Check against delivery

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

Good afternoon and welcome.

I'll begin by saying that we tried very hard to have this meeting in person, but we watched the Ottawa Public Health dashboard and found the sub-variant indicators too concerning. Out of the same abundance of caution that we have exercised for the past two-plus years, we decided to hold this meeting virtually once again. I sincerely hope we'll be able to return to meeting in person next year.

Speaking of COVID. It seems almost unimaginable that everyday life has been turned upside-down for so long. But it has, and here we are, still navigating the uncharted waters and unprecedented impacts facing our industry. As Chair of the Board, I have a bird's-eye view of the Authority team. I've been both impressed and very proud of the team's focus and dedication toward operating efficiently, all while ensuring passengers and employees remain safe. On behalf of the Board of Directors, I offer my sincere thanks to the entire team at YOW for another successful year, during unprecedented times.

We were encouraged to see passengers taking off to explore our beautiful country last summer. And, while we faced setbacks along the way, including COVID-19 variant-related restrictions, we have put a lot of time and energy into rebuilding our air service, restoring non-stop international flights to our airport, and getting U.S. and sun destinations returned to the schedule. And, return, they did. The holiday travel season proved that people are anxious to travel to the sunny south and to the ski slopes out west. We hope the balance of 2022 will bring a more robust schedule that allows us to help connect even more friends and families in more parts of the world.

Mark and his team have not paused for a moment on setting the stage for recovery or pursuing longer-term strategic initiatives that will be realized when the recovery occurs.

Of course, achieving financial sustainability is still our top priority. To that end, we are grateful that the federal government recognized our struggles and came through with funding for two specific projects through its Airport Critical Infrastructure Program. Transport Canada confirmed $6.4 million dollars for the Light Rail Transit Airport Terminal Station in June and another $3.9 million for a significant taxiway rehabilitation project planned for the upcoming summer months.

We also received $5.7 million dollars from the federal Airport Relief Fund to cover a portion of our operating costs for the year. These grants in no way make up for the extreme losses we've incurred over the past 25 months. They will, however, allow the Authority to move forward on other key projects that are in the queue to unlock commercial development opportunities critical for YOW's recovery, and continued success in serving our community.

Speaking of the LRT, each time I travel, I have the opportunity to see the incredible progress on both the City's track and the new LRT station at YOW. I have watched the station materialize and find it exciting and impressive. Despite supply chain and labour issues that have plagued the construction industry, the project is currently both on time and on budget. We expect the new YOW LRT station to be completed in the next few weeks, after which the City has more work to do on the Trillium Line, before we can begin service. Once the overall project is wrapped up, airport employees and the general public will have easier access to and from the airport. It will also fulfill our goal of providing even more connectivity between the airport and the City's core, which befits a G7 capital city. It will undoubtedly make Ottawa-Gatineau a more attractive destination for conferences and tourists for decades to come.

Our ability to advance the Authority's Strategic and Action Plan priorities like the LRT station, during these difficult times, is a testament to the excellent collaboration between the Authority team and the Board of Directors. It's also a credit to the Board's trust in Mark and his team where projects and decisions are concerned. I'd like to thank each member for investing their time and attention in the airport's success and for their flexibility during a very fluid period that has required even more meetings as well as strategic decisions.

On behalf of the Board, I would like to extend special thanks to At-Large member Jacques Sauvé and Ottawa Board of Trade nominee Craig Bater who left the Board, in 2021, after serving since 2012. Both Jacques and Craig served with distinction and have left an indelible mark on the airport.

Since we last met, we welcomed John Proctor to the Board as a nominee of the Board of Trade. And just last week, we confirmed the appointment of three new At-Large members to fill vacancies. I welcome Marc Joyal, Bruce Lazenby and Deanna Monaghan to the Board. All four new directors bring impressive resumes and skillsets that we are anxious to incorporate into our committee and Board work during this critical recovery period.

They say "it takes a village", which is a poignant anecdote during these challenging times. We've been able to rally our village of selecting bodies, local businesses and tourism partners to lend their voices to our requests for financial and other assistance from the government, which they willingly provided. The greater community has also been extremely supportive, and we are most grateful.

