CAIR Issue No. 18 - June 2004

IVC MARKETINTELLIGENCE

REPORT

InterVISTAS Market Intelligence ReportJune 2004 ©InterVISTAS Consulting Inc. Page 1

ARE HIGH FUEL PRICES HERE TOSTAY?15 June 2004

The price of crude oil exceeded $41/barrel in early June…The price of crude oil hit a high of $41.45 per barrel in early June; prices have since dropped to$37.59 per barrel (on 14 June 2004). Increased global demand is the main factor in the current rise ofoil prices.

Increasing Demand Requirements from China

The demand for crude oil in China is soaring due to its fast growing economy. After the U.S., China iscurrently the 2nd largest consumer of oil currently using 5.5 million barrels a day. China’s demand forcrude oil is expected to double from current levels over the next 10 years.

Stronger U.S. Economy

As the U.S. economy gains momentum, its demand for oil is also increasing. In the short term,demand will rise as the busy summer travel months are just around the corner, both on the road andin the air. The transportation sector is the largest consumer of oil products.

…Rising Futures PricesThe price of crude oil in the futures market has been increasing steadily over the past year. In mid-2003, the futures price of a barrel of crude oil for delivery in September 2005 was at the $25 range.By December 2003, the futures price for that same barrel of crude oil rose 8% to $27. As of June2004, the futures prices have continued to escalate to even higher levels – a barrel of crude fordelivery in September 2005 will cost $34. Over a one-year period, the futures price has risen 36%!

In the past, rising fuel prices were attributed to factors that largely impacted the supply of oil – such asthe Iraq war or the general strike in Venezuela. However, the main reason for the recent high pricesis excessive demand. It is likely that higher prices are here to stay - unless output from oil producingcountries significantly increases to match demand.

Doris Mak

Senior Market Analyst

$0.00

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Month of Delivery

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Aug 2003 FuturesMay 2003 Futures

Dec 2003 FuturesApr 2004 Futures

Jun 2004 Futures

SpotPrices

Crude Oil Spot & Futures Prices


AER LINGUS:A TRANSFORMED FULL SERVICE CARRIER

A Financial Snapshot: Pre versus Post 9/11…Aer Lingus reported an operating profit of €74million and had €236 millionin cash at the end of 2000. However, at the time, was forecasting aweaker financial position in 2001, in part due to intense competition from

low cost carrier, Ryanair. The events of 9/11 made a weakening situation worse. Aer Lingus reportedan operating loss of €90 million at the end of 2001 and forecast an operating loss of €152 million in2002. The airline was struggling financially and announced that it did not have enough cash tosurvive past January 2002. Aer Lingus was on the verge of bankruptcy.

The Survival Plan that would transform Aer Lingus…Aer Lingus was in a dire situation; management realised that if it were to save the airline it would haveto act swiftly and aggressively. The airline had been facing fierce competition in its own backyardfrom Ryanair, the world’s most successful low cost carrier and at the same time, Aer Lingus’stransatlantic network was suffering post 9/11.

The first step taken was a detailed review of the airline’s current revenue base and cost structure.Regarding revenues, Aer Lingus found that 40% of its revenue base was derived from thetransatlantic market – with the slowing U.S. economy and 9/11, the transatlantic market was weak.On the cost side, the airline recognised that its current cost structure and work processes were notsustainable or efficient enough in the post 9/11 environment with intense low cost carrier competition.The airline sought external assistance; however, due to EU restrictions, no government aid wasavailable, and because of its inflexible cost structure, the airline did not have any debt financingavailable. About a month after 9/11, on 19 October 2001, Aer Lingus launched a Survival Planfocusing on cost reduction and increased efficiencies.

Cost Reductions. At the onset, Aer Lingus targeted to reduce costs by €190 million, but as aresult of the actions taken described below, the airline exceeded the target and reduced its costs by€225 million.

§ Reduced Schedule. Almost immediately, the airline reduced flight frequencies and the numberof aircraft in its fleet. The airline also terminated routes.

§ Staffing Changes. The airline laid off 2,000 employees, equivalent to approximately 1/3 ofairline’s total employment base. All temporary staff were released and wage freezes wereenacted for remaining employees. The airline also cancelled its cadet pilots and apprenticeshipprograms.

§ Expansion Plans. All capital projects were terminated and all non-vital expenditures wereeliminated.

§ Distribution Costs. At the time, Aer Lingus’s distribution costs were thirty times higher thanRyanair. In an effort to close the gap, Aer Lingus dropped its travel agent commissions from 9%to 5%. The airline also encouraged the public to book their flights online through aerlingus.com –the airline’s more cost-effective distribution channel.

Doris Mak

Senior Market Analyst


AER LINGUS:A TRANSFORMED FULL SERVICE CARRIER (CON’T)

Increased Efficiencies. Through the process of reducing its operating costs, Aer Lingus was alsoable to increase efficiencies in its fleet utilisation.

§ Fleet Utilisation. In 2003, as the market began to recover, Aer Lingus was able to add 9 newroutes without requiring additional resources by tweaking its scheduling of operations.

Pricing Strategy and Revenue. In response to competition from the low-cost carriers, AerLingus’s pricing strategy was to significantly reduce its fares to match the competition. Ryanair wasoffering exceptionally low fares in the market place. As a result of its aggressive cost cuttingmeasures, Aer Lingus gave itself the opportunity to go head-to-head with Ryanair. The marketresponded to Aer Lingus’s lower fares and resulted in increased passenger volumes, a higher loadfactor and increased revenues.

Positive Results. After undertaking aggressive cost cutting measures to save the airline andchanging it pricing policies, Aer Lingus began to see positive results from their actions.

§ In 2002, the airline had an operating profit of €64 million, net cash of €155 million and free cashof €367 million.

§ In 2003, the airline was carrying 11% more passengers with 33% less staff.

§ In the aftermath of 9/11, the transatlantic market has since improved. In 2003, Aer Lingus added18% additional capacity on transatlantic routes.

Keys to the future…Aer Lingus continues to face stiff competition from Ryanair.In order to stay competitive, Aer Lingus must continue withits low fare strategy – as the market has respondedpositively. Also, working in tandem with the its low-farepricing strategy, Aer Lingus must continue its costing cuttingmeasures.


