INTERVISTAS CANADIAN AVIATION INTELLIGENCE REPORT In this issue Features Columns: A Review of Transborder Seat Capacity (p.1) Crude Oil Prices Ease to US$60 (p.2) Cargo Capers (p.10) Bringing Registered Travellers to Reality (p.11) Passenger Rail and Transit Security (p.13) Perimeter Clearance Strategy (p.15) Regular Reports: Airline Data-Canada (p.3) Airline Data-U.S. (p.4) Airport Data (p.5) Industry News (p.6) Ottawa Report (p.17) Washington Report (p.18) InterVISTAS News (p.19)
A REVIEW OF TRANSBORDER SEAT CAPACITY 7 In September 2004, WestJet launched scheduled services between Canada and the U.S. It has been over a year since the low cost carrier started transborder flights. This column examines the change in the share of transborder seat capacity and level of services offered by Canadian and U.S. carriers between November 2004 and. 1 Eugene Chu Project Analyst Level of Transborder Seat Capacity. In, total transborder seat capacity has increased by roughly 3% compared to the same month last year. As a group, Canadian carriers have decreased transborder seat capacity by 1%, while U.S. carriers have increased Canada-U.S. capacity by 6%. The bankruptcy of Jetsgo accounted for a large proportion of the decrease in transborder capacity offered by Canadian carriers. Air Canada increased Canada-U.S. seat capacity by 6% while WestJet added 54% more seat capacity in compared to November 2004. Most of WestJet s capacity increase was to sun-spot and leisure markets such as Fort Lauderdale, Las Vegas, Orlando, Palm Springs and Tampa. Share of Transborder Seat Capacity. The share of transborder seat capacity offered by domestic and U.S. air carriers is summarised in Table 1. Note that Air Canada has a larger proportion of Canada-U.S. seat capacity than any individual carrier. Table 1 - Transborder Seat Capacity Comparison Carrier Origin Nov 2004 Share of Total (Nov 2004) Nov 2005 Share of Total (Nov 2005) Canada 517,570 44% 510,981 43% Air Canada 408,068 35% 431,423 36% WestJet 28,016 2.4% 43,177 3.6% Jetsgo 32,385 2.8% - - U.S. 649,560 56% 686,802 57% Total 1,167,130 100% 1,197,783 100% Source: PLANET OAG November 2004 and 2005 data. Although WestJet has added a large amount of transborder seat capacity over the last year, Air Canada remains the dominant carrier in the market. Combined, the U.S. carriers also offer a significant proportion of transborder seat capacity. At the moment, the share of Canada-U.S. seat capacity remains largely unchanged as WestJet s transborder services have focused mostly on niche leisure travel markets. 1 This analysis does not include fifth freedom services offered by foreign carriers. Page 1
CRUDE OIL PRICES EASE TO US$60 4 Crude oil prices fall to below US$60 per barrel in October 2005 Crude oil prices fell below US$60 in late October, before closing at US$61.78 in early November. This is the first time that crude oil prices have dipped below the US$60 mark since late July 2005. Recent impacts such as Hurricanes Katrina and Rita on U.S. crude oil refineries have since stabilised, resulting in lower oil prices. Other global factors such as above season temperatures in the U.S. Northeast and spare OPEC capacity have played a role in recently declining oil prices. Doris Mak Senior Project Manager OPEC Able to Meet Winter Demand The 11 member country oil producer group indicated that there is spare capacity in the range of two million barrels that can be accessed should winter demand outstrip available supply. OPEC also expects crude oil prices in 2006 to fall to the US$45 to US$55 price range as global supplies build. Unseasonably Warm Temperatures in the U.S. Northeast Helps Build Inventory With the start of November, temperatures in the U.S. Northeast have been warmer than usual. Every week of above seasonal temperatures allows U.S. refineries to stockpile inventory ahead of winter peak demand. The U.S. is the world s largest oil consumer.. Futures prices fall below US$60 per barrel A futures contract in for delivery of crude oil in 2010 is priced at US$57, this is a decline of 6% for the same contract if purchased in September 2005. Since May 2003, each successive month has resulted in higher and higher overall crude oil price levels. However, is the first month where futures prices have fallen below price levels established in prior months as illustrated below. Crude Oil Futures Prices $70 $65 $60 $55 Crude Oil Spot Prices for Near Term Delivery Crude Oil Futures Prices - - - - - Sep 2005 Nov 2005 Jun 2005 $50 $45 $40 $35 $30 $25 $20 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 US$ Per Barrel Apr 2005 Jan 2005 Sep 2004 Apr 2004 Dec 2003 May 2003 Month of Delivery Page 2
