CAIR Issue No. 1 - January 2003

Page 7 Regina International Market Intelligence Report

INDUSTRYREVIEW

Page 1 January 2003

Crude Oil Futures PricesAs of January 10, 2003

$15$17$19$21$23$25$27$29$31$33

Feb-2

003

Apr-2

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Jun-20

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Aug-2

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Oct-200

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Month of Delivery

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But the market expects prices to fall.

Spot prices are high.

WHERE ARE FUEL PRICES GOING?Current crude oil prices are high for two reasons…

Crude oil prices have risen steadily in the past few months mainly due to two factors in the globalmarket.

Threat of War with IraqThe threat of war in the Middle East has been growing in recent weeks with the U.S. and Britainbuilding a military presence in the Middle East. This war threat in the world’s largest oil producingregion is creating uncertainty regarding short-term supplies, driving prices up.

General Strike in VenezuelaVenezuela is the world’s 3 rd largest oil producer. Currently, 13% of all crude oil imports to the U.S.are from Venezuela. A general strike began in Venezuela on December 2, 2002 with oil workersjoining in 2 days later. This is the fourth general strike for the country in the past year due to theongoing political conflict between President Hugo Chavez and the country’s business elite. The lackof oil production in Venezuela has constrained global oil supplies, impacting prices.

…But the outlook is for lower prices

OPEC ActionSpot oil prices closed January 10 at$31.68USD, a two-year high. OnJanuary 12, the Organization ofPetroleum Exporting Countries (OPEC)announced an increase in oil productionof 1.5 million barrels per day to 24.5million barrels. OPEC has done this inan attempt to stabilize and bring down oilprices.

Prices Expected to Decline Below $25 per Barrel by Year EndThe futures market shows the price of crude oil falling to below $25 per barrel by the end of the year.The market expects that the two current issues affecting the price of oil will not permanently shift theprice of oil to higher levels. On January 10, 2003, the futures price for a barrel of crude oil for deliveryin January 2004 is $24.78, 22% lower than the spot price per barrel.

Doris Mak

Senior Market Analyst

Page 2 January 2003

-15%

-10%

-5%

0%

5%

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20%

25%

J a n -02

Feb Mar A p r May Jun Jul Aug Sep Oct Nov Dec

Dom RPKDom ASK

December 2002 RPKs are 6.8% below December 2000 levels

Air Canada DomesticAir Canada Domestic

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Jan-02

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

RPKASK

WestJetWestJet

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Jan-02

Feb Mar A p r May Jun Jul Aug S e p Oct Nov D e c

Int'l RPK

Int'l ASK

December 2002 RPKs are 1.4% below December 2000 levels

Air Canada InternationalAir Canada International

AIRLINE PERFORMANCE

Traffic and Load Factors on Canada’s Major Air Carriers – December 2002

Passenger TrafficRevenue Passenger Kilometres

CapacityAvailable Seat Kilometres

Load FactorAir Carrier

% Changeover 2001

% Changeover 2000

% Changeover 2001

% Changeover 2000

% Changeover 2001

% Changeover 2000

Air Canada1 -0.6% -3.0% +2.5% -7.9% -2.1 pts(to 70.0%)

+3.5 pts

Domestic -8.9% -6.8% +0.6% -3.0% -7.1 pts(to 67.4%) -2.8 pts

International& Charter +3.5% -1.4% +3.4% -9.9% +0.1 pts

(to 71.1%) +6.1 pts

WestJet +50.9% +133.5% +57.5% 136.0% -3.2 pts(to 72.1%)

-0.8 pts

The following graphs highlight the year-over-year change in Air Canada’s mainline domestic andinternational passenger traffic and capacity.

Air Canada’s domestic traffic continues to weaken relative to a year ago. Because capacitygrew slightly during December, this resulted in a huge drop in its load factor, from 74.5% in2001 to 67.4% in 2002. Things were better on the transborder sector, with traffic up 6.2%.But with too much capacity deployed, load factors were 64.4%, even worse than on thedomestic sector.