I'd like to close my remarks with an analogy that I hope you will agree is appropriate given the ongoing situation. It brings together two passions of mine: YOW and sailing. Operating the airport during the pandemic has been like racing a sailboat in rough water with storm-force winds. Our boat requires a strong leader who can anticipate the changing environment and work with the crew to develop a sound strategy for keeping us on the right course regardless of the conditions. Every crew member must trust the skipper and the rest of the team, think quickly, pivot often, and communicate clearly as the boat navigates the obstacles in its path. It's not enough to be fast, nor is it enough to have a solid plan; a winning crew needs both to win the race. Mark and his team have done a fantastic job navigating the swell and chop and have kept YOW pointed in the right direction despite the many challenges thrown in their way.

Needless to say, we all look forward to calmer waters in the months ahead.

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, 2021, 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 2021. This financial review discusses changes in passenger volumes and landed seat volumes that impacted the Authority’s results from operations. The COVID-19 pandemic continued to weigh heavily on the Airport and the Canadian and global travel industries throughout 2021. In 2021, passenger volume of 1.2 million passengers was 14% lower and landed seats were 9.7% lower than in 2020.   

The Authority generated revenues of $57 million during 2021, including airport improvement fees of $19 million and landing and terminal fees and other charges to airlines of $13 million. The Authority’s remaining revenues came from concessions, car parking, land and space rentals, and other sources. While the Authority received COVID-19 specific funding under the Canadian Emergency Wage Subsidy and the Airport Relief Fund in 2021, the Authority does not receive government funding to support its ongoing operations. 

The Authority started collecting an airport improvement fee, included in the price of airline tickets, in 1999 and this fee was raised from $28 to $35 on June 1, 2021. This fee is used to fund the cost of airport infrastructure and related financing. During 2021, the Authority invested over $12 million in a variety of high-priority projects including the new LRT airport terminal station, apron and taxiway refurbishment, main terminal building enhancements and the acquisition of major fleet vehicles.

The Authority incurred total operating expenses of $62 million excluding depreciation.  Ground Rent payable to the Government of Canada was waived for the period from March 2020 to December 2021 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 $2 million. The total interest cost of $21 million was paid on debt incurred to finance the Authority’s capital expenditure programs. 

The Authority generated a loss before depreciation of $5 million in 2021 and which was better than the loss of $20 million in 2020 due to the effects of the pandemic and the resulting impact on passenger volumes.

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 $31 million in 2021, and was $1 million lower than 2020 depreciation.     

The Airport Authority ended the year with $48 million in cash together with approximately $150 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 liquidity strategy, the Authority successfully financed a $100 million bond in May 2021. This has provided the necessary liquidity for the Authority to continue to invest in priority capital investments, maintain debt servicing commitments on borrowings and provide positive cash flow support for operational purposes as it navigates the COVID-19 pandemic through to the eventual recovery over the coming years.

As we look ahead to 2022, the year began with weakness brought on by the omicron variant and travel restrictions, however, with the lifting of key travel restrictions, the Ottawa International Airport is experiencing some improvement in travel volumes as compared to 2021 but still a significant decline over 2019. Nevertheless, there is some anticipation that volumes will continue to improve with very modest increases over the course of 2022 and beyond. Mark will provide more details in his remarks. 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.

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

Two years. It sounds like forever, doesn’t it? As the Chair said, it’s almost unimaginable, yet here we are. Newsfeeds are filled with bad news, but I would like to focus on some of the positive things that have come of the past 25 months and discuss what the next five years hold for YOW.

In the early days of the pandemic, we got our finances in order to keep the lights on and remain operational, as expected of national, critical infrastructure. We cut costs, froze budgets, adjusted our workforce, and researched every available financial assistance opportunity to mitigate the effects of the pandemic. Then we went to work to help our tenants survive. From helping them apply for government subsidies to easing their contractual obligations where possible, we were in it with them.

During this entire time, we never neglected the longer-term view and eventual recovery. What would we need to not only survive but to thrive once the industry returned to a new normal?

We re-examined long-term projects like the YOW+ terminal revitalization program, whose original timeline was 2020 to 2022. At the time, three years seemed like an eternity.

The first pillar of YOW+ concerned the implementation of CATSA Plus and moving the Canada/International security checkpoint to Level 3. We completed the move in fall 2020. With the recovery well underway, we have recently seen some line-ups form at passenger screening. We have also seen the great potential to keep our line-ups efficiently moving because of the vastly improved layout and the additional capacity from the CATSA Plus lines.

