intervistas aviation intelligence report - february 2015

2015

IN THIS ISSUE:PAGE 3

Feature ArticlePAGE 5

Regional ReportsPAGE 8

Aviation NewsPAGE 12

Traffic UpdatesPAGE 15

InterVISTAS News

FEBRUARY

Deborah MeehanPresident and CEO

InterVISTAS Consulting Group

Vic PrinsAviation Director/Managing Director

Royal HaskoningDHV

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Hello and welcome to the first edition of the 2015 Aviation Intelligence Report.

Our feature article this month discusses the current drop in oil prices in the context of other rapid price changes for this commodity over the past 15 years. Chris Greer provides us with analysis on past recovery trends.

Our Regional Reports include: ■ IAG’s most recent offer to buy Aer Lingus,

by Ian Kincaid, ■ The struggle for profitability in Southeast

Asia’s Low-Cost Carrier sector, by Doris Mak,

■ The expansion of the Trusted Traveller program in Canada, by Debra Ward.

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

We hope you enjoy this month’s edition.

Best regards,Deb Meehan and Vic Prins

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Crude Oil Spot PricesReal 2014 US$

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Crude oil prices hit a low in January 1999

Steady climb of 127% between Jan 2007 to Jul 2008 peak

Sharp decline of 70%between Jul 2008 and Feb 2009

Oil prices have lost over 50% of their value since June 2014

Early 2000's price drop of 45% between Nov 2000 and Dec 2001

January 2007

Prices recover to May 2007 levels between Feb and Jun 2009

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Chris GreerAnalyst

Vancouver, Canada

Decline in Oil Prices: Is the Bottom Just Around the Corner? The past seven months have seen an unprecedented decline in benchmark crude oil prices, falling from their most recent peak above US $100/barrel in June 2014 to below $50/barrel through January of 2015. Global oil prices have not undergone such a severe reduction in price since the second half of 2008 following the 2007/08 run-up to nearly $150/barrel (real 2014 US$) in July of 2008. This article will examine the causes of the current price drop, discuss how soon oil may bottom out and begin its price climb once again.

Figure 1 depicts the recent history of crude oil prices. Since January of 1999 – when real prices hit their lowest point in the past 20 years – oil prices have seen three declines. The first was from November 2000 to December 2001, pushed by the collapse of the dot-com bubble, a mild recession in the U.S. and the 9/11 terrorist attack. The second was from July 2008 to February 2009 following the speculative oil price bubble of 2007/08 and onset of the great global recession. Finally is the current price drop, starting in June of 2014.

Current decline. Of great interest to any analysis of the current price decline is the 2007-2009 oil bubble and price collapse. The 2007/08 run was a combination of speculation (A4A did some great analysis of speculation in oil markets ) and rising demand in the face of constrained supply due to stagnant supply growth over the 2005 and 2008 period. When prices hit their peak in June and July

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

Figure 1 – Historical Crude Oil Prices (WTI Spot Prices), Real 2014 US$

Source: U.S. Energy Information Association.

of 2008, the price collapse was precipitated by the end of the speculative bubble. Part of the price collapse was the news that new supply – particularly the opening of offshore supply in the U.S. – would soon come on line. As well, demand was collapsing, especially in North America and Europe, with the onset of the global financial crisis. The price collapse appears to have overshot the new price and from the trough of 2007, prices made a rapid recovery. From the trough in February of 2009 it took only four months for prices to return to $70/barrel in real 2014 terms, and to stabilise there. By the end of 2009, the price pushed past the $80 mark.

Turning now to the current price decline, we see a price movement similar to the 2008/09 price collapse, but with only a few similar drivers. Though the world’s economies have largely dug themselves out of the Great Recession (Europe continues to stagnate, however), and demand for oil is still strong, we are not seeing the same sort of demand shift in petroleum products as was seen in 2008/09.

So where does this leave us? The story of the ongoing price decline is one of supply. In a global market where supply is outstripping demand, we must expect that prices will fall to allow the market to reach its equilibrium once

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again. The current excess of supply is due in part to increased supply from the U.S. and Canada, some of which is shale oil with high production costs. OPEC nations, especially Saudi Arabia, have decided to not withdraw its own supply to counter the increased supply from the U.S., Canada and some others. While short term supply is up, hence price down, in the medium to long term we should expect a reduction in supply. Many oil companies have put a halt on exploration as well as future capacity increases in the upgrades needed to process shale and oilsands oil. Without meaningful new exploration and new supply, we are surely heading towards a situation where demand will exceed reduced supply, hence higher oil prices in the medium to long term.

