Toronto Pearson International Airport:Toronto Pearson International Airport:A Look through the Crystal BallA Look through the Crystal Ball

Livable Peel ConferenceFebruary 10, 2006

Steve ShawVice President, Corporate Affairs

Greater Toronto Airports AuthorityGreater Toronto Airports Authority

• Manages, operates, and develops Toronto Pearson International Airport

• Established in March 1993; Toronto Pearson transferred December 1996

• Private, not-not-for-profit corporation with a 15 member Board of Directors nominated by various community interests

• Mandated to support and develop a Regional System of airports

• No federal funds

The GTAA’s vision is for Toronto Pearson to be the North American airport of choice

Transparency & AccountabilityTransparency & Accountability

Community Consultation

• The GTAA has established a number of community based committees to discuss and review issues affecting Toronto Pearson and its neighbouring communities

– Consultative Committee– Noise Management Committee

• Local residents, city councillors, regional staff, industry representatives, and affected stakeholders sit on these committees as members

• The GTAA also hosts several Public Workshops and Open Houses throughout the year

Transparency & AccountabilityTransparency & Accountability

Toronto Pearson: An environmentally sensitive neighbour

• The GTAA invested in, and maintains, an extensive Stormwater Management Program at Pearson

• The GTAA monitors Air Quality at Pearson and released a comprehensive Air Quality Study

• The GTAA maintains a Noise Management Program aimed at mitigating the effects of aircraft activity on local communities

• The GTAA has implemented a comprehensive Environmental Emergency Contingency Plan to ensure swift Environmental Emergency Response

Toronto Pearson International AirportToronto Pearson International Airport

• Canada’s largest airport handling 33% of total air traffic

• Ranked in the top thirty airports worldwide for passenger traffic

• Seventy-six airlines serving 5 continents• 29.9 million passengers in 2005• Highest % of International passengers in North

America: 55%• Over 70% of passengers originate and

terminate their trips here

North American ContextNorth American Context

76

85

33

27

69

80

41

# of Airlines

15,998,472

17,429,074

1,212,040

5,078,525

16,476,141

10,849,393

6,201,640

Int’l PAX Traffic(2004)

2.9%42 393 76610Denver

46.5%37,518,143 15New York (JFK)

55.9%28 615 70929Toronto

8.6%59 412 2176Dallas/Ft Worth

27.2%60 688 6095Los Angeles

14.3%75 533 8222Chicago

7.4%83 606 5831Atlanta

Int’l as % ofTotal

Total PAX traffic(2004)

GlobalRank

Canada’s Gateway to the WorldCanada’s Gateway to the World

• An established international passenger market• 47 per cent of international passengers use Toronto as their

point of entry into Canada

Economic SustainabilityEconomic Sustainability

• 130,000 jobs

• $4.1 billion in wages

• $14.7 billion in business revenue output

• $134.5 million in rent to Federal Government

• $25.7 million in PILT to the City of Toronto and Mississauga

• $25 million in real property taxes paid by Airport tenants

• More than 4% of all employment in the Southern Ontario Region can be traced to Pearson

28,945

38,447

70,752

Indirect

Induced

Direct

Impact of Airport and GTA Employment Impact of Airport and GTA Employment -- 20002000

Economic ImpactEconomic Impact

Direct $ 8 70 $ 8 58

Indirect $ 4 38 $ 4 40

Induced $ 2 29 $ 2 21

Total $ 14 137 $ 14 120

Annual Impact of a Weekly 747 FlightAnnual Impact of a Weekly 747 Flight** (2000$)(2000$)

Domestic Business Revenue

(Output) $M

Domestic Employment

(Jobs)

Foreign Business Revenue

(Output) $M

Foreign Employment

(Jobs)

* Numbers based on a flight of 300 passengers

Economic ImpactEconomic Impact

Demand ForecastsDemand Forecasts

Iraq War/ SARS

Historical Passenger DemandHistorical Passenger Demand40

30

25

15

10

0

35

20

5

(million passengers)

1990 1995 2000 2005 20101980 19851980 1985 1990 1995 2000 2005 2010

Recession

Gulf War/ Recession

9-11 Attacks/ Recession

Passenger Demand & Terminal Passenger Demand & Terminal CapacityCapacity

0

10

20

30

40

50

60

7020

00

2005

2010

2015

2020

2025

2030

Pass

enge

rs [m

illio

n]

T1

T1 Old

T2

T3

Enplaned and Deplaned Passengers Forecast - Capacity shown is based on terminals averaging 350 thousand passengers per gate.

