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2020 In Review

Presented by Code Cubitt, Chairman of the Board of the Ottawa International Airport Authority

Good afternoon, welcome, and thank you for taking the time to join the 2nd-ever virtual Annual Public Meeting for the Ottawa International Airport Authority.

I became the Chair of the Board of Directors in 2019 and can say with certainty that I could not imagine living through a global pandemic, let alone leading the governance of the Airport Authority through one. But, here we are formally wrapping up and reporting on the unprecedented and remarkable year that was 2020.

One of the first decisions by the federal government in March 2020 was to close the border with the United States to non-essential travel and limit international travel to only four airports in Canada. The list did not include Ottawa. We understand that these restrictions were effected to limit the spread of COVID-19, but the impact on our Airport was swift and severe, with flights and passengers all but disappearing. The Authority's financial situation also declined dramatically, calling for a rapid change in priorities. We reviewed our Strategic Plan action items and ultimately deferred or cancelled most non-essential projects entirely in the interest of cutting costs and preserving our limited capital resources.

The Board worked very closely with Mark and his team throughout the year as they maneuvered around the impacts caused by the pandemic. We were impressed with their rapid response to every public health directive from January to December. These included COVID-specific signage, deploying a comprehensive physical distancing program – complete with floor decals, plexiglass shields, automated public address system announcements, enhanced cleaning protocols, and launching a COVID-19 micro website with up-to-date information for travellers. These activities, coupled with many other health and safety measures, have ensured that all employees and passengers have been kept safe. For these, and so much more, the Board and I are incredibly grateful.

We all hoped for a quick recovery, and as we know, that did not occur. Instead, the virus persisted, and the government implemented additional travel restrictions to address growing COVID-19 infection rates. Mark and the entire Authority team continued to respond effectively and thoughtfully as everyone focused on the safety of our customers while ensuring the Airport's future.

I want to thank the entire Authority team for their patience, adaptability and resilience in the face of the ongoing changes and constant challenges. Many have continued to work from home with incredible efficiency and dedication. Those who were required to work on-site have done so with extreme caution, following public health directives for everyone's safety. I am so proud of all they have done to ensure that the Airport is in the best possible position when the recovery begins.

The Board was also required to shift its focus as financial sustainability became the most critical priority for the Authority. We continued with committee work, albeit virtually and with a more magnified financial lens. I want to thank each member and commend them for their dedication and willingness to adapt, as well as their unwavering commitment to the Authority.

The Board said goodbye to member Brendan McGuinty in 2020. Brendan, who was nominated by the City of Ottawa and joined the Board in 2011, chaired the Governance Committee and provided invaluable counsel on many issues during his tenure. His contributions were appreciated, and he is missed.

I was delighted to welcome a new member to the Board in 2020. Mario Cuconato joined us in September and filled the vacant City of Ottawa position. Mario brings a wealth of public and private sector experience and facilities and infrastructure management – all skills that will serve the Authority well.

We had a few more changes in the past few weeks that we would typically report on at the next APM; however, I believe they merit mention now. Jacques Sauvé and Craig Bater’s terms on the Board have expired, and we officially said farewell last week.

Prior to joining the Board as an at-large member in 2012, Jacques was heavily involved in the Airport as an engineering consultant for the new terminal construction project. In all, he served the Airport for 21 very distinguished years, including as Chair of the Major Infrastructure and Environment Committee.

Craig joined the Board in 2012, representing the Ottawa Board of Trade. He played key roles as Chair of the Major Infrastructure and Environment Committee, Chair of the Governance Committee and served as Interim Chair. I want to thank them both again for their service to the Authority and the community.

The Board of Trade will now be represented by nominee John Proctor. John is the President and CEO of Martello Technologies and brings a rich military and cybersecurity skillset to the Board. I look forward to our eventual return to meetings in the Airport's boardroom, where we can provide a proper, in-person welcome to Mario and John.

