2014

IN THIS ISSUE:PAGE 3

Feature ArticlesPAGE 4

Regional ReportsPAGE 8

Aviation NewsPAGE 12

Traffic UpdatesPAGE 15

InterVISTAS News

DECEMBER

Deborah MeehanPresident and CEO

InterVISTAS Consulting Group

Vic PrinsAviation Director/Managing Director

Royal HaskoningDHV

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Hello and welcome to the Aviation Intelligence Report.

In this edition, we look at the effects of the Ebola crisis on U.S. airline stocks, similar to our 2004 piece on the effects of the SARS outbreak on Asia-Pacific air carrier traffic. Geneva Tretheway will provide a traffic update in the next edition on U.S. trans-Atlantic travel once the fourth quarter figures become available from the U.S. Department of Transportation (DOT).

In our Regional Reports, Ian Kincaid updates us on the U.S. delay in granting Norwegian Air Shuttle rights to operate trans-Atlantic flights from Ireland, and on the EU’s plan to review aviation policy. Doris Mak provides a look at the difficulty in breaking even for Asian carriers, and at the interest from Asian investors in aircraft leasing companies. Debra Ward brings us the latest on the Canada Transportation Act Review and other aviation news from Canada’s Parliament Hill, and Steve Martin provides the U.S. side

FOREWORD EBOLA EFFECT ON U.S. AIR TRAVELPART 1: AIRLINE STOCKS

of the Norwegian Air Shuttle rights delay, and an update of the FAA reauthorization hearings and plan for air traffic control system upgrades.

We hope you enjoy this edition.

Best regards,Deb Meehan and Vic Prins

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FeatureFeature

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Geneva TrethewaySenior Consultant

Vancouver, Canada

Reuters reported a drop in U.S. airline share prices mid-October in reaction to the spread of the Ebola virus, following news of the growing outbreak in West Africa and that a second nurse in the U.S. had contracted the virus. An online poll conducted by the news agency and Ipsos later that week indicated a strong concern amongst American adults regarding international travel, with 45% of respondents saying they would avoid international travel.

Reuters reported a drop in stock prices for four U.S. carriers (illustrated in the chart). Airline traffic statistics from the U.S. Department of Transportation are not yet available, so a traffic analysis will be forthcoming in the first quarter of 2015.

Globally, IATA reported year-over-year drops in passenger traffic for October 2014 on routes between Africa – the Far East (-7%), within Africa (-4.2%) and minimal growth on Africa – Europe (0.7%). Africa – Middle East traffic appeared undeterred, with growth of 5.4%.

In 2004 we reported on the effect of SARS (Severe Acute Respiratory Syndrome) on Asia-Pacific air carriers. During the initial months of the SARS outbreak in 2003, these carriers experienced traffic declines of 50% but recovered six months later, by October 2003. Encouragingly, air travel bookings in the region had recovered as early as June of that year, as reported by Abacus International. On the other side of the Pacific, North American carriers experienced traffic declines of 20%, recovering by November of that year.

EBOLA EFFECT ON U.S. AIR TRAVELPART 1: AIRLINE STOCKS

Airline stock prices were trending upwards throughout 2014 and have shown strong growth following the hit from reports of the Ebola outbreak and contact with the U.S. Between January and December, American Airlines stock price rose US $23, United rose $22, Delta rose $17 and JetBlue rose $6

Region Oct 2014 vs. Oct 2013 YTD 2014 vs. YTD 2013

Within Africa -4.2% -2.0%

Africa - Far East -7.0% -3.8%

Africa - Europe 0.7% 0.4%

Africa - Mid East 5.4% 6.7%

indicating that although U.S. citizens were wary of international travel at the beginning of the fourth quarter, they have not been deterred in advance of the holiday season.

Source: IATA Premium Traffic Monitor, Origin Destination Passenger Statistics

http://www.reuters.com/article/2014/10/15/usa-airlines-stocks-idUSL2N0SA21L20141015http://www.reuters.com/article/2014/10/16/us-health-ebola-poll-idUSKCN0I51Q920141016

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UNITED STATES REPORT

Congressional Opposition to Norwegian Air GrowsA bipartisan group of 188 members of Congress wrote to the Department of Transportation (DOT), urging that it reject Norwegian Airlines’ request to increase flights to airports in the U.S. and Europe. Norwegian Air International (NAI) is seeking DOT approval to operate to U.S. markets under the US-EU Open Skies agreement by creating a separate operating entity and basing it in Ireland.

The Air Lines Pilots Association (ALPA), and to a lesser degree Airlines for America (A4A), have been vociferous in its opposition to the proposal and has secured the backing of many members of Congress. Other major U.S. and EU labor organizations have also joined ALPA to oppose the proposal.

The letter from the members to DOT Secretary Foxx urges him to reject the NAI bid because they said it would be unfair to U.S. airlines.

“We urge DOT to deny NAI’s pending application for a foreign air carrier permit,” the lawmakers wrote. “We remain concerned that granting NAI’s application for a foreign air carrier permit would not be in the public interest and would unfairly put domestic airlines at a competitive disadvantage. We also reiterate our belief that the business model of NAI does not comply with the provisions of the U.S.-EU Open Skies Agreement.”

ALPA argues that NAI would only be able to offer lower ticket prices for international flights because it skirts labor laws that are

normally applied to air carriers. It accuses NAI of operating a “flag of convenience” that would set a “dangerous precedent” and threaten safety and security.

In a speech before the International Aviation Club of Washington, however, NAI’s CEO, Bjorn Kjos, said last week that opponents of his company’s plans were painting a false picture of its operations. ”Fear of competition is the reason for the controversy about our EU licensed airline based in Ireland. Norwegian Air International is planning to have the same … pilots (all of them with European licenses), the same cabin crew – most of them Americans” as its Norway-based operations, to which no one objects.