OTHER CARRIERS: LOAD FACTORS CanJet: not reported AIRLINE DATA CANADA Traffic and Load Factors on Canada s Major Air Carriers October 2005 Passenger Traffic Capacity Load Factor Revenue Passenger Kilometres Available Seat Kilometres Air Carrier % Change % Change % Change % Change Change Change from over 2004 from 2003 over 2004 from 2003 over 2004 2003 +0.2 pts +4.7 pts Air Canada 1 +4.9% +13.0% +4.7% +6.2% (to 77.9%) (from 73.2%) Domestic -3.6% -2.0% -5.4% -13.2% +1.5 pts +9.3 pts (Mainline) Jazz +77.8% +85.5% +79.9% +49.2% -0.9 pts +14.0pts International & Charter +9.0% +20.8% +9.3% +16.6% -0.2 pts +2.7 pts WestJet +16.5% +44.4% +8.8% +43.1% Analysis: Air Canada reported its 19 th consecutive month of record system and domestic load factors in October 2005. However, both domestic mainline traffic and capacity declined during the month, reversing a previous trend. Jazz continues to record double-digit increases in traffic and capacity. Part of the increase in capacity could be attributed to a shift in domestic capacity from Air Canada mainline to Jazz. In October 2005, Jazz accounted for roughly 36% of Air Canada s total domestic capacity, compared to 27% in October 2004. 2 WestJet continued to report traffic increases and additional capacity in October 2005. However, the rate of increase has declined compared to previous months. Traffic growth outpaced the addition of capacity, resulting in an improved load factor. 10% 5% 0% -5% -10% -15% 15% 10% 5% 0% -5% -10% 60% 50% 40% 30% 20% 10% 0% Oct- 04 Oct- 04 Oct- 04 Air Canada Domestic Mainline Nov Dec Jan- 05 Nov Dec Jan- 05 Nov Dec Jan- 05 Feb Mar Apr May Jun Jul Aug Sep Oct Dom RPK +4.8 pts (to 73.5%) Air Canada International Feb Mar Apr May Jun Jul Aug Sep Oct Int'l RPK WestJet Int'l ASK Feb Mar Apr May Jun Jul Aug Sep Oct RPK Dom ASK ASK +0.7 pts (from 72.8%) Jazz data is not included in this graph 1 Air Canada consists of all Air Canada operations with the exception of Jazz. 2 PLANET OAG data for October 2004 and October 2005. Page 3
AIRLINE DATA U.S. U.S. Airlines Release October 2005 Traffic Figures Traffic Data October 2005 Airline Load Factor Traffic (RPMs millions) Capacity (ASMs millions) 77.1% 10,872 14,091 2.2 pts 1.5% 1.5% 72.5% 720 994 2.9 pts 21.2% 16.3% 73.2% 504 689 1.8 pts 49.1% 50.3% 1 77.3% 1.0 pts 6,632 7.2% 8,578 8.6% 72.4% 9,405 12,991 1.7 pts 2.3% 0.0% 78.4% 1,599 2,039 4.7 pts 14.4% 21.2% 82.9% 5,902 7,123 2.6 pts 4.0% 6.9% 70.4% 5,146 7,316 3.8 pts 14.3% 8.2% 2 80.6% 2.8 pts 9,451 1.1% 11,720 4.6% 2 74.8% 0.8 pts 2,940 13.3% 3,932 12.3% Notes: 1. Mainline operations only. 2. Load factor includes scheduled service only. Sources: Carrier traffic reports. Page 4
Summary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian Airports 2004 2005 Toronto Vancouver Montréal- Calgary Edmonton Ottawa Winnipeg Halifax Victoria Kelowna Saskatoon Regina St. Trudeau John s August +16.0% +4.9% +18.1% +1.9% +2.2% +6.2% +7.4% +6.9% -2.0% -5.9% +5.4% +1.5% +10.1% September +16.1% +11.5% +13.2% +13.0% +6.3% +7.9% +8.8% +8.6% +8.3% +12.1% +5.3% -0.6% +13.4% 3 rd Quarter +16.4% +8.7% +16.7% +6.2% +2.9% +6.6% +8.2% +8.6% +3.3% +1.1% +5.4% +0.8% +11.2% October +14.3% +7.0% +10.7% +10.7% -4.0% +11.9% +1.1% +3.7% -1.4% +9.1% +7.9% +1.9% +18.2% November +13.3% +6.2% +17.6% +9.6 +4.7% +11.4% +4.4% +8.3% +0.3 +5.1% +8.0% -11.1% +9.9% December +14.2% +6.8% +20.9% +8.9% +8.4% +11.0% +5.1% +8.0% +2.1% +3.9% +8.1% +3.6% +6.8% 4 th Quarter +14.0% +6.7% +16.1% +9.7% +3.1% +11.4% +3.5% +6.4% +0.3% +5.9% +8.0% -2.1% +11.9% Full Year +15.7% +9.6% +18.6% +7.0% +5.1% +10.2% +7.7% +9.1% +5.7% +3.6% +5.6% +0.3% +14.0% January +15.0% +9.8% +14.4% +13.2% +9.6% +12.9% +13.6% +7.0% +4.7% +12.4% +17.7% +9.7% +11.9% February +8.7% +4.5% +3.8% +10.2% +7.8% +5.5% +7.0% +4.8% +7.1% +15.8% +10.4% +8.5% +1.5% March +10.2% +8.2% +5.5% +17.5% +12.5% +7.3% +9.7% +7.1% +15.4% +19.5% +19.1% +22.2% +19.6% 1 st Quarter +11.2% +7.5% +7.7% +13.7% +10.0% +8.4% +10.0% +6.3% +9.3% +16.0% +15.6% +13.3% +11.5% April +4.0% +3.9% +5.7% +3.5% +5.5% +0.1% +4.3% -0.2% +2.6% +18.8% +5.9% +3.8% +9.8% May +6.7% +5.5% +3.7% +12.2% +12.0% +5.5% +8.0% -4.5% +5.8% +26.3% +13.4% +5.7% +8.5% June +6.3% +4.0% +7.5% +10.1% +13.9% +3.4% +2.9% -0.5% +6.8% +22.7% +11.0% +12.4% 12.4% 2 nd Quarter +5.7% +4.5% +5.7% +8.6% +10.4% +3.1% +5.0% -1.8% +5.1% +22.6% +10.2% +7.3% +10.3% July +3.6% +3.4% +3.8% +11.2% +11.7% +4.8% +4.5% -9.7% +1.2% +15.9% +5.1% +10.9% +14.0% August -1.1% +2.7% +1.5% +12.7% +8.8% +4.4% +4.6% -6.4% +5.2% +26.4% +10.1% +2.4% +8.9% Source: Transport Canada and individual airports traffic reports. If your airport is interested in providing InterVISTAS Consulting Inc. with its monthly passenger statistics, please email Doris Mak at doris_mak@intervistas.com. Page 5
