Air Transport World articles from June 2005

Air Transport World archives from June 2005

Jet fuel prices *.(TRENDS)(Illustration)
June 1, 2005... JET FUEL PRICES * April 22, 2005 New York 157.09 US Gulf Coast 155.99 Los Angeles 178.10 Rotterdam 171.15 Singapore ...

Top 20 airlines.(TRENDS)(Illustration)
June 1, 2005... TOP 20 AIRLINES JANUARY-APRIL 2005/RANK RANK AIRLINE RPKs (000) 1 American 70,067,776 2 Delta 61,446,361 3 United 57,247,220...

Exchange rate.(TRENDS)(Illustration)
June 1, 2005... EXCHANGE RATE CURRENCY UNITS PER US DOLLAR COUNTRY/ CURRENCY 4/29/05 2/28/05 Brazil/Real 2.53 2.638 Canada/$ 1.2519 1.2395...

Pensioned off.(EDITORIAL)(new pension plans for United Airlines Staff )
June 1, 2005... Last month, United Airlines added another first to the list of dubious achievements that have marked the economic fortunes of the US airline industry since the end of 2000: The largest pension default in US corporate history. The carrier will...

Now comes the hard part.(News Briefs: Financial results, new deals, and reports from every corner of the globe)(first flight of the A380)(Brief Article)
June 1, 2005... First flight of the A380 in late April represents a triumph of aerospace engineering and design and opens a new era in commercial aviation. Now comes the tough task of certifying the aircraft to an exacting schedule that already is slipping...

United terminates pension plans, seeks further savings.(News Briefs: Financial results, new deals, and reports from every corner of the globe)(United Air Lines Inc.)(Brief Article)
June 1, 2005... United Airlines' bid to terminate and replace pension plans covering 120,000 current and former employees was approved by a US Bankruptcy Court judge in May, marking the largest pension default in US corporate history. The plans were...

America West, US Airways talk merger.(News Briefs: Financial results, new deals, and reports from every corner of the globe)(Brief Article)
June 1, 2005... America West Airlines and US Airways appeared to be moving close to a merger agreement last month that would permit US Airways to exit bankruptcy through a combination that would unite AWA's strong presence along the West Coast with US Airways'...

787 orders rise; Boeing commits to 787-9 in 2010.(News Briefs: Financial results, new deals, and reports from every corner of the globe)(Brief Article)
June 1, 2005... Boeing made a bit of news this spring, announcing orders and options for up to 155 787s, including 52 firm from Air Canada, Air-India and Northwest (see "Equipment"), as it firmed the delivery schedule for the 787-9. According to 787 VP and GM...

Japan Airlines Corp.(ASIA/PACIFIC Report)(Japan Airlines Corp's profits)(Brief Article)
June 1, 2005... Japan Airlines Corp. overcame soaring fuel prices as it returned to profit in the fiscal year ended March 31, earning [yen] 30 billion ($284.2 million), a dramatic reversal from last year's net loss of [yen] 88 billion. Revenue rose 10.2% to...

ANA Group.(ASIA/PACIFIC Report)(Aircraft industry announces profits )(Brief Article)
June 1, 2005... ANA Group cited strong performance of its international operations, including the first annual profit since beginning international services in 1986, as it reported a consolidated net profit of [yen] 26.9 billion ($254.2 million) for the 2004...

Singapore Airlines Group.(ASIA/PACIFIC Report)(first quarter results)(Brief Article)
June 1, 2005... Singapore Airlines Group announced a net profit attributable to shareholders of S$1.39 billion ($839.7 million) for the fiscal year ended March 31, up 63.6% over a net profit of S$849.3 million in the previous SARS-affected fiscal year, which...

China Southern Airlines.(ASIA/PACIFIC Report)(China Southern Airlines blames fuel prices for loss)
June 1, 2005... China Southern Airlines blamed soaring fuel prices as it reported a loss of RMB48 million ($6 million) for 2004. Nevertheless, the results represented a significant improvement compared to 2003, when the SARS crisis pushed the airline into a...

China and Canada.(ASIA/PACIFIC: Report)(airlines contract)(Brief Article)
June 1, 2005... China and Canada signed a new bilateral agreement in April that provides for a three-fold increase in passenger and cargo flights between more city-pairs as well as codesharing opportunities for Canadian and Chinese airlines.