By now, it is no mystery that the pandemic will endure through 2021. But, there are glimmers of hope as efforts to administer approved vaccines continue and we work toward herd immunity. I hope at this time next year I can share the news that we are in recovery and that the Authority has resumed work on projects such as YOW+. I also hope to celebrate efforts to rebuild our flight schedule. I note, however, that YOW's route map will look very different for some time to come. Capturing accurate data will be critical as the airlines determine which markets to serve when a meaningful recovery happens. 

To that end, we need your help. If travel is essential now, or when public health guidelines deem non-essential travel acceptable again, I would ask that you include the Ottawa International Airport in your flight plans. Airlines need to understand actual demand from our community as they consider which routes to re-establish first. 

The Airport is an essential part of our local tourism and business ecosystems. Industry devastation has permeated our entire community, with hoteliers, restaurateurs, retailers and scores of individuals who work in the sector suffering the loss. Businesses may travel less in the future, but they still will need to travel in order to connect with other markets. Our goal will be to help point-to-point travel in the name of efficiency.  Our recovery is their recovery and vice versa, and while we know that this will take some time, we will be all-in to help push more connectivity between markets as well as inbound tourism. In short, we’ll continue to contribute where we can to stimulate demand.

We look forward to resuming our role as a positive economic generator for our community, fueling both the local economy and broader industry recovery. Rest assured that we will be ready to do so safely and responsibly when the time is right.

I will close my remarks with a final thank you to the community. Air travel may be different, challenging and a bit uncomfortable right now. But it will return to what we have always loved, and we can, once again, explore the world with excitement and wonder. Some of you have been required to travel throughout the pandemic, and when you did, you were cooperative and kind. We appreciate that, and we look forward to seeing many more of you when the time is right.

Stay safe. Thank you.

2020 Financial Review

Presented by Laurel Murray, Chair of the Audit Committee of the Ottawa International Airport Authority Board

The Ottawa Airport Authority’s audited financial statements for its year ended December 31, 2020, are in the Authority’s Annual Report, which is now available in both English and French online at yow.ca.

The Annual Report includes a detailed financial review of the Authority’s financial statements and results for 2020. This financial review discusses changes in passenger volumes and landed seat volumes that impacted the Authority’s results from operations. Since mid-March 2020, the COVID-19 pandemic has and continues to significantly impact passenger traffic and the financial performance of the Authority. In 2020, passenger volume of 1.4 million passengers was 73% lower and landed seats were 67.5% lower than in 2019.   

The Authority generated revenues of $49 million during 2020, including Airport Improvement Fees of $15 million and landing and terminal fees and other charges to airlines of $15 million. The Authority’s remaining revenues came from concessions, car parking, land and space rentals, and other sources. The Authority does not receive government funding to support its operations. 

The Authority started collecting an Airport Improvement Fee, included in the price of airline tickets, in 1999 and this fee was raised from $23 to $28 on October 1, 2020. This fee is used to fund the cost of airport infrastructure and related financing. During 2020, the Authority invested over $17 million in a variety of projects including the relocation of CATSA’s Pre-Board Screening operation to Level 3, base building works on the centre court concessions refresh, the new LRT airport terminal station and the acquisition of major fleet vehicles.

The Authority incurred total operating expenses of $68 million excluding depreciation.  Ground Rent payable to the Government of Canada was waived for the period from March 2020 to December 2020 as part of the federal government’s COVID-19 pandemic support initiative. Payments in Lieu of Municipal Taxes payable to the City of Ottawa amounted to $5 million. The total interest cost of $20 million was paid on debt incurred to finance the Authority’s capital expenditure programs. 

The Authority generated a loss before depreciation of $20 million in 2020, down from earnings of $36 million in 2019 due to the impact of the COVID-19 pandemic and the impact on passenger volumes. Earnings, in coordination with the long-term debt program, are used to invest in the Authority’s capital expenditure programs – expenditures to maintain and improve the Airport. 