Timing of the Turn. Oil commodity markets have seen a shift in the past seven months from a backwardation position (where future prices are less than current prices) to a contango position (where future prices are higher than current). The movement to a contango market began in November 2014. The contango spread is continuing to increase to this day, and signals that the declines in prices must be near their end. Stories of

‘floating inventory’ – tankers filled with oil but anchored as floating storage – further indicate that the market is nearing its lowest point. Build-up of inventory in idle tankers is speculation that oil prices will be going up. Always a highly speculative and volatile market, oil traders differ on their opinions of how long prices will stay low. Our analysis indicates that demand forces must eventually begin to push market prices up. The current speculative market will self-correct in the near future. As a guide, the past two oil price collapses had 7 and 13 month peak to trough periods. This suggests oil prices will bottom out in the first or second quarter of 2015.

This most recent price decline is likely only temporary and that within the near future prices will begin to climb. We cannot say exactly how soon prices will bottom out and begin their climb again, or to what price level they will return to. The movement of the market to contango and storage of oil in tankers are indications that the oil prices stabilisation may be soon.


Regional Reports

EUROPE REPORT

IAG Expected to Increase Offer for Aer LingusIAG, the parent company for British Airways and Iberia, is planning to increase its offer for Aer Lingus after the Irish carrier rejected previous offers. On January 9, 2015, Aer Lingus rebuffed an offer worth €2.40 per share, which valued the company at €1.28 billion. London-based IAG has made two takeover offers for Aer Lingus in the past month. Directors reportedly rejected the offer as one that significantly undervalued Ireland’s flag carrier airline.

IAG’s interest comes as London’s appeal court is expected to make a decision on a protracted battle between Ryanair and Aer Lingus over antitrust concerns. In August, the UK Competition Commission found that Ryanair’s 29.9% stake in its Irish rival could “substantially lessen” competition on routes between the UK and Ireland. The Commission ultimately ruled that Ryanair must sell its stake in Aer Lingus. Ryanair is unlikely to win its appeal; however, if the low-cost carrier chooses to continue its battle in European courts, the process could be delayed further. The Irish government is the second largest shareholder in Aer Lingus with a 25 percent stake, which it kept when the airline was privatized to ensure it would continue to serve Irish cities. Currently, the government is under no pressure to sell its shares. The government will closely examine how a merger would affect connectivity and competition for air routes out of Ireland, including from regional airports.

Despite a long history of union clashes, unprofitable routes, and volatile financial performance, Aer Lingus has recently done relatively well as an independent carrier. It has been expanding rapidly into the U.S., with new

direct flights to Washington, DC scheduled to begin in May. In addition, Dublin Airport is among Europe’s largest transatlantic hubs, its traffic boosted by the availability of U.S. customs pre-clearance. Strong earnings and weak oil prices have also helped to boost the airline’s attractiveness to potential bidders. Aer Lingus stock has risen almost 30 percent since December 17, the day before the first proposal became public.

According to Bloomberg reporting, IAG is considering raising its offer to as much as €2.50 per share, though no final decision has been made. Buying Aer Lingus would help expand IAG’s bank of take-off and landing positions at Heathrow, where British Airways is the number one carrier. There are also clear synergies, with Aer Lingus’s Dublin hub creating opportunities for IAG to expand its transatlantic routes.

Alitalia Aims for €100 million Profit by 2017Alitalia, Italy’s struggling national carrier, has pledged to return a profit within three years, as it implements a restructuring plan to cut costs, launch new routes and improve its image. Alitalia plans to win back business traffic in Europe and make a profit of roughly €100 million by 2017.

Abu Dhabi’s Etihad Airways bought a 49 percent stake in Alitalia last year and has played an active role in the airline’s restructuring. Etihad’s investment came as part of a €1.75 billion turnaround plan that included writing off €598 million of Alitalia’s debt and a capital increase of €300 million funded by some of the airline’s existing shareholders. Etihad has invested in eight airlines globally, including Germany’s Air Berlin.

Alitalia has been historically unprofitable,

only averting bankruptcy when the Italian government agreed to a bailout in 2012. Alitalia’s previous anchor investor, Air France-KLM Group, refused to participate in the capital increase after the airline failed to give assurances on restructuring steps.

Among the planned changes are closer links between Alitalia and Air Berlin to win more business in Northern Europe and use Milan’s secondary airport, Linate, as a hub. Malpensa airport will be expanded into a major cargo hub. Milan is one of Europe’s most lucrative air travel markets which previous Alitalia management exited.