Rep. Frank LoBiondo, Chairman of the House Aviation Subcommittee, told reporters that a new Congress would act to block Norwegian Air if DOT approved the application.

House Continues Hearings on FAA, NextGenThe House Committee on Transportation and Infrastructure held another in the series of hearings examining the state of the FAA, in preparation for the upcoming legislative push to reauthorize the agency. Key witnesses included the DOT Inspector General Calvin Scovel and A4A CEO Nick Calio.

DOT Inspector General Calvin Scovel testified that the FAA has not taken full advantage of its personnel reform authorities, or implemented changes that could significantly enhance air traffic operations. In general, FAA is not using business-like practices to improve its operational efficiency and cost effectiveness.

As a result, FAA has experienced significant increases in its costs without appreciable increases in controller productivity.

The FAA also faces significant challenges as it modernizes and operates the Nation’s air traffic control system, including ongoing investment priorities for advancing the Next Generation Air Transportation System (NextGen), numerous complexities related to safely integrating unmanned aircraft systems (UAS) into the NAS, and a lack of viable business continuity plans to mitigate potential security risks to the air traffic control system.

Nicholas E. Calio, President and CEO of A4A, urged Congress to push for “transformational” change in the next FAA reauthorization, including speeding efforts to modernize the Air Traffic Control system and implement NextGen to make air travel more efficient.

Airlines have already invested hundreds of millions of dollars to utilize NextGen technologies, such as performance-based navigation procedures and have consistently asked to see greater benefits so that the business case for investment can be made. A4A members support NextGen, and airlines have provided operational data to the FAA, participated in pilot programs, and served on working groups and federal advisory committees – yet their opportunities to use that investment in the airspace has so far been spotty. Calio also urged the Committee to keep an open mind and consider all options, including the wide-ranges of organizational and funding models that have been successfully adopted in other countries.

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Regional Reports

EUROPE REPORT

EU Claims U.S. in Breach of Open-Skies DealEuropean Union representatives claim that the United States has breached their aviation deal by taking too long to grant a license allowing low cost carrier Norwegian Air to expand its trans-Atlantic flights. It is the first time either side has declared a breach of their 2007 open-skies agreement. The pact removes most of the barriers on trans-Atlantic flying and includes provisions for cooperation on enforcing competition and safety rules.

Norwegian Air, which currently flies to the United States on a temporary license from non-EU member Norway, is seeking a foreign carrier permit for its Irish subsidiary with the backing of the EU executive. The move is strongly opposed by U.S. carriers and labour unions. Opponents argue that Norwegian Air is trying to circumvent European labour laws by registering aircraft in Ireland, even though it would not fly from that country, and hiring staff at local bases in Europe, Asia, and the U.S. Three big airlines – Delta, United, and American - have expressed such complaints to the U.S. Department of Transportation (DOT).

The Norwegian carrier, backed by some other airlines and consumer groups, claims that its decision to seek a license in Ireland was not driven by a desire to secure cheap labour, but rather a desire to gain access to favourable airline traffic rights and more attractive aircraft financing rates. It contends that it is bringing to transatlantic routes the same competition that Southwest and JetBlue have brought to the American domestic market. Advocates argue that international competition between airlines is the best way of improving service and offering value for money.

The U.S. DOT has yet to provide a timeline for ruling on the application, which was submitted by Norwegian Air in February. The EU argues that the open-skies agreement necessitates that the U.S. promptly grant traffic rights, as it has done before. Similar applications have typically taken two to three months. European Commission officials have not decided what action to take against the U.S. The aviation deal provides for the option of binding arbitration, a move that would likely antagonize critics of Norwegian Air’s plan who want the U.S. to reject its application.

Change in the Air as EU Reviews Aviation PolicyThe European Commission has begun a review of aviation policy that will cover a broad range of issues from passenger rights protection to airline ownership rules. The review is in its preliminary stage, with the initial positions to emerge in about six months.

The policy review comes at a time of mixed fortunes for the European airline industry, as the market continues to be highly competitive despite some relief from falling fuel prices. Air France-KLM and Lufthansa have been hit hard by repeated strikes, as both carriers confront worker resistance to sweeping overhauls aimed at cutting costs. On December 1, pilots at Lufthansa started a two-day walkout, their ninth strike this year, forcing Germany’s flagship airline to cancel 1,350 flights that impacted 150,000 passengers. Meanwhile, low cost carriers, such as Ryanair and easyJet, continue to earn high profits and gain market share from their more costly rivals. Ryanair now serves over 20

percent of the EU market and reported a 32 percent jump in its fiscal first-half net profits. Similarly, easyJet has increased its market share to approximately 8 percent and saw pre-tax profits grow by 22% in the year ending September 30.

Among the issues on the European Commission’s agenda is ownership and control of airlines, which is being intently monitored among U.S., Middle East and European carriers. EU rules currently limit foreign owners to a minority stake in one of the region’s carriers. Labour groups are reluctant to see ownership rules relaxed and the lack of unified labor laws makes it challenging to abandon existing restrictions. However, European Commission officials have indicated that it is unlikely that the review will recommend new rules. Rather, the outcome will determine what deficiencies characterize the existing rules and how they can be improved.

Minority ownerships currently under review include Delta Air Lines’ 49 percent holding in Virgin Atlantic Airways and Etihad Airway’s stake in several European carriers. Brussels recently gave the go-ahead for Etihad to become the largest shareholder in lossmaking Alitalia, even as it reviews that stake and others such as its holding in Air Berlin PLC. The European Commission has stated that it intends to address predatory behavior in the market, as well as clarify the parameters for fair competition.

