Strong commercial performance buoys Toronto Pearson Airport in 2019

CANADA. Greater Toronto Airports Authority (GTAA) has reported a strong commercial performance at Toronto Pearson International Airport in 2019, with consolidated concession and rental revenues increasing by +13.6% to C$315.2 million (US$223.7 million).

Key reasons for the increase included enhanced corporate partnerships, a rise in advertising, sponsorship and retail tenant revenues and income related to investment properties acquired in 2018.

Within this, concessions revenue from retail tenants, advertising and sponsorship partners increased by +15.8% to C$167 million (US$118.5 million). Retail and dining store sales per enplaned passenger at Toronto Pearson reached C$22.01 (US$15.63), up by +1.6% year-on-year.

Strong income from the concessions business helped buoy Toronto Pearson revenues in 2019 (click to enlarge)

Car parking and ground transportation revenues increased by +6% to C$203.3 million (US$144.5 million) compared to 2018. The roll out of an 18-month pilot programme to allow companies such as Uber and Lyft to operate at Toronto Pearson contributed towards this increase alongside a combination of rate increases, plus enhanced marketing and business development initiatives in parking and ground transportation. Parking volumes decreased slightly, with the GTAA noting a trend towards greater use of alternative ground transportation options.

Including ground transport, rentals, concessions and other income streams, overall commercial revenue hit C$555.5 million (US$395 million), up by +6.1%.

Passenger traffic at Toronto Pearson reached a new high of 50.5 million in the year, up by +2% compared to 2018. International traffic reached 32.4 million, a rise of +2.4%, with domestic up +1.4% to 18.1 million.

Passenger traffic passed 50 million for the first time last year (click to enlarge)

Total revenues were C$1.5 billion (US$1.06 billion), a rise of +3.4%, EBITDA for the year was C$725.9 million (US$516 million), an increase of +0.7% year-on-year, while net income rose +23% to C$139.8 million (US$99.4 million).

“2019 represented a year of positive milestones for Toronto Pearson,” said GTAA President and CEO Deborah Flint. “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.”

Click to open a special issue of The Moodie Davitt Spotlight series, published in January, and dedicated to the transformation of Toronto Pearson

The COVID-19 outbreak has prompted a sharp decline in passenger traffic in February and March, the company noted in its results commentary.

“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.”

Importantly too, the pandemic may affect the cost of capital from disrupted credit markets, and possible credit ratings or downgrading of debt. GTAA has embarked on a series of major infrastructure projects, with commercial at their heart, including Terminal 1 Pier G expansion, redevelopment of T1 with a T3 upgrade to come, among other projects.

GTAA added: “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.

“While the full duration and scope of the recent COVID-19 pandemic is not yet known, management does not believe 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 reviewing potential reductions to operating and capital expenditures.

“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.”

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