Routes will also play an integral role in reinvigorating the carrier. Rome will get new connections to San Francisco, México, and Santiago in Chile, as well as new eastbound routes to Beijing, Shanghai, and Korea. Milan will get flights to Tokyo and Shanghai, and Venice-Shanghai will launch in May. Five Italian cities – Rome, Milan, Venice, Catania, and Bologna – will all have direct services to Abu Dhabi.

To support the new route network, Alitalia is working with Etihad, which has more than 200 aircraft on order with Boeing and Airbus, to add more fuel-efficient, long-haul jets. The Italian carrier has already sold 14 Airbus A320 narrow-body jets to Air Berlin.

James Hogan, Etihad’s chief executive officer, has joined Alitalia as vice president, while three other executives from the Middle East carrier are joining Alitalia’s team. Duncan Naysmith has been named chief financial officer; John Shepley has been appointed chief planning and strategy officer, and Aubrey Tiedt has been selected as chief customer officer.

Ian KincaidVice President,

Economic AnalysisLondon, UK


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CANADA REPORT

Debra WardExecutive Consultant

Ottawa, Canada

Canadian Carriers Continue to Change Up Offerings, Expand Service in 2015Both Air Canada and WestJet headed into 2015 with a host of new or changed offerings that will have long term impacts on air service to and within Canada. Air Canada has announced a slew of new international flights, including a non-stop service from Toronto to Dubai and Toronto to New Delhi on Dreamliner 787s. WestJet’s international growth, which included St. John’s–Dublin ramped up again with a new Calgary–Houston daily non-stop flight.

Air Canada also shifted some domestic flights to its low cost carrier, Rouge, while announcing some new domestic non-stop routes under its Jazz banner.

WestJet’s Encore is spreading its wings into further corners of the domestic market, announcing regular scheduled service to

Gander, NL via Halifax, with a seasonal flight to Toronto. The domestic market may heat up even further later this year when the start-up carrier Canada Jetlines Ltd. takes aim at regional routes served by turboprops when it launches its 737-based service in western Canada, slated for July 2015.

Canada and Israel Advance Transportation RelationsCanada and Israel have signed three agreements designed to further open air service, cooperate on aviation security issues and share best transportation practices. The new Air Transport Agreement will allow any number of Canadian and Israeli airlines to offer air services to any city in Canada and Israel, it will increase the number of permitted flights for passenger and cargo services, and it will provide airlines the ability to introduce

new prices more quickly. The Declaration of Intent on Aviation Security formalizes Transport Canada’s cooperation with Israel on aviation security and the Memorandum of Understanding on Cooperation in the Field of Transportation provides a framework for sharing best practices and to identify opportunities for commercial interests.

Transport Canada Expands Trusted Traveler ProgramTrusted Travelers, including members of NEXUS and Global Entry programs, Canadian and U.S. military, and aircrew in uniform, are now able to access dedicated lines at Vancouver, Calgary, Toronto (Pearson terminals 1 and 3), and Montréal airports. These travelers have access to faster and less cumbersome security screening similar to TSA Pre-Check. For example, they do not need to remove shoes, belts, hats, or light jackets and may keep permitted liquids, aerosols and gels in carry-on bags. In addition, upgraded Trusted Traveler kiosks are now installed in all airports in Canada where NEXUS is available.

Canadian Tourism Experienced Growth in Summer 2014Canadian tourism experienced a positive summer that saw inbound international travel grow by 4.9% while Canadian outbound travel was flat, compared with summer 2013. With these results posted before the drop in oil prices and in the value of the Canadian dollar, Canada may be on track to see continued increases inbound tourism, especially from U.S. travelers, and perhaps, a dampening of outbound demand, particularly for cross-border bargain hunters.


Regional Reports

ASIA PACIFIC REPORT

Low-Cost Carriers Face Overcapacity and Thin Margins in Southeast AsiaLow-cost carriers across Southeast Asia have struggled to achieve profitability in the face of overcapacity and thin margins. Rising disposable incomes have been met with the emergence of several new airlines throughout the region. As passenger numbers grow, ambition to capture a greater share of a growing market has often suppressed realistic assessments of future cost-effectiveness. With available capacity growing faster than passenger demand, yields have taken a substantial hit.