WestJet continues to experience strongtraffic growth as it adds aircraft to its fleet.However, in 10 of the 12 months in 2002,growth in demand was several percentagepoints less than capacity growth, bringingits load factors down. This is consistentwith having exploited the most lucrativemarkets in the past. Adding new aircrafttoday will be increasingly challenging,especially as it faces more aggressive competition from Zip, Tango and Jazz.

1 Air Canada Mainline consists of all Air Canada with the exception of Jazz.

NEW CARRIERS:LOAD FACTORS

Jetsgo: 78.0%Zip: not reported

CanJet: not reported

US MAJORSLOAD FACTORS

US Airways: 72.4%Northwest Airlines: 76.9%Delta Airlines: 74.3%American Airlines: 63.0%United Airlines: 75.9%Southwest Airlines: 66.0%

JetBlue Airways: 84.8%

Page 3 January 2003

AIR CANADA’S TRAFFIC NUMBERS13 January 2003

With Air Canada’s introduction of Zip, Jazz, Tango and Jetz, it is often confusing as to which brandsand subsidiaries are included in Air Canada’s traffic statistics. To add to the confusion, Air Canada’straffic results are reported in two different publications. On a monthly basis, Air Canada reports its“mainline” traffic results, which include Air Canada’s trunk routes, aswell as Tango, Zip and Jetz. The mainline results do not include Jazz,which comprises roughly 5% of Air Canada’s total capacity in thirdquarter 2002.

In its quarterly financial results, Air Canada reports both its “mainline” and consolidated trafficstatistics. Air Canada’s “consolidated” results consist of the entire Air Canada family, including Jazz.

Air Canada Traffic Comparison - Third Quarter 2002

“Mainline” Consolidated

Timing Monthly, Quarterly Quarterly

Source Traffic press releases Financial reports

Inclusion Trunk plus Tango, Zip, Jetz

Excludes JazzAll Air Canada

In its third quarter 2002 financial report, Air Canada reports a 3.8% increasein consolidated passenger traffic. This compares to a 4.9% increase in AirCanada’s mainline traffic during the third quarter of 2002. The discrepancycan be attributed to a substantial (and hidden) 22.5% decrease in passengertraffic on Air Canada’s subsidiary, Jazz. Jazz’ substantial traffic decline is inline with Air Canada’s service reductions to small communities that are no longer profitable.

Air Canada Traffic Comparison - Third Quarter 2002Mainline Air CanadaMonthly, Quarterly

Consolidated Air CanadaQuarterly

Jul-02 Aug-02 Sep-02 Q3-02 Q3-02

-0.8% +0.5% +19.0% +4.9% +3.8%

Note: Passenger traffic is measured in Revenue Passenger Kilometres (RPKs).

Air Canada representatives claim that Air Canada is investigating a more clear and concise means ofreporting its traffic results.

Jane Ha

Senior Marketing Analyst

Page 4 January 2003

AIRPORT TRAFFIC

Summary of Total Passenger Traffic Performance at Selected Airports – 2002*

2002 Regina Saskatoon Winnipeg Edmonton Calgary VancouverMontreal-

Dorval Halifax Victoria St. John’s Ottawa Kelowna

January -8.4% -4.0% -20.1% -11.8% -4.3% -10.3% -15.2% -5.6% -12.1% -4.4% -11.4% -3.0%

February -6.2% -8.5% -17.2% -12.0% +1.1% -9.2% -12.4% -16.4% -6.8% -9.1% -10.1% -0.1%

March -7.8% -7.6% -12.4% -11.4% -2.0% -7.0% -13.1% -17.2% -6.5% +16.5% -12.9% -3.0%

1st Quarter -7.5% -6.7% -16.5% -11.7% -1.8% -8.8% -13.6% -13.6% -8.4% -10.3% -11.5% -2.1%

April -12.6% -13.4% -9.3% -8.1% -5.2% -9.2% -13.5% -12.3% -6.4% +7.9% -13.1% -5.7%

May -7.2% -3.0% -5.7% -4.9% -2.3% -9.3% -9.5% -4.7% -5.1% +9.7% -11.4% -3.8%

June -13.2% -9.7% -6.0% -7.0% -4.0% -7.4% -9.8% -1.2% -7.4% -1.8% -12.3% -8.8%

2nd Quarter -11.1% -8.7% -6.9% -6.7% -3.8% -8.6% -10.9% -6.0% -6.3% -11.9% -12.3% -6.1%

