Edmonton International faces losses in the tens of millions for 2020
Despite the bleak situation, the airport’s chief executive sees reason for hope earlier than you might expect
After the bloodbath that the global pandemic has inflicted on the world’s aviation industry, you might think that hope would be in short supply. But the chief executive at Edmonton International Airport sees trends that bode well for aviation, leading to recovery sooner than you might think.
“We’re doing ok, all things considered, in our new normal,” said Edmonton Airport Authority President and Chief Executive Officer Tom Ruth in an interview with Western Aviation News. He spoke with the publication between Christmas and New Year’s.
Normally, the airport would be bustling with travellers over the holidays, many of them headed to warm sun destinations. This year, the airport, as is the case around the world, has been a lot quieter. The airport is handling just a fraction of the traffic it did 10 months ago.
“We weren’t unique in that, but that’s the kind of year it’s been,” said Ruth. Silver lining “Over the last many months, we’ve been near the top if not at the top in terms of per cent recovery. Still really low, we’re talking 20-23% of our normal volumes. but that’s been relatively high compared to many airports.”
Edmonton is on pace to handle fewer than 3 million passengers this year. The airport hasn’t handled so few people since all of the city’s flights were consolidated at the International Airport. Before then, passenger traffic was split between the current site and a city centre facility. Last year, passenger numbers reached 8.2 million people.
“It’s been a tough year,” Ruth acknowledged.
A financial hit
Because all of Canada’s major airports are funded mostly through passenger revenues, that fall-off in traffic is hurting the bottom line.
Edmonton announced layoffs May 20 affecting 30% of its staff in the face of the pandemic. That helped the airport cut $50 million from its operating budget. Executives slashed the airport’s capital budget from $103 million to just $25 million.
Despite the cuts, losses for the year will be in the “tens of millions of dollars.” In its last fiscal update, the federal government announced help for airports. Edmonton will be the largest airport in the country to benefit from federal land lease forgiveness in 2021. The government is still working out details of other aid programmes.
Clarification: An earlier version of this article stated Edmonton was among the first airports in Canada to announce staff cuts. Calgary announced layoffs March 30 and Vancouver May 11.
But Ruth sees the proverbial light at the end of the tunnel. “Even though we’re in the deepest valley of COVID right now, there’s some things that bode well for aviation going forward,” he said.
“My opinion is a little bit different than all of the prognosticators and analysts that say we’re not going to get that close to our 2019 numbers until 2023, 2024,” said Ruth. “I really think that aviation is going to rebound quicker than a lot of people are thinking. Maybe the second half of this year we start seeing more of a rebound.”
Three factors are fuelling Ruth’s optimism: COVID treatments are improving every day; testing is becoming more and more widespread, and vaccines are starting to roll out.
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More vaccines, more testing
Since Ruth made these comments, Westjet suspended all of its U.S. and Mexico flights from Edmonton among other cuts, blaming government restrictions. It’s part of being in the deepest part of the pandemic. On Thursday, the International Air Transport Association reported that what little growth it had seen in global air traffic levelled off in November. IATA blamed government policies for halting growth. That includes quarantines, such as the two-week quarantine most international travellers arriving in Canada have to respect.
For Ruth, however, it’s a short-term trend, until the vaccine is more widely distributed and testing more widespread. The government of Alberta is conducting a trial in Calgary where passengers can get a COVID test on arrival. If the test is negative, they can be out of quarantine in as little as two days.
Ruth expects the government to expand the trial to Edmonton some time this year. “As more and more people get vaccinated, more and more rapid testing done, and people get more and more confident in what’s being done,” he said, “that we’ll start to see a healthy rebound in aviation.
“I think we’re in for a surprisingly healthy rebound.”
One area of growth at Edmonton International is cargo.
“Our cargo numbers are up significantly from last year,” said Ruth. “We moved a lot of [personal protective equipment] – all those medical supplies. Particularly in the spring and summer we moved them not just for Edmonton but throughout the country. And then of course ecommerce has just been crazy in a good way.”
In 2019, the last year for which data are available, Edmonton International moved almost 27,000 metric tonnes of cargo, according to Statistics Canada. That’s less than half the next airport up on the list in Winnipeg, and just five per cent of the cargo moved through Toronto-Pearson, the country’s busiest airport. All airports have seen significant jumps in cargo traffic. Air Canada is even converting some of its old Boeing 767 aircraft to take advantage of the emerging market.
Edmonton has seen $1.3 billion in private-sector cargo investments in the past six years, said Ruth. That includes new jet fuel tanks with a 2 million litre capacity at the airport. Those investments are starting to pay off.
“These big ecommerce companies, they know what the popular SKUs are,” said Ruth, referring to a code companies use to track and stock goods. The port of Prince Rupert is a day or more closer to Asia than any other port in North America. And Edmonton is the first major city goods reach on their way inland on the train.
“And those SKUs don’t have to go by air, initially. They can go by ocean from Asia, come into North America, come into Edmonton and then they can get stored,” he said. “So these popular SKUs can get stored in warehouses so if you order something in Canada, it’s already prepositioned in Edmonton. And that good can then get on a flight and get anywhere overnight in North America. We’re seeing many new warehouses sprouting up all over Edmonton because of that.”
The real challenge in the past, Ruth pointed out, was that cargo was coming in to Canada from Asia, but there was much less going back. That’s changing. More cargo is now leaving Alberta, particularly agricultural goods and pharmaceuticals.
“Now we have the complete equation,” he said. “There’s always this imbalance between import goods coming into Canada and not as many goods that are being exported to Asia and Europe. Particularly in Alberta, the market’s here that we can move a lot of products over to Asia. That and the move to ecommerce are probably two of the largest elements that will help us. We’ve been investing in air cargo and our Airport City particularly over the last five to seven years. We realize that this is a big part of our region’s future. We’re finally starting to see that come to fruition.”
Most of that cargo flies in the bellies of passenger aircraft.
It’s also key to earning revenue that doesn’t depend on passenger traffic. Those non-aeronautical revenues will be key to keeping fees – and airfares – as low as possible.
Despite all the hardship this year, Ruth believes his airport is well poised for recovery.
“We’ll be leaner, but we’ll be more passenger-centric in our focus,” said Ruth. That means making travel as pleasant and as smooth as possible.
“The things that we can control and influence, we’ve moved forward,” he said. “Rather than just dwelling on this horrible thing we’re all going through with COVID, we’re moving the needle on many areas in these difficult times. As I look back on the year, I’m proud of that.
“I think we’re well positioned long-term.”
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