U.S. Airlines Domestic Passenger Traffic (RPMs)

0100,000200,000300,000400,000500,000600,000

1993 1995 1997 1999 2001 2003R

PM

(m

illio

ns)

Source: Air Transport Association, Annual Traffic and Capacity-U.S. Airlines Scheduled Services.

THE DECLINE OF U.S. DOMESTICYIELDS14 June 2004

Over the last several years, the airline industry has been negatively affected by several externalfactors, including the outbreak of SARS, terrorism and the subsequent war in Iraq, and the economicdownturn in the U.S. Although passenger traffic has shown a recent recovery from these events,yields remain depressed.

Passenger Traffic. Overthe last 10 years, domesticU.S. passenger traffic hasrisen 41%, from 354 billion in1993 to 499 billion in 2003.Although there was a drop inpassenger traffic in 2001 and2002, a recovery was evidentin 2003, with RPMs reachingclose to the level seen in year2000.

Yields. In contrast, U.S.domestic yields have shown adecline over the last decade,from nearly US$0.14/RPM in1993, to US$0.12/RPM in2003. Domestic yields in theU.S. remained relativelysteady from 1993 to 2000,before a sharp decline in2001. The yield in 2003 waswell below the figuresrecorded in earlier years.

Although some attribute thedecline in U.S. passengertraffic during 2001 to external events (9/11), the data suggests that the drop in yields was largelycaused by other factors, especially increased competition from low cost carriers (LCCs). The 2001drop in yields began in January and was complete by July. Yields were actually stable (in bothCanada and the U.S.) after October 2001.

Notes: U.S. Airlines refer to all major, national, and regional airlines as defined by the U.S. DOT under Chapter 411 of Title49 of the U.S. Code.

U.S. Airlines Domestic Yields

$0.00$0.02$0.04$0.06$0.08$0.10$0.12$0.14$0.16

1993 1995 1997 1999 2001 2003

Yie

ld (

US

$/R

PM

)

Source: Air Transport Association, Annual Passenger Prices (Yield)-U.S. Airlines Scheduled Services.

Eugene Chu

Project Analyst


Summary of Total Year-Over-Year Passenger Traffic Performance at Selected Canadian Airports

Toronto Vancouver Montréal-Trudeau

Calgary Edmonton Ottawa Winnipeg Halifax Victoria Kelowna Saskatoon Regina St.John’s

April -15.1% -13.6% -9.0% +1.6% +1.1% -7.6% +4.4% +6.1% -0.9% -0.6% -3.9% -1.6% -1.7%May -17.3% -13.2% -7.4% -1.4% -5.3% -1.5% -0.5% -1.2% +0.4% -1.0% -5.3% -1.6% +4.5%June -9.0% -9.8% -0.7% +1.9% -0.4% +2.5% +5.0% +4.1% +0.6% -0.5% +1.4% +7.0% +17.8%

2nd Quarter -13.7% -12.1% -5.5% +0.7% -1.6% -2.1% +3.0% +2.9% +0.0% -0.7% -2.6% +1.3% +7.1%July -6.0% -4.5% +3.0% +4.7% +2.5% +3.0% +3.7% +5.7% +11.9% +5.0% +1.2% +4.7% +21.1%

August -7.6% -1.2% +2.0% +1.4% +0.3% -7.0% +0.4% +4.1% +9.8% +0.5% -4.8% -2.2% +22.5%September -5.9% -3.0% +2.3% -1.8% +8.6% +1.6% +1.5% -0.6% +10.8% -0.7% -2.4% -0.2% +12.3%3rd Quarter -6.6% -2.8% +2.4% +1.6% +3.4% -0.9% +1.8% +3.3% +10.8% +1.7% -2.0% +0.7% +19.0%

October -2.3% -3.1% +2.7% -0.7% +10.4% +1.4% +7.4% +2.5% +15.4% +1.1% -1.7% -1.3% +9.4%November +0.1% +2.2% +9.0% +8.0% +7.2% +6.5% +5.8% -0.05% +13.7% +9.6% -0.3% +19.8% +9.4%December +1.9% +2.8% +8.5% +5.4% +4.9% +6.0% +6.0% +2.9% +16.1% +9.1% +0.8% +2.0% +13.9%4th Quarter -0.1% +0.5% +6.4% +3.9% +7.4% +4.5% +6.4% +1.9% +15.6% +6.6% -0.4% +6.33% +10.8%

2003

Full Year -4.6% -3.7% +1.3% +2.7% +2.9% +1.3% +5.1% +4.2% +7.3% +2.9% -0.5% +2.4% +9.4%January +1.6% +1.5% +10.1% +4.2% +7.7% +3.5% +6.4% +3.2% +12.4% +5.9% -2.2% +8.3% +12.8%

February +7.9% +7.9% +19.6% +5.8% +10.7% +13.9% +11.7% +5.6% +11.4% +11.6% +7.8% +2.8% +19.8%March +8.7% +5.2% +21.4% +2.5% +8.0% +11.4% +11.4% +9.0% +8.2% +2.6% -2.4% +3.9% +21.3%

1st Quarter +6.1% +4.8% 17.1% +4.2% +8.6% +9.7% +9.9% +6.1% +10.5% + 6.5% +1.1% +5.0% +18.0%

2004

April +30.1% +20.5% +31.7% +12.2% +8.6% +20.8% +11.3% +16.9% +12.7% -0.3% +10.9% +2.6% +20.1%

CA

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AIRLINE DATA – CANADATraffic and Load Factors on Canada’s Major Air Carriers - May 2004

Passenger TrafficRevenue Passenger Kilometres

CapacityAvailable Seat Kilometres

Load FactorAir Carrier

% Changeover 2003

% Changefrom 2002

% Changeover 2003

% Changefrom 2002

% Changeover 2003

% Changefrom 2002

Air Canada1 +25.4% -7.7% +14.4% -10.2% +6.9 ptsto (78.5%) +2.1 pts

Domestic(Mainline) +12.2% -9.0% -1.9% -14.9% +10.1 pts +5.2 pts

Jazz +4.5% -5.4% +2.3% -16.3% +1.3 pts +7.1 pts

International& Charter +32.6% -7.1% +23.8% -7.9% +5.2 pts +0.7 pts

WestJet +18.3% +69.7% +31.2% +95.6% -7.1 pts(to 65.1%) -10.0 pts

Jetsgo +103.2% N/A +114.2% N/A -2.5 pts(to 72.4%) N/A

Analysis:§ Air Canada’s domestic traffic continued to

increase in May 2004, but year-to-year capacitywas reduced. This is reflected in the carrier’sdomestic load factor, which is 10 points above thesame time last year.