Overexpansion has plagued the Southeast Asia market. The Centre for Aviation (CAPA) indicates that of the nearly 50 airlines based in Southeast Asia – excluding small regional and charter operators – about 80 percent were lossmaking in the first half of last year. Cheap interest rates and Western export credits have fueled the aircraft buying binge in the region. Last year, for example, VietJetAir agreed to buy 63 Airbus aircraft for $9 billion. Southeast Asia is the only region in the world where there are as many aircraft on order as aircraft in service.

The recent poor performance of AirAsia, the largest carrier by routes served in the region, highlights the competitive pressures of the Southeast Asian aviation industry. Of the eight AirAsia-branded airlines, only the Malaysian one was profitable on an operating basis in the first three quarters of 2014. In particular, the Malaysian low-cost carrier has struggled to make headway in Indonesia – one of the world’s fastest-growing aviation markets – where tough competition and economic turbulence have harmed profitability.

Indonesia’s population of 250 million makes it one of the most sought-after markets in Southeast Asia. With a fast-growing middle class, Indonesia’s passenger numbers are forecast to grow from 85 million to 270 million by 2034, according to the International Air Transport Association. However, carriers, including AirAsia, have struggled to make money in Indonesia over the past year because of a sharp fall in the rupiah against the U.S. dollar – around 70 percent of costs including fuel and aircraft are dollar-denominated – and a slowdown in economic growth.

Most of the aircraft orders in Southeast Asia have come from AirAsia and Lion Air. However, AirAsia operates only 30 aircraft in Indonesia, compared with 80 in Malaysia and 40 in Thailand. This is a curious strategic decision given that Indonesia’s population is several times larger than either Malaysia or Thailand.

According to CAPA, Lion Air now controls over 40 percent of Indonesia’s aviation market while AirAsia has a market share of just 10 percent. AirAsia’s Indonesian affiliate has made losses on a cumulative basis since it was launched nine years ago.

Moody’s, the rating agency, has stated that continued weak profitability will likely put pressure on the credit profiles of Southeast Asian airlines in the next 12 months. AirAsia has responded to market conditions by deferring aircraft deliveries due this year and has cut costs more aggressively than some of its rivals. According to CAPA, Lion Air has more than 500 aircraft on order to add to its existing fleet of 159. Carriers across the region will have important decisions to make in the coming year with respect to overall capacity and competitive presence in growing markets.

Doris MakDirector, Special Projects

Vancouver, Canada

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ASIA PACIFIC REPORT

SpiceJet Launches Rescue Plan SpiceJet has announced a rescue plan that will see its original founder resume control of the cash-strapped carrier. The current controlling shareholder, Kalanithi Maran, who bought the airline in 2010, has agreed to transfer ownership, management and control of the airline to a group of investors led by co-founder Ajay Singh.

SpiceJet has been under pressure to conclude a more than two-year search for an external investor after struggling to pay bills and staff salaries over the past few months. New Dehli abruptly banned the carrier from accepting bookings for more than 30 days in advance resulting in nearly 2,000 canceled flights in December. SpiceJet faced another setback when state-owned fuel companies refused to extend it any further credit. Analysts estimate that SpiceJet needs a capital infusion of at least $300 million.

Singh, who ceased to be a director in 2010, and partners will invest $243 million in the airline in three installments through March, according to a senior Indian civil aviation ministry official. The carrier has reported five straight quarters of losses. SpiceJet continues to be burdened by its decision to add Bombardiers to its fleet of Boeing 737s in order to fly shorter routes – most low-cost carriers opt for a single aircraft type. The new investors will focus on cutting costs, rationalizing the airline’s route network, and regaining the confidence of fliers.

SpiceJet’s troubles underline the difficulties facing carriers in India, with highly taxed jet fuel and some of the world’s most price-sensitive

customers. While global oil prices have fallen almost 60 percent since last summer, the cost of Indian jet fuel has only declined about 25 percent over the period. Carriers have engaged in fare wars and stripped down in-flight services substantially; recently, Air India cut fares by up to half. Only IndiGo, India’s largest private carrier, has consistently met its bottom line.

The Indian airline industry is beset with long-term structural issues. State-owned oil companies use high profits from jet fuel sales to compensate for losses incurred on other subsidized petroleum products. Indian states also levy taxes on jet fuel. High taxes on maintenance make it 30 percent more

expensive to service aircraft in India than abroad, prompting many Indian carriers to fly empty jets overseas for overhauls.