Ian KincaidVice President,

Economic AnalysisLondon, UK

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CANADA REPORT

Debra WardExecutive Consultant

Ottawa, Canada

CTA review updateThe Canada Transportation Act review is shaping up to be one of the most comprehensive – and strategic – examinations of Canadian transportation policy and legislation in decades. In its public discussion paper, the Review, under the chairmanship of the Honourable David Emerson, raises fundamental questions about issues affecting our transportation systems and their impact on productivity, competitiveness and development.

The paper raises serious issues affecting the air sector, contrasting the Canadian “user pay” system with global hub airports or carriers “which benefit from subsidies and/or ownership that treat investments in transportation infrastructure and services as part of their national economic strategies”. It also notes that “(Canada’s) policy approach, along with a relatively small internal market, contributes to Canadians paying among the highest airfares in the world as well as creating an impediment to opening the market to foreign competition”.

While the Review is asking for submission by the end of 2014, it is expected that this will be an iterative process, with the final report due in the fall of 2015.

People on the moveScott Streiner, former Assistant Deputy Minister, Policy, Transport Canada has taken a position at the Privy Council Office as Assistant Secretary to Cabinet, Economic & Regional Policy... Robert Dick, Director General Air Policy has moved to the west coast, assuming his new role as Regional Director General, Pacific Region…Bruce Christie has been named Chief Air Negotiator for Canada…David Goldstein, former president & CEO of the Tourism Industry Association of

Canada has been appointed as president & CEO of the Canadian Tourism Commission. Canadian airlines get into the spirit of ChristmasBoth WestJet and Air Canada are playing Santa this year, and sharing their stories on YouTube. WestJet followed up last year’s “Christmas Miracle” (37 million hits and counting) by answering the wishes of people living in a small town in the Dominican Republic – with everything from dolls to a new motor to a horse to a new children’s play structure. Air Canada surprised the regulars at a London pub catering to Canadian ex-pats with free tickets home. Get out your hankies, and happy holidays to all!

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Regional Reports

ASIA PACIFIC REPORT

Asian Carriers Struggle to Deliver ProfitsThe Asian airline industry has struggled to achieve profitability this year, despite high passenger volumes. Airlines from this region were collectively just below break-even for the first half of the year. Their difficulties in keeping profits aloft have come as their U.S. counterparts are seeing some of their most profitable results since the mid-1990s.

The financial woes of Asian carriers can be largely attributed to overexpansion, as revenue failed to keep pace with capacity growth. Significantly, increase in demand was 1 to 2 percentage points below capacity growth this year. Asia’s airline market is also highly contested: 75% of its routes are flown by at least three carriers and 27% have at least five carriers, according to data from the Association of Asia Pacific Airlines. By comparison, in Europe, 45% of routes are served by only one or two airlines. While airlines in the U.S. and Europe met the capacity challenge by consolidating, national ownership rules have made it challenging in Asia.

However, there are signs that conditions in the Asian market could improve. First, Asia’s passenger traffic is forecast to rise at a 5.7% compound annual growth rate (CAGR) through 2017, compared with expectations for a 2.2% CAGR in the US, according to data released by the International Air Transport Association (IATA). IATA expects traffic within the Asia-Pacific region will account for nearly 32% of all air travel passengers by 2017, compared to Europe and North America’s share of around 23 to 24%.

Second, the price of oil has dropped as the U.S. pumps crude at the fastest rate in three decades amid signs of weakening global demand. West Texas Intermediate fell below

USD 65 in late November, trading at the lowest price in more than five years. Declining crude oil prices will benefit carriers across Asia, as fuel is an airline’s most significant expense. In India, spending on fuel can be as high as 50% for a budget airline.

In light of the fall in oil prices, shares for Cathay Pacific Airways and several Chinese airlines rallied at the end of November. China Southern Airlines, China Eastern Airlines, Hainan Airlines, and Air China all surged 10% each in November 28 in Shanghai trading. Similarly, Jet Airways jumped 20% in Mumbai while budget carrier SpiceJet advanced 18%. The improving stock performance of these airlines suggests that investors are still optimistic about the viability of the Asian market going forward.

Asian Investors and Budget Airlines Flock into Aircraft LeasingAsian companies have submitted billions of dollars of bids for aircraft and the firms that lease them. Deals of interest include the ongoing sale of assets of AWAS Aviation Capital and Avolon Aerospace Leasing, both put on the block by private-equity firms based in Ireland.

Many Western groups abandoned the business of buying and renting out planes after the financial crisis. However, strong demand for aircraft has enhanced its appeal amongst Asian financial conglomerates. Asia is set to overtake the U.S. as the world’s largest plane market as economic growth in China, India and Southeast Asia encourages more air travel. Last year, Beijing ended a six-year ban on new privately owned airlines. A global push towards more fuel-efficient aircraft also adds to the mix of demand.

While buying jets to lease represents a long-term investment, it can provide attractive returns and

stable cash flow at a time of low global interest rates. Between 2004 and 2011, estimated returns on leasing were 9% a year on average, while those from running an airline were just 4%, according to a prospectus from China Aircraft Leasing Group, citing data from IATA.

In early November, Li Ka-shing’s Cheung Kong Holdings finalized a deal to buy 60 passenger jets for more than USD 2.5 billion. Cheung Kong is also bidding on AWAS, the world’s 5th largest lessor by fleet size, in a deal that could value the company at USD 5 billion. Hong Kong Aviation Capital has also submitted a bid for AWAS’s assets. The lessor announced its intention to increase its aircraft portfolio from USD 2 billion to 5 billion by ordering new aircraft and buying jets from airlines in sale-and-leaseback deals.