§ In May 2004, Air Canada’s international trafficrecorded the largest year-to-year increase in over12 months. This follows a trend of continuingrecovery from the effects of SARS, the Iraq warand the economic downturn last year. However,both traffic and capacity remain below 2002levels.

§ Although WestJet’s traffic continues to post year-to-year increases, growth in May was slowrelative to previous months. WestJet’s CEO,Clive Beddoe, attributed this to a reduction in thenumber of seat sales offered during the month. Heclaims this is part of WestJet’s strategy to improveyields without increasing the base fares in a highfuel cost environment. The increase in capacityoutpaced the growth in traffic for the secondconsecutive month, depressing the load factor.WestJet’s share price fell to it lowest level in nearlya year, due in part to weak May traffic.

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

-25%-20%-15%-10%

-5%0%5%

10%15%20%

May-03

Jun Jul Aug Sep Oct Nov Dec Jan-04

Feb Mar April May

Dom RPK Dom ASK

Air Canada Domestic Mainline Air Canada Domestic Mainline

Jazz data is not includedin this graph

-40%-30%-20%-10%

0%10%20%30%40%

May-03


Feb Mar April May

Int'l RPK Int'l ASK

Air Canada InternationalAir Canada International

0%

10%

20%

30%

40%

50%

60%

May-03


Feb Mar April May

RPK ASK

WestJetWestJet

OTHER CARRIERS:

LOAD FACTORS

Jetsgo: 72% (May)

Zip: not reported

CanJet: not reported


AIRLINE DATA – U.S.U.S. Airlines Release May 2004 Traffic Figures

Traffic Data – May 2004

Airline Load FactorTraffic

(RPMs – millions)Capacity

(ASMs – millions)

73.1 %

â 0.5 pts

10,733

á 9.0%

14,671

á 9.7%

68.4%

á 3.2pts

529

á 30.5%

774

á 24.3%

2 69.9 %

â 3.1 pts

1,144

â 6.5%

1,706

â 4.7%

1 74.7%

â 1.2 pts

5,401

á 11.9%

7,232

á 13.8%

79.3%

â 0.4 pts

9,291

á 18.5%

12,577

á 19.1%

81.8%

â 3.1 pts

1,283

á 38.3%

1,567

á 43.5%

80.7%

á 5.3 pts

6,186

á 15.9%

7,667

á 8.4%

73.9%

á 4.6 pts

4,681

á 11.7%

6,338

á 4.8%

2 80.1%

á 2.9 pts

9,636

á 20.2%

12,036

á 16.0%

2 75.4%

á 1.9 pts

3,458

á 7.3%

4,585

á 4.5%

Notes: 1. Mainline

2. Load factor includes scheduled service only

Sources: Carrier traffic reports.


NEWS ARTICLESAIR CANADA UPDATEAIR CANADA GRANTED EXTENTION TOSTAY PERIOD

The Ontario SuperiorCourt of Justice has

approved an extension of the stay periodgranted to Air Canada until 30 September 2004.The carrier has been in bankruptcy protectionsince 1 April 2003.

AIR CANADA REACHES TENTATIVEAGREEMENT WITH CAW

Air Canada has reached atentative agreement with theCAW. Air Canada had

already reached tentative agreements with itsother 6 unions and this last agreement hasenabled Air Canada to meet the $200 millionlabour cost reductions required by its financiersDeutsche Bank and GECAS.

AIR CANADA PILOTS LAUNCHESADVERTISING CAMPAIGN TOREASSURE CUSTOMERS ABOUT THEFUTURE OF AIR CANADAThe Air Canada Pilots Association (ACPA),which represent 3,100 of Air Canada’s mainlinepilots, has launched an advertising campaign toencourage customers to keep flying on AirCanada, and negate doubts about the future ofthe carrier. The campaign began on 8 June andwill run for three weeks, with a focus on thepilot’s commitment to safety, and the ACPA’scommitment to working with Air Canada toensure a successful restructuring.

CIBC ORDERD TO PAY AIR CANADA $35MILLION FOR CREDIT CARD REWARD-MILE PROGRAMJudge James Farley of the Ontario SuperiorCourt of Justice has ordered the CanadianImperial Bank of Commerce (CIBC) to pay AirCanada $35 million for the month of May. Aspart an agreement last year, CIBC was to payAir Canada $35 million per month for thereward-mile points collected through theAeroplan program, but the bank had beenoffsetting the fee against a $350 million loan toAir Canada for the last 11-months. The loanhas been repaid as of 30 April, but CIBC nowwants to withhold future payments until the $1.4billion claim it has against the carrier has beenresolved. The court has yet to make a decisionon this matter.

ZIP TO BE INTEGRATED INTO AIRCANADA

Zip, Air Canada’s discountfare subsidiary, will bemerged into mainline

operations later this year, if Air Canada’s sevenunions ratify the cost cutting agreements thatwere recently reached with the carrier. Zip waslaunched in September 2002, and flies short-haul routes, mostly within Western Canada.With the labour cost reductions, Air Canada nolonger needs to operate Zip as a separate entity.

AIR CANADA EXTENDS LATITUDE PASSTO WESTERN CANADAAir Canada has introduced its Latitude Passdiscount program on flights between Vancouver-Calgary and Vancouver-Edmonton. Targeted atbusiness travellers, the online program offers 10or 20-one way trip credits to customers at adiscount.

FUEL PRICESJune 11, 2004

SPOT OIL PRICES CONTINUETO INCREASEFUTURES PRICES INCREASE

Crude Oil Prices:

Spot – US$38.45(down 4.0% from May)

Futures• 6 month - $38.28

(October 2004 delivery)• 12 month - $35.83

(May 2005 delivery)• 2 year - $33.52

(May 2006 delivery)• 5 year - $29.77

(December 2009 delivery)

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

Jun-03 Ju

lAu

g Sep Oct Nov DecJan

-04 Feb Mar Apr MayJun

e

US$

per

Barr

el

Monthly Spot PricesMonthly Spot Prices


NEWS ARTICLESAIR CANADA UPDATE – CON’TAIR CANADA REACHES RECORD LOADFACTOR FOR MAYAir Canada reported a load factor of 78.5% inMay, the highest recorded for the month, and6.9 points higher than the same month last year.Passenger traffic increased by 25% to 5,517million RPKs, while capacity increased by 14%.Please refer to the Airline Data-Canada sectionof this publication for details.