The Authority depreciates the cost of its capital assets, including the main terminal building, parking garage, vehicle maintenance and firehall buildings. Depreciation of capital assets amounted to $32 million in 2020, and was similar to 2019 depreciation.     

The Airport Authority ended the year with $11 million in cash together with $70 million in available credit facility capacity. As we navigate through these unprecedented times, the Authority received the consent of bondholders representing over 98% of outstanding principal amounts to waive the requirements to comply with key covenants for the years ended December 31, 2021 and 2022. As part of its financing strategy, the Authority successfully financed a $100 million bond this past week. This will allow the Authority to repay borrowings on its credit facilities and provide incremental cash flows for operational purposes as it navigates the COVID-19 pandemic through to the eventual recovery over the coming years.

As we look ahead to 2021, the COVID-19 has had a significant negative impact on demand for air travel. The Ottawa International Airport continues to experience significant declines in passengers and flight volumes, as compared to the same periods in 2019. The significant public health restrictions and travel restrictions by governments, flight and route cancellations and fleet groundings by air carriers, in response to the pandemic all continue to heavily affected passenger volumes. Mark will be providing more details. Nevertheless, we remain confident that the Authority will be in a solid position to withstand this event and engage with the community, passengers and stakeholders throughout the next phases of the recovery.

2020 Update and the Way Forward

Presented by Mark Laroche, President and CEO of the Ottawa International Airport Authority

When we gathered virtually last summer, I really did not give much time to the 2019 results, despite how great the year was. I mainly discussed how COVID-19 had devastated the Airport and the industry because it was unprecedented and catastrophic. The truth is that I could sum up 2020 in one word – ditto. But, simplifying it would diminish the Airport Authority team's great work, and it would negate their herculean effort to get us to the other side of the pandemic and towards financial sustainability. So, I will tell you about the achievements, realities, challenges, and the future.

Let me start by telling you about our people.

About 70% of our employees are working on site. They represent various trades such as plumbers, millwrights, mechanics, electricians and HVAC specialists. Information technology specialists, operations teams, project managers, snow removal operators and firefighters round out the group. They have no choice but to work at the Airport. They have been doing a great job of following public health guidelines and policies that are in place to keep themselves and each other safe as they keep our critical infrastructure open and operational. Remarkably, we have had only one case of COVID-19 among our employees, and they made a full recovery.

The other 30% is made up of our administrative staff from Finance, Communications, Human Resources, Marketing and Business Development, Information Technology, as well as my team. This group transitioned to working remotely in March 2020 and figured out how to do it effectively while staying connected to their peers.

The Information Technology team played a pivotal role in the successful transition. In addition to setting colleagues up to work remotely, they also rolled out Microsoft Office 365, a suite of products that includes Microsoft Teams and SharePoint, which allows the Authority team to collaborate and stay connected online.

Keeping all employees safe has underpinned many of the decisions made since the beginning of the pandemic. The Human Resources department developed and implemented many policies and programs to support the needs of all employees, whether on-site or remote. They have also collaborated with the Communications team to keep employees engaged and informed with up-to-date public health and Airport Authority information.

The attention to employee safety and wellbeing no doubt contributed to successfully negotiating a new collective agreement with the Public Service Alliance of Canada – the union that represents most Authority employees. We are delighted that the negotiations went smoothly and positioned us to move forward together towards financial sustainability.

Whether on-site or remote, the whole Airport Authority team has done a fantastic job during challenging circumstances. I want to thank each and every one of them for their cooperation, flexibility, compassion, and hard work throughout the past 14 months. I know it hasn't been easy for anyone. And while I don't believe our workplace will ever be the way it was, I look forward to the day we can bring the team back together to celebrate the end of the pandemic.

