Airport lost $242.6 million in 2020 and anticipates further decline in annual passenger numbers in 2021. For the first time, asset sales are on the table
Calgary International Airport says it will have to further cut costs and consider an asset sale as it expects 2021 to be even more challenging than 2020. The airport authority’s chief executive made the revelation at a news conference Wednesday.
“The pandemic decimated demand for travel and erased 25 years of passenger growth at YYC,” said Bob Sartor, the President and Chief Executive Officer of the Calgary Airport Authority. The private non-profit authority leases the land and runs the airport. The airport handled 5.675 million passengers last year, 68% down from 2019. What’s worse, the airport expects to handle only 5.1 million people in 2021, further depressing revenues.
The airport authority lost $242.6 million in 2020. Canadian airports earn the vast majority of their revenues from passengers and the fees they generate. Three of the country’s top four airports have now reported their 2020 financial results. Toronto and Montreal are the other two. Combined, the three facilities lost more than $860 million in a single year.
The airport laid off 80 employees in 2020 to save money. When he was asked how he would cope with further reduced revenues in 2021, Sartor raised the prospect of selling assets.
“To optimize both our facilities to really continue to reduce our costs and to optimize our campus,” he said. “So what assets do we have that we might be able to sell, for example? So all those options are being looked at and on the table and in fact, we have a meeting with our board in a few short weeks to discuss that.”
What would a sale look like?
Sartor said the airport authority would not sell assets critical to getting passengers on their way. Buildings are the airport’s largest assets. Financial disclosures show the airport’s buildings are worth nearly $3 billion. Since much of that value is tied up in the terminal building, the actual proceeds of a sale would be significantly less.
Calgary is not the only airport looking at selling assets. PortsToronto, which runs Billy Bishop airport, recently went public with its desire to bring in a private investor.
The next biggest asset is $126 million in machinery, such as snowplows and fire trucks. Many of those would be considered essential to passenger operations. It also has another $9 million in crew vehicles so personnel can get around the airfield.
The airport could also sell almost $6 million in land the airport owns outright. The rest of the land the airport sits on is leased from the federal government. Sartor declined to say what assets the airport is looking at.
“I’d rather really not discussed that until such time as we made a firm decision,” said Sartor. “But we do have buildings that we own on on campus and and other facilities that are not that are not essential for managing air travel.”
Taking on debt
To keep the lights on, the Calgary Airport Authority is taking on debt.
Sartor said expenses are being cut wherever possible.
“I would say that we are in a break-fix mode as an airport now as are most airports,” he said. “Given the operational losses plus the fact that many airports have had to take on additional debt simply to stay open.”
Calgary’s debt is approaching $3 billion, almost all of it held by the government of Alberta. Much of that was taken on to build a major terminal expansion and new runway. Both opened not long before the pandemic hit.
The Canadian Airports Council expects its members to pile on $2.8 billion in new debt because of COVID-19. Before the pandemic, airports collectively owed more than $15 billion.
“The pandemic is also having a direct impact on the ability of the Authority to generate sufficient cash from operations to pay principal and interest obligation on its long-term debt,” the airport said in financial nots. “These circumstances lend significant doubt as to the ability of the Authority to meet its obligations as they come due”.
The airport is due to make a $220 million payment on December 31, 2021. It is negotiating with the government to defer that payment until times get better.
And that will depend on Canadians getting back on planes once the pandemic eases.
“It has taken both of our national carriers, literally a quarter century in some cases to build these highly interconnected systems that feed the four major hub airports in Canada which are Montreal, Toronto, ourselves, and Vancouver,” said Sartor. “It will take time for those connections to be fully rebuilt.”
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