The second pillar relates to the complete overhaul of the airport’s retail and food and beverage concession program. As Code mentioned, part of the retail program was completed in summer 2021 with Paradies Lagardère opening The Locks and Maison de la Presse in the centre court area, between gates 17 and 18. We are now looking at several more retail outlets opening by the end of this year, including No Boundaries and iStore. The flagship Canal Market Hall will open early in 2023. We have adjusted the concept slightly, and work will be starting this summer, including a Big Rig restaurant and bar. As for the remainder of the program, their activations will depend on passenger growth and our concession partner, SSP Canada’s, financial recovery.

The LRT Airport Terminal Station, which represents pillar three, is well on its way to being finalized as projected and ready for connection to the City of Ottawa’s airport spur. OC Transpo’s most current projection is to have the Trillium Line substantially completed and ready for passengers by May 2023.

The fourth and final pillar is the hotel airport. Despite their challenges, I am confident that our partner, Germain Group, will break ground on their much-anticipated project in the near future. Like all hotels, the pandemic hit them hard; however, I know they are actively working to resolve challenges to pave the way forward. We also know that hotels connected to terminals are among the top-performing hotels. We will not compromise on the original design, which includes 180 rooms, a full-service restaurant and meeting spaces.

With the four pillars of YOW+ well underway, what other objectives are critical to strategically positioning YOW for the future?

The first is building back our route network. This effort will take some time, but we’re going after it with determination and a longer view. We are not satisfied being a feeder to larger hub airports for decades to come. For this, we need airline partners who see Ottawa-Gatineau as a priority market, deserving of appropriate air service for a market our size. Our airfield infrastructure can, and will, support this vision.

The reality of Air Service Development is that many new routes are subsidized by third-party, often government or economic development agencies. In fact, airlines expect this. Unfortunately, we do not have access to these types of incentives provided by other levels of government - be they provincial or municipal, so our air capacity has stood on its own merit – for better and worse. For a market like Ottawa-Gatineau, our airport needs to partner with carriers operating the right aircraft type for our market dynamics to ensure sustainable, long-term success – although carriers that fit the bill are limited. Airplanes are expensive mobile assets that must be deployed correctly and profitably, or the airline will move them to the next best opportunity. For example, large wide-body jets like Boeing 747s, 777s or Airbus A380s or A340s have too many seats to fill for a market our size.

Examples of well-suited aircraft for our market include the Trans-Atlantic range capable 182-seat Airbus A321NEO-XLR. Air Canada recently announced that starting in 2024, they will begin adding 26 of these planes to their fleet. Rest assured that we have an active dialogue with AC’s network planning leaders to help them understand how YOW is an ideal market for this aircraft. We believe this is true for the reintroduction of non-stop YOW/London-Heathrow service, Frankfurt, and possibly even the addition of Paris.

Porter Airlines is growing its fleet by adding at least 30, 130-seat Embraer E195-E2 jets – another excellent fit for our market. These aircraft will enable the airline to fly to the west coast, southern US, Mexico and the Caribbean. Like with AC, we will work with Porter’s network team to help them see how YOW can support their aggressive network expansion plans.

Flair Airlines, Canada’s independent ultra-low-cost carrier (ULCC), has arrived in Ottawa. They currently serve nine destinations from YOW and are filling a niche in our market by introducing new customers to air travel. We understand the regulatory challenges they are now facing. But, one thing is certain:  there is a market for ULCCs in Ottawa-Gatineau. Whatever the outcome, this market is important, and as of today, ULCCs represent 8 percent of total domestic departing seats and 33 percent of transborder departing seats.

Adding to YOW’s ULCC offering, West Jet’s Swoop commenced YOW service just last week to three destinations. ULCCs will represent 16 percent of total departing seats and nine routes by August this year.

All this to say, we are supporting our airline partners and encouraging them to rebuild routes and connect our community with the rest of Canada and the world. And we will be here for any airlines that wish to include YOW in their network.

As mentioned, multi-million-dollar financial incentives are common worldwide, with Canada and the USA being no exception. YOW, on our own, simply does not have the resources to go down this path alone.

That said, we are proposing a framework for an air service development fund where we hope that long-standing partners like Ottawa Tourism, The City of Ottawa, and others will be enthusiastic participants in support of our long-term growth objective. If successful, we will not use this fund to buy random flights that are not consistent with our market reality, nor will we compromise the excellent strategic partnerships with our current airline partners. Whether global network or local low-cost, every carrier is important to YOW and will play a vital role in our recovery.

