9 AIR TRANSPORTATION

PRICE, PRODUCTIVITY AND FINANCIAL PERFORMANCE

Total passenger revenues in 2005 increased by 11 per cent. Approximately half this increase was due to an increase in price levels, with the rest attributed to an increase in volume of activity. This second straight year in strong activity growth helped the industry to rebound from the demand-depressing effects of 9/11, SARS and the Iraq War and to exceed passenger revenue levels of 2001. However, revenues have yet to meet those of 2000. Overall, over the 2000 – 2005 period, both prices and activity levels were down slightly (-0.4 per cent and -0.7 per cent, respectively).

A large decline in cargo prices (-15.0 per cent) was to some extent offset by an increase in activity level (9.4 per cent). Part of the volatility of air cargo operations indicators comes from cargo data limitations.

In 2005, total factor productivity of the air transport industry overall increased by 7.9 per cent. There was a very large increase in labour productivity resulting from the spin-off of Air Canada’s maintenance division and the resulting decline in direct employees. A significant portion of this labour productivity gain was offset by a decline in productivity of other inputs such as the increase in maintenance service costs. Unit costs declined by six per cent in 2005. Declines in the cost of labour and capital contributed to this decrease, as well as increasing load factors. However, unit fuel costs continued to climb in 2005, offsetting a portion of the decline in those categories. Addendum tables A2-61 to A2-64 provide more details on the air transport industry.

Major Events in 2006

Infrastructure

Industry Structure

Price, Productivity and Financial Performance

Freight Transportation

Passenger Transportation