Thursday, August 07, 2008
Received | Reçu: 2008-08-07 2:56 AM THE OTTAWA CITIZEN (FINAL)
BUSINESS & TECHNOLOGY, Page: D1 / FRONT
2376 words | mots
Airports fly in face of industry woes
Expansion projects defy current fuel, fare crunch
Gordon Isfeld and Helen Morris, The Ottawa Citizen; with files from Canwest News Service
These are turbulent times for air travel.
Profits at the major carriers are being threatened by soaring fuel prices and passengers are being hit by higher fares and surcharges to cover those additional costs.
At the same time, there's a growing awareness -- among consumers and corporate leaders -- of the environmental impact of carbon emissions and concerns over how to reduce them.
But take a closer look and you'll see signs of business as usual, and a lot more, as airports across Canada undergo major expansion and improvements.
Over the next dozen or so years, more than $7 billion will be plowed into airport infrastructure projects -- from adding and upgrading amenities, to wholesale reconstruction.
Most of the money for these projects is coming from airport improvement fees collected from passengers and the issuance of bonds by individual airport authorities.
Canadian airports have already invested in excess of $9.5 billion in infrastructure improvements over the past 15 years, according to the Canadian Airports Council, which represents about 180 airports.
Much of the planning and budgeting for this expansion was done before the burst of the technology bubble and the 9/11 terrorist attacks in the United States.
Since then, the airline industry has been struggling to regain the six-per-cent annual growth it had enjoyed for the previous quarter of a century, says Joseph D'Cruz, professor of strategic management at the University of Toronto's Rotman School of Business.
"So, we've lost seven or eight years of growth," he says.
Record-high oil prices only steepened the industry's climb back to recovery.
Major airlines have raised fuel surcharges and added baggage fees to cushion the increased costs. Others have also slashed jobs and services. Recently, Air Canada -- the country's largest airline -- announced 2,000 staff cuts and a seven-per-cent reduction in its routes, followed by a decision by its regional carrier Jazz to eliminate 270 positions and trim its flights by five per cent.
"We're entering a stage where environmental consciousness (about carbon-emitting airplanes) and high prices will deter air travel," says Mr. D'Cruz.
All this as another wave of airport expansion is under way.
"The difficulty is that the airlines are on a different time horizon than the airports," says Paul Dempsey, director of the Institute of Air and Space Law at McGill University.
"Airport infrastructure has to be planned and financed years ahead of time in order to meet the capacity demands of the future," he said. "The airlines are faced with immediate problems of profitability and for them, at the moment, this is not the time to expand. The difficulty is that building a terminal or building a runway or adding a runway requires a much longer time horizon."
This dichotomy between supply and demand is lost on some passengers. At the Winnipeg International Airport, for example, it was not entirely certain why a new terminal was being built in the first place.
"I'm through the airport about six times a year and it never seems to be busy compared to the Toronto airport," said Paul Hurley, a Toronto software sales executive. "I don't really see the demand for a new terminal."
But demand is indeed there, according to the airports, with record passenger levels being recorded across the country.
Daniel-Robert Gooch, the airports council's communications director, says passenger numbers have now "passed the pre-2001 level" and airports are well-positioned to handle the increase in traffic. "We knew this was coming, so airports had to invest in their infrastructure programs," he says, adding that between 1991 and 2006, passenger levels have risen by 50 per cent.
To fund these expansion projects, most airport operators have imposed fees on passengers and raised money in the bond markets -- this, says Mr. D'Cruz, with the "implicit guarantee" of governments because of the operators' status as privatized not-for-profit or "corporatized" entities. As a result, he says, they have "an excessive amount of debt" on their books.
"It's clear that the corporatization of the Canadian airports has led to an exorbitant amount of gold plating," says Mr. Dempsey. "They are increasingly beautiful, but they are increasingly expensive."
"Building beautiful terminal facilities with lots of stone and waterfalls may facilitate the pleasure of the experience of the people who walk through the airport, but it's a cost that has to be incurred ultimately by the airlines and their passengers."
Adds Mr. D'Cruz: "This is called the edifice complex."
The flip side, according to the airport council, is that airport authorities are much more than money collectors with big ambitions -- they also contribute to area economies, especially tourism, which is the main engine that is expected to power growth in the industry. The council says airports also give, not just take -- together paying nearly $300 million a year to the federal government in airport rent.
Here is a closer look at airport expansion across Canada:
Victoria
Victoria International Airport continues to report record numbers of travellers. The facility had new life breathed into it with a $30-million renovation and expansion completed in 2006. Last year, it handled 1.48 million passengers. According to estimates from the Victoria Airport Authority, that figure is expected to hit 1.8 million by 2015 and 2.3 million by 2025.
The recent expansion of departure and arrival terminals and facilities has accommodated the increased numbers, but the airport authority is already preparing for the next phase.
Along with an elongated runway, the authority projects $133 million in capital improvements before 2025, including improvements to the apron, lighting, vehicle access, parking and the addition of new gates and customs facilities.
Vancouver
The Vancouver International Airport spent $290 million in capital improvements last year -- part of a $1-billion-plus expansion campaign that has put the airport in a near-constant state of construction.
With the number of airport passengers expected to surge from 17.5 million last year to nearly 24 million by 2015, airport officials say they have to facilitate growth.
More than $800 million has been dedicated to three major projects -- a $420-million international terminal expansion, a $117-million Link Building connecting the domestic and international terminals and a $300-million Canada Line rapid-transit connection to downtown Vancouver.
The $200-million first phase of the international terminal expansion began in 2005 and was completed last year. The project added four new gates and facilities capable of handling the world's largest passenger aircraft -- the Airbus A380. It also created a water-themed retail and food and beverage area, featuring a 114,000-litre saltwater aquarium, a jellyfish tank and a stream running through the centre of the building.
