Public agency issues tender for private investor to operate the airport as revenues collapse due to the pandemic
After watching its commercial services evaporate because of COVID-19, the owner of Toronto’s Billy Bishop airport is searching for a private investor to secure the airport’s long-term future.
PortsToronto, which owns the downtown airport, issued a Request for Information Tuesday. That’s the first step to find a private company that wants to take over operations at the airport.
“It is incumbent upon PortsToronto – as owner and operator of Billy Bishop Airport – to explore options to manage risk and enhance liquidity,” said Robert Poirier, the Chair of PortsToronto. He added that PortsToronto will maintain control of slots, safety and environmental performance. “This RFI will inform a strategic evaluation of opportunities regarding the airport by effectively extending the existing and successful P3 structure we already have in place with several key concessions at the airport.”
Also key, the chair highlighted, the airport would continue to comply with strict noise limits. Those limits ban most jet aircraft from the airport.
PortsToronto started the process, the agency said, to reduce its debt and ensure the airport’s long-term viability.
Private funding model
As they did at most Canadian airports, passenger revenues crumbled at Billy Bishop with the pandemic. Its largest carrier, Porter, shut down operations a year ago and has not restarted since. Air Canada also withdrew service, concentrating instead on operations at its main Toronto hub at Pearson.
In Canada, airports earn the majority of their revenues from passenger fees and associated revenues, such as parking and duty-free sales. It’s a user-pay model that served the country well for almost 30 years. But when the pandemic hit, revenues collapsed. Canada’s two largest airports in Toronto and Montreal, lost more than $600 million combined last year.
Airport privatization is nothing new in Canada. The largest Canadian airports are run by local airport authorities. They lease land from the federal government under long-term deals. Governments and local groups appoint their boards of directors.
On top of that, several mid-sized Canadian airports are owned by municipalities, but run by private companies under contact. PortsToronto owns the airport and nearby port facilities. Its directors are appointed by all three levels of government. As such, it falls somewhere between the two models. Terminal operations at the airport are already contracted out to a private operator.
“The last year has had a profound impact on many businesses and has necessitated innovative approaches to overcome the challenges at present and in future,” said Ports Toronto Chief Executive Officer Geoffrey Wilson. “We believe that undertaking a process now that may provide options for PortsToronto to secure a financial investor will enable the airport to come out of the COVID-19 crisis stronger,”
So who might bid?
Wilson told the Globe and Mail likely investors would be large institutional funds. He estimates some 25 pension funds routinely invest in infrastructure and might be interested in Billy Bishop.
If an investor is found, Billy Bishop would instantly rank among the busiest privately-operated airports in Canada. The airport handled 2.8 million passengers in 2019, making it the ninth busiest airport in the country.
Two airport operating companies dominate the market in Canada. WASCO evolved from the Winnipeg Airport Authority. It now runs a network of smaller and isolated airports across the country and provides services to dozens more.
The larger Vantage Airport Group was born as an extension of Vancouver International Airport’s operations. It now runs airports across the country, such as Kamloops, Fort St. John, Hamilton, and Moncton. It also has a stake in airports world-wide, such as Terminal B at New York-LaGuardia and Chicago-Midway.
The arrangement can be profitable for airport owners. In Hamilton, the airport is owned by the city but run by Vantage. Despite passenger numbers collapsing from 950,000 people in 2019 to 330,000 last year, Vantage paid the city $950,000 in rent. It also doubled capital investments at the airport to $22 million in 2020.
Should the RFI prove successful, PortsToronto said the next step would be a formal Request for Proposals some time later this year.
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