U.S.-CANADA AVIATION AGREEMENT

Second Anniversary

HIGHLIGHTS

The U.S.- Canada market is the world’s largest bilateral passenger market. Since the “open trans-border”

agreement was signed in February 1995, it has produced MORE SERVICE and LOWER FARES:

Passenger traffic in 1996 totaled 15.5 million, up 28 percent over 12.1 million passengers in 1994, the year preceding the

Agreement. Since 1994, 17 of the top 50 transborder markets gained nonstop scheduled service. The 17 new markets, and

the dates service began, include:

Montreal Atlanta (May 1995) Ottawa Chicago (May 1995)

Ft. Lauderdale (June 1995)

Washington D.C. (June 1995) Calgary Minneapolis (May 1995)

Las Vegas (Nov. 1995)

Toronto Atlanta (Mar. 1995)

St. Louis (Apr. 1995) Vancouver Dallas (May 1995)

Ft. Lauderdale (June 1995) Minneapolis (May 1995)

Orlando (June 1995) Phoenix (May 1995)

Washington D.C. (June 1995) Reno (May 1995)

Las Vegas (Nov. 1995) Las Vegas (Nov. 1995)

Among the top 50 nonstop markets, passenger fares (adjusted for distance traveled) have declined by an average of 22

percent. For the 17 new nonstop markets, the average decline is a robust 32 percent.

In 1994 there were 54 nonstop markets with traffic of more than 50,000 passengers. In 1996 the number was 73 -- an increase

of 35 percent. Over the same period the number of markets with 100,000 to 250,000 passengers rose from 19 to 31 -- a 63-

percent increase. In all, between 1994 and 1996, 13 transborder markets witnessed traffic increases of more than 100,000

passengers . Those markets are:

Increase Increase

Toronto Atlanta 294,784 Vancouver Los Angeles 139,660

Toronto New York 226,713 Ottawa Chicago 120,656

Toronto Washington D.C. 215,491 Vancouver Phoenix 114,279

Vancouver Dallas 192,062 Vancouver Reno 115,847

Vancouver San Francisco 178,057 Calgary Minneapolis 109,872

Vancouver Minneapolis 165,130 Montreal Washington D.C. 100,976

Montreal Atlanta 155,595
As of the second anniversary

of the U.S.-Canada Aviation

Agreement, traffic growth

exceeded 3.4 million passengers, a remarkable 28-percent increase for the 2-year

span. For calendar year

1994, the year before the new

Agreement, bilateral passenger traffic totaled 12.1 million;

after the Agreement was

signed in February 1995,

traffic grew to 13.3 million for

1995 and to 15.5 million for

1996.

Within the total 28-percent

traffic increase, Canadianflag traffic rose 35 percent

and U.S.-flag traffic grew 23

percent. On an annual basis,

the 3.4-million passenger

increase alone is larger than

all but six U.S.-country

markets (Canada, Japan,

United Kingdom, Mexico,

Germany and France).
The Agreement has also spurred competition. According

to the December 1996 Official

AirlineGuide, the U.S.-Canada

market has 22 scheduled

nonstop markets with bilateral

competition (at least one flag

carrier of each nation). By

comparison, U.S.-Mexico has

19 markets with competitive

nonstop service; U.S.-U.K. and

U.S.-Japan both have 12; and

U.S.-Germany has 9.
In 1994 there were 54 nonstop

markets with over 50,000 passengers (scheduled and charter service). For 1996 the comparable number jumped to 73 --

an increase of 19 markets, or

35 percent. During the same

period the number of markets

with 100,000 to 249,999 passengers rose from 19 to 31 -- an

increase of 12 markets, or 63

percent.
As of December 1996, nonstop passenger service to

Canada (scheduled or char -

ter) was provided to 17 U.S.

cities which had no scheduled service 2 years earlier .

The cities gaining service

are:

Lihue

Kahului

Kona

Palm Springs

Reno

Las Vegas

Phoenix

Kansas City

St. Louis

Milwaukee

Washington D.C.

Raleigh/Durham

Atlanta

Orlando

West Palm Beach

Fort Myers

Ft. Lauderdale
Likewise, 17 of the largest 50

nonstop markets with

scheduled service in 1996

had no scheduled service in

1994. The 17 new markets

are:

Vancouver

Reno

Las Vegas

Phoenix

Dallas

Minneapolis

Calgary

Las Vegas

Minneapolis

Toronto

Las Vegas

St. Louis

Atlanta

Orlando

Ft. Lauderdale

Washington D.C.

Ottawa

Chicago

Montreal

Atlanta

Ft. Lauderdale

Washington D.C.
Along with more service, the

Agreement has produced

lower fares. Based primarily

on U.S. carrier data,

passenger fares in the 50

largest U.S.-Canada markets

with scheduled nonstop

service declined by an

average of 22 percent

between the 3rd quarter of

1994 and the 3rd quarter of

1996. For 33 major

established markets, the

average decline was a healthy

18 percent. And for the 17

new nonstop markets, the

average drop was an

impressive 32 percent.
Even though U.S. carriers

offered nearly 2.7 million

more seats in 1996 than in

1994, their load factors -- the

percentage of seats

occupied -- remained high,

exceeding 58 percent in

1996.