COVID-19 will mean less congested airports, says Toronto Pearson’s new chief executive

The head of Canada’s largest airport is calling for government investment to help build a more automated, and ultimately safer, airport of the future.

“Indicators suggest that the travel and tourism sector will be amongst the slowest to recover,” said Deborah Flint, the airport’s new President and Chief Executive Officer, who took the reins in February.

Winning back travellers will mean convincing them airports are safe and clean. That will take investments in technology.

“In particular, we’ve stressed the need to enhance airport facilities both during the pandemic and for a post-COVID pandemic environment,” said Flint. “There is no better time than now to invest in modernizing Canada’s borders to reflect our new public health reality, and also to embrace technologies that will make international travel safer and more attractive.”

These improvements include the use of biometrics, e-gates that operate automatically, and CT scanners at security checkpoints – everything to remove as many touch points as possible from the passenger’s journey.

“Toronto Pearson will be among the leaders in establishing global standards and practices,” she said. Other measures to reassure passengers include more cleaning, disinfection, blocking seats and alternating kiosks and baggage drop off points to ensure physical distancing, and metering incoming passengers to ensure they don’t overwhelm customs facilities.

In normal times, more than 130,000 passengers would pass through Peasron every day. The pandemic has reduced that number to fewer than 5,000, a 94% drop.

Instead, the airport has turned to expanding its cargo operations to meet surging demand in that sector.

“We’re also looking at what facilities we can modify or additional infrastructure we might put in place to support our carriers,” said Doug Allingham, Chair of the Greater Toronto Airport Authority Board. “We’re even looking at building additional temporary cargo processing facilities to handle this traffic more efficiently.”

Last year was a good one for Pearson. The airport collected more than $1.5 billion in revenues, including:

• $448 million in Airport Improvement Fees
• $324 million in landing fees
• $203 million from parking and ground transportation (such as taxis)
• $194 million in terminal charges to the airlines

The airport also earned an eye-popping $315 million from concessions and office rentals.

“This increase was mainly due to the continued expansion of the GTAA’s corporate partnerships designed to enhance the passenger experience, increased advertising, sponsorship and retail tenant revenues as a result of long-term strategic partnerships, and to the revenues related to additional investment properties acquired in the fall of 2018,” the airport reported.

Long before COVID-19 kept passengers huddling inside their homes, Pearson owed $6.4 billion to creditors, the result of years of construction to keep up with surging passenger demand. Even that sum showed a downward trend, dropping from a high of $7.3 billion in 2011.

The airport spent $295 million, 21% of its budget, just to pay the interest.

At the same time, passenger numbers topped 50 million for the first time meaning the airport’s debt per enplaned passenger – a key airport metric – decreased from $258 in 2018 to $254 in 2019.

Pearson spent $1.4 billion to run the operation, including $384 million to suppliers, $201 million in salaries, and $171 million in ground rent paid to the federal government. That rent has been forgiven for the rest of the year and airports want payments suspended for the long term.

It all added up to a net income of $139.8 million last year. In Canada, airports are required to reinvest their profits into their facilities or operations.

Converting Boeing 777s to carry cargo in the passenger cabin requires new processes and innovative thinking.

We’re happy to support @AirCanada as they create new, safe and efficient ways to keep cargo moving, supporting the air cargo supply chain. pic.twitter.com/ZiaR6nb67Z

— Toronto Pearson (@TorontoPearson) May 1, 2020

Those financial results show why the COVID-19 pandemic poses such a risk to airports. When passenger numbers are rising, the money rolls in. But when passenger numbers plummet as they did in March and April. there aren’t a lot of expenses that can be cut.

How bad the impact will be will depend on the pandemic’s duration, the length of government travel restrictions, and the length of the recession caused by COVID-19.

“Long term, the financial sustainability of our organizarion remains strong and secure,” said Ian Clarke, the airport’s Chief Financial Officer.

“We can’t depend on a government hand up or hand out, so we’ve started to look at future and new sources of revenue including increasing our cargo business,” he said, noting the airport has reduced costs 55% this year.

“We expect to see domestic traffic resume first, followed by a gradual resumption of international flights,” said Flint. “City-pairs and corridors will open under highly coordinated strategies.” Even with those gradual steps, it could take three years or more to fully recover.

A survey by The International Air Transport Association – which represents most of the world’s largest carriers – shows it could take between two and six months for people to start travelling again once the pandemic subsides.

“We will emerge stronger to create the next great chapter in Toronto Pearson’s story,” said Flint.

“Aviation’s contribution to mankind, and with the need for humans to connect to each other across the planet this, industry will thrive once again.”