Indebted and pandemic-stricken, why some airports are charging
Despite the return of passengers to the skies, many airports across the country are struggling to balance their books, manage their bloated debt, and raise enough money to make the necessary repairs and infrastructure upgrades.
In some cases, this involves increasing passenger fees to ease financial pressure.
The largest airports are recovering much faster compared to those in smaller cities as passenger activity and reduced flight service continue to impact their financial health.
At Fort McMurray, Alta., the airport can handle up to two million passengers annually, but currently the facility is on track to only see about 300,000 travelers this year. The 19 daily flights before the start of the COVID-19 pandemic three years ago have been reduced to between nine and eleven, depending on the day of the week.
The Airport Authority carries what it calls “substantial” debt of $167 million after completing a major expansion project in 2014. The organization is running a deficit and is relying on its reserve funding to balance the books as management does not expect passenger activity to fully recover by at least 2025.
Annual passenger numbers at Fort McMurray Airport
Airports in Canada are non-profit and rely on passenger, aircraft and fuel fees to generate most of their revenue.
“The [passenger] The numbers still aren’t what we hoped,” said Denean Robinson, president and CEO of the Fort McMurray Airport Authority, which has received approximately $36 million in financial support for the pandemic from all three tiers of government.
“We are fighting like many airports in Canada,” she said. “The level of debt we took on when this terminal opened was certainly manageable given the passenger volume we had been through with the level of charges. The problem is that now we don’t have that peak revenue to support that debt payment.”
The airport charges an airport improvement fee of $40 per passenger, which is among the highest in the country. Management will review the fee at the end of the year.
“We’re doing what we can to try to maintain our fee structure. But if all else fails, we’ll have to look to increase those fees if we need to drive revenue growth,” Robinson said, adding that financial pressures could also lead to more congestion and longer queues as airports delay needed improvements.
Rising costs for airports
Toronto’s Pearson International Airport increased its fees on January 1, while Regina Airport will increase its fees beginning April 1.
“This user payment system works well, but when we got into the pandemic, there were no users,” said Barry Prentice, a professor at the University of Manitoba’s Asper School of Business in Winnipeg who specializes in transportation. He described the escalating allegations as “outrageous”.
The fees are often criticized by airlines and passengers for driving up the cost of air travel in the country.
Top 10 Highest Airport Improvement Fees
“Some of our airports have had to increase their airport improvement fees during the pandemic,” said Monette Pasher, president of the Canadian Airports Council (CAC).
The organization estimates that the federal government has provided approximately $1 billion in financial assistance. Still, airports added a total of $3.2 billion in debt to keep operations going during the pandemic, she said, putting many airports in a “challenging financial footing.”
“Before the pandemic, this model worked well. The people using the system pay for the system. We had award winning airports and things were going pretty well. Payment system to survive two years of pandemic,” said Pasher.
The federal government collects about $400 million in rent payments from airports annually, she said, and the CAC is asking the government to reinvest that amount in airport infrastructure over the next decade.
In general, Canadian airports are in a more difficult position financially compared to those in the United States due to the level of government aid during the pandemic, according to a recent report from rating agency DBRS Morningstar.
“We expect the air traffic recovery for Canadian airports to continue. Still, the limited financial support from the federal government over the past two years will reduce Canadian airports’ financial capacity to undertake significant debt-financed capital programs,” the report’s authors wrote.
New technologies could be the answer
In the darkest days of the pandemic in Calgary, only about 200 people walked through the airport terminal, which can seat 60,000 passengers. For Bob Sartor, President and CEO of the Calgary Airport Authority, it was like peering into the abyss, not knowing how long it would be before the frenzy of travel returned.
Its prospects have improved dramatically, and the airport now expects to match pre-pandemic passenger levels this year.
“We are really happy. We are the most recovered airport, certainly of the big airports,” said Sartor, who has announced his retirement in the coming months.
“It feels really good to be able to say I’m leaving an airport that’s on a great growth trajectory.”
While Canada’s major airports have experienced the fastest recovery, they still face challenges in keeping fees under control while improving the passenger experience.
Technology and other upgrades could be the answer to curb rising passenger fees, Sartor said, such as B. facial biometrics, self-boarding and self-bag drops.
“They’re inexpensive, they’re low-hanging fruit, and they make a lot of sense,” he said.
“There are so many ways we can reduce congestion at an airport through technological and policy improvements on the part of the federal government that would allow us to spend no more to have a larger customs waiting room, check-in area, to build or a larger security checkpoint.”
Calgary Airport is not considering a passenger fee increase in 2023.
The airport has about $3.3 billion in debt, but the airport authority has said the pandemic will not have a material impact on the facility’s long-term financial sustainability.