NEWS ARTICLES AIR CANADA UPDATE ACE POSTS CDN$270 MILLION INCOME IN THIRD QUARTER ACE Aviation Holdings Inc., Air Canada s parent company, announced a net income of CDN$270 million for the third quarter of 2005, an improvement from the net loss of CDN$81 million for the same period in 2004. AIR CANADA RECEIVES ARBITRATION DECISION TO PROCEED WITH ORDER OF B777 AND B787 AIRCRAFT Air Canada announced on 1 November that it has received a binding arbitration decision that resolves the issues of pilot costs and other matters with the Air Canada Pilot s Association related to the carrier s order of Boeing widebody aircraft. The decision allows Air Canada to proceed with its acquisition of 18 B777 and 14 B787 aircraft announced earlier this year. AIR CANADA INCREASES SCHEDULED TIME BETWEEN DOMESTIC AND TRANSBORDER FLIGHTS Beginning 1 November, Air Canada is increasing the amount of scheduled time between domestic and transborder flights to reduce the incidence of missed connections. Such connections at Toronto Pearson International Airport will now require 70 minutes, up from 60 minutes, while connections in Montreal will require 60 minutes, up from 50 minutes. AIR CANADA SIMPLIFIES FARES TO SELECT SUN DESTINATIONS Air Canada announced that it is expanding its simplified fare structure to select sun destinations. The carrier will offer fares to Bermuda, Bahamas, Barbados, Antigua, St. Lucia, Trinidad, and Venezuela in five categories including: R&R (Relax and Return), Tango Plus, Latitude, Latitude Plus, and Executive Class. The move follows the introduction of similar fare structures for domestic and transborder flights. OTHER CANADIAN AIRLINE NEWS WESTJET ANNOUNCES NEW SERVICES FOR 2006 On 2 November, WestJet announced a number of schedule enhancements including several new non-stop services. The new routes, to commence in January 2006, include services between Calgary-Fort McMurray five times per week, Vancouver-Las Vegas three times per week, and once weekly service between Winnipeg-Orlando and Hamilton-Orlando. In addition, WestJet is increasing frequencies on its Toronto-Orlando, Calgary-Phoenix, and Calgary-Palm Springs services. WESTJET EXPANDS BAGGAGE DROP COUNTER SERVICES WestJet announced on 1 November that it is offering baggage drop counter services at all Canadian airports where the carrier operates. The counters, which were previously available only at select domestic airports, allow passengers to check in more quickly, and complement WestJet s web check-in program launched in April 2005. CANJET CANCELS TORONTO- VANCOUVER SERVICE Citing insufficient passenger loads, CanJet Airlines has cancelled its daily Toronto- Vancouver service. The carrier indicated that it may revive the service in April 2006. ZOOM AND CANADIAN AFFAIR TO INCREASE TORONTO-GLASGOW SERVICE Following a pull-out of Air Canada s summer service between Toronto and Glasgow, two carriers announced that they will be adding services on the route. Zoom Airlines will increase its service next summer from two to three flights per week, while Glasgow-based Canadian Affair will offer chartered daily flights operated by Thomas Cook Airlines. Page 6
NEWS ARTICLES CANADIAN AIRPORTS KELOWNA AIRPORT INTRODUCES SELF-SERVICE KIOSKS Kelowna International Airport has deployed six self-service check-in kiosks, allowing passengers to check in and select available seats for their flights. The kiosks are being operated as part of a partnership with the Vancouver International Airport, which already operates such kiosks and is providing the hosting infrastructure. TORONTO AIRPORT ANNOUNCES OPENING OF TEN NEW GATES On 1 November, the Greater Toronto Airport Authority (GTAA) announced the opening of ten new gates at Toronto Pearson Airport s Terminal 1. These new gates represent the second major component of the new terminal. Air Canada has moved all of its prime international flights to the new terminal, eliminating the need for ground transportation to and from the infield terminal for these services. CARGO NEWS IATA UNVEILS PLAN FOR PAPERLESS CARGO PROCESSING On 1 November, IATA unveiled plans for its e-freight program, the cargo component of its Simplifying the Business initiative. The program has a target of global paperless cargo processing by 2010, which is expected to save US$1.2 billion annually and reduce shipping times by up to 25%. CARGOJET TO CREATE REGIONAL NETWORK CargoJet Airways plans to create a regional network that would complement its existing network covering major Canadian cities with B727-200F aircraft. Plans for the network are not yet fully developed, but CargoJet indicated that it would consist of two feeder carriers, one in the east and one in the west, using one or two types of aircraft, with shared training, storage and parts inventories. U.S. CARGO AIRLINES WIN ADDITIONAL ASIA FREQUENCIES FedEx, UPS and Polar Air Cargo have each won a weekly round-trip frequency on the U.S. Hong Kong Korea fifth freedom service. NORTHWEST JOINS SKYTEAM CARGO ALLIANCE Northwest Airlines Cargo joined the SkyTeam Cargo alliance, joining Aeroméxico Cargo, Air France Cargo, Delta Air Logistics, Korean Air Cargo, Alitalia Cargo, CSA Cargo, and KLM Cargo. The airline will adopt SkyTeam s standardised product line, including the Equation express product and the Cohesion, Variation, and Dimension standards over the next several months. Northwest operates a fleet of 14 Boeing 747 freighters, dedicated to pacific operations, in addition to carrying freight and mail on its 600 passenger aircraft. PEOPLE IN THE NEWS WestJet Airlines announced on 18 October that Thomas (Tim) Morgan, Executive Vice President of Operations, has resigned from the carrier, citing personal reasons. Mr. Morgan was one of the four co-founders of the carrier in 1995. Several other organisational changes have also been made at WestJet. Chris Avery was named Director of Schedule Planning, moving from his previous position as Senior Manager, Network Planning. Meanwhile, Brenda Trockstad has been named as General Manager of the company s new subsidiary, WestJet Vacations. She was previously Director of Revenue and Scheduling. Sean Durfy has been named Executive Vice President for Strategy Development and Marketing, after having served as Executive VP of Sales and Marketing. Sean Durfy Page 7