Virgin Blue.(ASIA/PACIFIC Report)(Virgin Blue Airlines to equip with LiveTV)(Brief Article)
June 1, 2005... Virgin Blue will equip its aircraft with inflight satellite television supplied by LiveTV, a subsidiary of JetBlue Airways. Installation on 51 737s is scheduled to begin in the third quarter. The systems will be maintained by LiveTV as well.

SIA Engineering Co. and Parker Hannifin Corp.'s Parker Aerospace.(ASIA/PACIFIC Report)(Aerospace Component Engineering Services Co to be formed)(Brief Article)
June 1, 2005... SIA Engineering Co. and Parker Hannifin Corp.'s Parker Aerospace will form a Singapore-based hydraulic component MRO center to be called Aerospace Component Engineering Services Co.

Thales.(ASIA/PACIFIC: Report)(new contract to Thales S.A.)(Brief Article)
June 1, 2005... Thales was awarded contracts by CAAC to supply its RSM 970S monopulse secondary surveillance radar for six en route secondary radars in China's eastern corridor.

GMF AeroAsia.(ASIA/PACIFIC Report)(Garuda Indonesian Airways signs contract with Garuda Indonesian Airways)(Brief Article)
June 1, 2005... GMF AeroAsia, the maintenance arm of Garuda Indonesia, and GE Transportation Aircraft Engines signed a two-year component repair contract worth roughly $10 million.

Lufthansa Group.(EUROPE Report)(first quarter results)(Brief Article)
June 1, 2005... Lufthansa Group had a net loss of 116 million [euro] ($148.5 million) for the first quarter to March 31 compared to a profit of 62 million [euro] in the year-ago period. The 2004 results, however, benefited from a 292 million [euro] book profit...

British Airways.(EUROPE Report)(British Airways PLC)(first quarter results)(Brief Article)
June 1, 2005... British Airways reported a net profit of 251 million [pounds sterling] ($464.2 million) for the financial year ended March 31, a 93.1% increase compared to a net profit of 130 million [pounds sterling] during the 2003-04 fiscal year. ...

Iberia.(EUROPE Report)(Iberia Lineas Aereas de Espana S.A.)(first quarter results)(Brief Article)
June 1, 2005... Iberia's first-quarter net loss widened to 16.1 million [euro] ($20.7 million) from 10.1 million [euro] in the year-ago period. Operating loss for the March quarter also rose, to 31.2 million [euro] from 26.4 million [euro]. Revenue climbed 5%...

SAS Group.(EUROPE Report)(Scandinavian Airlines System)(first quarter results)(Brief Article)
June 1, 2005... SAS Group reduced its net boss for the first quarter to Sek971 million ($135.7 million) from Sek1.37 billion in the 2004 March quarter. Group operating revenue rose 3.6% to Sek12.02 billion while expenses inched up 1.7% to Sek14.06 billion,...

Quoted briefly.(EUROPE Report)
June 1, 2005... "We had a very successful first flight and thoroughly enjoyed every minute of it" --Airbus Senior VP-Flight Division Claude Lelaie commenting on the A380 first flight.

Ryanair.(EUROPE Report)(Ryanair Holdings PLC not to offer IFE units )(Brief Article)
June 1, 2005... Ryanair will not move forward with plans to offer its passengers digEplayer portable IFE units after a five-month trial on five Stansted-based aircraft failed to develop sufficient interest among customers. Separately, Ryanair said it will...

Alitalia.(EUROPE Report)(Alitalia Linee Aeree Italiane S.p.A. to be sold)(Brief Article)
June 1, 2005... Alitalia's ground services unit Alitalia Servizi SpA has been set up as a separate subsidiary in preparation for its partial sale to government holding firm Fintecna. Alitalia Servizi holds 100% of Alitalia Airport, 100% of Atitech, 60% of...

Goodbye shar fin.(ASIAN/PACIFIC Report)(Boeing 787 has a new look)(Brief Article)
June 1, 2005... Boeing recently revealed the final exterior look of the 787, showing a more conventional looking tail than in past renditions. Northwest was one of three new customers for the 787 announced this spring. [ILLUSTRATION OMITTED]

Aer Lingus.(EUROPE Report)(Aer Lingus Group PLC has new CEO)(Brief Article)
June 1, 2005... Aer Lingus, as expected, appointed Dermot Mannion as its new CEO replacing Willie Walsh, who left the airline in January and recently was named CEO of British Airways. Mannion, 47, joined Dubai-based Emirates in 1987 and became president of...