The second phase of the international terminal expansion is expected to be completed between 2011 and 2014.
Calgary
Total air carrier passengers at the Calgary International Airport hit a record 12.26 million in 2007 -- or 33,500 passengers a day -- up 8.5 per cent from 2006, with a cumulative gain of 55 per cent over the past five years.
Growth in passenger traffic for 2008 is expected to be in the three- to five-per-cent range.
The longer-term outlook is expected to be at 30 million annual capacity by 2030, following a wave of expansions.
Over the next 10 years, an estimated $2.8 billion will be invested in expansion and development projects, including the development of a 4,267-metre parallel runway at an estimated cost of $500 million, a new international wing, estimated at $1.2 billion, and a new transborder/international concourse.
Edmonton
The Edmonton International Airport is launching a $1.1-billion expansion amid chronic labour shortages and rising construction costs.
The project includes construction of a new passenger concourse, adding 13 airplane gates to the current 17, a new control tower and offices, as well as more parking.
Regina
The booming Saskatchewan economy boosted passenger traffic at the Regina International Airport by 10.5 per cent in 2007 -- and by 32 per cent in the last three years. The airport is experiencing a five- to six-per-cent increase in passengers this year and expects to break the one-million-passenger barrier this year.
Over the next 20 years, $100 million will be spent on airport facilities improvements. The airport is projecting 1.5 million passengers by the year 2027, based on two-per-cent growth per year for the next 20 years.
Saskatoon
In Saskatoon, the airport authority says $70 million will be spent between 2009 and 2018 for new runway reconstruction, terminal renovations and other expansion projects.
By 2011, the Saskatoon Airport Authority expects the number of annual passengers to total 1.2 million -- up from 1.04 million in 2007.
Winnipeg
Winnipeg International Airport is in the midst of a $585-million terminal and site redevelopment project, which is expected to be completed by 2010.
Not only was expansion required for additional passenger traffic expected to hit four million by 2015, but the building infrastructure in the old terminal is in such a bad state of repair officials have said it would be completely inadequate by 2012.
Funded entirely through airport improvement fees -- that went up to a hefty $20 per flight at the beginning of 2008 -- the new 51,000-square-metre terminal will increase the number of airplane docking gates by two-thirds to 15.
Toronto
Canada's busiest airport Toronto Pearson International Airport has just completed a 10-year $4.4-billion rebuilding project. "Last year, 31.5 million passengers went through, now we have additional capacity for those seven million more," said Scott Armstrong, media and communications manager. While Mr. Armstrong said Pearson is ideally placed to compete for transit passengers with Chicago and the over-stretched New York airports, he said the airport authority is looking to other sources of revenue, not just passengers. The airport recently dropped its cargo fees by 25 per cent in the hope of attracting more cargo business.
Ottawa
The Ottawa International Airport saw passenger numbers increase to 4.09 million last year and it expects those numbers to rise to 4.5 million by 2010 and 5.9 million by 2020.
Its second phase of expansion will cost about $111 million, with a further phase planned sometime after 2017.
Krista Kealey, vice-president of communications at the Ottawa International Airport Authority, says the second phase is almost complete.
"The interior space has been opened, there is some work ongoing because we've just demolished the old terminal and so there's site preparation, and where the old terminal sat will be apron space, so aircraft will park there at new gates so that side of the building, the west side of the building, will open when all of that is finished," Ms. Kealey says.
Windsor
The Windsor Airport expects to increase its passenger totals from 245,000 in 2007 to 400,000 by 2018.
The $600,000 project will add a pre-boarding area that will including a café, business lounge and children's play area.
Montreal
Strong demand for air travel bolstered year-over-year traffic by 8.6 per cent, or around a million passengers, at Pierre Elliott Trudeau International Airport in 2007.
But higher ticket prices, raised to offset soaring jet fuel costs, are putting a damper on passenger traffic this year, with the airport recording four-per-cent growth for the first five months of 2008, said spokeswoman Christiane Beaulieu.
The airport invested $154.1 million in 2007, up from $83 million in 2006, and this year is expected to invest $275 million.
Halifax
Halifax Stanfield International Airport serves about 3.47 million air travellers annually -- with growth projected to reach 4.1 million passengers by 2012.
Since 1998, the airport has been undergoing a facelift and improving its facilities. The $95-million project has revamped the arrivals and departure halls, expanded the terminal building itself, constructed an observation deck overlooking the runways and expanded cargo handling capacity.
St. John's. N.L.
In Newfoundland and Labrador, the St. John's International Airport saw the number of passengers rise to 1.2 million in 2007. It projects 3.4 million passengers by 2015.
A five-year, $65-million capital spending program is set to begin in spring 2009. The plan calls for an expansion of the terminal building, as well as renovations to its operations buildings.
I agree with the bolded comments from the article above. I flew back from the states over the weekend and noticed how empty the Ottawa airport is compared to various US airports, (PHL, IAD). Personally I would rather have the $100 + in departure taxes I have paid over the past year and continue to use the old wing of the airport. A
Airport parking is one area that does need to be expanded, it was full on Saturday morning when I arrived for my flight, and I had to wait 20 minutes for someone to leave.
I have flown from both Syracuse and Burlington on occasion to save $ and have found I don't miss the cherry wood and waterfalls at all.
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This previous post seems to cover the Frankfurt situation. It was going to be reduced in frequency for the winter one way or another, consistent with travel volumes. I ran into German tourists this weekend who were from Frankfurt and had flown to Ottawa on that very flight, they were very happy with it and their visit here.
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