NEWS ARTICLES PEOPLE IN THE NEWS - CON T Larry Berg, CEO of the Vancouver International Airport Authority, has been recognised as director of the year by Airport Revenue News in the medium-small airports category. YVR was noted for its operating Larry Berg efficiency and cost competitiveness, serving as a gateway on the West Coast of North America. Steven Grossman has been elected as the 2006 Chairman of Airports Council-North America (ACI-NA). He is also the Director of Aviation for the Port of Oakland. Chief Operating Officer Wake Smith resigned from his post at Atlas Air Worldwide Holdings effective 31 October. Jeffrey Erickson, group President and CEO, will assume his duties in the interim. OTHER SKYWEST TO LAUNCH SALT LAKE CITY EDMONTON SERVICE Beginning 15 December 2005, SkyWest Airlines will be operating twice daily services between Salt Lake City and Edmonton. The route will be operated using Bombardier CRJ 200 aircraft. UNITED EXPRESS TO START EDMONTON-SAN FRANCISCO SERVICE Starting 8 February 2006, United Express will launch daily services between Edmonton and San Francisco. ETIHAD AIRWAYS LAUNCHES SERVICE TO TORONTO VIA BRUSSELS Based in the United Arab Emirates, Etihad Airways has launched services to Toronto via Brussels. The route is operated three times per week. Etihad Airways indicated that it plans to start services to the U.S. in the summer of 2006. DELTA TO FOLD SONG INTO MAINLINE OPERATIONS Delta Air Lines will be folding its low-cost operation Song into the mainline carrier in the next year, while keeping the name and key attributes of the carrier for new long-distance transcontinental services. Delta will add firstclass seats to Song s existing fleet, and keep Song s leather seats, seatback televisions, and MP3 music programming. The Song product will be introduced on select transcontinental routes beginning in Fall 2006, and eventually be extended to all routes over 1,750 nautical miles. BOMBARDIER SUSPENDS CRJ-200 PRODUCTION Bombardier announced that as of mid-january 2006 it will temporarily suspend the production of its 50-seat CRJ-200 aircraft. The aircraft manufacturer said it is doing so to realign its production to the current market outlook for 50- seat regional jets. Production of the Challenger- 850 business aircraft, the corporate variant of the CRJ-200, will continue on the existing assembly line. BOEING SELLS ARNPRIOR OPERATION Boeing has completed the sale of its manufacturing operation in Arnprior, Ontario to one of it suppliers, Consolidated Industries. The deal includes a long-term single-source supply agreement for all the parts currently made at the Arnprior facility. Page 8
TrackPAX CANADA U.S. AIR VISITORS TO CANADA InterVISTAS Consulting and Airclaims are now offering a unique data product that provides visitor volumes and travel itinerary data for air visitors from the United States the Canadian tourism industry s largest and most important inbound market. Accurate visitor data provide tourism and travel industry professionals with a competitive edge in today s fast-paced environment. Identify True Origin of Visitors Determine the true city and airport origin of U.S. visitors Track the Impact of Marketing Campaigns Evaluate the success of marketing initiatives with reports on air visitor from key U.S. cities/states InterVISTAS Consulting Inc. 550-1200 West 73 rd Avenue, Vancouver, BC, V6P 6G5 Canada Telephone: 1-604-717-1800 Facsimile: 1-604-717-1818 E-mail: info@intervistas.com This U.S. air visitor data provides a solid foundation for industry analyses, market monitoring and strategic marketing plans. Visitors from all U.S. Markets Aggregated travel agency ticket sales from Airlines Reporting Corporation (ARC) are now available for inbound air travel from U.S. origins to Canada. ARC travel agency sales represent one of the most comprehensive and detailed sources on U.S. air visitors to Canada. By combining the ARC air visitor data with other aviation data sources and years of industry knowledge, InterVISTAS and Airclaims offer custom reporting on air visitors for Canadian destinations. Customised Analyses & Data Extracts Flexible product options include: Custom analyses by origin and destination markets Annual, monthly or quarterly seasonal detail Data extracts To Request a Sample Report, contact: Nancy_Keen@intervistas.com Telephone: 604-717-1822 Air ticket data provided by:.
