Winnipeg Free Press - PRINT EDITION

Terminal illnesses

Were the costs, and benefits, of construction and demolition plans at the airport properly addressed?

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Winnipeg's new Richardson International Airport has tried its wings, so to speak, its first departures taking flight Sunday from the striking Cesar Pelli-designed terminal, a monument to aviation.

It was a long time in coming, with planning starting in the late 1990s, construction starts delayed repeatedly and a longer building schedule than anticipated.

It's been an expensive ride.

Is it worth it? Those who have seen the stunning edifice are instantly enamoured of the sophisticated, big-city airs it gives off to those visiting an urban centre tired of fighting for respect among its Canadian counterparts.

Barry Prentice says Winnipeggers have no idea how costly this project has been and sees potentially irreparable consequences from its planning to Winnipeg into the future.

The professor of supply chain management and transportation economics has a sobering tale to tell of the management of this $600-million project. He says the Winnipeg Airports Authority's forecasts of air traffic, used to justify the project, will be proven wrong.

And he worries the same misguided thinking will doom the old terminal to demolition.

Prentice sat on the airport's governing board for eight years, until 2002, as plans for a new airport took shape.

His criticisms of the decision to build and the intent to demolish come down to a basic, unfortunate weakness in planning -- where is the cost-benefit analysis to support the WAA's business plan?

"I asked repeatedly for a cost-benefit study to be done when I was on the board of the WAA. They would never agree to do one.

"As far as I am aware, the whole terminal (project) was undertaken without the justification of any cost-benefit (analysis)."

The new airport, he says, was built too soon for the kind of growth in air traffic Winnipeg sees. Building too soon lards on unnecessary expense, costs that are picked up by travellers.

"It was (and) is badly over-built."

Now, Prentice warns, the WAA is hastily moving to tear down the old airport terminal building, which he argues is not beyond rehabilitation, although it has been allowed to deteriorate.

And, he is convinced, the same mistakes made in proceeding with construction of a new airport will be repeated in demolishing the old.

What are the holes Prentice pokes in the WAA's decision to build a new terminal?

Prentice says the WAA relied on shaky forecasts of air-traffic growth to justify building the new terminal. Not enough thought was given to renovating and expanding the existing terminal.

Originally planned to be 61,000 square metres, or 50 per cent larger than the current terminal, the new airport was first costed at $200 million. Then the cost for the full development -- terminal, parking, roads -- was given as $350 million in 2004.

In 2005, the price escalated to $560 million.

By 2006, the new terminal had been scaled back to 51,000 square metres -- just 25 per cent larger than the old terminal. And the cost rose to $572 million. Now we are told the price is $585 million, but there are extraordinary additional costs coming due to errors made on the ground slope, which caused the WAA to switch contractors, sparking further delays and more work. After a protracted legal battle, the WAA was found to be responsible for the errors.

The WAA's Barry Rempel, who became CEO after Prentice left the board, says the first he heard of Prentice's concerns about the new terminal and a cost-benefit analysis was at a public meeting earlier this year.

Further, he says the bid to save the old terminal is misguided, as it has outlived its use as a terminal and would be cost-prohibitive to rehabilitate.

The terrazzo floor is cracking because of shifting; only partially piled, the foundation has dropped a foot in places and the basement is unusable, Rempel says.

The pillars have shifted. Condition reports have noted the mechanical and electrical systems are outdated.

All of that can be rehabilitated, Prentice insists. Both men agree it is simply a matter of spending money. Rempel says it would be throwing good money after bad.

Prentice's counterpoint: Expanding would cost nowhere near the $600 million that's gone into the new terminal.

Prentice's criticism of WAA's planning boils down to forecasts of air-travel growth and it has relied on grossly optimistic projections, he says.

Back in 2001, Winnipeggers were being told the WAA expected three million passengers that year, based on the 2.9 million seen in 2000. Both forecasts were proven wrong, particularly in 2001, in the wake of the 9/11 terrorist attacks.

Recovery was expensive and long, but optimism has returned: The WAA says it expects traffic to rise to 4.6 million passengers by 2020, citing forecasts based on Transport Canada data and other sources.

"Everybody knows those (Transport Canada's) forecasts are notoriously inflated for Winnipeg," Prentice says.

