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Toronto Pearson International Airport: Toronto Pearson International Airport: A Look through the Crystal Ball A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve Shaw Vice President, Corporate Affairs
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Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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Page 1: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 2: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 3: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 4: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 5: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 6: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 7: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 8: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 9: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

• 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

Page 10: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 11: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Demand ForecastsDemand Forecasts

Page 12: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 13: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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.

Page 14: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 15: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Air Cargo DemandAir Cargo Demand700

500

400

200

100

0

600

300

(‘000 tonnes)

2000 2005 2010 2015 2020

Page 16: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Airport Development ProgramAirport Development Program

Page 17: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 18: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 19: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 20: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Airport Airport Development Development

ProgramProgram

Page 21: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

DominoesDominoes

Page 22: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

DominoesDominoes

Page 23: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

DominoesDominoes

Page 24: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Airport Development ProgramAirport Development Program

Page 25: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 26: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Costs

Page 27: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 28: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Construction Cost ComparisonConstruction Cost Comparison

Page 29: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

2005 Cost per 2005 Cost per EnplanementEnplanement

Page 30: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 31: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

• 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

Page 32: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 33: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 34: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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%

Page 35: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 36: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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%

Page 37: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Airport Fees and Charges per RotationAirport Fees and Charges per Rotation

Page 38: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Airport Fees and Charges per RotationAirport Fees and Charges per Rotation

Page 39: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

Airport Fees and Charges per RotationAirport Fees and Charges per Rotation

Page 40: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Facilitation

Page 41: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 42: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 43: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

• 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

Page 44: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Bilaterals

Page 45: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 46: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Page 47: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve

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

Promote Air ServicesPromote Air Services

Page 48: Toronto Pearson International Airport: A Look through the ... · Toronto Pearson International Airport: A Look through the Crystal Ball Livable Peel Conference February 10, 2006 Steve