CARGO CAPERS 7 Talk about doom and gloom! You may have noticed some rather gloomy articles and news items in the October 2005 issue of Air Cargo World: Robert Andriulaitis Director, Transportation & Logistics Studies Shifting Supply Chains: New market realities suggest the clock is ticking on the Just-In-Time supply chain strategies. This column discusses the trend back towards having inventories close to the customers and the use of slower and less expensive modes of transport. Britain s Broader View: With U.K. air cargo in decline, British airlines and forwarders look for new ways to lure freight notes that with the migration of much of Britain s manufacturing base to Asia, air cargo in the U.K. is in a nose-dive and isn t ever likely to get better. The Breaking News items U.S. Airlines Report Slow Cargo Traffic Growth and Airlines Hike Fuel Surcharges also are rather short on optimism. Just-in-time (JIT) is not dead. The common view of JIT has always seemed to encompass the concept of speed. In reality, JIT is focused on timeliness and consistency. It does not matter if the shipment left the supplier the day before and went by air or a week before and went by rail what really matters is that the shipment is delivered when needed. Now while this might seem to work against air (if speed isn t the key), when it comes to reliability, air certainly performs very well compared to the other modes. Furthermore, while the pure transport portion of air is certainly more expensive, when you take into consideration the broader picture, including shorter product lifetimes, less product damage and theft, and higher reliability, air continues to present a good business case. As JIT practices continue to evolve, the fundamentals suggest a role for air cargo will continue. Shifts rather than declines. The problem cited for the U.K. is reflected to a greater or lesser degree elsewhere. While large portions of the western manufacturing base have undoubtedly moved, significant manufacturing still takes place in the western economies. We obviously will not compete with Latin America and Asia on the basis of labour costs thus productivity, investment and a highly educated and motivated workforce will be keys for value-added activities here. While some of Canada s historically key exports have declined in the last five years, there have been some strong gains in industries such as pharmaceuticals. Thus, while some manufacturing capacity will continue to be exported, other high value activities will continue to thrive in Canada and the U.S., generating a demand for outbound air cargo. If there is a trend to having inventories near the customers, Canadian airport communities can make a case for these inventories to reside in Canadian FTZs. Boeing is still optimistic. Boeing, after assessing the steep decline in air cargo in 2001, the subsequent recovery, and the basic fundamentals driving air cargo, still comes up with a 6.2% growth rate projection for the next two decades-a tripling of the market over this timeframe. Conclusion: challenges rather than doom. Now while there are certainly challenges facing air cargo in Canada and globally, I think the prospects for air cargo growth for Canadian airports, air carriers, and the modes that feed air cargo, remain strong. Page 10
BRINGING REGISTERED TRAVELLERS TO REALITY 7 The past eighteen months have seen considerable activity occur regarding the Registered Traveller (RT) initiative for airport pre-board screening (PBS). In the United States, the concept moved from its post-9/11 embryonic state to a recent announcement towards deployment of a national RT program in 2006. In Canada, CATSA has indicated some interest in establishing a program, but has not yet made any formal commitment. Marcel Champagne Senior Planner What is a PBS Registered Traveller Program? A PBS Registered Traveller program would allow pre-qualified participants to bypass regular queues via dedicated lines or queue jumping, and, if no alarms are triggered, be exempt from additional secondary screening such as pat-downs and bag searches. Applicants would first have to provide biometric data (e.g., fingerprints and iris scans) and submit themselves to government background checks before RT status is granted a qualification process similar to that involved with other trusted traveller programs for passengers and goods such as NEXUS Air and CANPASS. Once at a PBS checkpoint, the participant s biometric information would be used to confirm identity and provide access to the expedited PBS process. Aside from providing qualified travellers opportunities for quicker PBS processing, an operational RT program would also improve overall PBS efficiency through more effective dedication of resources and higher passenger throughput. Testing the Concept In spring 2004, the TSA initiated a pilot RT program to test the concept, with the ultimate objective of assessing how biometric technologies and background security assessments can enhance security and strengthen customer service at PBS checkpoints. The pilot was implemented at five large airports (Boston Logan, Houston Bush, Los Angeles International, Minneapolis-St. Paul and Washington Reagan) and limited participation to 2,000 frequent travellers flying on specific airlines at each airport. These pilots were concluded on 30 September of this year and were deemed a success by the TSA, airports, program participants and the media alike. A sub-pilot was also developed and launched at the Orlando International Airport in July 2005 to test a public-private partnership model that would enable a RT program to operate without government funding. Contracted to Verified Identity Pass, Inc. (VERIFIED ID) and baptised Clear, Orlando s RT program operates in a manner similar to that implemented at the five pilot airports, but allows an unlimited number of participants and requires payment of a membership fee by program participants. With over 10,000 enrolments as of November 2005, Clear has proven to be a success. Statistical analysis of Orlando program s first weeks of operation indicate that processing times for program participants are significantly lower, with biometric verification and processing times at a ClearLane taking roughly 14 seconds. Page 11
