9 AIR TRANSPORTATION

PRICE, PRODUCTIVITY AND FINANCIAL PERFORMANCE

Total passenger revenues in 2004 increased by 9.3 per cent. The entire increase was attributed to an increase in demand (9.4 per cent), as prices were virtually unchanged in 2004. These increases in output exceeded declines in 2003 (when SARS and the war in Iraq depressed demand); however, total revenues were still below 2002 levels. While 2004 prices did not increase overall, prices in the transborder segment did increase. Between 1999 and 2004, passengers prices have been flat overall, while demand has decreased slightly (-0.9 per cent). Based on preliminary data, air cargo prices fell by 2.7 per cent during 2004, while output increased by 16 per cent.

Productivity of the air transport industry overall increased by 4.8 per cent in 2004. This improvement was due to increases in both labour and fuel productivity, partially as a result of the trend towards more fuel-efficient aircraft. Productivity of capital declined by 2.8 per cent. This particular measure of productivity is difficult to measure with accuracy in the air transport industry due in part to the treatment of owned and leased assets. Unit costs declined by 6 per cent overall. This was due to a drop in labour unit costs of 17.5 per cent (reflecting labour concessions obtained by Air Canada during the completion of its restructuring) as well as a decline in capital costs of 7.2 per cent (which may also be related to Air Canada's restructuring and more favourable leasing arrangements). However, unit fuel costs continued to climb in 2004, up 15.5 per cent from 2003. Following a drop in 2003, total air transport revenues increased by over $1 billion, but remained below the peak levels of 2000.

Major Events in 2005

Infrastructure

Industry Structure

Price, Productivity, Financial Performance

Freight Transportation

Passenger Transportation