NL Airports Essential but Post-Covid Future Uncertain
What strange days we face right now. A time of the year normally marked with bustling terminals filled with sun seekers, snowbirds and business travelers is instead marked by vacant gates and empty parking lots. Air carriers servicing Newfoundland and Labrador are cancelling routes, operating revenue is steadily declining, and no one is quite sure what tomorrow will bring for the aviation sector and the communities our airports serve.
As residents of this rugged and beautiful province, we are no strangers to weathering a good blow. But the likes of this storm have never been seen before, it’s been challenging to predict how this will end and what recovery will look like.
We will persevere as people, for certain, but how each sector will fare in the wake of this global crisis remains to be seen.
One thing is for sure, COVID-19 has shown us just how much we need each other, and how important it is to stay connected. Defining an essential service seemed simple until that definition was put to the test. We now see how deeply intertwined so many sectors and services are. Today, we depend on each other to survive, and tomorrow we will depend on each other to thrive.
Today, our airports play a critical role supporting our communities and healthcare system in its fight against the COVID-19 crisis. As essential services, our airports keep Newfoundland and Labrador connected to what our communities need to be safe and healthy. Our airports facilitate air ambulance services, daily COVID swabs sent to our province’s capital, and our airline partners are continuing with essential routes to move doctors, goods, supplies and cargo.
As we move through this crisis together, our thoughts are never far from how we will recover together, and what that will look like. Within NL, airports are an economic spark plug for business, tourism and trade contributing more than $1 billion in total economic impact annually, accounting for more than 5,000 FTE jobs.
Though travelling may well be months away, now is the time to plan ahead for the recovery of our region’s tourism sector. Airports will play a critical role in that effort. Support for the aviation sector is needed to ensure the NL tourism industry is ready to welcome visitors back as soon as public health officials determine it is safe to do so.
The grim reality is, our province’s airports are in a difficult position as our passengers (and revenues) have dropped significantly. We anticipate an 80%-90% drop in traffic from March to June and a 70% drop in capacity for all of 2020. This will have a substantial impact on cash flow and future financial viability of our airports with a devastating trickledown effect on our respective communities.
Revenue loss projections for Newfoundland and Labrador airport authorities are severe at approximately $38 million. It is uncertain how long recovery will take, and when traffic levels will return to 2019 levels. What we do know is that it will be virtually impossible to recover without significant intervention and support from the federal government.
The Government of Canada recently announced support for our National Airport System (NAS) by waiving federal ground lease rent payments for 10 months in 2020. Airport rent is a commission charge our larger airports pay the federal government on gross revenue. This was a welcome first step for Canada’s airport network and necessary to assist with cash flow relief at our nation’s largest airports, however it will have a negligible impact on airports in our province. Because of rapidly declining revenue, St. John’s will be the only NAS airport in NL that qualifies for rent relief, projected to be only $145,000 in 2020, or 0.5% of lost revenue. Much more will be needed for all of our provinces airports to remedy the vast imbalance between reduced revenue and our fixed expenses.
Substantially more support is needed for our province’s airports to address our immediate cash flow challenges and to ensure that we can remain viable and recover. Our airports need financial relief for reduced cash flow in the form of direct, non-repayable funding support to offset operating shortfalls.
It is expected to take years for the aviation industry to recover. Each airport ecosystem, from our stakeholders to the airlines that serve us, is faced with challenges no one could have planned for. Our ability to rebound from the effects of COVID19 will directly affect the economic recovery of our province and the many sectors that depend on air service.
For now, as we all work together to chart a path forward, our airports have suspended many capital projects. Parts of terminal buildings are closed to conserve energy. Every reasonable cost-saving measure that can be implemented, has been implemented. This will not be enough.
Though these are dark times, we are heartened by a light at the end of the tunnel. We see early signs of recovery in countries that were first hit by this virus. We see government’s support for its people and businesses affected by COVID-19, eager to step up and support this province through a most trying time. We trust that government will be here to support our airports as we continue our essential work. By staying connected through the weeks and months to come, we will thrive again.
Peter Avery, President & CEO St. John’s International Airport
Reg Wright, President & CEO Gander International Airport
Tammy Priddle, President & CEO Deer Lake Regional Airport
Goronwy Price, CEO Goose Bay Airport
Brenda Martin, CEO Stephenville Airport