Discovering a New Way

THUNDER BAY, ON — In a community of some 110,000 people — a number that is not increasing — the Thunder Bay International Airports Authority has managed to increase passenger numbers as well as revenues. The economy in this northern Ontario community relies heavily on forestry, which has been hard hit by the weakness of the Canadian dollar against the U.S. Dollar, tariffs on soft wood lumber, and the high cost of energy. Airport president and CEO Scott McFadden, M.B.A., says central to keeping the airport self-sustaining is continuous improvement, finding efficiencies within the airport, and utilizing the airports assets to create revenue-generating opportunities.

“Continuous improvement,” says McFadden, is the company philosophy he and his airport team have employed. He calls it simple, but says there is always a better, more efficient way of doing things. “I like to believe that if somebody is telling you there are no more opportunities for us to find cost savings or new revenues or new efficiencies, then their organization is a prime candidate to find those.”

Operation of Thunder Bay International Airport was transferred from Transport Canada in September of 1997 to the Thunder Bay International Airports Authority Inc., a not-for-profit organization. The authority is governed by a nine-member board, comprised of representatives from federal, municipal, and provincial governments; the Chamber of Commerce; organized labor; and, one appointed by the board.

McFadden, who began his career in aviation as an aircraft technician with Air Canada, also has experience as a fixed base operation owner and as a consultant.

Even prior to transfer, says McFadden, who joined the airport in December 1997, the airport staff had been working to make significant cost reductions and changes, while creating new revenue generating opportunities. “When I arrived, the team that had worked so hard for the federal government realized that my mindset was very similar to theirs, in that I was prepared to explore every idea and continue to look for ways of finding efficiencies, cost reductions, and new revenue sources.”

A major challenge facing Thunder Bay, says McFadden, is that airports of its size “are not self-sustaining as a long-term business.” The airport sees some 590,000 annual enplanements and deplanements. “Our passenger activity, in the absence of other revenue-generating opportunities, is not enough to support the airport over the long term.”

To generate revenue to meet immediate needs when the authority first took over operation of the airport, an airport improvement fee (AIF) was imposed. “In the early days we were certainly forecasting that we were going to operate at a loss for at least the first three years. The company needed to generate some revenues to take care of some immediate issues just to make sure the airport was going to be on solid financial footing going forward,” says McFadden.

Initial forecasts showed that the AIF would be in place for five years, with the ability to extend as required. However, the airport eliminated the fee after 2-1/2 years. McFadden explains it was eliminated for two reasons: “First of all, in an economy that is declining, you have to do things to stimulate. An airport has the ability to both hinder and promote the economic development locally. Certainly, low cost, high quality air service is vital for any community’s economic development. Secondly, we were successful in bringing Westjet to the airport in 1999. At the time, Westjet was Canada’s high yielding, low-cost carrier. That single success really transformed the airport and certainly made us see that by lowering the cost of travel, you can significantly increase the amount of activity at the airport.”