forecast by Airbus. The aviation industry has set a target for carbon neutral growth by 2020; in 2050, emissions should be halved compared to 2005 levels. While developing more fuel efficient aircraft is a necessity, according to Airbus a more holistic approach is required.

A350 ADVANCES TOWARD FIRST FLIGHT

Airbus has completed the first wing-fuselage join and expects first flight of the A350

to be mid-2013, with deliveries beginning in late 2014.


October 2012

AIRLINE TRAFFIC

Asia-Pacific Airlines – August 2012

Airline Traffic

(RPKs – millions) Capacity

(ASKs – millions) Load Factor

1, 2

9,724 1.4%

12,156 1.5%

80.0% 2.3 pts

7,881 8.7%

10,070 6.4%

78.3% 1.7 pts

2

4,826 7.8%

7,000 5.2%

68.9% 1.6 pts

3

9,215 1.6%

11,094 3.0%

83.1% 1.1 pts

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

Source: Carrier traffic reports

European Airlines – August 2012

Airline Traffic

(RPKs – millions) Capacity

(ASKs – millions) Load Factor

1

20,925 0.6%

24,416 0.6%

85.7% 0.1 pts

2

20,167 3.7%

24,078 1.2%

83.8% 2.1 pts

3 16,613 5.0%

19,683 5.6%

84.4% 0.5 pts

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


October 2012

AIRLINE TRAFFIC

North American Airlines – August 2012

Airline Traffic

(RPMs – millions) Capacity

(ASMs – millions) Load Factor

CANADA

5,727 0.7%

6,513 0.1%

87.9% 0.1 pts

1,690 9.2%

1,900 2.3%

88.9% 5.6 pts

99.1

21.4% 133.1 12.0%

74.5% 5.8 pts

UNITED STATES

3,281 13.1%

3,744 12.8%

87.6% 0.3 pts

1 19,612 0.4%

22,648 0.6%

86.6% 0.9 pts

3 12,353 0.1%

14,398 1.5%

85.8% 1.4 pts

18,935 0.2%

21,561 0.8%

87.8% 0.9 pts

2 5,894 5.3%

6,750 5.3%

87.3% 0.0 pts

3 9,356 0.1%

11.118 1.8%

84.2% 1.6 pts

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.


O

ctober 2012

Summary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian Airports Total passenger traffic at the selected Canadian airports below increased in July 2012 compared to July 2011. Among these airports, the Calgary International Airport (YYC) showed the strongest growth at 6.2% followed by the Edmonton International Airport (YEG) at 5.5%.

Toronto Vancouver Montréal Calgary Edmonton Ottawa Winnipeg Halifax Victoria Kelowna Saskatoon Regina

2011

August +4.9% +3.3% +4.9% +3.2% +3.3% +2.6% +4.6% +0.3% +1.4% -2.5% +1.4% -3.3%

September +5.4% +2.8% +5.4% +2.1% +4.1% +6.7% +1.9% +1.7% -2.9% +2.7% +5.2% +4.2%

3rd Quarter +5.5% +2.7% +5.9% +2.2% +3.8% +4.7% +2.7% +0.8% 0.0% -0.2% +3.6% -0.4%

October +2.0% +0.0% +2.6% +0.3% +5.8% +4.7% +2.8% +1.6% -0.4% +1.7% +7.2% -0.9%

November +3.1% +1.9% +3.0% -0.6% +5.4% +7.3% +4.3% +4.7% 0.0% -0.2% +7.0% +3.1%

December +2.0% +3.9% +2.0% +1.7% +4.2% +4.4% +3.8% +2.9% +2.3% +1.0% +3.4% +2.3%

4th Quarter +2.3% +2.0% +2.5% +0.5% +5.1% +5.5% +3.6% +2.9% +0.6% +0.9% +5.8% +1.5%

Full Year +4.7% +1.5% +5.3% +1.1% +3.1% +3.4% +0.6% +2.5% -1.0% -0.1% +2.5% +1.9%