Avolon is also on the market. Among the bidders is Aviation Industry Corporation of China, a large state owned company. Similarly, China Aircraft Leasing Group intends to bulk up in this business. The Chinese firm raised about USD 94 million this summer by listing in Hong Kong, and signed a deal with Airbus in early November to buy 100 single-aisle aircraft. Based on the list price of the planes, the deal would be worth USD 10.2 billion.

Budget airlines are keen to get into the leasing business as well, taking advantage of better prices on volume orders and competition between Boeing and Airbus. In October, Indonesia’s Lion Air, Malaysia’s AirAsia and Norwegian Air Shuttle ordered more than 1,400 Airbus and Boeing jets, worth about USD 140 billion at current list prices. They plan to compete with established finance firms that lease out aircraft.

Doris MakDirector, Special Projects

Vancouver, Canada

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an Airbus A300-600 freighter last April, at Abu Dhabi Airport. The incident was due to the cargo being unloaded without rebalancing, counter to standard procedure. The resulting distribution moved the center of gravity past the center of gravity for “stability on wheels,” tipping the plane. There were no injuries due to this accident but extensive damage to the aircraft.

ASIA PACIFIC

Australian Court Rules in Favor of Air New Zealand and Garuda An Australian federal court ruled in favor of Air New Zealand and Garuda and against the Australian Competition and Consumer Commission. The case centers on an alleged agreement between Air New Zealand and Garuda over cargo surcharges between 2000 and 2006. The court concluded this agreement had occurred but did not occur in a “market in Australia.”

Minority Shareholders Approve Financial Restructuring of Malaysia AirlinesMinority shareholders of Malaysia Airlines approved a proposal for a selective capital reduction and repayment exercise. This will allow minority shareholders to receive a capital repayment amount of RM 0.27 per share so as not to be subject to associated risks and uncertainties relating to the restructuring the airline is undergoing.

MIDDLE EAST/AFRICA

Ethiopian Airlines Adds New Doha RouteAs of December 3rd, 2014 Ethiopian Airlines has added three weekly fights to Doha, Qatar. The route will be flown by Boeing 737s and marks the 10th Middle East destination Ethiopian Airlines services. “We are very pleased to spread our wings to Doha, one of the most vibrant and fastest growing economic hubs in the Middle East.” said Tewolde Gebremariam, CEO Ethiopian Airlines Group.

European Commission Approves Etihad and Alitalia Financial PartnershipThe European Commission has provided clearance to Alitalia and Etihad Airways. This clears the way for them to proceed with their strategic alliance, which was announced in August. Gabriele del Torchio, Chief Executive Officer of Alitalia, said “Today’s decision by the EU approves the largest ever foreign investment in Alitalia and demonstrates huge confidence in the future of the national carrier.”

Improper Unloading Cause of Abu Dhabi ‘Tail-Tipping’ IncidentThe Air Accident Investigation Sector (AAIS) has released its report regarding the tipping of

AirAsia X Expands OperationsAirAsia X has launched its Indonesian route between Melbourne and Bali. This flight will occur five times per week and begins operation on December 26th, 2014. Soeratman Doerachman, Indonesia AirAsia Extra CEO, said “We are thrilled to be the first long-haul low-cost airline in Indonesia and enthusiastic with the launch of our first route.”

Chinese Airlines May Order 100+ AircraftChina’s three largest airlines are in negotiation with Airbus and Boeing to expand their fleets, with potentially over 100 aircraft under consideration. Air China is considering the A320neo-family and A330-300 aircraft from Airbus and the 747-8s and 737-800s from Boeing. China Southern is also considering the A320neos and potentially leasing others, say the officials. China Eastern, which is further along in the negotiation process, is considering 15 777s and 20 787s or 10 A350s and 20 A330neos.

The Netherlands Collects and Repatriates the Wreckage of MH17The Dutch mission to the Ukraine has begun the removal of wreckage from the site of the MH17 disaster. This evidence is being taken

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to Kharkiv and will later be transported to the Netherlands for forensic reconstruction. Operation at the crash site will continue as long as safety conditions allow.

CANADA

Air Canada Adds 787 Dreamliners on More Asian RoutesAir Canada is expanding the use of Boeing 787 Dreamliners to more Asian routes based out of Vancouver, Canada. Flights between Beijing and Vancouver are planned to commence in February 2015 and between Seoul and Vancouver in March. The 787s will offer new International Business Class and Premium Economy seating.

Air China and Air Canada to Negotiate a Strategic Alliance, Reinforcing the Canada-China NetworkAir China and Air Canada have negotiated a memorandum of understanding, outlining the main principles for a comprehensive revenue sharing joint venture. This agreement still requires the airlines to make the necessary filings, obtain competition and other regulatory approvals and finalize documentation. Assuming success, the joint venture is expected to come into effect by the end of 2015.

WestJet Provides Information on Ongoing Phone ScamWestJet provided information regarding the ongoing telephone scam that has plagued the carrier and other prominent Canadian brands. The scam involves telemarketers claiming to be from WestJet in order to sell dubious holiday packages to Mexico. The companies responsible for these phone calls are:

Luxury Getaway Group; Caribbean Sun Trips; Caribbean Sun Group; and Global Group Travel.

WestJet is not affiliated with these companies, does not use telemarketers, or share its guests’ private information with third parties for the purposes of telemarketing.

Bombardier Renews Authorized Training Provider Agreement with FlightSafety InternationalBombardier Commercial Aircraft announced that the current ATP Agreement with FlightSafety International has been renewed and extended for 10 years. Under the agreement, FlightSafety uses Bombardier-approved syllabus to deliver flight and technical training to operators of Q100, Q200, Q300 and Q400 aircraft.