Finnair.(EUROPE Report)(first quarter results)(Brief Article)
June 1, 2005... Finnair earned 11.5 million [euro] ($14.7 million) in the first quarter ended March 31, much improved over a profit of 1.2 million [euro] in the year-ago period, while EBIT was 18.7 million [euro] versus negative EBIT of 2.4 million [euro] last...

Austrian Airlines Group.(EUROPE Report)(first quarter results)(Brief Article)
June 1, 2005... Austrian Airlines Group's first-quarter loss widened to 80.8 million [euro] ($104.3 million) from 47.9 million [euro] a year ago. The 2005 period was marked by load factor weakness, overcapacity and extremely high fuel costs, and AAG also saw...

European Commission.(EUROPE Report)(rescue aid Cyprus Airways)(Brief Article)
June 1, 2005... European Commission last month authorized rescue aid in the form of a six-month, 30 million [pounds sterling] ($56.7 million) loan guarantee at market rates for Cyprus Airways to "allow the authorities to organize the restructuring of the...

Malev.(EUROPE Report)(Company sales and earnings)(Brief Article)
June 1, 2005... Malev reduced its net loss to 2.11 billion forints ($11 million) in 2004 from 4.3 billion forints in 2003. The carrier said its market share at its Budapest hub fell to 49% from 56.5% in 2003, primarily as a result of the expansion of LCCs.

CSA Czech Airlines.(EUROPE Report)(Company Profits and sales)(Brief Article)
June 1, 2005... CSA Czech Airlines reported a final net profit of 324.2 million koruna ($13.8 million) for 2004, four times higher than 2003 results. Total operating income rose 16% to 22.3 billion koruna.

Blue1.(EUROPE Report)(Appointments )(Brief Article)
June 1, 2005... Blue1 VP-Finance and CFO Stefan Wentjaervi was appointed president and CEO of the Finnish SAS subsidiary, replacing Sveneric Persson, who is taking over as head of the SAS organization in the Americas on Sept. 1.

EADS.(EUROPE Report)(European Aeronautic Defence and Space Company )
June 1, 2005... EADS reported net income of 328 million [euro] ($420.7 million) for the March quarter, up significantly over 49 million [euro] earned in the year-ago period. Revenue climbed 16% to 7.01 billion [euro] and EBIT more than tripled to 657 million...

BAE Systems.(EUROPE Report)(contracts)
June 1, 2005... BAE Systems will provide actuator control electronics units for 777s through 2012 under an agreement with Boeing.

Boeing and KLM Engineering and Maintenance.(EUROPE Report)(contracts )(Brief Article)
June 1, 2005... Boeing and KLM Engineering and Maintenance signed a cooperative agreement to offer the 737NG Component Services Program jointly.

Lufthansa Systems.(EUROPE Report)(contracts)(Brief Article)
June 1, 2005... Lufthansa Systems said Austrian Airlines selected the NetLine/Sched modules Slot Manager and Slot Monitor with implementation set to be completed by summer. Separately, Spanair opted for an upgraded package of the integrated NetLine/Crew...

Finnair Technical Services and Martinair.(EUROPE Report)(contracts)(Brief Article)
June 1, 2005... Finnair Technical Services and Martinair signed a contract covering heavy maintenance for five MD-11Fs plus one option.

Sabena Technics.(EUROPE Report)(contracts )
June 1, 2005... Sabena Technics signed a contract with Germania Fluggeselischaft for brake overhaul on its fleet of 19 F100s over a period of five years.

Aviareps.(EUROPE Report)(Aviareps was appointed as the new general sales agent for SN Brussels Airlines in the Ukraine. )(Brief Article)
June 1, 2005... Aviareps was appointed as the new general sales agent for SN Brussels Airlines in the Ukraine.

EADS Sogerma Services.(EUROPE Report)(contracts )(Brief Article)
June 1, 2005... EADS Sogerrna Services subsidiary EADS Revima won a launch order contract for landing gear exchanges and overhauls on Cathay Pacific's fleet of 15 777s.

