Victoria

Victoria International projects $11 million cash loss this year due to COVID

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Government help doesn’t seem to be a priority says Victoria International chief executive

The terminal expansion at Victoria International Airport in January 2020 (photo: Brett Ballah).

To the head of Victoria International Airport, the pandemic hasn’t just devastated airport finances. It’s also taken an emotional toll.

“I watch the dismantling of Westjet and Air Canada, frankly I find it incredibly emotional to watch,” said Geoff Dickson during his airport’s Annual Public Meeting Thursday. “These two great companies that have done so much for the industry over the years and the unimaginable steps that they’ve taken and just watching helplessly. They can’t fly their planes.”

“Unlike many countries, the government support for the aviation sector here doesn’t appear to be a priority,” he said. “I look at the U.S. and France and Germany for example, you’re probably seeing contributions for around $60 a seat. In Canada, it’s less than two.

“It’s unfathomable for me to sit and watch this happen.”

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The pandemic has hit Victoria, a city famed for its beauty and charm on Vancouver Island, particularly hard. Traffic in April and May was down 98%. Passenger numbers recovered somewhat in June and that trend has continued into the summer.

“And now that we’re into July,” said Dickson, “We’ve seen our numbers go up almost 10-fold, but when I say 10-fold, we’re still going to be down 80% on a year-over-year basis.”

The airport forecasts handling in the range of 600-thousand passengers in 2020, with no full recovery for four or five years.

“Here’s the challenge,” said Dickson. “We’re a fixed-cost business predominantly and our revenues are almost entirely variable.”

That means it costs money to run the airport whether there’s one departure or 100, but airports in Canada get on average 65% of their revenue from passengers and the fees they generate. So far, Victoria has managed to avoid layoffs, unlike much larger airports that have laid off up to 40% of their staff.

To show just how unprecedented the pandemic has been, Dickson pointed to little-used contingencies buried deep in airport contracts.

“We had some clauses in there where if traffic goes down 25% for an extended period of time, you’ll go from a minimum annual guarantee to a percentage revenue base,” said Dickson. “And I can remember at the time a number of years ago thinking ‘well, that’s not going to happen.’ Well, here we are.”

The only stable revenues this year, said Dickson, have been collected from the companies that rent hangar and land space at the airport. Last year, those non-aeronautical revenues amounted to almost $12 million, or 41.6% of the budget. That places Victoria among the top airports in Canada. To raise a little extra cash during the worst of the pandemic, Victoria rented out part of its parking lot for RV storage.

All told, the airport expects revenues to be down 60% in 2020, and expects an $11 million loss for the year, though that will be reduced to $2 million by non-cash items. The airport has arranged up to $60 million in financing from creditors, just in case.

Aircraft manufacturer Viking is one tenants helping soften the pandemic’s impact on Victoria International’s income (photo: Brett Ballah).

Dickson said the recovery of air service will have to be guided by science. But to those expecting to maintain physical distancing will be disappointed.

“When I look at an airport world and an airline world in the absence of a vaccine, you can’t create two-metre distancing throughout the entire journey,” said Dickson. “think about a 737-800 that is close to 200 passengers. If you’re gonna physically separate throughout, you need 400 m of queuing space. We just can’t continue to build buildings double or triple the size.

“We’re going to have to figure out a way to reduce the risk but make people feel very confident,” he said.

Restoring traveller confidence will mean constant cleaning, touchless passenger processing, and monitoring airflows and passenger movements to minimize the risk.

Dickson sees other potential troubles. Concerned about cutting costs, airlines may decide to focus on their hub cities. Last week, Air Canada announced it was cutting service to eight communities in Ontario, Quebec, and Atlantic Canada. And the cost of travel may rise if airports raise fees to cover their costs and if airlines have to focus on squeezing the most revenue from the few remaining travellers rather than filling their planes. That could have a monumental impact on tourist destinations such as Victoria.

“COVID-19 has been crippling to our industry,” said Dickson. “But we have to find a way reduce the risk of transmission because there’s going to be more pandemics and we cannot simply do this over and over again, just shut down.”

Still, despite all the turmoil, Dickson is optimistic.

“I’m confident that the industry as it has proven time and time again, will emerge stronger, better, and safe than it was before,” said Dickson. “If you want to come out of this recession that we’re surely going into, it’s gotta be one of the strongest enablers for economic recovery.”