Despite these concerns, there may be hope on the horizon. The new government appears to regard aviation as a significant job creator and engine for growth, and policy changes may be imminent. In a draft aviation policy released in November, the Indian government promised to work with states to make jet fuel and maintenance duties competitive with other countries. However, change is unlikely to come easily given the extent to which cash-strapped governments rely on such revenue.


hub in Jordan extends Air Arabia’s operational footprint into the heart of the Levant and brings us a step closer to achieving our stated goal of connecting the entire Arab world. This step will also provide the Jordanian economy with a reagent for growth through direct contributions to the local economy” said Sheikh Abdullah Bin Mohammad Al Thani, Chairman of Air Arabia. Operations are expected to begin in the first quarter of 2015.

fastjet Continues Certification in Zambiafastjet has announced completion of Zambian Air Operator Certification Application (AOC) phase one evaluations. Zambian authorities will now evaluate fastjet’s planned company structure and operational plan. “The process to obtain permission to operate in Zambia is proceeding extremely well. We have an excellent team in Zambia, who are working positively with the local authorities to complete the approval process as efficiently as possible” said Ed Winter, interim Chairman and Chief Executive Officer of fastjet.

ASIA

Chinese Planning Authority Approves New Beijing AirportThe Chinese government has approved plans for a new international airport near Beijing. The airport is planned to handle 72 million passengers, 2 million tonnes of cargo and 640,000 flights annually. It will be

MIDDLE EAST/AFRICA

Dubai Passes Heathrow in Passenger TrafficThe United Arab Emirates, operators of Dubai International Airport, announced a total of 70.5 million passengers had passed through the airport in 2014. This surpasses the Heathrow’s 68.1 million passengers over the same time period. As a result Dubai is now the busiest airport in the world for passenger traffic.

Ethiopian Airlines Continues Long-Haul Fleet Replacement and Route GrowthEthiopian Airlines will phase out their remaining four Boeing 757s by 2016 and their remaining eight Boeing 767s by 2017. These planes will be replaced by twelve Airbus A350-900s which are slated to begin delivers in 2016. The new A350-900s coincide with new services to Tokyo and Los Angeles and the expansion of the Addis Abbaba airport terminal.

Air Arabia Sets Up Jordan AffiliateAir Arabia announced today that it will open a new international hub at Amman Queen Alia International Airport in Jordan. This follows Air Arabia’s acquisition of a 49 percent share of Petra Airlines. “The establishment of a new

located in the Daxing District, 46 km south of Tian’anmen Square and is planned be begin operations in 2018.

Jetstar Continues Expanding Operation in Australia and New ZealandJetstar will be adding three new flights from Cairns and Melbourne beginning in March of 2015. Specifically Jetstar is adding a Cairns–Bali route, Melbourne–Wellington route and a Gold Coast–Perth route. This will add 4,500 to their Asia Pacific network. “We’re always looking to open up new travel opportunities for our customers and I’m delighted that we’re the first low fares carrier to offer direct flights from Cairns to Bali,” said Mr. Hall, Jetstar CEO.

Garuda Indonesia Reduces International NetworkAs part of its restructuring plan, Garuda Indonesia will be eliminating or reducing its Australian and Japanese routes, effective February 1st. They will be suspending their Bali – Brisbane route, and reducing frequency on their Jakarta and Bali to Tokyo Haneda Airport route.

New Indian Airline Vistara Begins ServiceBeginning on January 9th, Vistara began flight operations with initial flights between Delhi-Mumbai, Delhi-Ahmedabad and Ahmedabad-

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Mumbai. These three routes provide 68 flights per week. Two other routes to Goa and Hyderabad will be added in March, expanding their weekly flight roster to 168.

Indonesia AirAsia Admits ‘Administrative Negligence’ On Route-Authority RequestAirAsia Indonesia CEO Sunu Widyatmoko admitted they had only verbally informed the Transportation Ministry of the change to Sunday flights, from Saturday. “I admitted that administrative negligence occurred when requesting the change in flight schedule, as the verbal information failed to reach the ministry,” Sunu was quoted. On January 2nd, Indonesian Transport Ministry suspended the airline’s Surabaya - Singapore route for violating their scheduled hours following the crash of Flight 8501.

CANADA

Ultra Low Cost Carrier Jetlines to Start Operations in Mid-2015Canadian Jetlines have signed a purchasing agreement with Boeing to acquire 21 Boeing 737 MAX aircraft. The agreement details five firm orders, with purchase rights to an additional 16 aircraft and an option to convert eight to 737-8 MAX. “This Agreement with Boeing is a major milestone for Jetlines,” said Jim Scott, CEO of Jetlines. “We are thrilled to be partnering with Boeing. The Agreement

provides Jetlines access to leading edge aircraft technology in the future.”

