9 AIR TRANSPORTATION

INDUSTRY STRUCTURE

AIRLINES

AIR CANADA FAMILY

The Air Canada family of companies remained Canada's largest airline in 2004. It earned revenues of $7.6 billion between October 1, 2003, and September 30, 2004. Air Canada provided service to 21 points in Canada, 30 in the United States and 54 international destinations. It operates a fleet of 199 aircraft and employs an average of 29,500 full-time employees. Air Canada is a founding member of Star Alliance, a consortium of 15 airlines that serve 772 destinations in 133 countries. Jazz operates service on less busy domestic and transborder routes, covering 69 destinations, particularly to small communities. Jazz employs an average of 3,500 employees and operates a fleet of 90 aircraft. Air Canada placed new orders for 90 regional jets from Bombardier and Embraer. The new aircraft are to be delivered over a four-year period beginning in the fall of 2004. Air Canada Vacations offers tour packages to popular destinations. Jetz, Air Canada's jet charter service, offers premium charter service to sports teams and businesses. In addition, three independent local service operators (Air Georgian, Air Labrador and Central Mountain Air) offer regional services on behalf of Air Canada.

LOW-COST CARRIERS

Canadians now receive domestic and transborder air services from a number of low-cost, no-frills carriers. These carriers have been the source of most traffic growth, a trend that is echoed in Canada and around the world. Calgary-based WestJet is now Canada's second-largest airline, having earned just over $1 billion in revenues between October 1, 2003, and September 30, 2004. It serves 31 cities with 54 aircraft and 4,500 employees. WestJet began scheduled transborder services in the fall of 2004, notably to California and Florida. WestJet also made several announcements regarding its fleet expansion. The company plans to add fifteen new aircraft to its fleet in 2005 and another six new aircraft by the end of 2006. Montreal-based Jetsgo continued expansion of its fleet, having purchased eleven used 11 Fokker 100 aircraft to supplement its existing fleet of 14 MD-83s. Five additional aircraft are to be put in service by mid-2005. With 1,200 employees, Jetsgo serves 18 Canadian cities and 10 U.S. destinations. CanJet, based in Halifax, operates nine aircraft to 14 destinations in Eastern North America. A further three new aircraft are to be added to the fleet in 2005. In addition to their scheduled services, all three low-cost airlines offer charter services.

LEISURE CARRIERS

A number of airlines focus their business on leisure destinations, carrying mostly tourists to warm southern destinations or Europe, depending on the season. Traditionally charter airlines, they offer vacation packages, generally to Europe in the summer and to the south in the winter. However, most leisure airlines now offer scheduled flights in those markets where they have been designated to do so. The major players in this segment of the industry are Air Transat and Skyservice Airlines. Montreal-based Air Transat flies 14 aircraft to 90 destinations. Air Transat also offers scheduled services to France and the United Kingdom. Skyservice Airlines, based in Mississauga, has a fleet of 24 aircraft and has 1,200 employees. Two other leisure airlines are based in Canada. Zoom Airlines provides scheduled services from several cities in Canada to the United Kingdom and France, as well as charter flights to the Caribbean, with two aircraft. Vancouver-based Harmony Airways offers scheduled flights from three Canadian cities to four U.S. destinations, as well as charter services, with three aircraft.

FOREIGN AIRLINES

Twenty-three U.S. airlines fly to 18 Canadian cities, while 37 foreign airlines provide service between Canada (primarily from Montreal, Toronto and Vancouver) and 51 international destinations in 31 countries. For a list of foreign airlines serving Canada on a scheduled basis, see Table A9-5 in the Addendum.

NORTHERN AIRLINES

A number of airlines provide year-round scheduled and charter service across the three territories with combination passenger and cargo aircraft. The major participants are Air North, Calm Air, Canadian North (incorporated as Air Norterra) and First Air. Services by these airlines are complemented by other airlines such as Aklak Air, Kenn Borek Air and North-Wright Airways. They offer flights to the most remote communities in the Arctic. Most airlines in the region also provide Medevac services and other transport under contract to the federal and territorial governments.

LOCAL SERVICE AIRLINES

Smaller local service airlines provide service across Canada, particularly to remote communities, in niche markets (e.g., Bearskin Airlines' service between points in Ontario, and floatplane and helicopter services in British Columbia). They also operate alternative services in some regional markets (e.g., Hawkair in British Columbia and Provincial Airlines in eastern Canada). Addendum Table A9-6 lists most of these airlines and their major areas of operation. Like the airlines serving the Arctic, many of the local service airlines provide emergency transport under contract to the federal and provincial governments.

ALL-CARGO AIRLINES

A number of all-cargo airlines provide jet service on behalf of Canada Post, courier companies, freight forwarders, consolidators and shippers. They include AllCanada Express and Cargojet Canada, both based in Mississauga, Kelowna Flightcraft of British Columbia, and Morningstar Air Express of Edmonton.

BUSINESS AND COMMERCIAL AVIATION

The actual number of airlines operating in Canada is much larger than the previous section implies. At the end of 2004, the Canadian Transportation Agency reported that more than 2,360 licences were active. Table A9-7 in the Addendum shows the number of licences held as of December 31, 2004. The number of personnel licences issued by Transport Canada confirms the importance of the commercial sector. The number of commercial licences held in 2004 is roughly equal to the number of air transport licences. Addendum Table A9-8 summarizes the number of personnel licences issued, while Table A9-9 gives a provincial breakdown of the licences.

Business aviation continued to grow in 2004 due to fractional ownership, which allows individuals or businesses that would not otherwise be permitted to own aircraft on their own to share aircraft use by purchasing units of flight time. This type of aircraft ownership is regulated in Canada as a commercial air service.

Specialty air services use aircraft but do not involve the movement of passengers or cargo between two points. They include such diverse services as flight training, parachute jumping, glider towing, aerial forest fire management and firefighting, aerial inspection and construction, aerial photography and surveying, advertising, weather sounding, crop spraying and helilogging, as well as hovercraft services. While some large companies (e.g., Canadian Helicopters) are represented in this sector, many of the companies are very small operators serving local markets.

RECREATIONAL AVIATION

Recreational flying in its various forms represented the bulk of general aviation activity, accounting for about two thirds of Canada's pilots and three quarters of all aircraft registered in Canada in 2004. It is also the largest segment of Canadian civil aviation activity. While most recreational aircraft are standard planes, this segment also includes all other types of recreational aircraft such as ultra-lights, gliders and balloons, among others. Table A9-10 in the Addendum gives further detail on the types of aircraft operated.

Major Events in 2004

Infrastructure

Industry Structure

Price, Productivity and Performance

Freight Transportation

Passenger Transportation