July -13.0% -9.5% -5.1% -9.4% -3.6% -7.2% -8.3% +4.4% -13.1% +22.1% -6.6% -6.3%

August -10.5% -13.6% -2.8% -7.5% -2.3% -7.7% -7.9% +7.5% -8.8% +3.9% -8.8% -1.7%

September +10.5% +12.6% +16.4% +7.6% +20.1% +12.6% +22.4% +26.1% -13.2% -17.4% +23.7% +11.8%

3rd Quarter -5.8% -5.4% +1.2% -4.4% +2.9% -2.5% -0.2% +11.2% -4.8% -0.8% +23.7% +0.2%

October +4.4% +1.7% +5.9% -0.1% +14.3% +12.5% n/a +7.9% +0.1% -1.9% +6.4% +5.7%

November +1.2% +0.2% +5.7% +9.4% +0.6% n/a n/a +5.7% +0.1% -16.7% +3.0% -1.4%

December +3.2% +1.5% +15.2% n/a n/a n/a n/a +8.1% n/a n/a n/a +4.3%

4th Quarter +3.0% +1.1% n/a n/a n/a n/a n/a +7.3% n/a n/a n/a +3.0%

* Toronto does not report monthly or quarterly traffic levels.

Page 5 January 2003

ECONOMIC OUTLOOK10 January 2003

Canada: higher interest rates? Canada's economy remains the strongest performer of the G7economies and indeed in the industrialized world. Inflation is catching up with us though. The Bankof Canada’s current measure of core inflation accelerated to 3.1% – a rate just outside of the targetrange of one to three percent. The traditional response to an increase in inflation is to increase theinterest rate. While the Bank of Canada held the overnight lending rate steady at 2.75% inDecember, there is a good chance we will see a rate hike in the next announcement (set to take placeon January 21st).

Some analysts now claim that Canadian GDP growth will weaken slightly from its current 3.5% paceto 3% growth in 2003. We will have to wait and see what the forecasters say after the fourth quarter2002 GDP growth announcement is made on February 28th.

The U.S.: respectable growth. Popular indicators of the current health and future prospects in theU.S. economy in December were encouraging. Automobile sales were unexpectedly strong,consumer confidence was up and the manufacturing economy seemed to rally. The growth forecastfor the U.S. economy is for a respectable 3% rate of growth for 2003.

Further improvement in the University of Michigan Consumer Sentiment Index(www.sca.isr.umich.edu) suggests that in spite of impending war with Iraq, consumers are optimisticabout the state of the economy. Also in December, the Institute for Supply Management’s USProduction Index(www.ism.ws) posted a 5.5percentage point increaseover November. Thisindicates that themanufacturing economyfinally showed signs of anincrease in activity after thedecline which began in thesummer. The Institute forSupply Managementconcluded that themanufacturing economyhad turned the corner, fromcontraction into expansion,in December 2002.

It looks like the U.S. willavoid a double-diprecession.

Allison PadovaManager

Economic Services

Sources: University of Michigan and The Institute of Supply Management

75

80

85

90

95

100

'Sept-02 Oct Nov Dec

Jan-02 Feb Mar Apl May Jun Jul Aug Sep Oct Nov

Dec-02

35

40

45

50

55

60

Consumer Confidence Production Index

Page 6 January 2003

NEWS ARTICLES

AIR CANADA FLIGHT ATTENDANTSREACH NEW DEALAfter a year of mediated negotiations, AirCanada’s 8,500 flight attendants have accepteda contract that will give them better pay,improved pensionsand increased jobsecurity. This is thefirst collective agreement to cover all AirCanada flight attendants since the merger withCanadian Airlines two years ago.

AIR CANADA GAINS $300M FROMLOWER INTEREST RATESAir Canada has completed two financialtransactions that will result in a $300 milliongain. The first replaces perpetual debt of 20billion yen (C$265 million) with debt that carriesa 25-year term at a lower interest rate saving AirCanada C$150 million. The second involvesleases on 16 planes which will allow the carrierto realize C$150 million in additional cash.