Projections are skewed because the department's model encompasses experience of major hubs such as Toronto, Calgary and Vancouver. Winnipeg has very little in-transit traffic that can be factored into airport use and revenue. Almost all travellers live or visit here.

This is critical when it comes to airport revenues, a growing chunk of which is derived from spending at terminal shops, services and restaurants, especially post-security by travellers with time to kill.

WAA's design for the new terminal has 80 per cent of retail post-security.

As for forecast accuracy, it's tough to assess. Transport Canada's forecasts are out of reach. It sells its data to airport authorities, on a "cost-recovery" basis. I could have historical forecasts, I was told, for $10,000. It was suggested I ask WAA to release its data.

WAA emailed scant forecast detail: In 2004, three million passengers; 2006, 3.3 million; 2015, 4.1 million; 2020, 4.6 million. (The number for 2004 is only 100,000 off; 2006 was underestimated by about 300,000.)

Prentice has done his own projections, with the benefit of more than 20 years of past data. His forecast for 2015 is 3.7 million and for 2020, just more than four million.

The differences may seem small but air traffic grows very gradually at YWG, he cautions. That is why long-term forecasts are most reliable.

The existing airport has a capacity of four million, he believes. The WAA should have planned to open a new terminal 10 years from now.

Further, overly optimistic forecasts affect revenue projections. The airport makes its money from airport improvement fees travellers pay, from airline landing fees and from the tenant businesses in the terminal. Prentice's forecasts show the WAA's projections being short by almost 600,000 travellers by 2020. Annually overestimating traffic compounds revenue shortfalls.

For Prentice, the fight over the new terminal is moot -- it's done, it's beautiful, and while it's costly, it's there to be enjoyed and Winnipeg should make the most of it.

But he fears the decision-making the WAA has exhibited will now condemn the old terminal to demolition. Tearing it down doesn't seem to make sense financially, he says.

As suggested by Arni Thorsteinson, a developer who proposed reuse of the old terminal, Prentice says there should be a public process of investigating the costs and benefits of reusing the old terminal.

How much will it cost to tear it down? WAA says that's protected information as the job will go out to tender.

The secrecy around these factors drives Prentice and heritage advocates nuts. None of them believes the WAA really tried to find good, workable reuses of the terminal.

Prentice goes further and says the airports authority has not showed an iota of private-sector entrepreneurial zeal -- the rationale to handing airport management to the private sector -- in developing business opportunities or containing costs. After all, the WAA simply passes its business costs on to passengers.

"There's an opportunity to be creative and the private-sector group that's running the show looks less creative than the bureaucrats that handed over the place."

The WAA defends itself against allegations it made a pathetic, perfunctory effort to find new uses for the old terminal.

CEO Rempel notes it has held public meetings repeatedly, issued a national request for proposals and extended the period for presentations.

Thorsteinson's plan, he says, was speculative. It did not return revenue to the WAA until it was making money beyond what it needed to pay off its investment. That was a risk the WAA did not want to take.

The Western Canadian Aviation Museum, which investigated being central to Thorsteinson's plan, has since announced it wants to build a new museum on the north side of the old terminal's footprint.

That caused preservation proponents to scratch their heads about what had changed: It seemed a natural fit to have the aviation museum a pivotal player in saving a historical terminal.

Shirley Render, president of the museum and now a member of the airport board, has said saving the old terminal really messes with her museum's future.

The airport has said previously it has plans for development on the land where the museum is now, in an old hangar on Ferry Road.

Prentice is sympathetic to advocates in the heritage and architectural community lobbying for preserving Canada's first international airport. But his priorities are straight-up.

"I'm not nostalgic that this building has to be saved at any price," he says. "My concern... has always been economic. This airport is owned by us, the people; it's our property. Why would we spend additional money to demolish that building, especially if there's no real use for the land?"

The only reason he can come up with for demolition is that people think this sterling example of mid-century, modernist architecture in the International style is ugly.

"I told them at the time it's my belief that the current generation really cannot judge the architectural value of things built in their or their parents' time."

And the combined monetary and cultural cost of demolishing the airport lead him to pose a troubling question: "Are people, in the future, going to look back on us and say 'What a bunch of idiots' "?

Republished from the Winnipeg Free Press print edition October 28, 2011 A15

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