Turbulence at the terminal With passenger traffic down 95 per cent, Winnipeg Airports Authority barely paying the bills By: Martin Cash Posted: 7:00 PM CDT Tuesday, Jul. 28, 2020

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This article was published 28/07/2020 (1870 days ago), so information in it may no longer be current.

The almost complete shutdown of air travel has left the Winnipeg Airports Authority precariously close to the edge of technical default as it tries to maintain debt payments on the $580 million it still owes on its terminal building.

Passenger traffic was down 95 per cent in the second quarter at the Winnipeg Richardson International Airport compared to last year. Only 56,000 people were through the terminal compared to 1.1 million last year, a huge revenue hit considering departing passengers pay a $25 airport improvement fee. (The WAA increased its airport improvement fee to $38 in May.)

 

 

Although passenger counts were decimated, the WAA’s revenue for the quarter was only down two-thirds (thanks to cargo traffic which was up slightly, land lease revenue, and third party management contracts the WAA earns for running airports in The Pas, Dawson Creek, B.C. and a couple of other place).

But the WAA is walking a tightrope on its debt commitments and has already breached one of the covenants on that debt called the debt service coverage ratio.

That asks if the WAA has enough money coming in this year to make the interest and principal payments for the year.

Barry Rempel, the chief executive officer of the WAA, did not mince words.

“We do not have enough money coming in this year to do that,” he said.

Luckily, that is not what is called an event of default. Just as fortunate, the WAA has access to about $75 million in cash which it can use to make the payments and it has been able to keep making all its payments.

“What that tells you is that we need traffic to come back or next year at this time we will be having a different discussion,” he said.

After two years in a row of passenger counts at the airport of 4.484 million, Rempel said the estimates are that the total will be below 1.5 million this year.

The hope for next year is to hit about 2.5 million which would provide enough revenue to be able to meet that debt covenant.

“What that tells you is that we need traffic to come back or next year at this time we will be having a different discussion.” – Chief executive officer Barry Rempel

But estimating the impact of the COVID pandemic has been hit and miss, and considering that unlike a manufacturer or a service company that might be able to mothball operations until business comes back, the airport has a lot of fixed costs on top of a very large debt load for an organization whose revenue last year was about $140 million.

But there are signs of growth.

This Monday saw 1,012 passengers through the terminal, the largest number since the shutdown began in March and much better than the all-time low of 59 passengers on April 11 of this year. (Typical daily arrival and departure passenger counts are between 12,500 and 13,000.)

 

 

In the meantime, the WAA has cut about 30 per cent out of its operating expenses, including reducing its workforce of 150 people by about 25 per cent.

Rempel said his team has done a great job shutting down certain parts of the airport including turning off the baggage handling system saving on staff, electrical and maintenance expense and relying on the much smaller system used for over-sized baggage.

While the WAA has been able to utilize the federal government’s Canada Emergency Wage Subsidy it has not been able to access any other financial support.

It has however benefitted from rent forgiveness related to the controversial land lease the federal government charges all the locally owned airports across the country.

But that rent amount is based on 11 per cent of revenue.

“Our revenue is based on people and when there’s no people travelling there’s no rent due,” Rempel said.

The Canadian Airports Council, of which the WAA is a member, has petitioned the federal government to forgive that rent payment for an additional five years. There has been no decision from government yet on that. As it stands now, that payment has been forgiven until December.

The implementation of the phase IV re-opening in Manitoba and the ability to travel around Western Canada without being required to self-isolate for 14 days has helped increase passenger counts slightly.

But Rempel said it is almost all leisure travel.

“Business travel is not picking up whatsoever,” he said.

“Business travel is not picking up whatsoever.” – Chief executive officer Barry Rempel

What happens in the fall will say a lot about how well the airport will be able to face its financial obligations next year.

If phase IV re-opening happens and travellers from Eastern Canada can freely move around, it might allow business travel to start coming back. If that doesn’t happen, Rempel is concerned because October and November are slow leisure travel months at the Winnipeg Richardson International Airport.

But Rempel said he feels pretty good about the forecast for next year and the ensuing years. But he is still not anticipating a return to 2018-2019 passenger levels until 2025.

martin.cash@freepress.mb.ca