Neha Jain: http://canadaaviationnews.blogspot.com/22

1. Merger fits national policy

History shows Ottawa traditionally has favoured creating international flag-bearer
It was busy outside the Queen Elizabeth Hotel one autumn evening in 2007 as golfers from the prestigious President's Cup golf tournament returned from their daily rounds at the Royal Montreal club.

Also arriving at the Queen E that night was Finance Minister Jim Flaherty to address a derivatives conference organized by the Montreal Exchange (MX).

It was a critical speech at a critical time as the delicate courting dance between the Toronto and Montreal Stock Exchanges was under way. The TSX was seeking to be the groom in a wedding with its intended bride, the MX. It was a major initiative to create a global-class entity and bring together Canada's biggest exchanges and the global trading of equities and derivatives.

Within moments of beginning his speech, it became very clear that Flaherty and the Harper government were in favour of the deal. While Flaherty was still speaking, a note was passed across the table between two observers that read: "They want it done! It's classic Canadian policy."

What did that note mean? History is the answer.

The history of Canadian policy making and economic necessity mandated that the federal government needed at least one strong Canadian player, a flag-bearer, in the fast emerging global capital market.

Our geographic size permits us the economy and resources to be a world player, but our small population and mid-sized economy will only allow us one international flag bearer as a technology or industry starts to take off in global importance and impact.

The Canadian track record is consistent on this globalization issue, with two examples being 19th century telephone technology (Bell Canada) and 20th century early airline (Air Canada).

Another pattern that has proven true throughout history is that once our global flag-bearer is established, Ottawa will typically and quietly encourage other players to expand into the domestic game: The goal being to learn skills and expand the same technology or industry that has gone global, but at the same time, to foster some other homegrown domestic competition in that same arena.

Examples of this are numerous.

In telecom, the early startup competitors to Bell are now such major players as Rogers or Telus. The same holds true for airlines. That dual policy was also evident with the TMX merger by allowing the rapid growth of Alternative Trading Systems (ATSs) like Alpha for example.

In short, it's a two-level strategy: first, have a monopoly-like global player abroad but, secondly, still have some domestic growth and competition at home (a subtle prodding to keep them sharp and attentive.)

These are all forms of infrastructure. From Canada's earliest days -from early canal building, the railway era and the National Dream, later the roads and highways, followed by the telegraph and telephone and finally into high-tech, the pattern is consistent. Canadian infrastructure policy has been crucial to our national sovereignty, our nation-building and economic survival and growth.

And, for all its volume and complexity of digital data at lightning-fast speed and global reach, an equity or derivatives exchange is, in essence, still an "infrastructure." It's a complex and sexy one, but still an infrastructure.

So, as the high-speed computers replaced the floor traders around the world's stock markets -and as equities became overshadowed by the complexities of derivatives -and as trading became not only integrated but global in reach -exchanges started to merge. Initially, in some cases mergers were continent-wide, in most cases since, trans-national and cross-continental. Hence the necessity of the TSX-MX wedding.

So, back to that autumn Montreal night in 2007, Flaherty made it quite clear that Ottawa wanted the deal done to have a Canadian flag-bearer in that fast-consolidating global capital market.

So in 2007-08, the TSX had to convince the Quebec government and the people of Montreal and Quebec that not only would no harm come to their beloved MX from this merger, it would prosper and grow and the MX family would benefit. Thus the TMX group was created.

Today, TMX is the bride and LSE the groom. Now LSE has to convince the complex parenthood of the TMX -not only the Harper government, but the Ontario, Alberta and Quebec governments as well -that the newly created exchange will prosper and grow and rise to new challenges.

The TMX feels the marriage is necessary because of shrinking market share at home from ATSs that are not on the same regulatory playing field.

Will this marriage work? Will the union be permitted by the Harper government? Is potentially losing control of Canadian economic infrastructure in an effort to create a pipeline into the global capital markets worth it?

Or, is the union a necessary precondition for simply staying in the global game?

History is a little murky on this one and the ball is firmly in the court of Harper, Flaherty and provincial regulators.

Howard P. (Buzz) Gibbs is a history

and education major, a retired telecom senior manager, former VP of a major Canadian polling firm, now an instructor in Issues Management at McGill University and an independent consultant.

2. Canadian airlines testing higher fares, analyst says
Despite arguments that high taxes and fees from Ottawa are behind higher fares in Canada, the country's largest airlines have also been testing the upper limits of what consumers are willing to pay to fly, according to one analyst.

And while it is still too early to say for certain, the days of cheap travel in Canada may be drawing to a close, Raymond James analyst Ben Cherniavsky, said in a note to clients Wednesday.

The highlight of the fourth quarter for both WestJet Airlines Ltd. and Air Canada were the pricing improvements they experienced in the final three months of the year.

WestJet, for instance, said its yields, reflecting higher prices, rose 6.8% during the quarter, and Air Canada's were up by 5.3% in the domestic market as well.

These small increases have incredible impact on the profitability of the airlines. Mr. Cherniavsky noted that WestJet's fourth-quarter earnings per share of 33¢ doubled his earnings estimates simply because its yield of 17.6¢ was only slightly more than his estimate of 16.8¢.

Mr. Cherniavsky said his random sampling of fares shows that the country's largest carriers are still trying to find the upper threshold where fare increases impact demand.

