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The Greater Toronto Airports Authority (GTAA) has reported its financial and operating results for the fiscal year ended Dec. 31, 2019. Passenger activity increased two per cent during 2019 as compared to 2018. While overall growth was up due to increased aircraft load factor, aircraft size and flights on existing routes, the moderate growth, compared to recent years, is reflective of global aviation industry challenges in 2019. Toronto – Lester B. Pearson International Airport (Toronto Pearson) remains Canada’s busiest airport and North America’s second busiest airport in terms of international passengers.
“2019 represented a year of positive milestones for Toronto Pearson,” said Deborah Flint, president and CEO of the Greater Toronto Airports Authority. “From a third Airport Service Quality award for Best Large Airport in North America, to surpassing the 50 million passenger milestone, the 50,000 workers across Toronto Pearson delivered an exceptional airport experience that benefits the broader region. The second half of the year, however, presented challenges for the entire aviation sector. In the face of significant international headwinds due to the grounding of the Boeing 737 Max aircraft and the travel disruption from the novel coronavirus, we are working closely with our partners to care for our customers, adjust as needed operationally, and to ensure the financial sustainability of the GTAA and its related economies.”
During 2019, 50.5 million passengers travelled through Toronto Pearson, representing an increase of one million passengers as compared to 2018. Passenger activity in the international sector increased by 700,000 passengers reflecting 2.4 per cent growth and the domestic sector increased by 300,000 passengers reflecting 1.4 per cent growth. During 2019, aircraft movements were down 4.2 per cent while the number of seats increased by one per cent, as compared to 2018, reflecting the continued shift by air carriers utilizing larger aircraft in their respective fleet.
The GTAA recorded net income of $139.8 million during 2019 compared to $113.7 million in 2018 (adjusted net income, excluding one‐time adjustments, was $139.8 million in 2019 compared to $139.8 million in 2018). The GTAA has reduced its gross debt per enplaned passenger by 1.6 per cent to $254 and net debt per enplaned passenger by 2.1 per cent to $236, when compared to 2018.
On Oct. 17, 2019, the GTAA issued $900 million series 2019-2 medium term notes due Oct. 17, 2039 at a coupon rate of 2.75 per cent.
During 2019, the GTAA reported total revenues of $1.5 billion, representing an increase of $49.6 million over 2018. The continued growth in revenues was a reflection of passenger growth and corresponding increases in commercial revenues. During 2019, the GTAA’s commercial revenues increased $53.6 million to $555.5 million, when compared to 2018. The increase in commercial revenues was due to increased passenger growth, commercial advertising and sponsorship, parking and ground transportation and rental revenues.
Total expenses reported during 2019 for the GTAA were $1.4 billion, representing an increase of $23.5 million over 2018. The increased costs were primarily related to higher snow removal costs as a result of harsher winter weather conditions in 2019, information technology costs, building repairs and maintenance costs, increased staffing to manage passenger flow, and a higher depreciable asset base, partially offset by a decrease in utility costs and the 2018 early redemption of debt charge. The GTAA’s operating costs to support government agencies during 2019 of $35.3 million decreased $0.9 million or 2.4 per cent, when compared to 2018. These included direct and indirect investments to Canadian Air Transport Security Authority (CATSA), U.S. Customs and Border Protection (USCBP) and Canada Border Services Agency (CBSA) to enhance services.
Earnings before interest and financing costs and amortization (EBITDA) during 2019 were $725.9 million, representing an increase of 0.7 per cent over 2018.
On the departure of retired GTAA president and CEO, Howard Eng, Flint said, “On behalf of the entire organization and the global aviation industry, I’d like to recognize the incredible contributions of Howard Eng. Howard encouraged everyone in the industry to think globally and to connect our airports to the regions around us. Thanks to Howard for helping to take Toronto Pearson to the next level of excellence.”
In late December 2019 and early 2020, a novel coronavirus (“COVID-19”) was confirmed in multiple countries throughout the world and declared on March 11, 2020 as a pandemic by the World Health Organization. The outbreak and resulting economic contraction has had, and is expected to continue to have, a negative impact on demand for air travel globally. Toronto Pearson has experienced significant declines in passengers and flight activity during February and March of 2020, as compared to the same period in 2019. This is due to flight and route cancellations, fleet groundings, travel advisories and restrictions and the economic contraction occasioned by the outbreak. The reduced activity is having a significant negative impact on the GTAA’s business and results of operations, including aeronautical and commercial revenues and airport improvement fees. Apart from the impact of this pandemic on our revenues and operations, there may also be disruptions, including to supply chains and third-party service providers, and potential disruptions to our workforce. The pandemic may also impact the cost of capital in the future which may arise from disrupted credit markets, and possible credit ratings watch or downgrade of our debt. We expect that many of our stakeholders and counterparties may experience financial distress which may precipitate requests to the GTAA for contractual relief or result in temporary or permanent shutdown of their operations, which could adversely impact our revenues or operations.
Given the rapidly evolving situation, management continues to analyze the extent of the financial impact, which could be material, depending on the duration of the outbreak. While the full duration and scope of the recent coronavirus pandemic is not yet known, management does not believe, however, that the outbreak will have a long-term impact on the financial sustainability of the airport given its available liquidity. In addition, the company is also reviewing potential reductions to operating and capital expenditures.
In relation to COVID-19 and its impact on the corporation in the first quarter of 2020, management is working diligently to ensure the GTAA is supporting its key partners and taking steps to help protect the safety of airport workers and passengers. Additionally, the GTAA and the Canadian Airports Council are actively engaging with governments at all levels to discuss financial support and the essential role Toronto Pearson plays in Canada’s supply chain.