Canadian Airports Council warns a Parliamentary committee passengers could bear the cost of the COVID pandemic for years
An association representing Canada’s largest airports warned Airport Improvement Fees could jump 50% as a result of the COVID-19 pandemic. Joyce Carter, President of the Canadian Airports Council, made the revelation Friday afternoon before the House of Commons Standing Committee on Finance.
Airports charge AIFs on top of regular airfares and they are a major source of cash to pay for capital expenses. In 2019, for instance, Toronto Pearson International Airport generated $448 million in AIF charges, its largest single source of revenue.
“Give me a practical example of what a traveller might be looking at from the booking process right through to the time they board their flight,” asked Sean Fraser, the Liberal MP for Central Nova.
“When you look at airports across Canada and they model out their financial stability over the next five years, they don’t have enough revenue,” replied Carter. “So that airport improvement fee in some cases has to go up 40, 50% to be able to sustain our operations through the most critical period.”
At many airports, that would mean an additional $10 – 15 on a one-way ticket.
“We do not want that to happen,” she said.
Carter compared the pandemic to 9/11, when airports had to make huge investments in security to make passengers feel safe.
“Today with the pandemic, that investment is going to be around the technologies and the touchless processes that passengers can go through,” she said, “that will allow them to feel safe as they go through the airport. So we need to preserve the cash we have today to allow us to make those investments.”
Airports are expecting to lose up to $2.2 billion in revenue this year. That would represent roughly half their revenues, based on 2018 data.
“Airports must also continue to meet their debt obligations,” said Carter, “and with little or no passengers, the Airport Improvement Fee, that typically covers these costs, has vanished.”
To prevent that scenario, airports need government help, Carter argued.
The airports council is calling on Ottawa to permanently abolish land rents that cost them hundreds of millions a year. The move would help them cope with the long-term effects of the COVID-19 pandemic, they argue.
Land lease payments have been a contentious issue for Canadian airports for years. They are a holdover from the mid-90s when Ottawa transferred operations to non-profit local authorities.
The eight largest airports pay 97% of all land rents. In 2018, that amounted to almost $400 million. Leases are charged as a percentage of an airport’s revenue and Ottawa has cancelled payments for airports through the rest of the year.
“Given the financial strain that COVID crisis is having on airports, I’m just wondering if you can comment on whether the existing programmes that have been offered by the federal government have been of any assistance,” asked Conservative Member of Parliament Marty Morantz, whose riding includes Winnipeg International Airport.
One of those existing programmes includes a federal emergency wage subsidy.
“We just confirmed, in the past 24 hours, that Canada’s 21 privately-operated airport authorities are eligible for this programme,” said RJ Steenstra, President and CEO of the Fort McMurray International Airport and Vice Chair of the Canadian Airports Council.
Those eligible include all of Canada’s largest hubs.
Carter worries, however, the subsidies will expire long before the crisis in aviation passes.
“The recovery for the aviation business is going to be extremely long,” added Carter. “And so while we very much appreciate the programme that is put in place today, by it ending in June, it is simply going to push the ball down the court in terms of when airports will need to lay off employees for those that haven’t already done so.”
The picture is no less dire for smaller airports. A dozen municipal and territorial airports are not eligible for the wage subsidy, said Steenstra.
“The financial model for Canada’s smallest airports is barely sustainable at the best of times,” Carter told the committee. They have remained open to help move essential cargo and medical flights. Some have no passenger service at all.
Those airports need a federal assistance plan to pay for capital projects to reinforce aviation safety as well as direct subsidies to stay afloat, she told the committee.
Airports expect the domestic aviation market to open first as provinces and territories remove travel restrictions. International travel could be quite some time after that.
“From a domestic perspective, we expect air travel to open up toward the end of this summer,” said Carter. “From an international perspective, it’s going to be much longer.”