National compilation shows COVID-19 had a large impact on Canada’s airports

The COVID-19 pandemic cost the largest Canadian airports more than $2.2 billion in lost revenues in a single year. The revelation is contained in the annual Canadian airport results compilation by Western Aviation News.

Expenses dropped only $600 million in the same period, leading to massive losses across the system. The data include 22 of the country’s busiest airports who report their results publicly.

Combined, Canada’s airports lost $1.56 billion in 2020, compared to a surplus of $340 million the year before. That’s a staggering drop of 737%. Toronto, as the country’s busiest passenger airport, lost $383 million in 2020. Vancouver reported a $380 million loss, while Calgary and Montreal reported losses of $242 million and $234 million respectively.

Adding to the debt

For the most part, Canada’s airports are run by private airport authorities who rely largely on passenger revenues. Any surpluses are reinvested in facilities. Any losses are covered by piling on debt.

And that’s exactly what happened. Even before the pandemic, Canada’s airports carried more than $15 billion in debt. That number has since ballooned to $16.77 billion. Most of that debt financed terminal expansions and infrastructure rehabilitation – much of it desperately needed to meet rising passenger demand. And airports have been able to secure debt with favourable terms.

As an example, in October, Calgary refinanced $2 billion in debt. Repayment periods range from 15 to 40 years with interest rates varying from 3.2% to just under 3.8%. The airport called it the “largest total order books of a bond offering ever in Canada.”

“The reaction to this inaugural bond offering represents confidence in YYC and its future,” said Bob Sartor, President and Chief Executive Officer of The Calgary Airport Authority in a release. “The certainty provided by this move will sharpen management’s focus on long-term planning from a capital, operations, and growth perspective.” 

Other airports have similarly piled on debt to make it through the year.

Debt per enplaned passenger

It’s normal for a larger airport to carry more debt – airport improvement fees help pay it down over time. But with the collapse in passengers, AIF revenues plummeted $1.1 billion – 73% – in 2020 from the year before. Among the airports covered by the Western Aviation News study, passenger numbers dropped by 111 million in one year, 73%. To level the playing field, it’s helpful to calculate the amount of debt per enplaned passenger.

The pandemic has been punishing for airports with recent infrastructure projects. A massive parkade and green energy expansion in Vancouver sits half-finished. The authority stopped construction on the $460 million project in 2020 – it stands as a monument to the disastrous year. Fredericton had the misfortune of opening a terminal expansion in 2020. It now has the dubious distinction of carrying the highest debt per passenger in the nation in 2020.

Canadian Airport Debt

Even those airports that entered the pandemic without any debt took a hit. Victoria International depleted its cash reserves in 2020 from $13.5 million to just $4.9 million. Just four airports, including Victoria, reported no debt in 2020. Abbotsford, London, and Charlottetown survived the year without debt.

A long road back

Airports face a long road to recovery. In reporting its summer results, Tuesday, Montreal Airports said revenues were increasing, but still lagged behind 2020. Revenues were up 56% over the previous summer. But for the nine months ended September 31, total revenue was still down 27.3% from last year’s dismal returns.

“While times are still challenging for ADM, the results of this third quarter are encouraging and show some resurgence in activity at YUL,” said Philippe Rainville, President and CEO of ADM Aéroports de Montréal. “The past few months have shown us that passengers are becoming increasingly comfortable with the idea of travel and traffic volumes at our facilities during the summer season exceeded our initial projections. We are definitely optimistic about the future of our industry.”

More than 1.9 million passengers used YUL totalled 1.9 million in the third quarter of 2021. That’s up 216.6% compared with the same period in 2020, across all sectors. But traffic is still down 68% from what it was in 2019. And in the first nine months of the year, YUL saw only 2.8 million passengers, down 41.5% from 2020. International traffic decreased by 55.1%, transborder by 59.2%, while domestic traffic decreased by 14.9%.

Those results show the depths of the challenge.

Air Canada, the dominant carrier at Montreal, also reported third quarter earnings Tuesday. They showed revenues almost triple what they were in 2020, but still well behind what they were before the pandemic.

Signs of growth

“Since the start of the year we have recalled more than 10,000 employees,” said Air Canada President and Chief Executive Officer Michael Rousseau. “We have expanded services to the U.S., and have launched new routes, such as to Cairo. We also announced expansions of our services to India and South America as well as the return next summer of popular seasonal destinations such as Barcelona, Venice, Nice and Reykjavik. To support our network restoration, we have reversed our decision to cancel two Airbus A220 aircraft orders and are now accelerating deliveries of new Boeing 737 MAX aircraft.”

Still, it will be another two or three years before the carrier is back to where it was pre-pandemic.

“Even with air service beginning to ease up in the summer and early fall, the third quarter of 2021 is only at 37 per cent of what it was in 2019 and just 20 per cent for international traffic,” said Daniel-Robert Gooch, president of the Canadian Airports Council. “Airports are continuing to lose hundreds of millions of dollars. Every day that safe air access is delayed is a blow to airports’ fragile recovery.”

The CAC expects airports to lose $5.5 billion over two years. Only Tuesday did eight airports – St. John’s, Hamilton, Waterloo, Regina, Saskatoon, Kelowna, Abbotsford, and Victoria – regain the right to handle international passengers.

Government support programs have only scratched the surface.

Only one Canadian airport reviewed by Western Aviation News reported a small surplus of revenues over expenses in 2020. Municipally-owned Abbotsford International Airport reported net surplus of $885,000 on the year. But even that turns into a $1 million loss when amortization and other charges are taken into account.

Western Aviation News Airport Indicators 2020