AIR CANADA SEAT SALEAir Canada and Air Canada Jazz haveannounced a system-wide seat sale with farereductions of up to 30% for the New Year. Theseat sale is in effect January 3-20, 2003 fortravel as late as April 30, 2003.

AIR CANADA ISSUES INTERNET FARESAir Canada will offer reduced regular Internetfares of up to 70% under an agreement reachedwith the Quebec government for thecontinuation of service by Jazz throughoutQuebec.

JETSGO BOXING WEEK SALEJetsgo announced a 2-for-1 Boxing Weekpromotion where the second person flies foronly the cost of taxesand surcharges. Thesale was in effectDecember 24-31, 2002 for travel betweenJanuary 8 and February 28, 2003. Jetsgoofficials were adamant that this was merely to

stimulate traffic and did not signal liquidityproblems.

JETSGO BOOSTS CAPACITYEffective January 13, Jetsgo will offer 20weekly flights, up from 14 on its Toronto-Winnipeg route.

ZIP EXPANDS SERVICEEffective February 2, 2003, Zip will expandservice to Ottawa, Montreal, Victoria andAbbotsford. Thecarrier will addthree aircraft to itscurrent fleet of seven to operate new nonstopflights between:• Winnipeg-Montreal,• Winnipeg-Ottawa,• Calgary-Abbotsford, and• Calgary-Victoria.

AIRLINES IMPOSE FUEL SURCHARGEOn January 10, 2003, WestJet Airlines andZip Air imposed temporary fuel surcharges onairfares due to the significant increases in oilprices. The surcharge will be based on thedistance travelled by a passenger.• Trips under 300 miles - $5• Trips 301 to 1000 miles - $7• Trips over 1000 miles - $10On the same day Air Canada introduced a fuelsurcharge of $14.51 on transborder flights.

AIR TRANSAT ATTENDANTS RATIFYCONTRACTOn December 29,2002, Air Transatflight attendants ratified a new collectiveagreement. The contract takes effectimmediately and expires on October 31, 2005.

CANJET FLEET EXPANDS 25%CanJet acquired itsfifth Boeing 737-200aircraft, configured for120 seats, and equipped with the same enginesas the other four CanJet planes.

AIR CANADA UPDATE

OTHER CANADIAN AIRLINES

Page 7 January 2003

NEWS ARTICLES

UNITED FARESUnited Airlines announcedthat it will reduce its leisurefares on nearly all of its 1,800daily flights to both domesticand international destinations. Tickets will beavailable for US domestic flights beginningJanuary 1 and for international services fromJanuary 13. Additionally, discounts of up to 40%are expected on business fares for one-waytravel in markets to and from Chicago andDenver.

UNITED CUTS MANAGEMENT JOBSAND OFFICESEffective January 7, United Airlines will closeits stations in Caracas, Santiago andDuesseldorf. In addition it will end its mainlineflights and convert to United Express service atfive stations:• Eugene and Medford Oregon;• Cedar Rapids, Iowa; and• White Plains and Syracuse, New York.Beginning January 28 United will:• furlough nearly 1,500 management and

salaried employees• close 32 city ticket offices affecting an

additional 188 employees

US AIRWAYS WINS $120M EMERGENCYFINANCINGUS Airways has completed a deal with GECapital Electric Corp. that will give the carrieranother infusion of emergency financing. GEwill provide US Airwayswith a US$120 million(C$185 million) loan andwill receive a stake in theairline after it emerges from bankruptcy.

US AIRWAYS DROPS FUELSURCHARGEOn January 3, 2003 US Airways eliminated aUS$15 (C$23) one-way fuel surcharge.

DELTA UNVEILS STANDBY CHARGEEffective March 1, 2003, Delta Airlines willoffer customers travelling on most restrictedfares the opportunity to confirm travel fordifferent flights, including connecting flights, onthe same day of their originally ticketed flight.Customers will be charged US$25 (C$39).