World’s Largest Cargo Aircraft in Toronto The Antonov An-225 Mriya transport plane, the world’s longest and heaviest aircraft, arrived at Pearson Airport on November 17th for the first time in the airport’s history. Only one An-225 was ever completed, developed in the 1980s for the Soviet space program. The plane stretches 84 meters long with a wingspan of 88.4 meters, six engines and a maximum takeoff weight of 640 tons.

EUROPE

EasyJet Adds 26 New Routes for Summer 2015 EasyJet plans to create 26 new routes for next summer, including new destinations such as Essaouira, Morocco and Stuttgart, Germany. The new routes will provide over 420,000 additional seats across the entire easyJet network. Sophie Dekkers, easyJet’s UK Director, said “We’re pleased to be continuing to deliver an unrivalled network which, with today’s announcement sees two completely new destinations and 26 new routes.”

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Virgin America Upgrading Astronautics SystemVirgin America has begun replacing the navAero electronic flight bags (EFBs) in the carrier’s 53 Airbus A319s and A320s with the Nexis Flight-Intelligence System. The new system, which includes two displays and two multi-purpose servers, will also be installed in 40 new A320s on order. Nexis will provide pilots with Nexrad weather, maintenance functions, and flight data recording and monitoring.

Little Red’s End Forces Leasing of Heathrow SlotsWith the dissolving of Virgin Atlantic’s domestic service, Little Red, the carrier is planning to lease out two pairs of valuable Heathrow take-off and landing slots to competitors, until its new fleet of Boeing 787s arrives. Virgin Atlantic announced “We are planning to lease these on a short-term basis, but they will remain open to us and that gives us options for growth as our new aircraft become available.”

Norwegian CEO Calls for Resolution, Opponents Call for RejectionNorwegian Air Internatinal (NAI)’s CEO

Bjørn Kjos will call on the U.S. Department of Transportation (DOT) to approve NAI’s application for a foreign air carrier permit. “We are doing exactly what the Obama administration wants: create American jobs, bring tourists to the United States and offer Americans cheap flights. The transatlantic market has far too long been dominated by alliances that have been allowed to rule the market with high prices and limited choice.” In response, the Association of Professional Flight Attendants (APFA) urged the DOT to completely reject NAI’s application. “NAI is attempting to subvert provisions of the Open Skies Agreement that guarantee labor protections in the transatlantic market,” said APFA National President Laura Glading. “Their business model – which relies on a ‘flag of convenience’ strategy – is a sham. It threatens all workers in the busiest aviation market on the planet and as the President of APFA as well as a JFK-based flight attendants, I consider the company’s actions an attack on all our livelihoods.”

Deutsche Bahn Files Suit for €2.1 Billion in Damages from Cargo AirlinesGerman rail company Deutsche Bahn is seeking a total of €2.1 billion (US$2.6 billion) in damages from air freight carriers in Germany and United States. European regulators fined 11 airlines in 2010 for price fixing, forcing €800 million in fines. These cases prompted the civil lawsuits undertaken by Deutsche Bahn.

LATIN AMERICA

JetBlue Airways Announces Three New Caribbean RoutesJetBlue plans on launching three new weekly seasonal routes to the Caribbean from Boston. The three new routes provide travelers access to Costa Rica; the Dominican Republic; and Saint Lucia. “We also offer customers more destinations in the Caribbean than any other airline as we know how important it is to getaway and enjoy well-deserved time off,” said Scott Laurence, senior vice president of airline planning.

Airlines Still Seeking $3.6 Billion Held In VenezuelaAccording to Copa Airlines CEO Pedro Heilbron, Venezuela is slowly moving toward repatriating money owed to airlines. While he acknowledges the “outstanding balance is still high,” Heilbron said it is $500 million below where it was in July. In order to pressure the Venezuela government, airlines have reduced flight services, 50% in the case of Copa. IATA estimated in July that $4.1 billion was owed by the Venezuelan government.

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Azul Orders 63 A320neos Azul Airlines, currently Brazil’s third-largest airline, might become No. 1 in seat capacity, with a $6.5 billion aircraft order. They are seeking to lease and purchase 63 Airbus A320neo jets. With this planned increase in seat capacity the carrier will be able to offer 3,000 more seats than their competition, GOL and LATAM. Brazil’s airline association projects domestic demand to rise to about 200 million passengers by 2020 from about 100 million currently.

UNITED STATES

APFA (Association of Professional Flight Attendants) Members Reject Contract, Forcing Binding Arbitration The APFA union has rejected a proposed contract, forcing binding arbitration in December. The arbitrators are tasked with creating a fair contract based on current market value. This is projected to be approximately $112 million annually. The arbitration group is comprised on three neutral representatives, two union and two company members.

AT&T Drops Plans for In-flight ConnectivityAT&T has withdrawn plans to develop inflight connectivity after deeming the business space uncertain. “As AT&T explores opportunities for future growth and diversification, expanding our international presence has remained an area of interest. On Friday we announced our intent to acquire Mexico wireless company Iusacell. After a thorough review of our investment portfolio, the company decided to no longer pursue entry into the Inflight Connectivity industry. We are focusing our capital on transformative investments, such as international and video,” AT&T announced.

Allegiant Adds Five Cities and 14 New RoutesAllegiant Air announced 14 new non-stop routes. This also includes the addition of five new cities to the Allegiant network: Pittsburgh, Pa., Indianapolis, Ind., Omaha, Neb., Richmond, Va. and Jacksonville, Fla. “We are extremely pleased to announce this expansion and bring new convenient, low-cost vacation options to five new communities, as well as new destination options for those communities we currently serve,” said Jude Bricker, Allegiant Travel Company senior vice president of planning.