BRINGING REGISTERED TRAVELLERS TO REALITY CON T What Next? In spite of favourable results, the lack of program interoperability between participating airports has been criticised as a major flaw of the pilot programs, as traveller participation was only allowed at the airport of enrolment. It appears therefore that the next phase of program development would involve implementation of an integrated RT system in which participants may access RT lanes at any airport. Although only currently in operation in Orlando, the Clear program was developed with interoperability in mind. Such an approach is already being advocated by the airport industry via the recently created Registered Traveller Interoperability Consortium (RTIC). With over 50 member airports and growing, the RTIC is increasingly becoming well positioned to put forward the interoperability standards and develop the marketing benefits necessary for successful RT deployment in the United States. Although the current U.S. budget for the year beginning 1 October 2005 contained no funds to keep Registered Traveller going, TSA chief Kip Hawley indicated in early November that a national RT program will debut on 20 June 2006 based on the Orlando model. Leading up to this announcement, the five original pilot airports had already signalled that they wished to continue their own registered traveller programs based on this model, and more airports had positioned themselves to do so as well. Unfortunately, none of these initiatives appear to adopt a broad approach that would also integrate other existing and Given the multiplicity of trusted traveller programs such as NEXUS Air and CANPASS, interoperability between programs are key future trusted traveller programs such as Nexus-Air, Nexus-Highway and Sentri, that also require extensive participant background checks. Much like the debit card system adopted by the banking industry, the transportation industry would benefit significantly by the development of one interoperable program that recognises similar programs across all modes, much like that envisioned by Perimeter Clearance strategy. For more information, see Perimeter Clearance: Updating the Strategy, written by Gerry Bruno on page 15 of this publication. The TSA experience in testing the RT model can serve as a strong foundation for the development of a potential Canadian program. Development of a potential Canadian RT model will also need to consider similar interoperability issues and involve a broad group of stakeholders such as Transport Canada, airports and air carriers. As Canada, the U.S. and Mexico continue to implement Security and Prosperity Partnership (SPP) initiatives, however, the maturing of the RT concept will need to converge with other trusted traveller programs to ensure its success in simplifying travel into and across North America. Page 12
PASSENGER RAIL & TRANSIT SECURITY: THE NEW EMPHASIS 4 July s tragic attacks in London, and last year s in Madrid highlight a disturbing reality: terrorism is multi-modal in nature. Rail, sea, and other forms of transportation are potential targets for attacks, in addition to aviation. The job to secure all forms of transportation is unenviable: the billions of dollars spent in aviation and maritime security since 9/11 will pale in comparison to a comparable level of effort in other modes. As major airports in North America are building or contemplating linkages to rail and transit systems, it is important to keep track of the advances in solutions for the new focus in passenger rail and transit. Solomon Wong Director, Security & Planning Magnitude of Problem: Annual Volume Eight times the number of Air Passengers Each year, approximately 90 million passengers are enplaned/deplaned from Canadian airports. By comparison the transit rail/metro systems in Canada carry roughly 750 million passengers annually. Annual Rail Transit Trips (millions of riders) Rail Transit Type Calgary Edmonton Vancouver Ottawa Toronto Montreal Total (millions) Light 46.9 6.5-2.5 84.3-140.2 Heavy - - - - 257.6-257.6 Commuter - - 2.0-36.4 14.3 52.7 Automated/ Other - - 64.1-15.3 222.9 302.3 Total (M) 46.9 6.5 66.1 2.5 393.6 237.2 752.8 Source: American Passenger Transit Association, 2004 + Estimate for Montreal Metro; does not include buses The large volumes, and multiple access points (stations) for each system presents a sizeable challenge. For example, the busiest subway stations in Canada handle 90,000 passengers per day. This means that a single subway station processes the same number of passengers as the entire enplaned/deplaned traffic volume at Toronto Pearson International Airport. Is Screening the Solution? In the 1970's a rash of hijackings and bombings prompted the development of pre-board screening of passengers, and now checked baggage. Screening for passengers boarding subways has proven to be difficult due to the lack of space, as well as the dependency of mass transit on rapid flow-through. Nevertheless, recent experiences in London and NYC for targeted bag searches have introduced some level of passenger screening, at least on a selective basis. The slow speed of current screening machines is a technological that, over time, may prove to generate a new market for rapid detection systems that may have a market for both airport and transit systems. This may be at least a decade away in terms of development and commercial deployment. Page 13
What Else is Being Advanced for Rail Transit Security? Other techniques for securing mass transit systems are still in their infancy. According to a UN study, measures included for securing rail transit security include: Perimeter barriers, high-tech fencing and lighting. Intrusion detection equipment. Alternative external communications capability for continuity of operations. Increased number of uniformed and undercover patrols on light rail and subway systems. Hazmat training for personnel. Increased number of inspections of trash receptacles and other storage areas Increased number and frequency of bomb detecting canine teams. Continued broadcast of public announcements to alert riders and citizens to be aware of attacks (e.g., Madrid, London) and to watch their surroundings, and report any suspicious activities Increased video surveillance and review of such materials. Procurement of personal protective equipment for emergency responders. Systems have participated in exercises, protocols, and training for identifying the effects of a chemical/biological attack and have developed system-wide Employee Awareness Campaigns as well as deployed chemical and biological detection equipment. In the U.S., the Transportation Security Administration has a Mass Transit Passenger Security group. The group also started to promote a "prohibited items" list, similar to the aviation mode. Certain items such as firearms, ammunition, flammable materials, mace, knives and explosives may be prohibited in or on mass transit vehicles and stations depending on each system's operational criteria. Due to the shared responsibility of security at different levels of government, each initiative that has been tried is co-ordinated through multiple jurisdictions in the U.S. For example, a pilot program to test the feasibility of screening luggage and carry-on bags for explosives at rail stations and aboard trains has involved a large number of different authorities. Biological, chemical and high explosives countermeasures are also research efforts that are under way for improving the U.S. system. Canadian Response Additional security initiatives that aim to further reduce vulnerabilities to transit and rail systems and make commuters and transit riders more secure may be forthcoming. This will invariably involve a large number of stakeholders, as well as potential interaction with Canadian airports insofar as planning for new transit facilities adjacent to terminal buildings proceed. Page 14