AIR CANADA SIGNS DEAL WITH SABRETRAVEL NETWORK

Air Canada has signed anagreement with SabreTravel Network, a

company that connects travel buyers and sellersto the world’s largest global distribution system(GDS). The 4-year agreement includes reducedbooking fee rates allowing Air Canada to furtherreduce distribution costs. Currently, 60% of AirCanada’s domestic GDS bookings areprocessed through Sabre.

AIR CANADA RAISES FARES AS FUELCOSTS AND NAV CANADA CHARGESINCREASEAir Canada has raised fares on mainlineoperations, Jazz, Zip, and all code-share flightsin response to higher fuel prices. Base fareswithin Canada have been increased by $7-$10depending on the length of the trip, while faresfor flights to and from the U.S. have been raisedby $14-$28. Fares to and from internationaldestinations have been increased by $6.

Effective immediately, Air Canada will alsoincrease the Nav Canada surcharge for travelwithin Canada on or after 1 August 2004. Thecharge for customers travelling under 300 mileswill be $9, $15 for trips between 301-1000 miles,and $20 for flights over 1000 miles. The NavCanada surcharge for travel between Canadaand the U.S. will remain at $7.50 each way.

OTHER CANADIAN AIRLINESWESTJET RECORDS DECLINE IN LOADFACTOR FOR 2ND CONSECUTIVEMONTH

WestJet posted a loadfactor of 65% for themonth of May, a 7.1

point decrease compared to the same monthlast year. This is the second consecutive monththat the carrier has reported a decline in year-to-year load factor. WestJet had posted a 0.1 pointdecrease in load factor, to approximately 66%for the month of April. Please refer to the AirlineData-Canada section of this publication fordetails.

WESTJET APPLIES FOR NEW YORKLAGUARDIA SLOTSWestJet has filed an application to the U.S.Department of Transportation for 12 slots atNew York LaGuardia to begin six daily flightsfrom Toronto. The carrier indicated that it wantsto launch service on or before 31 October, usingStage 3 compliant B737 aircraft.

WESTJET ADDS FEES AS NAV CANADASURCHARGE INCREASEWestJet has increased the fees on its fares inresponse to an increase in Nav Canadanavigational charges. Effective immediately, thenew charges are applicable for travel on or after1 August 2004. The Nav Canada fee will be $9for customers travelling under 300 miles, 15 forflights between 301-1000 miles, and $20 for allother flights.

CANJET EXPANDS FLORIDA SERVICESBeginning 31 October,CanJet will launch non-stopweekly Sunday service

between Halifax and Orlando. The carrier willintroduce year-round Hamilton-Orlando flightsstarting 19 June.


NEWS ARTICLES OTHER CANADIAN AIRLINES –CON’THMY RENAMED TO HARMONY

Based in Vancouver, HMYAirways has changed itsname to Harmony

Airways. Owned by David T.K. Ho, the carrierstarted operations in the winter of 2002 with twoB757-200 aircraft. HMY offers scheduledservices between Vancouver and Toronto, LosAngeles and Las Vegas. Summer flights toHonolulu and Maui will be launched on 25 June.

U.S. & INTERNATIONALAIRLINESAMERICA WEST LAUNCHES SERVICEFROM LAX TO VANCOUVER ANDEDMONTONAmerica West Airlines has initiated daily non-stop flights from Los Angeles (LAX) toVancouver and Edmonton. Daily non-stopservice from LAX to Puerto Vallarta andMazatlan, Mexico has also been added. Thecarrier now operates 32 daily flights from LAX tonine destinations including Boston, Edmonton,Las Vegas, Mazatlan, New York, Phoenix,Puerto Vallarta, Vancouver, and Washington,D.C.

AMERICA WEST MAY CHANGE AIRBUSORDERAmerica West has negotiated an amendment toits 1999 Airbus order that will include anadditional 22 A319 and A320 aircraft as well asincreased flexibility with its A318 order. Theairline indicated that it may change its 15 firmorders for 107-seat A318s into orders for largerA319s and A320s, or it may even cancel theorder all together.

UAL REQUESTS EXTENSION OFBANKRUPTCY PROTECTIONUAL, the parent company of United Airlines,has filed a motion to the U.S. Bankruptcy Courtin Chicago to extend its exclusive right to file are-organisation plan by three months to 30September. The carrier is requesting a US$1.6billion government guarantee from the AirTransportation Stabilisation Board (ATSB), anda $2.0 billion loan from J.P. Morgan Chase Bankand Citicorp U.S.A. The loan is required forUAL to exit from bankruptcy protection. Thecarrier filed for protection from creditors inDecember 2002.

JETBLUE CONVERTS 30 AIRBUS A320OPTIONS

JetBlue, plans to convert 30Airbus A320 options. This will

make JetBlue Airbus’s fourth largest customerwith 123 orders on backlog. Currently JetBlueflies 60 A320s.

VIRGIN U.S.A. TO BE BASED IN NEWYORK AND SAN FRANCISCOVirgin U.S.A., Richard Branson’s U.S. low costcarrier, will base its headquarters in New York,and operations in San Francisco. TheManhattan headquarters will handle themarketing, human resources and financefunctions, while San Francisco will house theflight attendants, pilots, maintenance staff,engineers, and dispatching. Virgin U.S.A. willbe U.S. owned and operated, with plans to startoperations early next year.


NEWS ARTICLESU.S. & INTERNATIONALAIRLINES – CON’TRYANAIR POSTS QUARTERLY LOSS,EASYJET ISSUES PROFIT WARNING

Ryanair posted a loss ofEUR3.3 million (CDN5.4million) in the first quarter

of 2004, its first quarterly loss since 1997. Netprofit for the year ended 31 March wasEUR207 million (CDN339 million), the firstdecline in 13 years. Revenues increased by28%, and Ryanair carried 47% morepassengers during the year, but yields wereweak.

Meanwhile, EasyJet hasissued a profit warning,

stating that increased competition and high fuelprices could decrease earnings this year.