Air Canada Considers Leaving Toronto City AirportAir Canada is assessing the viability of operation at the Billy Bishop Toronto City Airport, located 25 km from Toronto Pearson International Airport in downtown Toronto. As part of their cost saving initiatives, there is concern over the terminal’s rates and terms even as load factors have increased, year over year. In response, Porter CEO Robert Deluce would attempt to acquire any slots that were vacated. Porter currently owns that majority of slots at the terminal.

Jazz Reaches a Tentative 11 Year Agreement with PilotsJazz Airlines has reached a tentative agreement with the Air Line Pilots Association for an 11 year contract, ending December 31st, 2025. Details of the agreement will be released after pending approval, with the vote occurring on February 1st, 2015. “I commend ALPA leadership and Jazz management teams for their hard work, and for capturing the unique opportunity Jazz has to maintain a significant presence in Air Canada’s regional network,” said Jolene Mahody, Chief Operating Officer of Jazz.

Bombardier Pauses Learjet 85 Program Due to weak economic projection, Bombardier has paused its Learjet 85 program. As a result of this pause, Bombardier will reduce its workforce by 1,000 employees from its sites in Querétaro, Mexico, and Wichita, United States. Consequently there will be a special pretax charge of approximately US$ 1.4 billion reported in the fourth quarter results of 2014.

YVR Noise Complaints Mainly From Three IndividualsAccording to data from the Vancouver International Airport, there was a 31% increase in noise complaints from 278 individuals surrounding the YVR Airport, according to the municipalities located under the flight path for the airport. However of these 1,695 complaints, 1,122 were sourced to only three people. The City of Richmond and the Vancouver Airport Authority are currently developing their five-year “YVR noise management plan.”

EUROPE

Heathrow Completes Sale of Aberdeen, Glasgow and Southampton AirportsAs of December 18th, Heathrow Airport Holdings has finalized the sale of the

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Aberdeen, Glasgow and Southampton airports. Ferrovial Aeropuertos and Macquarie European Infrastructure purchased these three airports for US $1.68 billion, with shares divided equally between them. “We wish the new owners and our airport colleagues every success and are confident the airports will continue to flourish” said John Holland-Kaye, Chief Executive of Heathrow.

Lufthansa Group’s Next Step in Alternative FuelsBeginning in March of 2015, Lufthansa aircraft at Oslo Airport will be fueled using a bio-kerosene mixture. The Statoil Aviation Company will be providing approximately 2.5 million gallons of biofuel to over 5,000 flights during the following year. As the bio-kerosene is derived from non-petroleum biomass, no carbon is added to the environment through its use.

Transaero’s Irish MRO Seeks Court ProtectionTransaero Engineering Ireland (TEI), a subsidiary of Transaero Airlines, has sought court protection in order to develop a restructuring plan and avoid bankruptcy. The Russian-based Transaero Airlines has been hit by the ruble currency crisis and declining price of oil, leading them to seek Russian government financial aid. As a result Transaero cannot meet their financial obligation to TEI. TEI employs 200 people at the Shannon Airport and was acquired by Transaero in 2012.

Air Europa Increases Boeing 787 OrderAir Europa has placed a firm order for 14 787-9 Dreamliners, valued at US $3.6 billion. This order raises the total number of 787-8 and 787-9 to 22 as Air Europa shifts to a Boeing-only long haul fleet. “The first 787-8 Dreamliners will start to arrive in 2016, this will allow us to grow both the number of flights and destinations we will operate to by around 50 percent” said Juan Jose Hidalgo, president of Globalia, the parent company of Air Europa.

Gatwick Reveals Plans for Efficient Two-Runway OperationGatwick Airport presented designs for an expansion, adding a second runway, with an eye toward efficiency. With self-service bag drops and electronic security gates, passengers could be boarding 30 minutes after arriving at the airport. The project could be completed as early as 2025. “The way we travel is changing fast and we have to change with it – only Gatwick can cater for all passengers, travelling to any destination, with any airline type, now and into the future” said Gatwick Airport CEO Stewart Wingate.

LATIN AMERICA

ANA to Improve Latin American Links Via New Houston ServiceANA, in a joint venture with United Airlines, has added a new route between Narita International Airport and Houston George Bush International Airport, allowing ANA increased access to Latin America. Through United, ANA will be able to connect with flights to Rio de Janeiro, Sao Paulo, Buenos Aires, amongst of South America destinations.

