The purpose of this study is threefold. Firstly, a working measure of the profitability realized by C.P. Air in their Pacific operations should be derived. This will be gauged through the calculation of profit indicators on each of eight route segments. With the aid of these indicators, some suggestions can be given regarding the presence and degree of cross-subsidization in C.P. Air's overall operation. Secondly, the impact of possible charter development on scheduled services should be ascertained. Uncovering the nature of the Pacific air travel market and the major trends therein will complement the discussion of this evolution. Thirdly, consideration should be given to the implications that arise for Canadian regulatory policy. In particular, reference should be made to the aviation policies set out by the Canadian Transport Commission and to the stated objective of the National Transportation Act of 1967. This will serve to highlight the areas in which regulatory inconsistencies occur and in which questions may be asked concerning the long-run development of Canadian airline companies. Cost and performance data as well as information on the general development of the Pacific air travel market was collected and analyzed. This analysis provided a basis for the study of the Pacific operations of C.P. Air. Through this progressive analysis, profit indicators were derived on a route basis. In order to assess the effect of non-scheduled operators on regular Pacific air services, a gravity-type model was formulated and tested for the years 1962 - 1968. The impact of charters was measured through the inclusion of a "dummy-variable" in the multiple regression framework. The process was further refined to include some factor analysis in order to determine the principal dimensions of demand. Using the results of the statistical analysis, selected aspects of regulatory policy were discussed. This enabled questions to be asked regarding the appropriateness of some current transport policies. It was concluded that C.P. Air was apparently realizing sizeable returns on many Pacific routes. Although it was necessary to qualify this finding, it could not be denied that profits seemed high and C.P. Air would not wish any disturbance to occur. Should charters evolve in the Pacific to a significant magnitude, it was felt a large impact would be made on C.P. Air's scheduled services. Finally, it was concluded that domestic regulatory policy must be improved. The system should encourage efficient operations domestically and reinstate the true, spirit of serving the public interest. / Business, Sauder School of / Graduate

The purpose of this thesis is to attempt to explain the forces behind the past growth of Canadian air travel and to use the explanation as a basis for forecasting the long-run growth of Canadian air travel. The forecasting attitude adopted in this study is that of the Department of Transport wishing to quantitatively forecast, to 1975, total Canadian domestic and international air passenger boardings independent of other modes, on the basis of average total Canadian data. Accurate forecasts are important to the Department of Transport since new airports cannot be constructed instantaneously, but at the same time, premature construction of airports is undesirable. There are a great variety of forecasting methods. Due to the problems of inadequate Canadian air passenger travel data, however, the author felt that the only appropriate quantitative method of forecasting air passenger boardings at the major Canadian airports, would be with dynamic and static, multiple regression models. The dynamic model is a new approach at forecasting air passenger boardings, since at the time of this study, not one example of its use in forecasting air passenger boardings could be found. The dynamic model of this thesis expresses the idea that current decisions are influenced by past behavior i.e. habit formation. Also, although there are many examples of the use of a static model for forecasting air passengers, the form of this study's static models is quite unique since it tries to take into account the increasing air travel elasticity of rising per capita incomes. There are many factors affecting demand but it was not possible to provide explicitely in multiple regression forecasting formulas for all of them because of the complexities involved and the lack of data with respect to some of them. It was found that one of the major factors affecting future boardings per capita will be fare policy. The long-run fare elasticity was found to be approximately -2.30. In forecasting air passenger boardings, five different assumptions were made with respect to future fare levels. The growth patterns of each of this thesis's five air passenger boarding forecasts based on the five future fare assumptions had two things in common: (1) all showed a declining rate of growth both in terms of boardings per capita and total Canadian boardings and (2) all showed absolute annual increments which in general increased from year to year throughout the entire forecast period. These two trends are both major characteristics of a growth industry which has not yet matured. An average annual decrease of 0.1334 current cents in the air passenger yield per passenger-mile seems the most reasonable future fare assumption. If this is so, the growth of total air passenger boardings will progressively decline from a 7.81 percent increase in 1968 to a 6.54 percent increase in 1975 and the growth of boardings per capita will progressively decline from a 5.07 percent increase in 1968 to a 4.35 percent increase in 1975. This forecasted growth is much lower than in the historical period of 1955-1966 when the average percent growth in total boardings was 11.4 percent and in boardings per capita was 8.48 percent. Of course, national forecasts of total domestic and international air passenger boardings are of little value in comparison to air passenger boarding forecasts of individual Canadian cities. Fortunately, the largest twenty-five air transportation hubs, which have accounted for 89 percent to 93 percent of the total of all Canadian air passenger boardings in the past, have through time each maintained a generally consistent relationship to the national total. Thus, by fitting numerous least-squares trend curves through each community's past percentage of national air passenger boardings and modifying where necessary because of the advice of experienced people in Canadian air travel, forecasted percentages of total Canadian boardings were arrived at for each of the largest twenty-five Canadian air transportation hubs. / Business, Sauder School of / Graduate

Canada and the United States have the largest, bilateral trade relationship of any two nations. Fittingly, they also exchange the largest volume of international air travellers of any pair of countries. The terms under which Canada-United States air transportation are provided are set forth in the Canada-United States Bilateral Air Services Agreement. The current Agreement was founded upon the consumer demands and industry operating practices that prevailed in 1966. Although the Agreement was substantially modified in 1974, the essence of the regime has been rendered obsolete by the developments of transborder airline market characteristics. Canada and the United States have recognised that a new bilateral air services agreement is a necessity. Three general strategies have been proposed as the bases for a new regime: the specified rights option, the open border option, and the cabotage rights option. Specified rights is the genre of the current regime: all routes having entry strictly controlled. The open border option would entail complete freedom for either country’s carriers to contest all transborder routes. Cabotage rights allow carriers to contest any market within or between the two countries. A new agreement has yet to be achieved. The delay in finding an acceptable scheme has been the difficulty in meeting both major objectives for the new policy: efficiency and equity. This report examines the alternative schemes for a new Canada-United States air services regime. The structure-conduct-performance paradigm of industrial analysis is utilised to evaluate the nature of the distribution of benefits that would arise following the adoption of the various alternatives. The report concludes that the adoption of a phased-in, open border regime would best meet the twin objectives of efficiency enhancement and equity of opportunity.

Canada and the United States have the largest, bilateral trade relationship of any two nations. Fittingly, they also exchange the largest volume of international air travellers of any pair of countries. The terms under which Canada-United States air transportation are provided are set forth in the Canada-United States Bilateral Air Services Agreement. The current Agreement was founded upon the consumer demands and industry operating practices that prevailed in 1966. Although the Agreement was substantially modified in 1974, the essence of the regime has been rendered obsolete by the developments of transborder airline market characteristics. Canada and the United States have recognised that a new bilateral air services agreement is a necessity. Three general strategies have been proposed as the bases for a new regime: the specified rights option, the open border option, and the cabotage rights option. Specified rights is the genre of the current regime: all routes having entry strictly controlled. The open border option would entail complete freedom for either country’s carriers to contest all transborder routes. Cabotage rights allow carriers to contest any market within or between the two countries. A new agreement has yet to be achieved. The delay in finding an acceptable scheme has been the difficulty in meeting both major objectives for the new policy: efficiency and equity. This report examines the alternative schemes for a new Canada-United States air services regime. The structure-conduct-performance paradigm of industrial analysis is utilised to evaluate the nature of the distribution of benefits that would arise following the adoption of the various alternatives. The report concludes that the adoption of a phased-in, open border regime would best meet the twin objectives of efficiency enhancement and equity of opportunity. / Business, Sauder School of / Graduate