Shepherd Systems.(EUROPE Report)(Shepherd Systems announced that ANA, Virgin Atlantic and Qatar Airways renewed contracts for its Market Intelligence online product )(Brief Article)
June 1, 2005... Shepherd Systems announced that ANA, Virgin Atlantic and Qatar Airways renewed contracts for its Market Intelligence online product suite and Galaxy processing services.

SAS Ground Services.(EUROPE Report)(SAS Ground Services will provide ground handling for Thai Airways )(Brief Article)
June 1, 2005... SAS Ground Services will provide ground handling for Thai Airways International at London Heathrow.

Swissport International.(EUROPE Report)(Swissport international will provide air cargo handling )(Brief Article)
June 1, 2005... Swissport international will provide air cargo handling to Asiana at Amsterdam Schiphol beginning June 1.

US Airlines.(NORTH AMERICA Report)(Brief Article)
June 1, 2005... US airlines would have more time to make payments to underfunded employee pension plans under legislation proposed in late April. The Employee Pension Preservation Act of 2005 would allow carriers to spread their deferred pension funding...

More Indian competition.(EUROPE Report)(Kingfisher Airlines took delivery of its first V25000-powered A320)(Kingfisher Airlines )(Brief Article)
June 1, 2005... Kingfisher Airlines took delivery of its first V25000-powered A320 in April, one of 14 to be delivered through 2006. [ILLUSTRATION OMITTED]

European Airline Traffic April 2005.(FACT FILE)(Illustration)
June 1, 2005... FACT FILE European Airline Traffic April 2005 RPKs change ASKs Airline (billions) 2004 (billions) AF-KLM (1) 15.00 4.8 18.94 BA Group 9.00 0.1 ...

US Airways.(NORTH AMERICA Report)(Services of Airlines)(Brief Article)
June 1, 2005... US Airways will Dull another 10 unspecified jets out of is mainline fleet this summer, a step that will bring its fleet to 253 By the end of August from 281 at the start of the year.

Calgary-based WestJet.(NORTH AMERICA Report )(Calgary-based Westlet, impacted by high fuel prices and very low yields, lost C$9.6 million ($7.7 million) in the March quarter)(Brief Article)
June 1, 2005... Calgary-based Westlet, impacted by high fuel prices and very low yields, lost C$9.6 million ($7.7 million) in the March quarter, reversing net income of C$512,000 in 2004 and also its second consecutive quarterly loss after a streak of 31...

Northwest Airlines.(NORTH AMERICA Report)(Appointments and Resignations)(Brief Article)
June 1, 2005... Northwest Airlines announced that CFO Bernie Hart resigned and will De replaced by Neal Cohen. No reason was given for his departure. Han joined NWA n October 2002 after seven years as CFO at America West. Cohen most recently was executive VP...

Alaska Airlines.(NORTH AMERICA Report)(Brief Article)
June 1, 2005... Alaska Airlines Pilots took a 26% pay cut and will contribute more to their health care under a new two-year contract crafted by an arbitrator that went into effect at the end of April. The contract also includes productivity enhancements, but...

Midwest Air Group.(NORTH AMERICA Report)(Midwest Air Group reported a $15.9 million net loss for the first quarter)(Brief Article)
June 1, 2005... Midwest Air Group reported a $15.9 million net loss for the first quarter, more than double the net loss of $6.9 million in the 2004 period.

World Air Holdings.(NORTH AMERICA Report)(World Air Holdings, parent of World Airways, acquired North American Airlines)(Brief Article)
June 1, 2005... World Air Holdings, parent of World Airways, acquired North American Airlines effective April 27 for $35 million in cash. The carriers will be managed and operated independently of one another. World operates 16 MD-11s and DC-10s in civil and...

Hawaiian Airlines.(NORTH AMERICA Report)(Labor contracts)
June 1, 2005... Hawaiian Airlines' exit from bankruptcy appears to be all but assured now that its pilots have ratified a new three-year contract. The pilots were the last of the carrier's organized workgroups to approve a new contract, a condition for the...

AirTran Airways.(NORTH AMERICA Report)(Labor contracts )(Brief Article)
June 1, 2005... AirTran Airways and its flight attendants, represented by the Assn. of Flight Attendants, reached a tentative agreement on a new 42-month contract. If ratified, it takes effect June 1.