Unfortunately, we were required to put the Airport's two volunteer programs on hold indefinitely. We look forward to welcoming both the Infoguide volunteers and therapy dog teams back to the Airport once demand returns in a meaningful way, and all public health guidelines allow it. Thank you to both groups for their love of the Airport and understanding why we had to pause their activities.

The next topic I would like to cover is projects and the great work completed since our last public meeting.

Perhaps the most visible project was the domestic/international security screening checkpoint move from Level 2 to Level 3. This critical project was one of the key pillars in the now deferred YOW+ program and a multi-year collaboration with the Canadian Air Transport Security Authority. Despite the deferral of most capital projects, we completed this one because we were so far along in the process and because additional queuing space will be required for physical distancing when the industry recovers.

Our staff took advantage of a very quiet arrivals area to refurbish the terminal's four original baggage carousels. We would typically have outsourced this activity, but instead, having our own trades complete the project saved the Authority approximately $150,000. This project is one of many initiatives that helped preserve cash while keeping as many of our on-site employees as busy and productive as possible.

We achieved full compliance with Canada Transportation Agency's Accessible Transportation for Persons with Disabilities Regulations, which went into effect in 2020. Our compliance complements the Rick Hansen Foundation Accessibility Certified Gold rating we received from the Foundation in 2019.

The Airport's geographical footprint is now recognized as an economic development zone in the City of Ottawa's draft Official Plan after years of collaboration between our respective planning departments. This designation will facilitate future development on airport land and leverage the City's Light Rail Transit project.

Finally, we completed a new Security and Emergency Response Training Policy and Program to equip all necessary staff with the skills to respond to an emergency. The team also began transitioning the Airport to the Incident Command System for handling incident response. The move aligns us with the City of Ottawa and the Province of Ontario who are also adopting this system.

These were just a few highlights. We have covered more achievements in the 2020 Annual Report, which you can find online at yow.ca.

In the weeks after the federal government closed the border and funnelled all international traffic through four airports, we knew the impact would be devastating. What we could not have predicted was the magnitude. Our year-end results confirmed a drop in passenger volumes of 73% from 5.1 million in 2019 to a mere 1.36 million in 2020. If we look just at the pandemic months, the volume dropped 87.5% between March and December 2020.

Revenues of $48.6 million were 65% lower than 2019, and all revenue areas, except land and space rentals, were significantly impacted by the profound decrease in passengers.

We finished 2020 by generating a loss before depreciation of $19.5 million compared to earnings of $36.2 million in 2019. After depreciation, a net loss of $51.2 million in 2020 compared to net earnings of $5.1 million in 2019.

To ease our payroll burden while remaining operational, we were able to take advantage of the Canada Emergency Wage Subsidy. Despite the subsidy, we had to make the difficult decision to implement a workforce adjustment that resulted in the loss of 18 Authority staff and the cancellation of 11 vacant positions. We provided outplacement services to all affected staff and training and support to all supervisors and managers involved in the difficult adjustment process.

The impact on the industry has also devastated our commercial tenants and airline partners. Our Business Development and Marketing team has continued to work with both groups to help them manage through the situation where possible.

In the case of our commercial tenants, we have offered as much flexibility as we could afford and have scaled back the in-terminal offering to match demand. We have also agreed to rent reductions so that eligible tenants could take advantage of all government commercial assistance programs available to them.

We have helped our airlines reduce their overhead by accommodating their frequent schedule modifications and reducing their in-terminal space to meet low demand.

Given the importance of cargo movements throughout the pandemic, we continued to support freight operators to expand their operational areas to meet their growing needs.

So, what are we focused on in 2021?

The drone file is an important one and there have been advancements in the technical trials we told you about last year.

In 2020, we added InDro Robotics' Aeroscope Radio Frequency drone detection and analytics of DJI drones to QinetiQ's micro-Doppler radar detection system. This suite of capabilities provides an incredible level of situational awareness and valuable data that we share with Transport Canada, NAV CANADA and the Ottawa Police Service every month. This trial is one more example of YOW stepping up to assist our industry in any way we can.