NORTHWEST RETIRES 727 FLEETNorthwest Airlines retired its last Boeing 727aircraft from its fleet on January 7, 2003. TheAirbus 319/320 family will replace the Boeing727.

RYANAIR ANGRY OVER AIRPORTCHARGESRyanair has launchedattacks on Manchesterand Dublin Airportsover fees and charges. The carrier hasannounced fare increases and servicereductions to Manchester Airport as a result of aproposed increase in airport charges. In aseparate development, the carrier has alsoattacked Irish airports operator Aer Rianta overplans to impose a range of charges for airportusers at Dublin Airport.

AÉROPORTS DE MONTRÉAL: AIF ONTICKETAéroports de Montréal has announced that itwill now includethe AirportImprovement Fee(AIF) in the cost ofthe airline ticket. The new collection methodstarts January 15.

GTAA PURCHASES AIR CANADACARGO BUILDINGThe Greater Toronto Airports Authority(GTAA) completed a sale-leaseback agreementwith Air Canada for the purchase of AirCanada’s cargo building, ground serviceequipment building and the automated cargohandling equipment within the cargo building.The GTAA paid C$100 million for the buildings.

AIRLINESUS & INTERNATIONAL

AIRPORTS

Page 8 January 2003

NEWS ARTICLESYVR DEFERS AIRLINE FEE INCREASESVancouver International Airport will delay the7% increase in the fees it charges to airlinesuntil July 1.

US CARGO GROWSThe latest US Air TransportAssociation (ATA) cargofigures for November showa 8.9% increase in revenueton miles for total domesticcargo from the year before. Total internationalcargo increased by 19.6%. Overall cargoincreased 14.2%.

FEDEX SECOND QUARTER INCOMEUNCHANGEDFedEx Corp. reported a net income of US$245million for its fiscal second quarter endedNovember 30, consistent with last year.Revenues for the quarter reached US$5.7billion.DHL INCREASES RATESEffective February 2, 2003, DHL WorldwideExpress will increase most of its US domesticand US outbound service rates by 3.5%.

CARGO COMPLEX TO OPEN AT BUSHAIRPORT A US$125 million cargo facility is slated to openat Bush Intercontinental Airport. The facilityoffers ramp space for 20 wide-body aircraft andthree warehouses that include more than550,000 sq. ft.

LUFTHANSA 2002 CARGO DOWNLufthansa Cargo December traffic dropped1.6% to 128,000 with load factor falling 2.7percentage points to 65.2%. Annual trafficdeclined 1.9% in 2002. Load factor increased to66.6% from 62.8%.

ATSC MAY BE REDUCEDFinance Minister John Manley indicated hisdepartment is reviewing the Air Traveller'sSecurity Charge and may reduce the fee

somewhat in the next budget. He indicated thata switch to accrual accounting, advocated byairlines and the tourism industry, could result insomewhat lower charges. However, he saidthat he still expects air travellers to pay the fullcosts of aviation security.

NAV CANADA INCREASE SERVICECHARGESOn January 1, 2003 NAV Canada’s chargesincreased 3%. Other charges will increase bythe same percentage on March 1.

CATSA Takes Over Pre-BoardingSecurityOn January 1, 2003, the Canadian AirTransport Security Authority (CATSA) tookover pre-boarding security at all Canadianairports.

ATA APPOINTS NEW PRESIDENT & CEOJames May has been named the new Presidentand CEO of the U.S. Air TransportAssociation. May has extensive experience inregulated industry trade associations andcorporations, but no aviation experience. Hewas previously the executive VP for the NationalAssociation of Broadcasters.

EDMONTON AIRPORTS APPOINTS NEWCFORalph Peterson, CA has been appointed thenew Vice President Finance and Chief FinancialOfficer of Edmonton Airports. Peterson was aformer partner of PricewaterhouseCoopers andhas experience in internal processes,operations, finance, sales and marketing, andcustomer service and support.

GOVERNMENT/REGULATORY

CARGO

PEOPLE IN THE NEWS

CRUDE OIL PRICES RISING

Crude Oil Price:• Spot – US$33.26

Increasing(up 26% from November)

• Future – US$27.48for delivery in January 2004

FUEL PRICESJanuary 3, 2003

Page 9 January 2003

WHAT’S HAPPENING9 January 2003

A frank lesson on WestJet’s expectations for route performance.