Kalitta Air.(NORTH AMERICA Report)(Kalitta Airlines)(Brief Article)
June 1, 2005... Kalitta Air and its pilots, represented by the International Brotherhood of Teamsters, reached a tentative agreement on a new contract calling for a 15% pay increase over the three-year span of the contract with an additional signing bonus of...

Transportation Safety Board of Canada.(NORTH AMERICA Report)(Transportation Safety Board of Canada)(Brief Article)
June 1, 2005... Transportation Safety Board of Canada continues its investigation into a March 6 incident in which an Air Transat A310 carrying 270 passengers and crew from Cuba to Quebec City lost most of its composite rudder during the cruise phase of...

President Bush.(NORTH AMERICA Report)(Brief Article)
June 1, 2005... President Bush nominated Edmund Hawley as the next head of the Transportation Security Administration to succeed David M. Stone, who leaves this month. Hawley is currently a supply chain technology consultant and a member of FAA's Air Traffic...

Boeing.(earnings)(Brief Article)
June 1, 2005... Boeing had net earnings of $535 million in the quarter ended March 31, down 14% from $623 million in the 2004 period. Revenue was virtually flat at $12.99 billion. Earnings from continuing operations fell 16.6% to $687 million from $824 million...

Happy birthday.(General Electric Co.)(Brief Article)
June 1, 2005... GE90-115-powered 777-300ER marked its one year service anniversary last month. [ILLUSTRATION OMITTED]

US Majors Traffic April 2005.(air transportation industry)(Brief Article)(Illustration)
June 1, 2005... FACT FILE US Majors Traffic April 2005 % +/- RPMs % chg. ASMs chg. LF chg. Airline (bil.) 1004 (bil.) 2004 (%) 2004 AirTran ...

GE90-110-powered 777-200LR.(NORTH AMERICA Report)(Brief Article)
June 1, 2005... GE90-110-powered 777-200LR set a world record for a twinjet last month when it took off for stall tests at 783,000 lb., eclipsing the record of 774,600 lb. (351,300 kg.) set by the 777-300ER in 2003. Boeing expects the 2% improvement in fuel...

Boeing.(NORTH AMERICA Report)(Brief Article)
June 1, 2005... Boeing named four more 787 suppliers. Jamco Corp. will provide flightdeck interiors along with the flightdeck door and bulkhead assembly. Earlier this year, Jamco was chosen to supply the lavatories. Diem Luftfahrt Elektronik will provide the...

Boeing and Mxi Technologies.(NORTH AMERICA Report)(Brief Article)
June 1, 2005... Boeing and Mxi Technologies said Aloha Airlines completed installation of several modules of Boeing's Enterprise One maintenance software for configuration management and maintenance tracking for its fleet of 737-200s and 737-700s.

Messier Services.(Messier Services America Inc.)(Brief Article)
June 1, 2005... Messier Services signed landing gear overhaul contracts with Mesaba Airlines and BWIA West Indies Airways. The Mesaba agreement covers 35 Avro RJs and the contract with BWIA represents the first A340 contract for Messier Services.

Sabre Airline Solutions.(agreement with Southwest Airlines Co.)(Brief Article)
June 1, 2005... Sabre Airline Solutions signed a seven-year agreement with Southwest Airlines to supply a customized passenger management solution for its reservations system and customer interactions at airports.

CAE.(NORTH AMERICA Report)(Brief Article)
June 1, 2005... CAE will furnish training on A320s to USA3000 Airlines through the Airbus-CAE training cooperation.

Global ePoint.(AirWorks Division)(Brief Article)
June 1, 2005... Global ePoint's AirWorks Division received an FAA STC for its cockpit door surveillance system, which now spans the entire family of 737s.

Israel Aircraft Industries.(NORTH AMERICA Report)(Brief Article)
June 1, 2005... Israel Aircraft Industries' Empire Aero Center--New York will perform heavy maintenance on Midwest Airlines' 13 MD-80s.

Servisair/GlobeGround.(ground handling services)(Brief Article)
June 1, 2005... Servisair/GlobeGround began ground handling services at Miami International Airport. By the end of May it expected to be handling seven airlines there.

Varig and TAP Portugal.(Varig S.A.)(Brief Article)
June 1, 2005... Varig and TAP Portugal confirmed signing of an MOU that may lead to the Portuguese carrier taking up to a 20% stake in the struggling Brazilian airline Separately, Varig overhauled its entire board of directors and replaced CEO Luiz Martin...

