Feasibility Study Air Cargo Development at Windsor International Airport Phase 1: Market Potential Analysis Submitted on September 04th, 2009 by: Lufthansa Consulting GmbH Von-Gablenz-Str. 2-6 50679 Köln Germany Registration: Local Court of Cologne Commercial Register HRB 17788 Managing Director: Werner Schuessler Market Potential Analysis for Windsor International Airport 2 Content 1. Executive Summary .................................................................... 9 2. Introduction .............................................................................. 14 3. Methodology ............................................................................. 15 3.1 Research .................................................................................................... 15 3.2 Determine Relevant Air Cargo Market ........................................................ 16 3.3 GDP driven base forecast for the Relevant Market ..................................... 17 3.4 Definition of Market Share for Windsor International Airport and creation of base forecast .............................................................................................. 18 3.5 Consider impacts of influence factors on YQG ........................................... 20 3.6 Use Forecast Model to project YQG Cargo Volumes .................................. 20 4. Economic Environment ............................................................ 23 4.1 Economic characteristics of Canada ........................................................... 23 4.1.1 Gross Domestic Product of Canada ........................................................... 24 4.1.2 Demographic Structure of Canada ............................................................. 25 4.1.3 Foreign Direct Investments of and in Canada ............................................. 26 4.2 Economical characteristics of Ontario ......................................................... 30 4.2.1 Gross Domestic Product of Ontario ............................................................ 30 4.2.2 Trade and Infrastructure of Ontario ............................................................. 31 4.2.3 Demographics of Ontario ............................................................................ 35 4.2.4 Perishable Air Cargo and Ontario’s Perishable Trade ................................ 36 4.2.5 A closer look at the economy of Windsor .................................................... 39 4.3 Economic characteristics of Michigan, USA ................................................ 42 4.3.1 Gross Domestic Product of Michigan .......................................................... 42 4.3.2 Trade and Automotive Industry of Michigan ................................................ 44 4.3.3 Demographics of Michigan ......................................................................... 46 4.4 Canadian Trade Development .................................................................... 48 4.4.1 Canada’s Trade Partners ............................................................................ 51 4.4.2 Key Export / Import Commodities ............................................................... 52 4.4.3 Agreements impacting trade crossing the border (CA-USA) and Air Cargo Security ...................................................................................................... 53 4.5 Canada’s Transport System and Trade by Mode of Transportation ............ 56 4.5.1 Canadian Air Transportation & Trade ......................................................... 57 4.5.2 Canadian Road Transportation and Trade .................................................. 60 4.5.3 Canadian Rail Transportation and Trade .................................................... 62 4.5.4 Canadian Marine Transportation and Trade ............................................... 64 4.6 Aviation Policies and Regulations ............................................................... 65 4.6.1 Historical Background ................................................................................. 65 4.6.2 Bilateral Air Agreements (Canada) ............................................................. 65 5. Relevant Airports and Airlines for YQG ................................... 70 Market Potential Analysis for Windsor International Airport 3 5.1 Windsor International Airport (YQG) ........................................................... 70 5.2 Competing Airports ..................................................................................... 71 5.2.1 Region of Waterloo International Airport (YKF) ........................................... 72 5.2.2 Hamilton - John C. Munro International Airport (YHM) ................................ 73 5.2.3 London International Airport (YXU) ............................................................. 74 5.2.4 Detroit Metropolitan Wayne County Airport (DTW) ..................................... 75 5.2.5 Detroit Willow Run Airport (YIP) .................................................................. 77 5.2.6 Toledo Express Airport (TOL) ..................................................................... 79 5.2.7 Toronto - Lester B. Pearson International Airport (YYZ) ............................. 80 5.2.8 Bishop International Airport (FNT) .............................................................. 82 5.3 Historic Traffic Development at YQG .......................................................... 84 5.4 Canadian Airline Market ............................................................................. 85 5.4.1 Canada’s Key Passenger and Cargo Airlines ............................................. 85 5.4.2 Other Regional and Cargo Airlines ............................................................. 89 6. Air Cargo Forecast ................................................................... 93 6.1 Influence Factors ........................................................................................ 93 6.1.1 Development of Air Cargo Related Facilities .............................................. 93 6.1.2 Distribution Centers .................................................................................... 93 6.1.3 Airline Marketing / Air Service Development ............................................... 94 6.1.4 Pre-Clearance Facility ................................................................................ 94 6.1.5 Stimulus Packages and Local Business Development ............................... 94 6.2 Assumptions for the three Forecast Scenarios ........................................... 95 6.3 Cargo Forecast Results .............................................................................. 98 6.3.1 Most Likely Scenario................................................................................... 99 6.3.2 Optimistic Scenario ....................................................................................102 6.3.3 Conservative Scenario ...............................................................................102 7. Recommendations ..................................................................103 7.1.1 Development of Air Cargo related facilities ................................................103 7.1.2 Airline Marketing / Air Service Development ..............................................104 7.1.3 Development of the “Cargo Village” ...........................................................105 8. Annex I - Cargo Forecast Data by Scenario ..........................106 8.1 Most Likely Scenario..................................................................................107 8.2 Optimistic Scenario ....................................................................................110 8.3 Conservative Scenario ...............................................................................113 8.4 Short to long term growth rates ..................................................................116 9. Annex II – Examples of Shippers, Consignees and Routings for the Windsor Region ................................................................117 Market Potential Analysis for Windsor International Airport 4 List of Figures Figure 1: Lufthansa Consulting project approach .......................................... 9 Figure 2: Data for total forecast – all three scenarios .................................. 12 Figure 3: Data for Most Likely Scenario – Comparison of Segments .......... 12 Figure 4: Lufthansa Consulting project approach ........................................ 15 Figure 5: 2008 market shares within the Relevant Air Cargo Market .......... 16 Figure 6: Air Cargo Base Forecast for the Relevant Market 2009-2034 ...... 18 Figure 7: Air Cargo Base Forecast for YQG – 2009 to 2034 ....................... 19 Figure 8: Screenshots Lufthansa Consulting “Market Model Technique” .... 21 Figure 9: From Base Forecast to three different scenarios for YQG ........... 22 Figure 10: Map of Canada showing YQG ................................................... 23 Figure 11: Nominal GDP of Canada – 1998 to 2008 ................................... 24 Figure 12: Canada’s nominal GDP growth – 1999 to 2033 ......................... 24 Figure 13: Canada’s GDP structure – 2008 ................................................ 25 Figure 14: Population density of Canada .................................................... 25 Figure 15: Top 15 cities in Canada – 2009 ................................................. 26 Figure 16: Development of Canada’s in and out flow FDI – 2004 to 2008 .. 27 Figure 17: FDI in Canada by industry