CONDOR LAUNCHES LCC PRICINGBased in Germany, Condorhas introduced low cost

carrier fares on its intercontinental flights. Thecarrier offers services to North America, theCaribbean, and Southeast Asia. It currentlyoperates nine B767-300ER aircraft. Fares startat EUR99 (CDN165) one way. Condor is asubsidiary of tour operator Thomas Cook AG.

SIA PLANS TO LAUNCH A380 SERVICETO LONDON AND SYDNEY

London and Sydney willbecome the first airports in

the world to see A380 service when SingaporeAirlines begins operating the aircraft in early2006. A380 service to Hong Kong and SanFrancisco will be launched later in 2006 and2007. Singapore Airlines has 10 A380s on firmorder, with options for 15 additional aircraft.

SWISS DECIDES NOT TO JOINONEWORLD

Swiss announced that it willnot join the oneworldalliance, stating that the

cost of joining the alliance outweighs thebenefits. The carrier never reached anagreement with British Airways on theexchange of frequent flyer data. The Britishcarrier’s EUR50 million (CDN83 million) loanguarantee for Swiss that was granted inexchange for eight slots at Heathrow isunaffected. Swiss will continue to codesharewith British Airways on the Geneva-Londonroute for the next three years.

STAR ALLIANCE WELCOMES THREENEW MEMBERS

Star Alliance, one of thethree global alliances, hasadded South African

Airways, TAP Portugal, and Blue 1, a Finnishairline, to its membership. The alliance nowhas 18 members and captures almost 20percent of the global market share of flights.Star Alliance will have more than 15,000 dailyflights to 833 destinations in 152 countries.

SKYTEAM ADDS NEW MEMBERS,LOOKS TO FURTHER EXPANSION

The SkyTeam alliance will officiallyadd Continental, Northwest, andKLM on 13 September. Thecarriers already code-share with

existing members and previously launched afrequent flyer-link. The alliance will allow thegroup to expand its network in Asia to ninedestinations. SkyTeam is also consideringMalaysian Airlines and Kenya Airways asfuture members.


NEWS ARTICLESU.S. & INTERNATIONALAIRLINES – CON’TAIRLINES FIND NEW WAYS TOCONSERVE FUELWith rising fuel prices, Airlines are findingcreative ways to cut fuelcosts. To lighten weight,American Airlines carries less emergency fuelon Trans-Atlantic flights. JetBlue use one

instead of two engines to taxialong runways. United Airway’s

low cost carrier Ted nowflies at a maximum flyingspeed of 516 mph, down from 530 mph.Southwest Airlines added extensions to the

wingtips of their Boeing 737’s toreduce drag, lowering fuel

consumption by up to four percent. Others inthe industry have also recognised the need forfuel efficiency. Boeing’s 7E7 dreamliner will be20% more fuel-efficient than its 767 models fromthe 1970s.

REGULATORY/GOVERNMENTE.U. REJECTS OPEN SKIES DEAL

European Uniontransportministers rejected

an open skies deal with the United States,wanting further negotiations on the marketaccess issue. The E.U. court ruled that pre-existing U.S bilateral agreements with individualE.U. states broke European rules that create asingle internal market. The E.U. has asked thatit be allowed cabotage rights in order to create abalance in the market. The U.S. has agreed toincrease the foreign ownership levels from 25%to 49% voting stock, but is unwilling to allowEuropean carriers access to its domesticmarket.

U.S. AND E.U. SIGN PASSENGER DATAAGREEMENTThe agreement allows airlines to provide theU.S. Customs and Border Protection (CBP)with Passenger Name Record (PNR)information relating to flights between theUnited States and the European Union. TheDepartment of Homeland Security (DHS)requires that airlines provide PNR data forsecurity reasons, but E.U. privacy laws did notpermit airlines to disclose the data. Prior to theagreement, an interim agreement had been ineffect allowing airlines to provide the CBP withrequired PNR data without penalty or fine fromeither side during U.S.-E.U discussions. TheU.S. now has access to 34 categories ofpersonal information, and must destroy itsrecords after 3.5 years.

CARGOThe Air TransportAssociation (ATA) reportedthat 2.0 million revenue ton

miles were transported in the month of April, up6.9% over April 2003.

The International Air TransportAssociation (IATA) memberairlines’ overall freight tonne

kilometres increased 13.8% over April 2003.The Middle East remains the region showing thestrongest growth, with an increase of 29.8%,followed by North America with a 17.2%increase for April 2004.

KITTY HAWK TO CONVERT B737-300STO FREIGHTERS

Kitty Hawk will be the NorthAmerican launch customerfor the Boeing 737-300SF.

The airline will lease seven of the convertedB737-300s from GE Capital Aviation Services.The first delivery to Kitty Hawk is set forNovember 2004; the remaining six will bedelivered throughout 2005.


NEWS ARTICLESCARGO – CON’TU.S. CARGO TO CONTINUE TO SHIFTTO FREIGHTERS, FAA SAYS

The Federal AviationAdministration’s (FAA)“Aerospace Forecasts 2004-2015”

report finds that the overall share of U.S.domestic cargo moving by freighter will reach79% by 2015, up from 75% in 2003. Thisgrowth is attributed in part to the heightenedsecurity requirements imposed by the FAA inOctober 2001, to an increase in integratortraffic and to the increased demand for fasterservice and greater capacity. The annual rateof growth of revenue ton miles (RTMs) isexpected to be 4.5% from 2006-2015.

7E7 COULD BOOST POINT-TO-POINTU.S. CARGO SAYS FREIGHTFORWARDER

Chris Coppersmith,president and CEO of TargetLogistic Services, believes

the launch of Boeing’s new aircraft will winfreight forwarders back to using air transportrather than ground services since 9/11.Pointing out that point-to-point services meanless handling and less chance of damage andtheft, Coppersmith also notes that point-to-pointservices will stimulate air cargo growth in theU.S. as cities that are served as spokes gaindirect services, decreasing delivery times. TheBoeing 7E7 Dreamliner has a belly capacity of22,680 kg or 50,000 lbs and is expected toenter service in 2008.

ARROW AIR EMERGES FROMCHAPTER 11 PROTECTION

Arrow Air has exitedChapter 11 bankruptcyprotection after only five

months. The cargo carrier and its creditorsagreed to a reorganizational plan that allowed itto maintain its 520 employees, itsmanagement, and its assets intact. Arrow Airalso hopes to expand its employee base in thenext year and a half. The carrier’s threeprincipals are James Pinto, Michael Tokarz,and Philip George, all from investment andliability firms.