Last month, the Competition Tribunal resumed hearings on the predation case brought by theCommissioner of Competition against Air Canada. The hearings, originally scheduled for last year,were suspended on Sep. 11, 2001.

The first witness called by the Commissioner was CliveBeddoe, CEO of WestJet. The public parts of histestimony reveal some interesting aspects of WestJet’sapproach to business.

Most important is that WestJet expects a 20% profit on virtually every one of its flights. It is notcontent with break-even operations. This fact should be kept in mind by airports soliciting WestJet forservice. Presentations need to deal not merely with growth in the local economy, but must alsopresent evidence on the yield WestJet would receive in the market, including information on the sizeof market, WJ potential market share, average fare, etc.

Another important point he made was that WJ expects thisreturn on fully allocated costs. It does not tolerate flightswhich merely cover variable flights costs. In his opinion,businesses which get themselves into trouble do so becausethey are fooling themselves as to what their costs really are.Justifying business decisions based on contribution to EBITDA is a recipe for disaster. ‘You are eitherprofitable at what you do or you are not.’ He stated that in every organisation he has been in, he hasfought against using terminology such as contribution margin.

What WJ wants is hard research that your market will earn it a profit on its total cost. Don’t talk aboutcontribution and building the market, talk about profit and success out of the starting gate.Mr. Beddoe also indicated that WestJet expects every flight and route to stand on its own. With rareexceptions, they will not maintain a flight which makes a loss, even if some passengers connect ontoother WJ flights. He gave a specific example of the Winnipeg to Thompson route. Some of thepassengers on that route segment originated in places such as Vancouver. When WJ droppedservice on Winnipeg-Thompson, they did not lose the Vancouver originating passengers. These folkscontinued to use WestJet as far as Winnipeg, and then simply connected to Thompson on anothercarrier. WestJet was unwilling to attribute any of the Vancouver-Winnipeg revenue from thesepassengers to maintaining the Winnipeg-Thompson flight. Winnipeg-Thompson, like every routesegment and flight must stand on its own.

There are some hard and painful lessons from Mr. Beddoe’s statements (made under oath) to theCompetition Tribunal. WJ has a drawn line in the sand which a potential service must cross. Theyare not willing to move the line. They want hard evidence on the potential profit performance of theroute, and that evidence must go beyond traffic levels to comment on the yield WestJet will get fromthe route or flight. They play hard ball, so better bring an experienced major league batter when yougo visit them.

Michael TrethewayVice President & Chief

Economist

Page 10 January 2003

Solomon WongDirector

Security & Planning

New Information TransmissionMandated for January 1, 2003

As of January 1, 2003,all airlines, cargo flights,cruise ships and othervessels, except forferries operating to theU.S., are required topre-transmit informationabout crew and

passengers to U.S. authorities. Past practiceexempted U.S. and Canadian citizens. Allcarriers will be required to submit thisinformation prior to departure/arrival into theU.S.

In addition to the standard Advanced PassengerInformation fields (APIS) for name, date of birth,citizenship, gender and document number, thenew U.S. INS regulations will also collect theaddress of residence/visit in the United Statesupon arrival. The May 2002 legislation thatprompted this change also allows for PassengerName Records (PNR) to be collected in thefuture. PNR's include over 20 fields with detailsuch as method of payment and routinginformation.

MY COMMENTARY:The U.S. INS and Customs have longcoordinated collection of this data at Pre-Clearance facilities in Canada. As well, theCanada Customs and Revenue Agency hasbegun the collection and exchange of this data.As the volume of this data increases, its sharingand coordination between other agencies (e.g.TSA, CATSA) will be important into to allow forquick identification and interdiction ofpassengers that appear on intelligence reports.An integrated information system for bothCanada and U.S. is needed to provide for thismultiagency and data sharing platform, asoutlined in the U.S.-Canada 30-point SmartBorder Action Plan.