5 Runway

6 Runway

Aircraft Movements & Runway CapacityAircraft Movements & Runway Capacity

0

100000

200000

300000

400000

500000

600000

700000

800000

90000020

00

2005

2010

2015

2020

2025

2030

Airc

raft

Move

men

ts

Air Cargo DemandAir Cargo Demand700

500

400

200

100

0

600

300

(‘000 tonnes)

2000 2005 2010 2015 2020

Airport Development ProgramAirport Development Program

Toronto Pearson RedevelopmentToronto Pearson Redevelopment

• Mandate of the GTAA includes redeveloping Toronto Pearson International Airport

• Unique three sector airport

• Many years of under-funding

• Poorly maintained and inadequate facilities

• In 1997 the airlines agreed that the redevelopment of Toronto Pearson was required and agreed to the associated costs

• The new facility was built on time and within 2% of budget

• represents the only major contribution to Toronto’s infrastructure in many years

Strategic VisionStrategic Vision

• Support a regional airport system

• Replace aging infrastructure– Ground Lease requires $1.9 billion in capital

expenditures over first 20 years

• Consolidate the airports lands & facilities into an integrated operation– Strategic acquisition of Terminal 3 = $881 million

• Must be cost effective; cost competitive as an important link in the global aviation network

• Must have a high level of customer service

Toronto Pearson International Toronto Pearson International Airport 1997Airport 1997

T2 originally constructed as a cargo terminal

Convoluted road system

One of the smallest aprons in North America

Inadequate / obsolete cargo area

T1 reaching end of useful life

Airport Airport Development Development

ProgramProgram

DominoesDominoes

DominoesDominoes

DominoesDominoes

Airport Development ProgramAirport Development Program

Vision: North American Airport of ChoiceVision: North American Airport of Choice

Factors affecting Pearson’s competitiveness:

• Costs• Passenger facilitation• Bilateral Agreements with other countries

• With a competitive airport, we can do our share and ensure the competitiveness of the Greater Toronto Area and Southern Ontario

Vision: Vision: North American Airport of ChoiceNorth American Airport of Choice

Costs

Airport CostsAirport Costs• A not-for-profit corporation that is required to cover its

costs - When government operated, fees were set nationally and had no

relation to actual costs

• Aeronautical rates and charges methodology– Simple and transparent– airlines only pay for facilities when they are receiving the benefit

of those assets– Airlines were consulted and have accepted this methodology

• Use of Aeronautical revenues – only in the capital development, improvement, management,

maintenance and operation of the airport

• On average, less than 5% of an airline’s total costs are airport-related costs – Fuel and labour costs make up most of an airline’s costs

Construction Cost ComparisonConstruction Cost Comparison

2005 Cost per 2005 Cost per EnplanementEnplanement

Services Provided by GTAAServices Provided by GTAA

• Common Use Passenger Processing• Campus Area Network• Baggage system maintenance• Baggage Tracking & Reconciliation• Oversize baggage handling• Resource Management Unit/Apron Control

• Passenger loading bridge maintenance• Fixed ground power, potable water and

conditioned air systems• Passenger Information• Logistics centre• Surrey and wheelchair services

Services Provided by GTAAServices Provided by GTAA

Airport RentAirport Rent

• The original rationale for airport rent was that the federal government would receive fair value for transferred airports, including recognition of their future earning potential

• At the time of transfer Canadian airports were valued at $2 billion

• It has long been agreed that the original rent deals were unsustainable over the long term and had to be addressed