Earlier today, we officially broke ground on an exciting project that is a game-changer for YOW. We call it Taxiway Romeo, and it represents the first major airside infrastructure expansion project since well before the Authority was established in 1997. We initiated Romeo to accommodate the growing demands of our G7 Capital airport, including the unique and frequent needs of the Government of Canada. We’ve earmarked nearly 25,000 square metres, or six acres, for their needs.

A positive side effect was how quickly the private sector seized the opportunity to shore up the remaining space. We have a potential private hangar and supporting apron project representing another approximately 25,000 square metres and well over $50 M in capital investments and some high-paying aeronautical jobs. Add serious interest from a cargo/logistics operator who could potentially occupy the north side of the taxiway, and I am sure you can understand why I’m bullish about our future. Confidentiality agreements preclude me from sharing more, but I will be happy to elaborate when the time is right.

Our second objective is passenger-centric and understanding who will be filling these seats in this emerging new normal of air travel. Historically, YOW skewed unusually high, with more than 40% of our passenger base travelling for business purposes. Walking the terminal makes it clear that we are nowhere near this level today.

With our region’s largest employer, the federal government, mostly still working remotely, there is a lot of uncertainty. The recently announced strategic policy review being conducted by Ottawa MP Mona Fortier will examine how the public service works in a post-pandemic era. We applaud their focus on real property cost savings and increased digital service delivery, but we cannot disregard the impact these changes could have on market demand at YOW. Direct government-related travel is down, but so is the indirect as people meet online instead of in person. This represents a fundamental market shift.

To better understand this new market, we will update previous studies to glean hard evidence on our market profile, assess the impact, and make informed decisions.

We have watched leisure travel return in a big way, and thank everyone who has travelled from YOW. We anticipate this segment will return to pre-pandemic levels and may even surpass them. Either way you look at it, our business to leisure breakdown is sure to change, and so must we.

Our third strategic objective is sustainability. As we continue on our path to recovery, we must adjust our infrastructure to accommodate future demand in an economically sustainable, socially and environmentally responsible way.

Our achievements in Airports Council International’s Carbon Accreditation Program are testament to the Authority’s efforts to reduce our operational impact over the past 20 years. Just as the pandemic hit, we were ready to apply for the highest level of accreditation after purchasing ethical, responsible carbon offsets.

Still, we are ready to take our commitment to the environment further by aggressively decarbonizing our operation. We need to source green projects on which we can work collaboratively with our airline partners to help offset our carbon footprint. We have also initiated discussions with another local champion of sustainability - Ottawa Hydro. Together, we have started exploring opportunities to move boldly on several opportunities, including electrifying our vehicles and heavy equipment and introducing photovoltaic generation on airport property. These are lofty projects that require equipment purchase and deployment and the assistance of all levels of government. Our work with our airline partners to electrify ground handling equipment with state-of-the-art recharging stations – all in a very fluid and fast-moving environment, has already begun. YOW is committing to making these changes and encouraging our campus partners to join us in our efforts to achieve net-zero by the earliest date possible, but well before 2050. Stay tuned for announcements in the next twelve months on YOW’s commitment in this regard.

We are already shifting to ESG (Environmental, Social, Governance) reporting to share our successes and achievements in sustainability. We will introduce our first ESG report in 2023 to report on activities from this year.

An increasingly more critical topic is Cybersecurity. We need to ensure that we harden our systems and facilities as much as possible as bad actors attack infrastructure such as ours. We have recently witnessed the chaos that a cyberattack can create for an airline. Sunwing has a substantial, seasonal operation at YOW, and we saw first-hand the impact when their flight management IT system was disrupted. As part of the IT ecosystem, airports must be aware and prepared. The international airport of a G7 Capital City that vigorously defends democracy and the rule of law worldwide increases our risk profile. Defending its national, critical infrastructure comes at a cost. We have and will continue to play a part in that defence.

The discussion of information technology also touches on the next strategic area of the passenger experience. We are looking at ways to provide the exceptional experience our customers have come to expect over the years. The future will include seamless and touchless processing. This change also comes at a cost, which we are working to understand and consider in our budget cycles. Already, we have seen our main carriers improving on processes such as touchless check-in. As an airport promoting a common-use platform, we must invest in keeping our systems current, with a strong cyber posture to protect networks and assets.

