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Airlines are evolving

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Gross domestic product in the air transportation industry rose 9.5% in 2006, 10.9% in 2005, and 9.4% in 2004, following three consecutive years of decline after the September 11, 2001 attacks. Industry employment followed roughly the same pattern.

The air transportation industry has been evolving in response to more than a decade of changes in its business environment. Legislation, including the signing of the Canada–U.S. Open Skies Agreement in 1995, moved it toward less regulated, more competitive operations. Likewise, the growth and popularity of low-cost carriers has changed the way airlines must compete in domestic and international markets.

While the number of commercial domestic flights in Canada fell slightly in 2005 from 2004, the number of seats available has been falling steadily. In 2005, airlines offered about 63.5 million seats in Canada, down sharply from 71.4 million in 1995. This decrease in seating capacity may contribute to upward pressure on airfares. In 2005, the average domestic and international airfare (all types) paid by passengers was $251, up 0.4% from $250 in 2004.

Part of the decline in seating capacity stems from changes made to aircraft fleets: smaller, more fuel-efficient planes are replacing big aircraft with large seating capacities. In 1996, large aircraft, such as Boeing 747 jumbo jets, accounted for 39% of the air fleet, medium-sized planes, 29%, and small planes, 32%. By 2005, jumbo jets accounted for only 4% of the fleet; medium-sized planes, such as the Airbus 320, jumped to 60%, and small aircraft, such as the Dash 8, rose to 36%. In 2005, for the first time in years, the proportion of medium-sized planes fell in favour of smaller planes.