FEDEX TO FLY US POSTAL SERVICEOVERSEAS MATERIAL

FedEx will take over the deliveryof the US Postal Service's

(USPS) overseas Global Express Guaranteedpackages from DHL Worldwide Express.FedEx already transports much domestic mailand packages for USPS under existingagreements. The new arrangement will comeinto effect on 1 July 2004.

MILKTRUCKS BECOME MAILTRUCKSWITH TNT MAIL UK

TNT Mail, the U.K. subsidiary ofTPG NV, has signed a two-yearagreement with Express Dairies,a trading division of Aria Foods

UK. The agreement will have Express Dairiesdelivering large non-time sensitive mail items tomore than six million U.K. households for TNTMail. The partnership will also offer businessesa service for large and heavier addressedpackages.

PROFITS UP FOR UPS, CARGOLUXCargolux broke its records witha 2003 net profit of US$70.9

million. UPS reported $759 millionnet income, a 24% increase in itsfirst quarter of 2004.


NEWS ARTICLESCARGO – CON’TVOLGA-DNEPR LAUNCHES AIRBRIDGECARGO

Volga-Dnepr’s subsidiaryAirbridge Cargo has

launched its inaugural flight from Beijing toLuxembourg via Novosibirsk. The subsidiary,set to become an independent carrier by 2005,operates a fleet of B747-200Fs.

Volga-Dnepr also test flew its re-engined AN-124 with the payload increased to 150 metrictonnes. More testing is required before theaircraft is ready for services.

AIRCRAFTMANUFACTURERSAIRBUS TO BOOST A320 PRODUCTION

Airbus plans to increasethe production rate of its

A320 family of aircraft by 20% next year, with apossible further increase by year-end 2005. Asof 31 May, Airbus reported booked orders for61 A320 aircraft. The manufacturer expects todeliver 300-305 aircraft this year.

OTHERNUMBER OF PARKED PLANESDECREASESAccording to Airclaims and Lehman Brothers,the number of parked planes decreased from595 in November 2003 to 534 in March 2004,representing 11.7% of the pre-Sept. 11 U.S.domestic fleet, down from 12.6%. Thirty-sixplanes were parked and 96 were removed.Thirty-eight of the removed planes werereturned to service, 28 were leased or sold, 30were scrapped, and one was converted into afreighter.

PEOPLEPeter Wallis has beenelected as the nextChairman of the Board of

Directors for the Calgary Airport Authority,effective 9 August 2004. He succeedsThomas J. Walsh. Wallis has served as aBoard member since 1998.Wallis is Director of theUniversity of Calgary’s VanHorne Research Institute, anda former Vice President atCanadian Airlines.

Royal Roads Military College inVictoria, B.C, has awarded ScottClements, CEO of EdmontonAirports, an honourary PhD.Clements is the longest serving

CEO of a Canadian Airport Authority, and wasformerly Lt. General with the Canadian Forces.He has been involved in the education andtraining of leaders, including his prior commandof the National Defence College in Kingston,Ontario.

Jean-Cyril Spinetta, Presidentand CEO of Air France, waselected chairman of the IATAboard of governors for 2004-

2005. He takes over from JAL Chairman IsaoKaneko.

Iberia President FernandoConte was named chairman ofthe oneworld alliance governingboard at the alliance’s recent summit meetingin Singapore.

Jacques Grilli has beenappointed as the new Directorof Screening Operations at

CATSA. All CATSA’s RMs will report to Grilli.Grilli was previously the CATSA Director of LawEnforcement and Security Liaison.


Randy Martinez Jeff MacKinney

NEWS ARTICLESPEOPLE – CON’T

Air Canada hasnamed Bill Zoeller

as president and CEO and Ron Elvidge as VPand COO of its Technical Servicesmaintenance group. Both are based at theairline’s Montréal maintenance centre.

Gerard Aprey has been namedchairman of AMR Corp, parentcompany of AmericanAirlines. Aprey also currentlyserves as president and CEOof AMR Corp.

World Airways has promoted RandyMartinez to President and CEO and JeffMacKinney to Chief Operating Officer. RobBinns has been named Sr. Vice President,Marketing.

John Allan, chairman of Exel,has been named as president ofthe U.K.-based FreightTransport Association, for2004-05.

Aer Lingus Chairman Tom Mulchay resignedon 29May after being named in a tax evasionscandal at Allied Irish Banks plc.

SAS Cargo Group hasappointed VP Kenneth Marxas the new president and CEO.He succeeds Peter Grønlundwho became president andCEO of Scandlines in May.

Swissport Z ürich hasappointed MarcelHungerbühler to the positionof CEO, effective 1 May. Theformer SWISS executivesucceeds Urs Sieber, whohas been appointed as the head of theEuropean division at Swissport International.


15.0

15.2

15.4

15.6

15.8

16.0

16.2

Jan

Mar

May Ju

l

Sep Nov

Jan

Mar

May Ju

l

Sep Nov

Jan

Mar

May

Source: Labour Force Survey, Statistics Canada

Employment in Canada (Millions, Seasonally adjusted)

2002 2003

ECONOMIC OUTLOOK10 June 2004

Canada - Momentum BuildingStatistics Canada reports CanadianGDP grew 2.4% (at an annualised rate)in the first quarter of 2004. A more in-depth look reveals that there are somesignificant positives that can be takenfrom the first quarter GDP growth. Finaldomestic demand (consumer spending,government outlays, and businessinvestments) and exports bothexperienced tremendous growth overthe quarter, at 4.8% and 6.3%respectively. The growth in exports signals that the expansion in U.S. GDP is more than offsetting thestrong loonie.

Canadian employment dropped in February andMarch, but increased in April and May (0.3% and0.4% respectively). The combination of firstquarter GDP growth and consecutive months ofemployment increases indicate that the Canadianeconomy may be heating up. This may lead to arise in interest rates later in the year.

U.S Economy Surging AheadThe U.S. economy grew 4.4% in the firstquarter of 2004, finally outpacing theCanadian economy by two percentagepoints after lagging for several years.Consumer spending in the U.S. is in goodshape, as two major factors that drive it;personal disposable income andemployment, have been improving. Non-farm employment grew by 248,000 in themonth of May, marking the ninthconsecutive monthly increase. U.S. GDPand employment are higher in comparisonto the same period last year (Q1 GDP is5% higher, and May employment is 1%higher).

