9 AIR TRANSPORTATION
PRICE, PRODUCTIVITY
AND PERFORMANCE
AIR TRANSPORT INDUSTRY
Total passenger revenues in 2003 declined by 12 per cent.
Both lower passenger prices (-5.8 per cent) and a drop in
passenger demand (-6.6 per cent) contributed to the
decline in revenues. These declines were due, in part, to
the decrease in international passenger traffic, reflecting
the impact of the SARS outbreak and the war in Iraq.
However, all three market segments (domestic,
transborder and international) experienced revenue
declines. Prices declined most in the domestic market
due to increased low-cost competition. Between 1998 and
2003, passenger prices increased by 1.3 per cent
per year on average, while output decreased on average
by 2.2 per cent annually. With respect to air cargo, based
on preliminary data, prices increased by 9.5 per cent
during 2003, while output declined by 16 per cent.
Productivity of the air transport industry increased by
1.3 per cent in 2003. This improvement was due to
increases in both labour and fuel productivity, as the
industry continued to move towards more fuel-efficient
aircraft. Capital productivity declined noticeably in 2003.
It is important to note, however, that such a partial
measure of productivity is particularly volatile and difficult
to measure in the air transport industry. While total unit
costs recorded an overall marginal decline of 0.3 per cent
in 2003, significant variations were experienced in the
various cost components. Unit fuel costs were up
15.5 per cent as oil prices increased during the year; while
unit labour costs decreased by 8.1 per cent, a situation
largely explained by the labour concessions Air Canada
obtained during its restructuring.
The air transport industry's revenues declined in 2003.
One of the key drivers of this decline was the drop of
approximately $1.5 billion in 2003 in Air Canada's
revenues as it continued its restructuring.
Major Events in 2004
Infrastructure
Industry Structure
Price, Productivity and Performance
Freight Transportation
Passenger Transportation
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