FAA Announces Drug/Alcohol Testing Rates in 2015Based on the data from 2013, the 2015 randomized testing rates will not change, with 25% of safety-sensitive employees tested for drugs and 10% of safety-sensitive employees tested for alcohol. These policies will only be changed if the positive test rate is above 1%. In 2013 the positive test rate was 0.485%.

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AIRLINE DATA – ASIA PACIFICAsia-Pacific Airlines Release Traffic Figures for October 2014

Airline Traffic(RPKs – millions)

Capacity (ASKs – millions)

Load Factor

2,532

h1.0%

3,274

i0.3%

77.4%

h1.0 pts

7,811

i1.2%

10,121

h0.5%

77.2%

i1.3 pts

5,200

i0.8%

7,034

i0.3%

73.9%

i0.3 pts

9,365

h5.7%

11,605

h6.8%

80.7%

i0.8 pts

Source: Carrier traffic reports.

AIRLINE DATA – EUROPEEuropean Airlines Release Traffic Figures for October 2014

Notes: 1. Includes Lufthansa Passenger Airlines, SWISS, and Austrian Airlines. 2. Includes British Airways, Iberia (including Iberia Express), and Vueling. Vueling traffic is currently accounted as non-premium traffic.Source: Carrier traffic reports

Airline Traffic(RPKs – millions)

Capacity (ASKs – millions)

Load Factor

19,927

h2.0%

23,519

h1.2%

84.7%

h0.7 pts

1

19,363

h3.3%

24,022

h3.1%

80.6%

h0.1pts

217,805

h7.5%

21,969

h7.7%

81.0%

i0.2 pts

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FeatureAviation Traffic

Airline Traffic(RPMs – millions)

Capacity (ASMs – millions)

Load Factor

Canada

5,056

h11.0%

6,159

h9.9%

82.1

h0.8 pts

1,576

h6.8%

2,035

h9.2%

77.4%

i1.8 pts

United States

2,999

h10.4%

3,593

h7.6%

83.5%

h2.1 pts

17,040

h0.4%

20,859

h0.7%

81.7%

i0.2 pts

17,907

h0.2%

21,779

h0.5%

82.2%

i0.3 pts

17,036

h4.8%

20,329

h3.6%

83.8%

h0.9 pts

8,989

h4.4%

10,820

h0.4%

83.1%

h3.2 pts

546

h23.3%

622

h23.1%

87.9%

h0.2 pts

AIRLINE DATA – NORTH AMERICANorth American Carriers Release Traffic Figures for October 2014

Notes: 1. Represents the combined traffic results of American and US Airways. 2. Results include flights operated under contract carrier arrangements. 3. Total system includes scheduled service, fixed fee contract. Source: Carrier traffic reports

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InterVISTAS | aviation intelligence report 13InterVISTAS | aviation intelligence report 13

Fore

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Avia

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Traf

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

2013

October +4.2% +2.2% +1.6% +4.8% +3.2% -1.3% -2.0% +2.2% +1.8% +6.0% +6.6% -0.2%

November +3.2% +2.6% +1.7% +6.2% +3.5% -1.5% -3.4% +1.3% +5.9% +5.3% +6.1% +6.6%

December +6.2% +7.1% +4.1% +8.0% +9.9% +1.6% +4.7% +6.3% +7.1% +7.1% +8.8% +6.3%

4th Quarter +4.6% +4.0% +2.5% +6.4% +5.6% -0.4% -0.2% +3.2% +4.8% +6.2% +7.2% +4.3%

Full Yearea +4.3% +2.1% +2.1% +4.8% +4.6% -2.3% -1.5% -0.7% +3.3% +3.9% +4.7% +3.5%

2014

January +3.7% +8.9% +3.1% +7.3% +5.8% -0.6% +0.2% +0.2% +5.2% +7.3% +6.2% +3.8%

February +6.5% +6.7% +2.7% +9.4% +4.8% -0.2% +2.2% +0.2% +5.4% +8.5% +6.6% +3.9%

March +2.0% +6.9% -2.8% +6.4% +5.0% -3.5% +0.8% -6.5% +3.7% +7.5% +5.5% +2.7%

1st Quarter +3.9% +7.5% +0.8% +7.6% +3.4% -1.5% +1.1% -2.6% +4.7% +7.8% +6.1% +3.5%

April +7.2% +9.3% +3.3% +9.7% +8.3% -0.1% +7.7% +0.3% +6.8% +11.0% +8.0% -0.2%

May +7.0% +10.0% +6.0% +6.5% +4.2% +0.5% N/A +5.6% +5.0% +6.5% +3.9% -0.2%

June +7.2% +7.8% +4.2% +0.5% +4.6% +5.6% +5.0% +6.5% +3.9% +4.3% +10.0% 4.3%

2nd Quarter +7.2% +9.0% +5.3% +8.0% +6.3% +1.3% +6.0% +3.5% +4.8% +7.8% +7.3% +2.6%

July +10.8% +7.3% +7.4% +6.4% +5.9% +2.0% +6.3% +3.7% +8.0% +5.7% +10.0% +6.2%

August +9.8% +8.0% +6.5% +5.9% +6.9% +0.5% +8.8% +6.0% +7.7% +6.4% +8.5% +2.8%

September +7.5% +8.8% +6.0% +6.1% +8.6% +2.7% +7.2% +5.9% +6.3% +8.7% +6.7% +5.6%

3rd Quarter +9.5% +8.0% +6.6% +6.3% +7.1% +1.7% +7.4% +5.2% +7.3% +6.8% +8.5% +4.8%