Fundamental Problems with RentFundamental Problems with Rent

• Rationale for Rent no longer exists

• Revenue-based formula the wrong concept

• Toronto pays disproportionate share

• New policy hinders the competitiveness of Airport

Ultimately, airport rent should be eliminated entirely as government has already recovered

its costs

0

10

20

30

40

50

60

70

2006 2010

Old New Gov't Formula

Changes in Airport Rents (%)Changes in Airport Rents (%)

Pearson carries 33% of Canada’s air traffic

Pearson’s share of all airport rent

50%

63%

44% 41%

Costs of Undercutting PearsonCosts of Undercutting Pearson

• 34% of Toronto Pearson’s landing fees goes to Ottawa to pay rent• 2006 landing fees increase: 6.9%; general terminal charges increase: 8.9%• Almost 60 per cent of increase in landing fees is attributable to the increase

in rent payments

• Pearson could lose business to U.S airports:• Airports must compete for traffic and routes• U.S. airports don’t pay rent• U.S. airports are often subsidized by local and state governments• Competitors: Detroit, Chicago, etc.• Loss of traffic to US airports is becoming a very real threat with potentially

serious economic consequences

• The GTA inevitably bears an opportunity cost:• Toronto Pearson is unable to lower airline fees and charges in short-term• Without rent, flights out of Toronto would be more economical for airlines

and would, in turn, generate thousands of additional flights per year

Toronto Pearson needs a Fair DealToronto Pearson needs a Fair Deal

Why an improved rent deal for Toronto Pearson:

• Competitiveness • Communities lose when airports are less competitive

• Despite the claimed long-term savings, the government’s new rent regime still saddles Toronto Pearson going forward

• Similar rent burden not felt by other domestic and internationalairports

• Fairness• In the transition period, Toronto Pearson’s rent payments will

decline only 6% while the next 5 largest airport rents will decline by an average 52%

Airport Fees and Charges per RotationAirport Fees and Charges per Rotation

Airport Fees and Charges per RotationAirport Fees and Charges per Rotation

Airport Fees and Charges per RotationAirport Fees and Charges per Rotation

Vision: Vision: North American Airport of ChoiceNorth American Airport of Choice

Facilitation

Passenger Facilitation IssuesPassenger Facilitation Issues

• Major components of the ADP are completed

• GTAA focus: Improving Passenger Facilitation

• Government, airlines and airports need to work co-operatively

• Safety and security remain the top priorities

• However facilitation should not be unduly hindered by regulation

• Necessary to ensure Pearson is competitive globally

Facilitation OpportunitiesFacilitation Opportunities

• The GTAA is working with both the Canadian and U.S. government border agencies

• Continue to advocate for improved passenger flows and expedite transit processes

• Looking into new procedures and regulatory changes that will improve overall customer experience, eg.: – International to US Preclearance – International to International connections– Canpass/Nexus Air

• As an intermodal facility, an airport should provide convenient and reliable transition between transportation modes

Highway 409• Main vehicle access to Toronto

Pearson• 1.5km purchased from the province• $82 million Redevelopment ensures

adequate access to airport

Groundside AccessGroundside Access

Vision: Vision: North American Airport of ChoiceNorth American Airport of Choice

Bilaterals

Air Policy IssuesAir Policy Issues

• GTAA actively supports international trade and commerce by proactively promoting Pearson Airport

• Government’s international air policy should reflect the realities of the global air transportation industry

• Most countries are moving towards increased liberal air services agreements

• We cannot afford to be left behind

Air PolicyAir Policy

• Given its geographic location and new facilities, Pearson is well positioned to vastly improve its air transportation services under ‘open skies’ conditions

• A less restrictive market will allow Canada’s airport system to grow and flourish

• New US/Canada Open Skies agreement a significant step forward

• Other opportunities for growth include China, India, Middle East, South America

Toronto Toronto –– FullFull--Fledged International Hub Fledged International Hub

Promote Air ServicesPromote Air Services