Systematic Strategy: Defined roles make Edmonton Airports work

Cover Story

A Systematic Strategy

Defined roles make Edmonton Airports work

By Jodi Richards

August 2004

Airport Business August2004  Issue coverEDMONTON — Aviation has long served a vital role in nurturingindustry in this northern Alberta community, particularly the oil industry.So when Transport Canada began the transfer of ownership processfor the nation’s airports to local control, The Edmonton RegionalAirport Authority prepared itself with a system-wide approach, refining and defining the roles of four airports in the region. Despite challenges, the approach offers opportunities.

According to Scott Clements, president and CEO, the authority envisioned running “all or most of the airports in the region,” with the idea that “it would be better not to have competition in the region, but rather have one authority overseeing the appropriate use of airport infrastructure in the region.”

Four airports (Edmonton International, Cooking Lake, Villeneuve, and Edmonton City Centre) have been brought into the fold since the early ‘90s and each serves particular niches within aviation, officials say.

Andrew Shanks, manager of general aviation services, explains, “The advantage to the airport system of facilities is if their roles are defined properly and then managed to those roles, you’re able to manage the activities in one location. One entity manages all of these airports, as opposed to separate entities managing each and competing with each other for the same marketplace.”

Andrew Shanks (left) and Scott Clements Andrew ShanksScott Clements

The Downtown Airport
Says Clements, “The use of each airport within the system has evolved somewhat over that time frame. But, by and large, the International Airport was to be the commercial center of gravity for the Edmonton region and northern Alberta.”

Aptly named, City Centre Airport is located in downtown Edmonton. Airplane at City Centre Airport

Edmonton City Centre is owned by the City of Edmonton, but operated by Edmonton Airports, says Shanks. “There is no rent that is paid on any basis [to the city],” explains Shanks. “Edmonton Airports assumes all of the responsibilities of operating this facility. So all the operation costs, all the capital costs, and any improvements are our responsibility.” The lease between the city and Edmonton airports, which began in 1992, expires in 2052.

Edmonton Airports contracts with ATCO Frontec to handle the day to day responsibilities of managing the airport, including maintenance and administration of leases.

For years, says Clements, City Centre had been competing for the same traffic and service as the International airport, some 20 miles away. “This was just not good for the region. It was not good for air service and that realization culminated in a plebiscite [referendum] October 15, 1995.”

Edmontonians were asked if they agreed that all scheduled passenger service should be moved from City Centre to the International Airport and 77 percent of voters agreed with that statement.

Cooking Lake and Villeneuve airports each serve a niche in the market: float planes and flight training, respectively. Villeneuve airportSea plane at at Cooking Lake Airport

“The role of the downtown airport then became highly restricted general aviation,” says Clements. “And we have revisited that role just recently through a process that’s very public; and reconfirmed that that is the role of the downtown airport. And, within that role, the viability of the airport is solid, with things we either have done or will put in place over the next year or so.”

Clements says there are plans to allow “a very small amount” of scheduled air service to the North. “There was a very strong political advocacy mounted ... to say, ‘The North is vital historically and currently to the Edmonton region, and vice versa. We need special access to the downtown airport.’” Clements explains the airport authority has responded to that claim by continuing to allow the current schedule to be maintained in small aircraft to the various northern communities that currently have the service. “But all other scheduled passenger service will be relocated over the next year to the International Airport. We’ve given a year’s warning.”

Float Planes and More
Cooking Lake Airport was purchased from the Alberta transport department in 1995 for $1, says Shanks. Capable of handling float planes and wheeled aircraft, Clements says it actually had a unique role in “opening up” Canada because for many years the only way to get around was float planes. “And that’s still an important component of aviation in the North,” he adds.

Edmonton Airports undertook to operate Cooking Lake for ten years as an airport. Instead of operating the airport with traditional land leases, the authority opted to create a bare land condominium association, allowing those interested to purchase the land and develop it for aviation purposes. “Each of the small business people who own aircraft have a piece of the action, and therefore you have the ownership pride and participation of the management of the airport; which is working, by and large, pretty well,” says Clements.