Aerolineas Argentinas Transported 9 Million PassengersOn December 10th Aerolíneas Argentinas surpassed 9 million passengers in 2014. This is a notable increase from 2013, during which the carrier only transported a total of 8.4 million passengers. President of Aerolíneas Argentinas, Dr. Mariano Recalde, credits the passenger increase to increases in seat capacity and flight frequency, with 26% more seats and 22% more flight operations.


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UNITED STATES

Top Carriers’ Third Quarter Profits Over US $3 BillionNet profits for U.S. scheduled passenger airlines were US $3.1 billion in the third quarter of 2014. This is down from US $3.6 billion in the second quarter, but virtually unchanged from the third quarter of 2013. Operational expenses for these passenger airlines in the third quarter of 2014 were US $39.8 billion, 28.7% of which was spent on fuel and 26.3% on labor costs.

Los Angeles International Airport Will Spend US $4 Billion On Ground Transport ProjectsThe Los Angeles Board of Airport Commissioners has approved a US $4 billion plan to improve LAX’s ground transport and

arrival/departure experience. The expansion will include the addition of a new automated train, connecting the airline terminal to new facilities, such as a rental car center, multiple locations for passenger pick-up and drop-off, and the Metro’s planned Crenshaw Line station.

FAA Grants Two Exemption for UAS UseThe Federal Aviation Administration (FAA) have expanded the use of unmanned aircraft systems (UAS), granting two more exemptions to the current ban. The agency gave new exemptions to Burnz Eye View, Inc. for aerial photography and inspections and to AeroCine, LLC for aerial cinematography. The requirements for these exemptions are that the operator has a private pilot license, the UAS remains in sight at all times and a secondary observer is required.

American Airlines Attempts Acquisition of Haneda SlotsAmerican Airlines has formally applied to the United States Department of Transportation (DOT) to operate daily flights between Los Angeles International Airport (LAX) and Tokyo’s Haneda Airport (HND). Based on the U.S.-Japan bilateral agreement, U.S carriers can only provide 4 daily round trip flights to HND. American Airlines is seeking to supplant Delta’s Haneda slot, due to current underutilization.


FeatureAviation Traffic

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

Airline Traffic(RPKs – millions)

Capacity (ASKs – millions)

Load Factor

N/A N/A N/A

8,410

i0.8%

10,280

h0.1%

81.8%

i0.7 pts

2,947

h1.8%

4,024

h4.0%

73.2%

i1.6 pts

9,875

h7.5%

2,494

h6.3%

83.5%

h1.1 pts

Source: Carrier traffic reports.Note: Qantas December statistics not released at time of publication.

AIRLINE DATA – EUROPEEuropean Airlines Release Traffic Figures for December 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

18,437

i0.5%

22,223

i0.6%

83.0%

h0.1 pts

1

14,615

i1.2%

18,854

i0.5%

77.5%

i0.5pts

215,878

h5.7%

19,923

h5.0%

79.7%

h0.5 pts


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Airline Traffic(RPMs – millions)

Capacity (ASMs – millions)

Load Factor

Canada

4,988

h8.3%

6,039

h8.5%

82.6%

i0.1 pts

1,850

h5.1%

2,286

h6.1%

80.9%

i0.8 pts

United States

3,414

h5.6%

4,182

h7.2%

81.6%

i1.3 pts

16,889

h0.1%

20,216

h2.3%

83.5%

i1.9 pts

18,069

i0.4%

22,464

h3.7%

80.4%

i3.4 pts

16,115

h2.1%

19,259

h4.0%

83.7%

i1.5pts

9,224

h2.8%

11,151

h2.9%

82.7%

i0.1pts

684

h6.2%

794

h3.9%

86.1%

h1.9 pts

AIRLINE DATA – NORTH AMERICANorth American Carriers Release Traffic Figures for December 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

1

2

3


FeatureFeature

Aviation Traffic

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

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%

October +8.0% +6.6% +6.3% +7.1% +1.7% +7.4% +5.2% +7.3% +6.8% +8.5% +4.8% +7.0%

November N/A +6.0% +5.7% +4.5% +1.7% +0.9% n/a +2.1% +5.5% +4.4% +4.8% -2.4%

United States International

Atlanta Chicago LosAngeles Dallas Denver New York

JFKLondon

HeathrowParisCDG Frankfurt Beijing Tokyo

NaritaMexico

City

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%

October +4.3% +4.7% +6.3% +2.1% +3.1% +6.9% +0.4% +4.5% +1.4% +2.9% -2.4% +10.3%

November +3.9% +5.1% +6.4% +1.0% -0.1% +6.5% +1.1% +2.8% +2.6% N/A -2.2% +8.8%

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


Fore

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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:

Charlottetown Airport Catchment StudyWe are delighted to announce that we have been contracted to provide a catchment study for Charlottetown Airport (YYG). We look forward to working with YYG on this important study.