One final area of focus, and certainly one of the most important, is our workforce. The pandemic took a toll starting with the initial workforce adjustment. It continued with some retirements and some staff departures, and issues associated with a split workforce with some able to work remotely and some required to work only on-site. We are adjusting to a smaller team and experimenting with a hybrid arrangement that allows certain positions to work remotely a few days per week.

Employee engagement and culture are even more critical as we move towards recovery. The dual workforce will require increased attention to continue to work effectively and efficiently, together apart. Talent recruiting will become more expensive in a highly competitive market. But our people are vital to our success, and we need to invest in the team.

As we get clarity on the workplace of the future, we will need to adapt. This will include modifying our workspace to allow for more digital meetings, and adapting yet more new technology. We’re only at the cusp of this shift, and we need more information to inform the planning that will start this year.

The three preceding topics underscore the importance of information technology in our business. To better reflect its criticality, we have upgraded our top IT position from Director to Vice President. A key task of our new VP, who will be starting in the weeks to come, is to maximize our planned investment in upgrading our infrastructure to meet our evolving needs through the balance of the year.

All of the points I have mentioned link directly back to economic development. Before the pandemic, the Ottawa International Airport generated more than 2.1 billion dollars in annual economic activity. We’ve suffered a setback in that regard. However, the projects we’re working on and positive travel recovery indicators signal a return to that role.

To get there more quickly, we need stronger engagement with the cities of Ottawa and Gatineau to ensure support for the economic opportunities coming from aviation.

I want to thank the City of Ottawa for their feedback as we strive to attract new or re-investment from the private sector to further enhance YOW’s position as a major economic engine and employer for Canada’s Capital Region. I am confident that we will see initiatives, that are currently being explored at the request of the Mayor’s Economic Partners Task Force, help YOW increase the prosperity of the National Capital Region. Increased partner backing makes the difference between our area getting on more airline and developer shortlists instead of being left behind as major decision-makers pursue other destinations backed with ready and available enticements and incentives.

Trust that we are anxious to resume our role as an economic engine and look forward to working with the municipalities and other stakeholders to make YOW an attractive partner for business and industry.

To return the favour and give back to the community, we propose to relaunch our community giving program in 2023. We introduced Project Clear Skies in 2004 and invested more than 1.5 million dollars in Ottawa-Gatineau. The pandemic put the program on hold, but we are ready to refresh, rebrand and make a more significant investment in the future. It’s too early to share the details, but we are looking at all possibilities. These include making additional funds available to engage with our community and manage the program, and working with airport partners to maximize impact. We may even extend our reach beyond our region to areas where our operation makes a difference, such as Canada’s North. Stay tuned!

Without a solid balance sheet, we can’t accomplish any of the mentioned projects, opportunities, and tasks. Since the early days of the pandemic, we have preached financial sustainability, and our finance team has been laser-focused on that objective. We increased our debt by issuing 100 million dollars in Series F Bonds. We also benefitted from funding from the federal government. 

We anticipate provisioning up to 30 percent of our accumulated pandemic debt within the next five years and entirely within ten years. We will do this by prudently setting sufficient amounts aside as our balance sheet turns from red to black so that we can repay the entire debt taken on as a result of the pandemic as it comes to maturity.

The preceding is a lot of information to take in. And, it barely scratches the surface of the activity and big plans we have for YOW. I am very excited about what the future has in store for us, and I look forward to working with the most amazing airport team to turn our plans into reality for the benefit of our community.

I want to thank that fantastic team for their patience, understanding, dedication and hard work. You have all done an excellent job of keeping the airport moving forward during the most challenging two years. Whether working on-site or remote, your efforts have not gone unnoticed.

Thanks also to our Chair and the rest of the Board of Directors, who have also been working differently but very hard during the pandemic. Two years of virtual meetings, including emergency meetings that required timely and efficient discussion, have been a lot to endure. I look forward to being back around a boardroom table and at our strategic planning session in June, where many of the above projects will be discussed as we plan to operationalize them in the years to come. In the meantime, I want to express my appreciation for your steadfast support, which is vital to our success and fulfilling our vision of being the world-class gateway for Canada’s Capital Region and an economic engine that drives prosperity for our community.

I also extend my thanks to our selecting bodies, business partners and the greater community. Your support and patience as we build back are appreciated. I would ask that you continue to support our community’s recovery by including YOW in your travel plans. Every ticket that includes YOW airport demonstrates to airlines that we have a market in need of service.

Above all, I hope you will follow along as we embark on an exciting five-year path filled with great things for the airport and our entire community.
 

Thank you.