Airport produced a small net income in first three months of the year, before the COVID-19 pandemic’s full impact was felt
Toronto’s Pearson International airport – Canada’s busiest airport and largest hub – reported a small profit in the first three months of the year as the effects of the COVID-19 pandemic started to make their mark on the aviation industry.
“The first quarter of this year has brought unprecedented and dramatic challenges to the aviation industry due to COVID-19,” said said Deborah Flint, President and Chief Executive Officer of the Greater Toronto Airport Authority, the non-profit agency that runs the airport. “The sharp reduction in air travel has had a significant negative impact on our business at Toronto Pearson, that is expected to continue for some time to come.”
The airport said it made $6.6 million from January to March, down from $11 million the year before. In Canada, airports are required to reinvest any profits into their facilities or operations.
Pearson management said the results would have been far worse had the federal government not decided in March to forego millions in annual lease payments for the land the airport sits on. Last year, Toronto paid more than $170 million in ground lease to the federal government.
Toronto International reported income of $339 million in the first quarter, down $23 million from the year before.
The pandemic has had a devastating effect on revenues collected as a result of passenger activity at the airport. In 2019, Toronto collected almost $450 million in Airport Improvement Fees charged on every passenger passing through the airport, and more than half a billion dollars in landing and terminal fees.
“The COVID-19 pandemic and resulting economic contraction has had, and is expected to continue to have, a negative impact on demand for air travel globally,” the airport reported. “Toronto Pearson has experienced significant declines in passengers and flight activity during March and April of 2020, as compared to the same periods in 2019.”
In Canada, major flight reductions by the country’s largest carriers, Air Canada and Westjet, started to take effect in mid-March as they cancelled international services and scaled back domestic flights. Flint told an Annual Public Meeting last week passenger volumes decreased from an average of 130,000 people a day to fewer than 5,000.
As the aviation market started to collapse, passenger numbers in Toronto dropped from 11.7 million people in the first three months of 2019 to 9.1 million in 2020. Data for April and May are expected to be even lower, as airlines have cancelled flights and passengers have stayed home.
On top of the revenue lost from landing and passenger fees, the airport authority has seen its revenue tumble from businesses that, in good times, leased prime real estate inside the terminal, such as boutiques and restaurants.
“Many GTAA stakeholders and counterparties are experiencing financial distress which has precipitated delays in payments and requests to the GTAA for contractual relief, and has resulted in temporary or permanent shutdown of their operations, which have adversely impacted our revenues and operations,” the airport reported.
Toronto is the third major Canadian airport to report financial results for the first quarter showing a decrease in revenues, even as it made money, largely as a result of traffic in January and February.
Winnipeg reported in late April it had lost $5 million in revenues as a result of the pandemic, while Montreal, the third-busiest airport in the country, reported on May 5 that revenues fell $30 million in the first three months of the year, while net income fell to less than $12 million.
The Canadian Airports Council, a body representing dozens of the largest airports in the country, expects airports to lose up to $2.2 billion as a result of the pandemic. Airports have laid off employees and turned to federal wage subsidies to help make ends meet during the crisis.
Toronto and Montreal, along with Vancouver and Calgary, are the only airports large enough to take advantage of a federal loan programme unveiled Monday to help businesses make it through the pandemic.
Daniel-Robert Gooch, the council’s President, said in an e-mail to Western Aviation News the loans have their drawbacks.
“Airports don’t typically have challenges accessing credit at affordable rates,” he wrote, “but have serious concerns about the impact of taking on additional debt for an extended period of time to cover operating expenses on vastly reduced revenue, as the debt will have to be repaid eventually. Airports want to be in a strong position financially and be able to sustain themselves through this crisis to support economic recovery and the recovery of our travel and tourism sectors without having to raise rates.”
Here’s a #BehindTheScenes peek at the set-up for our @CFSnowbirds welcome.— Toronto Pearson (@TorontoPearson) May 11, 2020
Thank you again to the brave men & women of the Canadian Forces Snowbirds, and all frontline workers across Canada.
You’re all a part of #OpInspiration 🇨🇦🤩 pic.twitter.com/hC0xEX75kk
The council’s Chair, Joyce Carter, told a Commons committee airports may have to raise AIFs by as much as 50% to make up for lost revenue.
While the pandemic has had a devastating impact, executives do not believe it will hurt the airport’s long-term viability.
“As we continue to weather this current storm, we are focused on supporting the essential movement of goods through increased cargo activity,” said Flint. “We are working with our airline partners to support the eventual recovery and once again connect passengers to points across this great country and eventually, across the globe.”