United States International

Atlanta Chicago LosAngeles Dallas Denver New York

JFKLondon

HeathrowParisCDG Frankfurt Beijing Tokyo

NaritaMexico

City

October -2.2% +4.2% +6.2% +4.7% -0.6% +6.2% +4.6% +3.4% +3.5% +4.5% +11.1% +7.1%

November -4.8% +1.6% +2.3% -1.1% -3.5% -3.4% +0.6% -0.1% +3.5% +0.9% +7.9% +8.3%

December +5.6% +8.1% +9.3% -0.5% +4.8% +4.6% +2.8% +3.5% +2.9% +0.2% +7.6% +8.4%

4th Quarter -0.6% +4.6% +6.0% +1.1% +0.2% +2.6% +2.7% +2.3% +3.3% +2.0% +8.9% +8.0%

Full Yearea -1.4% +1.2% +4.8% +3.1% -1.1% -0.5% +3.4% +0.7% +1.7% +2.1% +7.9% +6.9%

2014

January -3.5% -7.5% +6.8% +5.6% +0.8% -2.7% +3.8% +5.3% +3.4% +9.2% +10.6% +10.0%

February -4.1% 3.2% +6.5% +1.6% +2.2% +1.7% +1.0% +3.4% +1.8% +3.6% +4.7% +10.4%

March +2.2% 4.7% +4.3% +3.0% +2.0% -1.3% -2.8% +0.0% +0.9% -3.5% +7.9% +7.0%

1st Quarter -1.5% 0.3% +5.8% +3.5% +1.7% -0.9% +0.5% +2.8% +2.0% +2.9% +7.8% +9.1%

April +3.1% 11.5% +7.6% +4.7% +3.2% +13.6% +6.7% +7.4% +0.9% 2.1% +2.0% +12.4%

May +7.8% +5.1% +6.4% +4.8% +2.1% +4.8% +2.2% +3.2% +3.7% +0.6% +2.3% +11.8%

June +1.8% +5.6% +6.7% +6.1% +2.4% +5.3% +1.1% +6.1% +1.0 +.01% -3.2% +5.9%

2nd Quarter +4.2% +7.2% +6.9% +5.2% +2.6% +7.7% +3.2% +5.5% +1.9% +0.9 +0.3% +10.0%

July +3.6% +7.7% +6.3% +6.7% +2.2% +5.2% +0.5% +3.9% +2.3% +3.7% -1.7% +4.8%

August +2.6% +4.8% +6.1% +6.3% +2.2% +7.6% +1.3% +6.2% +5.4% +0.7% -1.9% +9.2%

September +2.9% +3.1% +5.0% +10.1% +3.3% +8.3% +0.3% -12.3% +5.9% +1.2% -3.0% +6.9%

3rd Quarter +3.0% +5.3% +5.8% +7.6% +2.5% +7.0% +0.7% -0.4% +4.5% +1.9% -2.2% +6.9%

AIRPORT TRAFFIC: SELECTED CANADIAN AIRPORTSSummary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian Airports

AIRPORT TRAFFIC: SELECTED U.S. & INTERNATIONAL AIRPORTSSummary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian Airports

2013

14 aviation intelligence report | InterVISTAS

FeatureInterVISTAS N

ews

THE INTERVISTAS GROUP CONTINUES TO BE ACTIVE IN DELIVERING A DIVERSE RANGE OF CONSULTING PROJECTS

AROUND THE WORLD. SOME OF THE NEW PROJECTS WE ARE WORKING ON ARE LISTED BELOW:

Philadelphia International Airport renews InterVISTAS for On-Call Air Service Development Consulting ServicesWe are pleased to announce that after a successful RFP process, Philadelphia International Airport (PHL) has renewed their contract for On-Call Air Service Development Consulting Services. The contract begins January 1, 2015 and includes a team of local firms Malish & Pagonis (graphics) and Portfolio Associates (community outreach, surveying) and IHS (formerly Global Insight). We look forward to our continued relationship with PHL!

TACV Step II After the successful completion of the 2020 restructuring plan for TACV, the national carrier of Cape Verde in Africa, we are delighted to announce that we have been engaged for three additional projects. These will look at network optimization for 2015, revenue management, and crew scheduling.

Tancredo Neves/Confins International AirportWe are delighted to announce the we have signed a contract with the Tancredo Neves/Confins International Airport (CNF) in Belo Horizonte, Brazil. The airport was recently privatized and has accepted our proposal to supply a leakage study, a cargo review, and an

air service strategic review. We look forward to working with CNF on this important project.

Congratulations to Newcastle International Airport on First Scheduled Transatlantic RouteWe are delighted to announce that our client, Newcastle International Airport in Newcastle, UK, has been selected as the newest non-stop destination from United’s Newark hub. The summer seasonal operation will begin in May 2015 and run through September of next year using 757-200s. This route is the first schedule transatlantic route at Newcastle International ever. Congratulations on a great success!

InterVISTAS | aviation intelligence report 15

South Carolina Governor’s Conference on Tourism and Travel 2015 The 2015 South Carolina Governor’s Conference on Tourism and Travel will be held February 9 - 11, 2015 in Myrtle Beach, South Carolina, USA, Paul Ouimet, Executive Vice President of InterVISTAS Consulting Inc. will present DestinationNEXT on February 10, 2015.

The 2015 conference will feature national speakers delivering motivational talks and industry professionals exchanging ideas on improving the business of tourism. Visit the conference site for updates on speakers, agenda and other conference events.

Georgia Association of Convention and Visitors Bureaus Winter MeetingThe Georgia Association of Convention and Visitors Bureaus Winter Meeting will be held at the James H. Rainwater Conference Center in Valdosta, Georgia, on February 23 – 25, 2015. Paul Ouimet, Executive Vice President of InterVISTAS Consulting Inc., will deliver the keynote address titled, DestinationNext.

