Despite a return of passengers to the sky, many airports across the country are struggling to balance their books, manage their bloated debt levels and lift enough money to make essential infrastructure repairs and enhancements.
In some cases, that features climbing passenger fees to assist alleviate financial pressures.
The most important airports are recovering much faster compared with those in smaller cities, as passenger activity and reduced airline service continues to hamper their financial situation.
In Fort McMurray, Alta., the airport can handle as much as two million passengers annually, but currently the ability is on pace to see only about 300,000 travellers this yr. The 19 each day flights before the COVID-19 pandemic began three years ago have been reduced to between nine and 11, depending on the day of the week.
The airport authority is carrying what it describes as a “significant” debt of $167 million after a serious expansion project was accomplished in 2014. The organization is running a deficit and counting on its reserve funding to balance the books, as management doesn’t expect passenger activity to completely rebound until at the very least 2025.
Airports in Canada operate as not-for-profits, counting on passenger, aircraft and fuel fees to generate most of their revenue.
“The [passenger] numbers are still not where we might hoped they’d be,” said Denean Robinson, president and CEO of the Fort McMurray Airport Authority, which received about $36 million in pandemic financial support from all three levels of presidency.
“We’re struggling as many airports in Canada are,” she said. “The extent of debt that we had taken on when this terminal was open was definitely sustainable with the quantity of passengers that we had going through with the extent of fees. The difficulty is that we do not have that top-line revenue now to support that debt payment.”
The airport charges an airport improvement fee of $40 per passenger, which is amongst the best within the country. Management will review the fee at the tip of the yr.
“We do what we are able to to try to keep up our fee structure. But when all else fails, if we’d like to lift that top-line revenue growth, we can have to have a look at raising those fees,” Robinson said, adding that financial pressures could also end in more congestion and longer lineups as airports delay essential improvements.
Rising costs for airports
Toronto’s Pearson International Airport boosted its fees on Jan. 1, while Regina’s airport is increasing its rates starting April 1.
“This user-pay system works wonderful, but after we went into the pandemic there have been no users,” said Barry Prentice, a professor on the University of Manitoba’s Asper School of Business in Winnipeg who specializes in transportation. He described the escalating charges as “outrageous.”
The fees are sometimes criticized by airlines and passengers because they drive up the associated fee of air travel within the country.
“Numerous our airports did need to increase their airport improvement fees throughout the pandemic,” said Monette Pasher, president of the Canadian Airports Council (CAC).
The organization estimates the federal government provided about $1 billion in financial support. Still, airports collectively added $3.2 billion in debt to keep up operations through the pandemic, she said, which puts many airports on “difficult financial footing.”
“Pre-pandemic, this model was working well. The individuals who use the system pay for the system. We had award-winning airports and things were going quite well. It’s really difficult in a not-for-profit model and a user-pay system to get through two years of a pandemic,” Pasher said.
The federal government collects about $400 million annually in rent payments from airports, she said, and the CAC is asking the federal government to reinvest that quantity back into airport infrastructure for the subsequent decade.
Generally, Canadian airports are in a tougher position financially compared with those in the US due to the level of presidency aid through the pandemic, in line with a recent report by DBRS Morningstar, a credit standing agency.
“We expect air travel recovery to proceed for Canadian airports. Nevertheless, the limited financial support from the federal government over the past two years will reduce the financial capability of the Canadian airports to tackle any significant debt-funded capital programs,” the report’s authors wrote.
Latest technology might be the reply
Throughout the darkest days of the pandemic in Calgary, only about 200 people would walk through the airport terminal, which might handle 60,000 passengers. For Bob Sartor, president and CEO of the Calgary Airport Authority, it was like looking into the abyss, not knowing how long it might take for the hustle and bustle of travel to return.
His outlook has drastically improved, with the airport now projecting to achieve pre-pandemic passenger levels this yr.
“We’re really completely happy. We’re essentially the most recovered airport, definitely of the massive airports,” said Sartor, who has announced he’ll step down within the months ahead.
“It feels really good to have the option to say I’m leaving an airport that has an excellent growth trajectory.”
While Canada’s major airports have experienced the quickest rebound, they still face challenges to maintain fees in check, while improving the passenger experience.
Technology and other upgrades might be the reply in containing rising passenger fees, Sartor said, equivalent to facial biometrics, self-boarding and self bag-drops.
“They’re low price, they’re low-hanging fruit they usually make a tonne of sense,” he said.
“There’s so some ways through which we are able to reduce the pinch points at an airport through technology and policy improvements on the a part of the federal government that will allow us to not spend more to construct an even bigger hold room for customs, the check-in area or an even bigger security screening area.”
The Calgary airport will not be considering raising its passenger fee in 2023.
The airport is carrying about $3.3 billion in debt, however the airport authority has said the pandemic won’t have a fabric impact on the ability’s long-term financial sustainability.