The overwhelming expansion in most aspects of the U.S. economy lead many economists to believethat the U.S. Federal Reserve will soon begin raising interest rates to moderate the surging economy.

Ian KincaidManager,

Economic Analysis

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Q1

2000

Q2

2000

Q3

2000

Q4

2000

Q1

2001

Q2

2001

Q3

2001

Q4

2001

Q1

2002

Q2

2002

Q3

2002

Q4

2002

Q1

2003

Q2

2003

Q3

2003

Q4

2003

Q1

2004

Source: U.S. Bureau of Economic Analysis

U.S. Real GDP (Annualised Quarterly % Change)

-1

0

1

2

3

4

5

6

Q1

'00

Q2

'00

Q3

'00

Q4

'00

Q1

'01

Q2

'01

Q3

'01

Q4

'01

Q1

'02

Q2

'02

Q3

'02

Q4

'02

Q1

'03

Q2

'03

Q3

'03

Q4

'04

Q1

'04

Source: Statistics Canada

Canadian GDP (Annualised Quarterly % Change)


Components of Canada’sNational Security Policy

CANADA’S NEW NATIONALSECURITY POLICY & AIRPORTS11 June 2004

The National Security Policy (NSP) was thelast major policy platform announced by theLiberals before the Federal Election wascalled. In advance of the NSP, Canadawas under considerable criticism for thelack of a formal policy, even though integralparts of national security were alreadyimplemented. Canadian Intelligence’s rolein tracking Ahmed Ressam in 1999, forexample, was cited in his trial for the AlQaeda plan to blow up LAX on 1 January2000.

The NSP will redefine the role andinteractions of Canadian airports as a firstline of defence for threats, such as health contagions and terrorist activity.

The NSP contains 6 key areas related to intelligence, borders, transportation security,health/emergencies, as well as international security. Of major importance to airports are:

§ Biometric Passports to be introduced in 2005. In time for the future 2006 deadline forbiometric passports mandated by the U.S., Canada will begin deploying biometric passports in2005 using the facial biometric (a standard outlined by ICAO).

§ National Health Agency formed. The primary co-ordination function for crises such as SARSwas announced in December 2003 to be a new Health Agency. The NSP outlines further rolesand hints at future roles of this agency at airports. Depending on the progress of newcontagions, this may promote either increased international arrivals scanning for health reasons,or for this area to evolve as a pre-clearance to Canada model.

§ Transportation Security changes. In addition to CATSA’s formation in 2002, the response ontransportation security has been fragmented by modes. While the NSP does not explicitly dealwith the modal disparities in transportation security, significant funding is provided for maritimesecurity to upgrade this mode to many of the regulations airports have operated under post-AirIndia. A commitment is placed to work with the private sector, including airports, for future aircargo security and passenger security modifications.

In addition, the NSP outlines the evolution of the 2001 Canada-U.S. Smart Border process into thenext phase, which could potentially include Mexico. Furthermore, implementing Smart Borderconcepts throughout the world is outlined -- developments which could help evolve the processes forinternational departures and arrivals in future.

All in all, the NSP is a logical evolution of anti-terrorism legislation passed by Parliament since 9/11.In addition to this, however, the NSP provides a glimpse of the underlying structure for integratedcrisis response. The federal “Government Operations Centre” and regional “Security OperationsCentre” are new concepts which, when fully defined, will aim to provide a central co-ordination of allgovernment agencies -- and the central funnel that airports will need to deal with in futuremanagement of national security issues.

Solomon WongDirector,

Security & Planning


OTTAWA SCENE10 June 2004

Bill C-7 Public Safety Act Comes into ForceFor the Canadian aviation industry, the facilitation files continue to be busy in 2004.Bill C-7 or the Public Safety Act gives Canadian domestic security agencies the rightto demand passenger information. For Canadian carriers this will likely beproblematic because the passenger data airlines keep for domestic flights is far lesscomplete than the information required for international travel. The Air TransportAssociation of Canada (ATAC) is apprehensive that security agencies will try to fixthe problem by ordering carriers to gather more information and transmit it at theairline’s cost. The airlines are hoping to limit carrier responsibility to simply

providing access to security agencies who would gather and sort data at their own expense. Beloware the highlights of the newly enacted Public Safety Act.

Why do the RCMP and CSIS need air passenger information?

§ In light of the terrorist events of September 11th, the adaptability of terrorists, and the continuingthreat, there is a need to be vigilant in ensuring that our security and law enforcement agencieshave the necessary tools to protect the safety and security of Canadians.

§ Due to terrorist threats and criminal acts against aviation security, the RCMP needs passengerinformation to make effective decisions about which flights to target with aircraft protectiveofficers.

§ CSIS requires passenger information to investigate threats to the security of Canada.

§ Canadians expect their police to use all reasonable tools available to ensure their safety.

What does Section 4.82 in Bill C-7 do?

§ It amends the Aeronautics Act to require airlines, upon request, to provide a small core group ofspecially designated RCMP and CSIS officials with access to air passenger information for veryrestricted purposes. These purposes are limited to transportation security, the Air CarrierProtective Program, and counter-terrorism.

§ Designated officials will be authorized to match passenger information against other informationunder their own control to identify known and potential terrorists and risks to transportationsecurity.

§ The RCMP and CSIS would have seven days to analyze passenger information to identifyterrorist and transportation security threats. This analysis includes checks on the ground toreliably identify passengers who pose an actual threat so that any unnecessary passengerinformation could be destroyed as quickly as possible.

§ Designated officials would only be authorized to disclose matched information to a third party forvery restricted purposes.

§ A consequential amendment to the Personal Information and Protection and ElectronicDocuments Act (PIPEDA) is required to recognize that national security involves collaborationand cooperation between governments at all levels and the private sector community. Theamendment provides assurance to businesses that they can assist national security withoutconcern of breaching PIPEDA.

Sam BaroneRegional Vice President,

Ottawa


OTTAWA SCENE – CON’TNew Director General Air Policy appointed at Transport CanadaIn late May 2004, Ms. Brigita Gravitas-Beck was appointed as the new Air Policy Director General,replacing Mrs. Val Dufour who has been in Air Policy since 1986. Ms. Brigita Gravitis-Beck waspreviously Executive Director, Treasury Board of Canada, Secretariat for Industry, Science, RegionalDevelopment and Regulatory Issues.