PERIMETER CLEARANCE: UPDATING THE STRATEGY 3 Founded in December 2000, the Perimeter Clearance Coalition (PCC) is a broad based bi-national industry group dedicated to working with the Canadian and U.S. governments to move border management as much as possible away from our shared border to our common perimeters and offshore. Much of the Coalition s conceptual work found its way into the Smart Border Action Plan of December 2001 and the report of the U.S. Congress Data Management Improvement Act Task Force on entry/exit tracking, which manifested itself into the U.S.-VISIT program. Gerry Bruno President & CEO InterVISTAS Consulting Inc. And Executive Director, Perimeter Clearance Coalition The Coalition s concepts were documented in the May 2002 Perimeter Clearance Strategy, a comprehensive roadmap for re-designing border processes using information and biometric technologies to expedite the entry of low risk travellers and goods. Over the years, PCC members have been active advocates of the Perimeter Strategy and provided hundreds of briefings and presentations at industry conferences and private meetings with key government officials on both sides of the border. In order to enhance the effectiveness of its advocacy efforts, the Coalition recently agreed to align itself with the Canadian-American Border Trade Alliance (Can-Am BTA). Under the new governance structure, the PCC is now a major initiative of Can-Am BTA and will have an Advisory Board that includes select Can-Am BTA Executive Board members and key Coalition sponsors. Recent Developments Smart Border Action Plan Implementation: While the PCC has been very supportive of the Smart Border Action Plan, there have been concerns with the implementation of Smart Border initiatives. Issues include the lack of integration among various expedited programs such as Nexus-Air, Nexus- Land and Registered Traveller and insufficient co-ordination among departments and agencies responsible for border management and security. While action is being taken to address these issues, the PCC needs to continue to advocate for smart implementation of the Smart Border Plan. The Western Hemisphere Travel Initiative (WHTI): The Intelligence Reform and Terrorism Prevention Act of 2004 requires that by January 2008, entry into the U.S. from Western Hemisphere nations including Canada require a passport or secure travel document. This requirement applies not only to visitors from Western Hemisphere nations but also to returning American citizens and residents. More recently, the U.S. has proposed a phase-in for WHTI that would advance the new document requirements for entry into the U.S. by air or sea to 1 January 2007, while entry by land would be effective 1 January 2008. This new requirement has significant implications for the air travel and cruise ship industries, and the PCC is advocating for delaying implementation for air and sea to 2008 in line with the legislative deadline so as to provide more time to develop practical and affordable alternatives to secure travel documents for Canadian and U.S. travellers. Security and Prosperity Partnership : The Security and Prosperity Partnership (SPP) of North America was announced on 23 March 2005 by Prime Minister Paul Martin of Canada, President George Bush of the U.S. and President Fox of Mexico. The June 2005 Report to Leaders on SPP included over 300 hundred initiatives, a number of which are relevant to the Perimeter Clearance Strategy. The SPP includes objectives such as expanding air transportation relations, streamlining Page 15
PERIMETER CLEARANCE: UPDATING THE STRATEGY CON T border facilitation for low-risk traffic, and securing shared borders in North America from external threats by establishing comparable security standards for travellers and cargo. The PCC can play an important role in this tri-national effort by ensuring that the key concepts of the Perimeter Clearance Strategy are integrated in the implementation of SPP initiatives. Strategy Update It has been almost five years since the original concepts and strategy for Perimeter Clearance were developed by the PCC. While significant progress has been made by the U.S. and Canadian governments in implementing joint expedited programs for low risk trade and travel, there is still much work to be done to realise the full potential for a more seamless and secure border regime. The challenge is to convert the large volume of unknown-risk trade and travel to known and low-risk, to implement a practical Western Hemisphere Travel Initiative that minimises damage to the tourism industries of both countries, and to take advantage of opportunities under the Security and Prosperity Partnership to improve border and security processes. In light of these developments, the Coalition sees a need to update the Perimeter Clearance Strategy not only to deal with these current challenges and opportunities but also to ensure continued evolution of the vision for achieving Perimeter Clearance for Canada and the U.S. over the next five to ten years. The current plan is to develop new border clearance and security process maps for people and goods over the next two months and publish an updated Perimeter Clearance Strategy by the Spring of 2006. For further information and updates, contact the PCC at http://perimeterclearance.org/. To join the PCC, contact Gerry Bruno at 604-717-1800. Page 16
OTTAWA REPORT 7 Sam Barone Regional Vice President Ottawa, ON Government of Canada Announces Pacific Gateway Strategy On 20 October, Transportation Minister Jean-C. Lapierre introduced in the House of Commons the proposed Pacific Gateway Act. The Act outlines national interest in development of the Pacific Gateway, establishing principles for federal government action, and commits the Government to a clear strategy. The Government of Canada has since released details on the Pacific Gateway Strategy, which includes investments in transportation infrastructure, improvements in border services and security, and stronger ties with the Asia-Pacific region. The strategy includes up to CDN$590 million in specific measures, including CDN$190 million in immediate investments. The initial CDN$190 million investment includes CDN$125 million in transportation infrastructure, CDN$20 million over two years to the Canada Border Services Agency to accommodate increased passenger and container volumes, CDN$10 million over five years for measures led by the Standards Council of Canada to deepen links with the Asia-Pacific region, and CDN$35 million over five years to fund the secretariat for the Pacific Gateway Council and supporting federal departments. The strategy is intended to strengthen Canada s position in international trade, recognising the growing importance of the Asia-Pacific region, and in particular, the rise of China, and building on British Columbia s location advantage in the Asia-Pacific-North America trade corridor. Canada Completes New Bilateral Agreement with Greece Canada signed a new, although restrictive bilateral agreement with Greece which allows each country to designate two carriers and allows up to eight flights per week in total by Canadian carriers. The new agreement improves the opportunity for Air Transat's services and increases Air Canada's code share capacity via Frankfurt. Lapierre Announces Appointment to Transportation Appeal Tribunal On 25 October, Transport Minister Jean-C Lapierre announced the appointment of Evariste Cormier of Moncton to the Transportation Appeal Tribunal of Canada. Mr. Cormier brings extensive experience in the rail sector to the Tribunal, having served 37 years with the Canadian National Railway, including eight years as