Lodging for the meeting will be at the adjacent Hampton Inn & Suites Valdosta Conference Center in Valdosta, Georgia. Details on the agenda, speakers, lodging reservations and other information will be available soon.

Spea

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Transportation Research Board WebinarThe TRB webinar will be broadcast from 1400-1530 EST on February 24th, 2015 from Washington D.C., USA. Barney Parrella and Steve Martin will present “Factors That Influence Air Service Development”, based on the ACRP Studies #18 and #98.

ACI Airport Economics & Finance ConferenceThe 2015 ACI Airport Economics & Finance Conference runs from February 25th to 27th in London, United Kingdom. Johan Schölvinck will participate in Session 7: “Supercharging Non-Aeronautical Revenue Streams – how are airports changing the business and reliance on traditional revenue generation?” on Friday the 27th.

New Jersey Tourism Industry AssociationThe 2015 New Jersey Conference on Tourism takes place March 12-13 in Atlantic City,

New Jersey, USA. Paul Ouimet will present DestinationNEXT on March 13th.The conference is an annual event providing educational and networking opportunities to tourism industry professionals in New Jersey. It is a joint venture of the New Jersey Department of State’s Division of Travel & Tourism and the New Jersey Travel Industry Association.

ACI-NA Business of Airports ConferenceThe first annual ACI-NA Business of Airports Conference takes place April 20th to 22nd 2015 in Phoenix, Arizona, USA. Join Barney Parrella and Kenneth Currie when they present “Activity Forecasting for Airport Business Planning”.

The conference is an “un-conference” focused on next-level thinking for key airport decision makers to connect, inspire, and demonstrate.

Hoosier Hospitality Conference 2015The Hoosier Hospitality Conference 2015 will take place on April 21 - 22, 2015, in Indianapolis, Indiana, USA. Paul Ouimet, Executive Vice President of InterVISTAS Consulting Inc. will present DestinationNEXT on April 21, 2015.

16 aviation intelligence report | InterVISTAS

Staff Announcements

InterVISTAS welcomes the following new team members:

We are pleased to announce that Danielle Fiddick has joined InterVISTAS as Proposal Support and Marketing Communications Manager on November 17, 2014. Danielle will assume the responsibilities of being prime contact and manager of marketing and communications initiatives for the InterVISTAS Consulting. She will help coordinate various corporate marketing initiatives and provide support on marketing and billable project initiatives for all consulting functions. Danielle will work with project teams and project managers on document/proposal production.

Danielle has a Business Management, HR and Leadership Certificates from BCIT. She is currently working on completing her degree in Business Management and PMP certification. Welcome Danielle!

We are pleased to announce that Yelong Han has joined the InterVISTAS Washington, D.C. office as a Consultant on November 17, 2014.Yelong is a senior research professional with

extensive experience in commercial aviation consulting, market research and analysis, and has been instrumental in a wide range of market development projects.

With a keen knowledge of aviation policies and regulatory issues, and a proficiency in aviation databases and database programs, Yelong brings a level of skill in extracting meaning from disparate data to perform in-depth analyses that consistently exceed client expectations.

Yelong has a Ph.D. in International Relations from the University of Chicago and is proficient in Chinese. Welcome to the team, Yelong!

InterVISTAS congratulates the following team members on their promotions:

Ian Kincaid was promoted to Senior Vice President, Aviation Forecasting in October 2014. Ian has had a long involvement in the application and development of InterVISTAS’ forecasting product, including the development of innovative methodologies (such as the ACRP report Addressing Uncertainties about Future Activity Levels in Airport Decision Making). Ian will focus on traffic and revenue forecasting and will continue to provide strategic support and advice to the economic analysis teams in North America and oversee our other forecasting projects. Congratulations, Ian!

Marcus Lam was promoted to a new position, Vice President of Modelling and Technical Approaches on December 1, 2014. Marcus will shepherd IVC through an all-Lift shop and state-of-the art approach across all our practice lines. He will have a dual appointment as he will be an important part of ASA and remain part of the Airline Practice. Congratulations, Marcus!

Doris Mak was promoted to Vice President in December 2014. She is one of our most effective soft leaders - always working behind the scenes to make sure that our teams are moving ahead towards a common goal. In her 16+ years at InterVISTAS, her commitment to continuous learning at all levels of the organization is highly commended, as well as her own initiative to strengthen her skills with PMP certification.

Doris is progressively recognized for a number of projects in economic impact studies (airports, ports, tourism), and supporting a number of practice groups to ensure our resource pool is effective. Congratulations, Doris!

InterVISTAS | aviation intelligence report 17

WASHINGTON

SÃO PAULO

OTTAWA BATH

THE HAGUE

SKOP JEBOSTON

VANCOUVER

InterVISTAS Consulting Group is a management consulting company with extensive expertise in aviation,

transportation and tourism. Our exceptional people have successfully delivered projects in over 70 countries around the world. We are committed to working collaboratively with our clients to apply vision and expertise to achieve results.

NACO, the Netherlands Airport Consultants, B.V. is one of the world’s leading independent airport consultancy and engineering firms offering integrated, full-service

planning and design services. With more than 60 years of experience, they have the expertise that is instrumental in solving the increasing complexity of developing today’s airports. NACO has assisted over 550 airports of all sizes in more than 100 countries with realizing their goals; goals that entail every aspect of airport design and development.

Royal HaskoningDHV combine global expertise with local knowledge to deliver a multidisciplinary range of professional engineering, consultancy and project management services in

aviation, buildings, energy, industry, infrastructure, maritime, mining, rural areas, urban areas and water.

royalhaskoningdhv.com

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.

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