GAO and G8 Issue Reports onBiometric TechnologiesThe U.S. General Accounting Office (GAO)reported its review of biometric technologies toenhance border security in November. Thefindings identified four biometric technologies asbeing suitable for border security:

§ facial recognition;§ fingerprint recognition;§ hand geometry; and§ iris recognition.

Other biometric technologies were tested butdeemed unsuitable, including retina, signatureand speaker recognition. The reportrecommended that financial and non-financialcosts be considered before any full scalebiometric technology is implemented. Thereport also warned that biometric technology isnot a universal remedy, rather, it is just one partof the decision support systems whichdetermine who will/will not enter into the UnitedStates.

The Immigration section of the G8 issued areport in December with similarrecommendations, stressing "complete,common technical interoperability standard," asthe basis upon which all nations of this worldare to introduce the machine-reading of identitypapers with biometric features.

MY COMMENTARY:Hand geometry technology was used inCANPASS and INSPASS applications throughthe 1990's; however this proved difficult forpassengers to use. Current technologicaldevelopments have allowed more widespreaduse of iris scanning for authentication in the newCANPASS airport program.

Greater efforts for integration of borderprograms will be required. During the 15-minuteinterview process for Nexus-Land, for example,fingerprint, facial and signature information iscollected, but no iris scanning. Should theairport version of Nexus be developed with irisscanning for Canadian airports, re-registrationof Nexus participants will be required. Futureintegration of modal initiatives should be ofparamount importance in order to enhancecustomer satisfaction, reduce administrativeburden, and increase participation in suchexpedited programs.

Page 11 January 2003

Roland DorsayRegional Vice President

Ottawa

THE OTTAWA SCENE14 January 2003

Parliament has returned from its six week Winter break. High on Minister Collenette's agenda will bethe tabling of the new Canada Airports Act, perhaps as early as next month. The new Act is expectedto provide guidelines and controls for Airport Authorities in a variety of areas, including Boardgovernance, public consultation and accountability, airport fees and charging practices, scope ofbusiness activities permitted to subsidiaries, and borrowing limits. After second reading, thelegislation will be referred to the Standing Committee on Transport which is expected to hold publicconsultations, perhaps as early as this Spring.

Still awaiting public release after Cabinet approval is Transport Canada's Blueprint visioning exercisein which the Department will identify and address the key issues that the Department anticipates itwill need to contend with for the next few years. The Blueprint will include the Department's responseto the recommendations of the Canada Transportation Act Review Panel and is also expected toaddress to some degree the recommendations Transport Canada received in its public consultationson the review of the International Air Policy.

Finance Minister John Manley recently confirmed to the London Chamber of Commerce that theGovernment may change its accounting procedures so as to allow the Government's costs to berecovered on an accrual basis. The effect of this change would be to reduce the costs that theGovernment would need to recover annually from the Air Travellers Security Charge. The results ofthe Government's current review of the $24 Security Charge is expected to be announced at the timeof the upcoming Spring 2003 Budget.

New Cross Border Currency and Instrument Reporting Regulations took effect on January 6th. Thenew regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Actrequire that all persons and entities report the importing and exporting of currency and monetaryinstruments of $10,000 or more to the CCRA. The regulations require that the written currency reportbe signed and given to a Customs officer for assessment at the Financial Transactions and ReportsAnalysis Centre.

Earlier this month, two Customs officers at Vancouver Airport, using information obtained through theAdvance Passenger Information data system (APIS) , recovered a child who had been kidnapped bya non-custodial parent in the United States. The APIS information alerts customs officers in Canadaand the US to air passengers that may warrant additional security before they arrive in either country.At the same time, but unrelated to this specific incident, the Privacy Commissioner, GeorgeRadwanski released a letter he wrote to Revenue Minister Elinor Caplan to express his concern thatthe CCRA's new Advance Passenger Information System/Passenger Name Record (APIS/PNR)database is in violation of the Canadian Charter of Rights and Freedoms. The Commissioner's mainconcerns are that the data is keep for six years and can be used for many different governmentpurposes.

This 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 materialize. Information containedherein is provided for the use of TradePort International Corporation only, and may not bedistributed beyond the Corporation.

Prepared by InterVISTAS Consulting Inc.