"We do not know where demand destruction ultimately kicks in (nobody does), but it is obvious that at some point consumers and (less so) businesses will eventually balk at price increases and just stay put," Mr. Cherniavsky said.

Mr. Cherniavsky said his February fare index was up 34% and 46% for Air Canada and WestJet respectively, marking the "highest absolute value" he has has recorded in February in the eight years since he started doing these surveys.

Mr. Cherniavsky said the index has proven useful in the past in determining the direction of pricing trends.

"While it may be a stretch to suggest that this marks the end of cheap travel per se, it appears increasingly evident to us that, after more than a decade of waiting (effectively ever since Canadian failed), the elusive benefits of a 'cozy duopoly' in Canada's airline market may finally be at hand.

3. Canadians drive to the U.S. for less expensive airline tickets

More and more Canadians are travelling by car to the United States to purchase less expensive airline tickets says data released today from the Hotel Association of Canada (HAC) 2011 Canadian Travel Intentions survey.
Twenty-one per cent of leisure travellers said they travelled by car to a United States airport in 2010 to take a trip using less expensive airline tickets purchased for U.S. or foreign travel, and an additional 11 per cent said although they had not done so in the past, they might travel to the U.S. for cheaper travel in 2011. This is up from 18 per cent from 2010.

“This has the potential for almost one third of Canadian travellers spending money on foreign airline tickets and taking flights outside of Canada. The dollar at par and high costs for Canadian airports and travel mean that Canadian air carriers are at a distinct disadvantage and cannot offer the prices to match those in the United States”, said Tony Pollard, President of the Hotel Association of Canada. “This growing trend has serious consequences for the Canadian travel industry and needs to be addressed by the reduction of airport fees, travel security costs and airline surcharges”.

Travel is Up
Eighty-three per cent of leisure travellers said they will be travelling in 2011. This is up from 78 per cent in 2010.

Seventy-six per cent of business travellers said they will be travelling in 2011; a figure consistent with 2010. However in Ontario business travel will be up 5 per cent year over year.

Social Media and Travellers
Seventy-three per cent of leisure and 86 per cent of business travellers use the Internet to gather information before they book travel.

“The top five things travellers are looking for on the Internet are special travel offerings, photos, maps, accommodation ratings and amenities,” said Mr. Pollard. “The number of travellers reading testimonials from other travellers, consulting blogs and writing about hotels on Twitter and Facebook is also increasing.”

Almost twice as many business over leisure travellers are actively Tweeting and posting on Facebook (22% business; 12% leisure).

Of all the things business travellers are looking at on the Internet, star and diamond ratings, testimonials from other travellers, videos, travel blogs and social media influence topped the list. Almost 60 per cent of business travellers and 54 per cent of leisure travellers said that star and diamond ratings on internet booking services have the most influence on their travel choices. This is up 7 per cent from 2010. The same number of leisure travellers (46%) and 11 per cent more business (49%) travellers than 2010 said testimonials/comments by previous travellers influence them. Videos have the same amount of influence on travel choices as the 2010 survey (43% business; 47%leisure). The influence of travel blogs is up almost 10 per cent over 2010 survey results with 25 business and 21 per cent leisure travellers acknowledging that blogs influence them. Social media has more influence on business travellers (17%, almost double 2010 results) than on leisure travellers (13%, up 4% over last year’s results).

Mobile Phones and Blackberry
For the first time, the HAC Travel Intentions Survey included questions on mobile phone/blackberry use. The majority (39%) said they use their Smartphone to check the weather. Paranoid about missing connections or worried about flights being delayed, 27 per cent of travellers check departure and arrival times. Thirty-two per cent of travellers said they use GPS and/or get directions on their mobile phones or blackberries. Facebook is becoming more and more popular with 20 per cent of travellers indicating they use it to check their messages and update their status on Facebook. Nineteen per cent book hotels and 11 per cent book air, train, or bus tickets on their Smartphones. Four per cent said that they use their Blackberries and mobile phones to Tweet.

“The travel industry in Canada has to continue to adapt to new technology. With travellers Tweeting about their hotel experience while in the lobby means that customer service, cleanliness and the overall look of the accommodation is vitally important”, said Mr. Pollard.

Environment Still Important
“More and more Canadian travellers are calling for hoteliers to look at their environmental offerings”, said Mr. Pollard.

Thirty-seven per cent said environmental initiatives such as water recycling and energy efficiency are important to them. Thirty-six per cent said it is important for hotels to have green products. Thirty per cent said a hotel with an environmental certification program is important to them.

Twenty-seven per cent said the ability to purchase carbon credits is very important to them, up 6 per cent from 2010. Thirteen per cent said their company has a green travel policy, up 2 per cent from 2010 and 8 per cent from 2009. Forty-five per cent of all travellers said they would pay $1 or more to offset their stay.

4. German budget airline Condor to start Seattle service
By CAROL PUCCI - The Seattle Times

SEATTLE - Germany's Condor, an airline that whisks European budget jet-setters around the world on low-cost flights, will be the latest player to shuttle travelers between Seattle and Europe.
With the addition of Condor's flights starting in June, Sea-Tac Airport officials expect airlines to boost European seat capacity by 23 percent this summer and fall through a combination of additional flights and bigger planes.
Seattleites are more likely to use Condor's new twice-weekly service to reach Frankfurt and other European cities, but they could also snag a deal on a connecting flight to one of Condor's more exotic destinations. Among them: Brazil and India.