“We had to kind of wean those folks off handouts from the government, into a mindset that this [airport] has to be self-sustaining.” Clements says most of the economically viable development at Cooking Lake has been sold and there is still more demand.

Training Operations
Villeneuve, located northwest of Edmonton, was built by Transport Canada to “offload traffic from the downtown airport,” says Clements. It has two 3,500-ft. runways and a control tower. Edmonton Airports assumed ownership and control in 2000, also at a cost of $1.

Intended primarily as a training facility, most of the movements there today are training operations that originated at City Centre. “It’s absolutely perfect for training and that’s going to be its core business in the future,” says Clements. He also expects that over time YEG will become so busy that a reliever airport will be necessary, and Villeneuve is intended to fill that need.

Financial Challenges
One of the main challenges of operating three general aviation facilities is making sure they are each financially self-sustaining, says Shanks. “Self-sufficiency is always a challenge in general aviation, particularly when you get into the recreational or flight training. It doesn’t produce a whole lot of revenue.”

Edmonton International Airport serves some 4 million passengers annually. Edmonton International Airport - gateway north

City Centre is self-sufficient on an operating level only, says Shanks. “We actually generate operating surpluses, but the goal is to cover, obviously, not only our operational costs, but capital costs as well.”

Cooking Lake Airport is self-sufficient on both accounts, according to Shanks. “But I think we will probably face some challenges into the future.”

Villeneuve, unfortunately, is not self-sustaining, “and we knew that from the outset,” Clements says. “The board had a couple of gos at the business plan to take on the responsibility for the airport. And, in the final analysis, decided to [take it on] on the basis of that strategic statement. We may need that airport. We probably don’t need it right now, except for training operations. But we will need it; so they decided to acquire the airport on that strategic basis.”

Clements says when Edmonton Airports took over operations at YEG, it was in “terrible shape. Nothing had been spent on it for years and years.” Since 1995, the authority has invested some $250 million in infrastructure, funded primarily through an airport improvement fee.

According to Diane Trenn, manager of airport operations and services, YEG completed construction of its South Terminal in December 2000 and the Central Hall in November 2003. The next step for the airport is to renovate the original North Terminal, which dates to the early 1960s, to upgrade the facility and accommodate continued growth.

Rent Review

Scott Clements, president and CEO of Edmonton Airports,calls the National Airports Policy, under which Transport Canadaturned over management and responsibility of many of its 150airports to local entities, an “absolutely brave venture.” However, it’s one he says is overdue for reform.

Clements explains that rent was always meant to be part of the arrangement between Transport Canada and the non-profit organizations which took over the airports.

“And as the evolution of the devolution went, different players were involved, both on the airport side and the government side, and you ended up with a complete mishmash of arrangements. Inequities in rent, inequities in acknowledgment of costs, inequities in estimations of revenue, and it sorely needed a review. We got that review from the federal government about four or five years ago — cost a bunch. But the government has not acted on what is contained in that review yet, and we don’t even know what is in it yet. It has been kept in very close hold to the Department of Transport and the Cabinet.

“And the rent issue has become, each year, overwhelmingly pejorative in terms of explanation by anybody. There is nothing more important right now, aside from security, to airport authorities than getting resolution to the rent issue. And the airlines are very much on the side with the airport on this as well.”

Clements expects a resolution to the rent issue by year’s end. “And by resolved, I mean put a cap on the rent, make it a reasonable cap, with an equitable distribution amongst all the players that pay rent.”

When Edmonton International gained some one million passengers as a result of eliminating commercial service to City Centre Airport in 1996, YEG was granted rent relief for 10 years. “But that line in the sand is over in a few months,” says Clements. Currently YEG pays some $3 million annually to the government. As of January 1, 2006, the tab jumps to some $19 million.

“There is absolutely no explanation whatsoever for the government to be taking this kind of profiteering from the aviation industry,” says Clements, “which, quite frankly, is in some trouble right now and can’t afford it. It’s a virtual tax.

“Any business rationale for rent to the landlord has disappeared. They [Transport Canada] provide absolutely nothing. The value of what they put into this airport has long since been amortized. They have no stake in this airport or any other airport, for that matter. We should pay no rent. They should pay us a fee for managing their airports well.”

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