LAN Airlines.(LATIN AMERICA)(Brief Article)
June 1, 2005... LAN Airlines said net income for the three months ended March 31 fell 3.7% to $46.3 million from $48.1 million n the year-ago period. Operating income dropped 10.2% to $56.6 million from $63 million in the 2004 quarter. "First-quarter...

Brazilian low-fare carrier Gol.(Gol Transportes Aereos)(Brief Article)
June 1, 2005... Brazilian low-fare carrier Gol reported a 131.1 million reais ($53.1 million) net income for the first quarter, up 44.6% from R$90.7 million last year, as its strong growth helped offset high fuel prices. Net operating revenues soared 36% to...

Chile and Paraguay.(open skies agreements)(Brief Article)
June 1, 2005... Chile and Paraguay signed a broad open skies agreement that includes cabotage for both countries. The new agreement replaces a bilateral dating to 1957. Paraguay now joins Uruguay in enjoying open skies with Chile, an aggressive advocate of...

US and Paraguay.(open skies agreements)(Brief Article)
June 1, 2005... US and Paraguay also signed an open skies agreement allowing carriers of the two countries to operate between them without restriction.

Emirates Group.(earnings)(Brief Article)
June 1, 2005... Emirates Group cited sharp sales growth and increasing customer preference for its products as it reported a record net profit of Dhs2.6 billion ($707.9 million) for the fiscal year ended March 31, a 49% jump over a net profit of Dhs1.75...

Seattle-based.(Boullioun Aviation Services Inc. acquired by Aviation Capital Group)(Brief Article)
June 1, 2005... Seattle-based operating lessor Boullioun Aviation Services was sold by German banking giant WestLB to Aviation Capital Group, a subsidiary of Pacific LifeCorp, parent of Pacific Life Insurance Co. Price was not disclosed. A Pacific LifeCorp...

Debis AirFinance.(Cerberus Capital Management acquires)(Brief Article)
June 1, 2005... Debis AirFinance shareholders DaimlerChrysler, Bayern LB, Dresdner Bank, DZ Bank and HypoVereinsbank sold the Amsterdam-based aircraft finance and leasing company to Cerberus Capital Management. Terms were not disclosed.

Northwest Airlines.(finance)(Brief Article)
June 1, 2005... Northwest Airlines completed a $147.8 million financing, the proceeds of which it used to pay the November 2005 principal amortization in the same amount under its $975 million credit agreement.

Pegasus Aviation Finance Co.(LEASING & FINANCE BRIEFS)(Brief Article)
June 1, 2005... Pegasus Aviation Finance Co. delivered the first 737-800 it has leased to West Jet. Pegasus will finance a total of five 737NGs for the airline.

BAE Systems Regional Aircraft.(BAE SYSTEMS PLC leased Atlantic Airways Inc.)(Brief Article)
June 1, 2005... BAE Systems Regional Aircraft leased a 146-200 to Atlantic Airways of the Faroe Islands.

AWAS delivered.(MD-80s to World Focus Airlines)(Brief Article)
June 1, 2005... AWAS delivered the first of three MD-80s to World Focus Airlines. It delivered a CFM56-3B1-powered 737-500 to Bulgaria Air and a CFM56-3C1-powered 737-300 to bmibaby.

Gulf Air.(Gulf Air Company GSC)(Brief Article)
June 1, 2005... Gulf Air absorbed a 30 million dinar ($79.6 million) increase in fuel expense and reported a net profit of 1.5 million dinars for 2004 compared to a net loss of 19.9 million dinars in 2003. Revenue rose 23.8% to 476.3 million dinars on a 27%...

South African Airways.(Kyrl Acton appointed as chief operating officer)(Brief Article)
June 1, 2005... South African Airways in April named Kyrl Acton as its first-ever COO. The position replaces that of deputy CEO, last held by Oyama Mabandla, whose resignation became effective March 31. An Irish national and former top executive at Aer Lingus...

FAA.(Federal Aviation Administration)(Brief Article)
June 1, 2005... FAA lowered Ghana's safety rating from Category 1 to Category 2. This is not an indication of whether individual Ghanaian carriers are safe or unsafe. However, airlines operating from countries with a Category 2 rating may not increase services...