After two decades of expansions, rehabilitations, and refurbishments, national data compiled for the first time show airports racked up more debt than four provinces.

Unless you’re really into the bond market, the Greater Toronto Airport Authority’s news release Monday afternoon was easy enough to ignore. The title: GTAA Announces Commencement of Bondholder Consent Solicitation.

Behind the nondescript headline lies a stark reality: Toronto is asking to loosen some of the terms of its bonds for the next two years. Terms such as how much debt the airport is allowed to carry. It’s a way to avoid getting into trouble as revenues plummet and the airports take on more debt as a result of the COVID-19 pandemic. That simple calculation shines a light on the risks posed by billions in loans racked up by airports across the country even before the COVID-19 pandemic devastated their revenues.

After more than a decade expanding their terminals, building car parks, improving access roads, adding rail connections, and rehabilitating their runways, Canada’s 21 largest airports racked up a pile of debt that works out to an average of $200 for every person who boarded an aircraft last year. This year, the number is set to skyrocket.

National data compiled for the first time by Western Aviation News present in stark terms the threat the pandemic poses to airport finances. Canada’s airports – ranging in size from Charlottetown serving 383,000 passengers to Toronto which served more than 50 million – together owed $15.2 billion at the end of 2019. That’s more than the debt owed by the provinces of Saskatchewan, Newfoundland, New Brunswick, and Prince Edward Island.

Canadian airports, with few exceptions, are private not-for-profit companies that pay for their own upkeep and rely heavily on passenger revenues, such as landing fees and Airport Improvement Fees, for their survival.

The data were compiled by reviewing the annual reports of 21 of the busiest facilities in Canada that represent every province, but exclude government-run facilities in the three territories. Together, the airports handle about 97% of all passenger traffic in the country.

“That’s the challenge of the airport business model,” said Geoff Dickson, President and Chief Executive Officer of Victoria International Airport in an interview whose airport paid off its debt in 2017. “So much of our revenue is activity-based, whether airplanes landing – for passengers coming off the aircraft there’s a landing and terminal charge for the carriers – the individual passengers boarding would pay an Airport Improvement Fee, and then all the variable revenue from your tenants, you concessionaires, your food services, your retail services, your car rentals, and your parking lot. All that revenue has effectively disappeared.”

Airport investments span the country and take any number of shapes, not all of them immediately visible by the public:

• In Vancouver, a terminal and car park expansion
• In Toronto, ongoing terminal expansion
• In Montreal, $351.7 million invested in construction of a new parking facility, preliminary work on a new train station, terminal construction, access road construction, and rehabilitation of runway 06L-24R
• In Fredericton and St. John’s, completion of major terminal expansions

A typical passage in Winnipeg’s Annual Report shows how the airport spent its money last year. “Total capital investments in 2019 were $60.1 million. This is an increase of $38.9 million compared to 2018. Two large projects were undertaken in 2019: the reconstruction of runway 13-36 [sic] including new edge lighting and electrical upgrades, plus the construction of a new common use ground servicing equipment facility which will be open in the spring of 2020.”

Even airports that have long since completed major works now have to pay off the mortgage on those fine new facilities. Calgary, which added a new runway and opened a new international terminal in 2016, owed $2.9 billion at the end of 2019. Edmonton, whose most recent terminal expansion opened in 2012, owed a little more than $1 billion.

To even out the playing field, Toronto International expresses debt in a useful way, calculating debt per enplaned passenger. It’s a way of figuring out how much an airport owes for each departing person and adjusting for the airport’s size and passenger growth over time. Arriving passengers are worth less to airports because they use substantially fewer services and generally don’t require fancy waiting areas or expensive security screening – they also don’t pay Airport Improvement Fees.

The Canadian Airports Council estimated in March that the pandemic would cost its members $2.2 billion in lost revenue this year. That would effectively cut their revenues by more than half, with few options to reduce expenses.

The 21 airports in our survey spent $664.6 million servicing their debt last year. That’s $100 million more than they spent on salaries. Those numbers help explain why the pandemic poses such a threat to airport authorities. While they are able to cut salary expenses from $562 million to roughly $350 million this year, there is little they can do about their debt payments. That amounts to a billion dollars in expenses before a single dime is brought in.

The effect: without major government intervention, debt per enplaned passenger will skyrocket in 2020.

In terms of their overall budgets, debt servicing ate up 17 cents of every dollar airports spent last year. The five airports that spent the most on debt servicing as a share of overall expenses were Winnipeg, Ft. McMurray, Toronto, Calgary, and Edmonton.

Only three airports – Charlottetown, Saskatoon, and Victoria – reported owing no debt in their 2019 annual reports. That has given them a little breathing room as they respond to the ongoing effects of the pandemic.

“We happen to be in a situation as an airport that is debt-free,” said Victoria’s CEO Geoff Dickson. “For us without having to be burdened with the repayment of principal and interest at this stage gives you a little bit more endurance as you burn through your cash reserves.”

The head of Regina International Airport, which finished 2019 with $37.9 million in debt ($183 per passenger) warned Friday his airport could run out of money by the end of September. In early June, Saskatchewan Conservative MP Michael Kram raised the spectre of airport bankruptcies because of the pandemic.

So far, no airport has publicly said it could go bankrupt, though Toronto’s request for bond condition easing shows the impact debt is having in the airport sector. And it’s likely to get worse before it gets better.

Victoria is projecting an $11 million cash loss this year, although non-cash items bring that down to around $2 million and has arranged for up to $60 million in financing, just in case, to cover operations and capital investments. In early June, the chief executive of St. John’s International warned his airport would have to borrow “a lot” of money to keep operating.

Ultimately these loans threaten to make make airfares more expensive, as airports raise fees as one of their only ways to cope with mounting losses and surging debt.