It will be interesting to monitor which direction Airport and Airline policy will take given the newmanagement. Such policy direction will largely be a function of who the next Minister of Transport willbe on 29 June 2004, and from which political party.

Mrs. Dufour has taken up new duties as Senior Advisor to the Assistant Deputy Minister of Policy atTransport Canada (Kristine Burr). Among Mrs. Dufour’s new duties is a mandate to reintroduce anew Canada Airports Act.


CARGO CAPERS9 June 2004

Back to the Future – Air Canada reintroduces freighter operations. On May 11th, Cargojetannounced the start-up of a daytime Hamilton-Calgary-Vancouver service as of June 1st tosupplement its overnight cargo network. This was seen as anopportunity to meet customer demand anticipated due to thereduction in cargo capacity resulting from Air Canada’s down-gauging of passenger aircraft used in domestic service. It would alsoincrease utilization of aircraft that would otherwise be idle during the day.

The day the Cargojet operation began, Air Canada launched a new freighterservice in Canada. Not announced – launched. No fanfare, noannouncements: just the sudden appearance of an Air Canada freighter

(operated by All Canada Express) on the apron at Pearson, Calgary,and Vancouver. Although rumours had been circulating for sometime that AC was in negotiations with ACE, the first time Cargojetknew the deal was done was when one of their pilots let them knowthey crossed paths with the AC freighter at YYC!

There had been speculation for years that Air Canada would resume freighter operations. Statementsby Claude Morin and Robert Milton gave clear indication they wanted to move the company in thisdirection. Air Canada Cargo was spun off as a “stand-alone business” back in early 2003, to helpprepare it for potential freighter operations. When Air Canada announced it was eliminating its 747sfrom the fleet, Air Canada Cargo fought the decision and managed to retain the three combi versionsAC operates in order to give it much needed main deck space. Everything seemed ready at AC forsome time – it was “just” a matter of whether they could:

(1) handle it financially;

(2) get the Board on side during a difficult period for the airline; and

(3) get the pilots to agree to contract this out in order to lower costs and enable it to competemore effectively with Cargojet.

Ironically Air Canada’s precarious financial condition – which was driving the first two concerns – islikely what convinced the pilots to concede the third point. It is believed that in the last round of labournegotiations for concessions, with Air Canada at the brink, the pilots agreed to contracting outfreighter operations. There is speculation that they in turn extracted their pound of flesh from AirCanada, but details of the agreement are not known with any certainty.

So what does this mean: Fare Wars? We are all very familiar with the fare competition beingwaged among Canada’s passenger air carriers. While a standard feature on the passenger side, thishas not been as large a factor on the cargo side, at least domestically. (It should be noted thatinternational rates have been subject to downward pressure, particularly across the North Atlantic,resulting from the large amount of belly capacity that is available on a discounted basis.)

Now however, rate wars are a distinct possibility as AC and Cargojet battle for customers, particularlysince the routing and timing of the respective services are very similar, other than the difference in thesouthern Ontario base. It will be very interesting to see what lessons Air Canada has learned from itsbattles with the Low Cost Carriers on the passenger side, and what strategy it will adopt for cargo. Sofar it looks like a fight to the finish, but as we are still only a couple weeks into this brave new world, itis a bit premature to declare how this will end. Who knows, maybe they can take a page from theexperience of LCCs and use pricing to stimulate and grow the market to a point where they can bothco-exist!

Robert AndriulaitisDirector Transportation

& Logistics Studies


CARGO CAPERS – CON’T

The future: dare we say international service? Air Canada’s strengths lie in the internationaldomain, and seems prepared to concede a big portion of the domestic market to WestJet, Jetsgo andthe others. Many of the factors that led Air Canada to this realization on the passenger side also playa role on the cargo side. Perhaps Air Canada will look to international freight operations as its cargoniche, rather than battling it out with Cargojet for the domestic market. Only time will tell if Air Canadatries to fulfil this role, but as Canada has historically been underserved by international freighteroperations, I can think of few Canadian airports (not to mention freight forwarders, 3PLs, andshippers) that would not encourage Air Canada (or anyone else for that matter) to provide Canadianswith dedicated international freighter operations.


THE WASHINGTON REPORT14 June 2004

No Additional Aid to U.S. AirlinesHouse Aviation Subcommittee Chairman, John Mica indicatedthat no additional monetary aid will be given to the country’stroubled airlines. This was the clear consensus during a hearingat a recent House Aviation Subcommittee on 3 June. There doesnot appear to be any inclination by key congressional committeesto provide any additional aid to the industry. Mica stated, “theairlines in trouble must be prepared to fend for themselves”.

Recommendations made by DOT Inspector General on Easing Air Traffic CongestionOn 18 May, DOT Inspector General (IG) Ken Mead made recommendations to the Senate AviationSubcommittee on easing air traffic congestion. Mead predicted that air traffic would probably worsenthis summer. He mentioned that the key “drivers of congestion” include regional jet growth increasingdemand on airports and air traffic control, and low cost carrier (LCC) expansion in large and medium-sized markets. Mead made two recommendations:

§ The Federal Aviation Administration (FAA) should publish new capacity benchmarks as soon aspossible. The current benchmarks were set in the summer of 2000.

§ The DOT should collaborate with the Department of Homeland Security (DHS) to collect andreport airport-specific data on wait-times at airport passenger security screening checkpoints.This will help determine which areas in the aviation system need improvement.

U.S.-VISIT Comment Deadline ExtendedThe period for providing comments on information collected under the United States Visitor andImmigrant Status Indicator Technology (U.S.-VISIT) program will be extended by 30 days to 21 June2004. The DHS has been collecting information on non-immigrant visa holders seeking admission tothe U.S. from 5 January 2004 through to 5 January 2005. DHS estimates that 24 million people (ofwhich 19 million are air travellers and 5 million are sea travellers) would be required to providebiometrics during this one-year time period. DHS estimates that the collection of biometrics data willadd an average of one minute per person to the passenger processing time.

Charles ChambersRegional Vice President

InterVISTAS Consulting Inc.

AND

Senior Vice PresidentGA2

Washington, D.C.

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 InterVISTAS Consulting Inc. only, and may not bedistributed.

Prepared by InterVISTAS Consulting Inc.