2012

January +5.2% +5.6% -0.4% +6.5% +8.7% +7.8% +8.5% +3.1% -0.7% +1.5% +7.1% +2.2%

February +7.5% +6.9% +4.9% +7.6% +10.1% +9.4% +9.9% +2.0% +4.2% +6.8% +8.4% +5.3%

March +4.4% +2.9% +5.6% +4.1% +5.7% +6.3% +5.5% +5.8% +0.0% +6.3% +6.8% +3.8%

1st Quarter +5.6% +5.1% +3.4% +6.0% +8.1% +7.8% +7.9% +3.8% +1.0% +4.8% +7.4% +3.8%

April +5.3% +4.8% +2.3% +6.7% +6.6% +6.0% +6.4% +5.2% +2.1% +3.3% +9.6% +2.9%

May +1.8% +2.8% -2.0% +4.0% +5.8% +0.1% +4.9% -1.2% -1.9% +1.3% +5.8% +1.5%

June +3.8% +2.2% -0.1% +6.0% +3.8% +0.3% +4.1% -3.6% +0.6% +3.0% +7.2% +7.4%

2nd Quarter +3.8% +3.2% +0.1% +5.6% +5.4% +2.1% +5.1% +0.3% +0.2% +2.5% +7.5% +3.9%

July +1.7% +2.7% -2.9% +6.2% +5.5% -1.3% N/A -3.2% -2.1% +3.2% +3.7% +2.9%

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


O

ctober 2012

Summary of Total Year-Over-Year Passenger Traffic Performance at Selected U.S. & International Airports Total passenger traffic at the selected U.S. airports below increased in 2012 compared to 2011, and overall annual volume at selected international airports increased year-over-year.

United States International

Atlanta Chicago Los

Angeles Dallas Denver New York

JFK London

Heathrow Paris CDG

Frankfurt Beijing Tokyo Narita

Mexico City

2011

August +5.3% -0.6% +5.1% +2.9% +2.3% -3.6% +0.7% +1.1% +2.5% +5.4% -12.5% +7.0%

September +3.2% +0.2% +6.1% +4.9% +0.6% +2.6% +1.4% +4.7% +4.3% +6.7% -15.0% +29.1%

3rd Quarter +4.8% -0.6% +6.0% +3.9% +1.3% +0.6% +1.5% +3.2% +4.0% +5.3% -15.3% +11.7%

October +2.4% -0.9% +2.7% +0.9% -2.4% -0.2% -1.3% +1.3% +2.5% +3.8% -13.8% +19.6%

November +3.1% -1.9% +3.7% +0.7% +1.6% -1.3% -0.5% +2.2% +4.3% +7.2% -5.9% +20.7%

December +1.2% +2.0% -0.4% -1.6% +2.1% +3.7% +14.7% +9.0% +12.2% +2.7% +0.4% +23.4%

4th Quarter +2.2% -0.3% +2.0% 0.0% +0.3% +1.1% +3.8% +4.0% +5.9% +4.5% -6.8% +21.3%

Full Year +3.6% -0.4% +4.6% +1.6% +1.7% +2.5% +5.5% +4.8% +6.5% +6.4% -17.1% +9.3%

2012

January +7.3% +1.0% +5.4% +0.4% -0.6% +7.2% +2.3% +3.3% +5.5% +5.0% +1.4% +22.5%

February +7.7% +11.3% +8.2% +9.7% +2.5% +12.5% +3.8% +3.6% +0.7% +8.2% +3.8% +24.0%

March +4.0% +0.6%% +6.1% +2.6% -1.0% +8.5% +6.9% +5.9% +4.1% +4.2% +30.3% +19.7%

1st Quarter +6.1% +3.8% +6.5% +4.0% +0.2% +9.2% +4.4% +4.3% +3.5% +5.7% +11.1% +21.9%

April +4.1% +1.2% +2.6% +0.3% +0.4% +7.3% +0.0% +2.9% +2.8% +1.6% +51.3% +12.2%

May +1.4% +0.6% -1.2% +6.2% -0.1% +3.5% -0.6% -0.1% +1.4% +1.8% +29.4% +6.9%

June +3.3% +0.9% +2.0% -0.8% -0.9% +9.8% +1.6% +2.3% +5.4% +4.5% +23.1% +13.3%

2nd Quarter +2.9% +0.9% +1.1% +1.8% -0.2% +6.9% +0.4% +1.7% +3.2% +2.6% +33.4% +10.7%