Winnipeg International Airport Catchment StudyWe are excited to announce that we have been chosen once again by Winnipeg Airports Authority Inc. (WAA) to provide a catchment study for the Winnipeg International Airport

(YWG). YWG is the 8th busiest airport in Canada and a major gateway for Central Canada and we look forward to our continued relationship with the WAA.

CBAA Releases an InterVISTAS Study on the Economic Impact of Business Aviation in CanadaThis study completed for the Canadian Business Aviation Association (CBAA) is the first detailed analysis of the size and economic impact of business aviation in Canada. The study reveals an industry that is integral

to wealth generation and connectivity for communities and businesses across Canada. In addition to the economic impacts, the report includes case studies and examines business aviation operations by purpose and by aircraft. Click here to view the report.

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http://www.cbaa-acaa.ca/CBAA/News/Businessaviationworth3.1billiontoCanadaCBAAreport.aspx%3FWebsiteKey%3D8f74cd30-fdac-4d7f-84f6-9de55b13003e

FeatureInterVISTAS N

ews

Destination 2020 Summit The Destination 2020 Summit hosted by Visit Pensacola was held at the Museum of Commerce in Pensacola, Florida, on January 9, 2015. Paul Ouimet was a member of a panel discussion with Michael Gehrisch, President/CEO of Destination Association International and Will Seccombe, President/CEO of Visit Florida.

Transportation Research Bureau Webinar: Factors that Influence Air Service DevelopmentThe Transportation Research Bureau (TRB) will conduct a webinar on February 24, 2015, from 2:00pm to 3:30pm ET that will feature research conducted by TRB’s Airport Cooperative Research Program (ACRP) on airline service decisions. Factors that affect airline service decisions and passenger choice in regions with multiple airports will be discussed. Barney Parrella and Steve Martin will be presenting the webinar and David Ballard, of Gellman Research Associates Inc., will moderate.

ACI Airport Economics & Finance Conference 2015 On February 25 to 27, 2015, the 7th annual ACI Airport Economics & Finance Conference will be held in London, United Kingdom. Johan Schölvinck will present Supercharging Non-Aeronautical Revenue Streams – how are airports changing the business and reliance traditional revenue generation?

2015 New Jersey Conference on TourismOn March 12 and 13, 2015, the New Jersey Travel Industry Association will hold the 2015 New Jersey Conference on Tourism at the Golden Nugget in Atlantic City, New Jersey. Paul Ouimet will present Destination NEXT.

ACI-NA Business of Airports Conference 2015On April 20 to 22, 2015, the first annual ACI-NA 2015 Business of Airports Conference will be held in Phoenix, Arizona. Barney Parrella and Kenneth Currie will deliver a presentation on Activity Forecasting for Airport Business Planning.

ACI-NA Canadian ConferenceMichael Tretheway will be a speaker at the ACI-NA Canadian Conference on March 26th. He will speak on the topic of “a connected world”. The conference is being held in Vancouver.


Staf

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InterVISTAS welcomes the following new team members:

Kami Grovue, Senior HR Generalist, Vancouver OfficeKami has a background in Human Resources from both the private and public (health care) sectors. Her most recent assignment was with an environmental contracting company where she was a key member in building an HR department from scratch, improving employee engagement and performance across multiple regions and lines of business. Kami has a degree from Capilano University, an HR Management Certificate from Simon Fraser University and has a CHRP designation. Welcome, Kami!

Ian Winton, Manager, Airline Strategy, Vancouver Office Ian brings over 10 years of experience in aviation, including 7 years at WestJet. He has been closely involved in several facets of the airline business, including airport operations, network planning, schedule planning, and fleet optimization. Welcome to the team, Ian!

Paul Tambeau, Director, Tourism and Economic Development, Vancouver OfficePaul has eight and a half years of management consulting experience focused on strategy and program evaluation. He brings an Honours Bachelor of Arts degree from Wilfrid Laurier University and an MBA from the University of Edinburgh. He has his private pilot license and enjoys flying throughout BC and Washington State and we look forward to having Paul on board!

InterVISTAS congratulates the following team members on their promotions:

Wei Jin, Consultant, Vancouver Office

Diego Leon Chi, Senior Consultant, Vancouver Office


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

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intervistas aviation intelligence report - february 2015

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