supervisor of the Moncton Main Car Shop. Rail Rate Final Offer Arbitration Challenged Under the Charter The Canada Transportation Act has a provision for shippers to apply to the Canadian Transportation Agency for final offer arbitration (FOA) to settle rate disputes with rail carriers. On 5 October 2005, CN filed a challenge of the FOA provisions of the Act as being in contravention of the Canadian Bill of Rights. CN s basis is that the Act does not provide criteria to be used by the arbitrator and that the arbitrator is not required to provide reasons for his/her decision. The appeal rose out of a coal rate dispute where an arbitrator ruled in favour of Western Canadian Coal Corporation and against CN. NAV CANADA Announces Traffic for August 2005 and Fiscal Year 2005 NAV CANADA announced its traffic figures for August 2005, as well as for the fiscal year 2005. Traffic for August was up 4.8% over August 2004, while overall traffic for fiscal year 2005 increased by 5.0% over the last fiscal year. Traffic is measures in weighted charging units, a measure that reflects the number of flights, aircraft size, and distance flown in Canadian airspace. Page 17
WASHINGTON REPORT 4 US$66 billion Transportation Bill Passed by Senate In October, the U.S. Senate passed the FY 2006 transportation bill, worth US$66 billion (CDN$78 billion). The discretionary spending bill includes US$14.3 billion for the FAA, US$8.2 billion for Operations, and US$3.5 billion for the Airport Improvement Program. The bill also includes a provision that extends protection to airline passengers holding tickets on bankrupt airlines for one year to 30 November 2006. In June, the DOT ruled that passengers holding tickets on bankrupt or insolvent airlines have a right to transportation on an alternate carrier on a space-available basis. Charles Chambers Senior Vice President InterVISTAS-ga 2 Consulting Inc. Washington, D.C. U.S. DOT Proposal Would Facilitate Airlines in Raising Money The Department of Transportation (DOT) put forth a proposal that would allow U.S. airlines more opportunities to obtain financing from foreign investors without increasing the foreign ownership levels. Under the new proposal, international investors could have more say in the marketing, route planning and fleet structure aspects of airline operations, but actual control over safety and security decisions, and oversight of U.S. Department of Defense contracts will remain in U.S. hands. The requirement for 75% ownership by U.S. citizens will not change, and the proposal would only apply to investors from countries with Open-Skies aviation agreements with the U.S. FAA Completes Installation of West Coast Trans-Oceanic Flight Management Center Installation has been completed on the Advanced Technologies and Oceanic Procedures (ATOP) system at Oakland Air Route Traffic Control Center (Oakland Center, CA), which will allow air traffic controllers to better manage flights across the Pacific Ocean. The ATOP system will efficiently allow controllers to manage flights electronically rather than relying on the labour-intensive manual method of tracking trans-oceanic flights on paper strips which has been in use for decades. In June, the FAA began using ATOP for transatlantic flights, handled by York Center in Ronkonkoma, N.Y. Another center is expected to open at Anchorage Center for transarctic flights in the spring of 2006. The FAA currently provides up to 80% of the world s air traffic services for controlled trans-oceanic flights. U.S. and Russia Expand Airspace Agreement The U.S. and Russia have agreed to expand code-share-only points between the two countries as Aeroflot prepares to join the SkyTeam Alliance. The agreement also strengthens the rights of U.S. airlines to fly over Russian airspace on flights to Asian countries, including trans-polar routes. For the first time, U.S. airlines will be able to transit Russian airspace on non-stop flights to India. U.S. and China to Co-ordinate Aviation Safety Regulations The Federal Aviation Administration (FAA) and the General Administration of Civil Aviation of China (CAAC) signed a Bilateral Aviation Safety Agreement on 20 October 2005. The Agreement will reduce redundancy in safety oversight of both countries airlines and facilitate co-operation in aviation safety. Airlines in both countries will see a reduction in regulatory burden as U.S. and Chinese safety programs are co-ordinated and streamlined. Page 18
INTERVISTAS NEWS Nigel Brownlow joins InterVISTAS Consulting, Inc. as Executive Consultant InterVISTAS Consulting Inc. is pleased to announce that Nigel Brownlow has joined the firm as Executive Consultant. Mr. Brownlow has 20 years of airline experience including financial control, fleet and network planning, market and schedule development, revenue management, and information systems development. He has been instrumental in the design of advanced airline and airport business models and revenue management systems. Mr. Brownlow started his airline career in financial planning at Air Canada before becoming product manager and then manager new product development. He joined Aeronomics Incorporated where he worked as Senior Revenue Management Consultant. For the last eight years, he has been President of Sherpa Decision Systems Incorporated, providing consulting and customised software development for the airline and aviation industry. Yesawich, Pepperdine, Brown & Russell, InterVISTAS Consulting Inc. Combine to Uncover New Insights about Canadian Leisure Travellers Canadians seek new and unique travel experiences according to a comprehensive new study analysing the lifestyles, motivations and future vacation plans of Canadian leisure travellers. More than six in 10 of these travellers said it is extremely important to experience new things do to on vacation and to discover new and different destinations. The 2005 Portrait of Canadian Leisure Travellers, a joint undertaking between Yesawich, Pepperdine, Brown and Russell (YPB&R), Orlando, FL., and InterVISTAS Consulting Inc., headquartered in Vancouver, B.C., explores the travel habits, preferences and future trip intentions of Canadian leisure travellers. The study s results are based on a nationally projectable panel of 1,350 pre-qualified Canadian leisure travellers. For more information, please contact Paul Clark, InterVISTAS Consulting Inc., at 604-717-1837. InterVISTAS Upcoming Speaking Engagements 23 February 2006: 9th Annual Hamburg Aviation Conference, Hamburg, Germany Dr. Mike Tretheway, Executive Vice-President, InterVISTAS Consulting Inc., has been honoured by being selected to give the Martin Kunz Memorial Lecture. is a collection of information gathered from public sources, such as press releases, media articles, etc., information from confidential sources, and items heard on the street. Thus some of the information is speculative and may not materialise. To inquire about advertising opportunities or to provide comments/feedback on the InterVISTAS Canadian Aviation Intelligence Report, please contact Rob Beynon at rob_beynon@intervistas.com or 1-604-717-1864. To subscribe, please send an email to subscribe@intervistas.com To unsubscribe, please send an email to unsubscribe@intervistas.com. Prepared by InterVISTAS Consulting Inc. Page 19