The data confirms that drone use is increasing at an alarming rate with little activity being properly registered. I am particularly concerned with the rate of activity in restricted areas around the Airport and likely around other airports in Canada, near other sensitive zones, and about operators who are not following Transport Canada regulations.

We continue to voice our concerns to officials at the Transportation Safety Board and Transport Canada.

Throughout the pandemic, the entire senior management team has been collaborating with peers from across the country, sharing best practices and coordinating advocacy efforts on behalf of the greater industry. YOW has been front and centre in discussions with the federal government to advocate for all forms of aviation sector support. We will continue to fight for our Airport as we look to recovery.

These advocacy efforts include soliciting financial support for the terminal station that will connect the Airport with the LRT in Stage 2 of the City's overall transit project. Unfortunately, with little to no revenues, the station is now unaffordable, and the Authority needs to take on additional debt to complete the project. We have been in discussion at the federal and provincial levels and hope we can announce good news soon. We are glad to count active support from MP David McGuinty, Mayor Jim Watson and Minister Lisa MacLeod.

We have also been advocating for fair and equitable access to international and transborder flights to be reinstated. The federal government restricted all non-domestic flights to Montreal, Toronto, Calgary and Vancouver airports with no consultation or end date. Routes take several months to reintroduce. Without a concrete date for the reinstatement of landing rights at YOW, our airline partners will not return flights to their schedules, which will stall our local recovery. We are not asking for service to be reinstated now, but when it is safe to do so. We need to know how YOW can meet or exceed necessary travel safety protocols that are being contemplated by the federal government and to lay out the phased approach to full reopening – including milestones, criteria and timelines – so that we can anticipate and work with our stakeholders towards these timelines. The current lack of criteria and even notional timelines for shuttered airports such as YOW has created unprecedented uncertainty for our facilities, stakeholders and business partners. This framework is needed so we can collaborate with our respective partners on the pathway to recovery and reopening. We have been collaborating with Halifax, Winnipeg and Edmonton airports, all of which have suffered this same set of restrictions. We are working with our respective mayors, who have added their voices to the call to ensure that our communities can recover and return to prosperity as quickly as the four larger airport communities to prevent permanent economic scarring.

Despite these activities and our hopes for an efficient and widespread vaccine rollout, I can't stress enough that it will take several years for YOW to build back its air service and its facility improvement plans. Demand will return starting with domestic travel, followed by transborder and finally international. Some non-stop destinations will likely not return in the foreseeable future. But, if I have learned one thing since joining this industry, it's don't be surprised to be surprised and always be ready if opportunity knocks. Trust that we will be working as hard as we can to ensure our airline partners understand the importance of serving Canada's Capital Region. In the meantime, please include YOW in your travel plans as much as possible, which will help us accurately capture every bit of demand.

As we work towards recovery and financial sustainability, we will continue to leverage our strong credit facility capacity and continue to meet our regulatory, operational and debt service obligations. To plan for 2021 and 2022, the Authority has worked with bondholders to waive the requirement to comply with key covenants contained in our borrowing agreements. YOW is the last of the Tier 1 airports to engage in this activity as we were trying hard not to increase our long-term debt. Like our peers, we were successful in our consent solicitation process, and we successfully went to the market to seek an additional $100M in financing. We are committed to repaying this additional COVID debt within ten years.

Every effort, initiative, and decision I mentioned was made with the support of our Board of Directors. Under the leadership of Chair Code Cubitt, we have been in lockstep as we negotiated the twists and turns that have accompanied this unprecedented period in our history. I want to thank Code and the Board for their trust and support as we have maneuvered through these challenging times.

As Code mentioned, we are looking to an efficient immunization program rollout to expedite our return to everyday life and eventual industry recovery. We hope that our populations roll up their sleeves and get the shot. We know you will all be ready to travel again, and we will be here to welcome you back.