July +0.4% -1.7% +2.0% -2.1% -0.1% +4.3% -4.4% -0.8% +3.7% +6.2% +17.2% +10.9%

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


October 2012

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:

Rhode Island Airport Corporation and Puerto Rico Tourism Company Project Manager and Advisor for an application to the U.S. Department of Transportation for a

Small Community Air Service Development Program Grant. This year there were 61 grant applications and the Consortium of RIAC and PRTC was among the 33 winning grants.

Groningen Airport Eelde Two Phase Project First phase entails air travel market size research and leakage analysis; second phase is to

create a route development strategy.

Orange County John Wayne Airport Becomes Interjet’s Newest Destination

Interjet will begin daily flights to Guadalajara and Mexico City starting in October from Orange County John Wayne Airport.

Greater Orlando Aviation Authority Activity Forecast Provide an activity forecast to support airline lease and use agreement negotiations.

Tourism Jasper and Consortium of Five Alberta Stakeholders Air service development assessment and strategy for Edson Airport, which includes a Market

Assessment (as well as, stakeholder consultations); an Air Service Feasibility Assessment; and Airline Business Case Development.

Eznis, Mongolian Air Carrier Facilitate discussions with Eznis shareholders and management on a strategy of acquiring

new aircraft and network expansion.

Port Metro Vancouver Preclearance Negotiations Support - Extension Contract extension to continue to support Port Metro Vancouver with border facilitation.


October 2012

INTERVISTAS NEWS – CONT’D Speaking Engagements Gerry Bruno, Chief Executive Officer

ATAC Annual Conference: Vancouver, BC – 14 November 2012.

Mike Tretheway, Executive Vice President

Conference on Airport Competition FEDEA (Foundation for Applied Economics) and IEB (Instiut d’Economica de Barcelona): Barcelona, Spain – 19 November 2012.

Dr. Tretheway presents “Distortions to Airport Competition”.

European Aviation Conference: Reinventing the Aviation Value Chain: Berlin, Germany – 22-23 November 2012.

Dr. Tretheway to Speak at the European conference on re-inventing the aviation value chain

Solomon Wong, Executive Vice President

IATA Facilitation Industry Meeting: New York, NY – 29 October 2012.

Mr. Wong presents “The NEXUS Experience”.

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

Olaf van Tol is promoted to Manager, Commercial Development It is with great pleasure that we announce Olaf van Tol’s appointment Manager. During the past years Olaf has actively participation in new client generation including managing proposals for smaller projects, supporting RFP's for larger projects, and integrating and networking with potential clients. He has also published an article in ACI Pacific Airports magazine on the Shenzhen project and another in Aerlines on the impact of airports on their surroundings regions. Olaf has played an important role in

the delivery of airport commercial development projects, Airport City development planning, PPP implementation and oversight advisory services. He has also made a significant contribution to improving the corporate culture of the InterVISTAS Consulting Group and was instrumental in the founding of Young InterVISTAS and served as the first chair of this group for two years.

OUR OFFICES

UNITED STATES CANADA

UNITED KINGDOM

NETHERLANDS

*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.

Bethesda, Maryland 7200 Wisconsin Avenue, Suite 1103 Bethesda, MD 20814 Tel: +1-301-941-1400 Fax: +1-301-941-1402

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Winnipeg, Manitoba

2000 Wellington Avenue, Suite 205, Box 23 Winnipeg, MB R3H 1C2 Tel: +1-204-949-2900 Fax: +1-204-949-2909

The Hague 10 Anna van Saksenlaan 2593 HT The Hague Tel: +31 70 344 6449 Fax: +31 70 324 5302

Ottawa, Ontario 55 Metcalfe Street, Suite 1100 Ottawa, ON K1P 6L5 Tel: +1-613-288-1577 Fax: +1-613-288-1578

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 [email protected] or 1-604-717-1800.

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