Challenges of Success

Aug. 8, 2002

Challenges of Success

Calgary Int'l is prospering, but national issues could thwart growth

By John F. Infanger, Editorial Director

August 2002

CALGARY - Calgary International is a thriving airport. Since the Calgary Airport Authority (CAA) took over control of the facility in 1992 from Transport Canada (TC), passenger counts have steadily grown, infrastructure has been expanded, and retail and cargo have been recognized with international awards. However, like the other major Canadian airports, its future could be hampered by what CEO Garth Atkinson sees as moves by some in Ottawa to maintain or recapture control of such facilities, which he says has the potential to put a black mark on the success of the transfer of airports program.

Atkinson, 48, is a former Transport Canada employee himself, having held several positions at Toronto's Pearson Airport and at Calgary, where he was involved in the transfer of the airport from the federal government to the local authority. Initially the VP of finance and administration at the CAA, he became CEO in January 2001.
Since the CAA took over control of Calgary International Airport under a long-term lease agreement, it has seen cumulative passenger growth of some 79 percent, moving nearly 9 million passengers in 2000. It is currently constructing its fourth pier (concourse) that will add eleven gates to the existing 22, and will create a "seamless" terminal complex. Air Canada is the predominant carrier here as in the rest of the country, although new entrant WestJet, based in Calgary, has had a significant impact on airline counts.

Among the unique features at Calgary International: the Spaceport technology center with free admission, and a local muse-um’s display in baggage claim.

"We've had arguably the highest growth in the country since 1993," says Atkinson. "We're still in a bit of catch-up mode and we've been going at it seriously for a couple of years. We've got about two more years of heavy construction."
The impact of the merger of Canadian Airlines and Air Canada was lessened considerably, says Atkinson, with the entry of WestJet in 1996 and by the U.S.-Canada Open Skies agreement in 1993.
"WestJet has grown exponentially," says Atkinson, "and they're still in double digits in 2002 over 2001. The actual growth rate has started to slow, but having said that, WestJet is now a significant air carrier in Western Canada and very significant to Calgary. Market-share-wise, Air Canada has actually dropped down to around 50 percent, whereas nationally they're probably still in the 70 percent range. It's a good competitive air service environment.
"We've seen good growth in what we call the Tier 3 activity as well, which is smaller airlines moving in to service smaller communities with appropriately sized aircraft.
"We're down this year about two and one-half percent, which is extra-ordinarily good news. It's probably the best performance in Canada this year, and Canada generally speaking is doing much better than the United States."
In conjunction with airline growth, the parkade, or parking lot, is having an additional 1,000 stalls added after being expanded by 800 spaces just three years ago. The air cargo apron, completed three years ago, is being expanded by 50 percent, and the airport was recently recognized by the Airports Council International with its top cargo award for North America.
Says Atkinson, "Calgary, because of it's geographic location, is becoming a very large distribution center in Canada." Recent developments have included distribution outlets for Purolator, Staples, and Wal-Mart. The airport's cargo apron is dominated by the movement of livestock, most notably horses for which it developed a special loading facility for charters to Asia. Cargolux also flies to Europe twice weekly from Calgary.
Calgary International has also received accolades, including the top ACI-NA concessions award, for its retail and concessions program, turning the core of a 25-year old terminal into a vibrant retail center that covers more than 75,000 square feet and offers more than 80 shops. Among its features: Spaceport, with a Space Shuttle mockup and moon rock on loan from NASA, space camps for children, and F-16 simulators. The retail growth continues, and the Hudson Group was recently awarded a contract for four additional stores.

CATSA - Canada's Security Initiative
Garth Atkinson, CEO of the Calgary Airport Authority, says of Canadian airport security after 9/11, "It's much better in Canada, frankly, than in the United States." In Canada, the Canadian Air Transport Security Authority (CATSA) was created April 1, 2002, as a crown corporation reporting to the Minister of Transport, and is charged with pre-boarding screening of passengers, contracting to accomplish the task, and for acquiring and operating screening equipment.

Explains Atkinson, "I don't believe they're necessarily going to carry out the role the same as in the United States, such as the hiring of all screeners directly. Airports can still step in and provide some of those services. The essential mandate is roughly the same. They have funding."
Atkinson says that Calgary International officials took the initiative to implement various changes since 9/11, including improved signage, an instructional video, and working to improve processing procedures.
"EDS is coming just as it is in the U.S. Eventually, we'll get to 100 percent baggage screening. Those things are coming; they take time," he says.
He terms Canada's security response since 9/11 as reasonably appropriate, emphasizing that the airport still needs to do business and passengers still need to have a positive experience. "What I've been telling CATSA since the beginning is that the number one goal is you have to set a national performance standard for passenger processing," he explains. "For example, we should say no one should spend more than seven minutes in a security line, and we should work backwards and provide the right combination of staff, equipment, and procedures which meet that goal. It might not be the same mix at every airport. Their reaction is very positive."
Concerning general aviation security, Atkinson says the first step is risk assessment. "From a government regulator point of view, it's messier. The very nature of GA is more diverse and perhaps calls for different solutions. You have to be careful to not impose solutions that are oriented toward terminal complexes."

The airport is in the midst of its master plan update that Atkinson says is charged with looking as much as 40 years into the future needs of the facility, which sits some ten miles from downtown Calgary. Included in that plan is a parallel runway to what is billed as the largest civil aviation runway in Canada at 12,675 feet.
Future airport growth is facilitated, says Atkinson, by an Alberta law that restricts non-compatible development around airports. "Provincial legislation actually prohibits residential housing within the (noise) exposure forecast," he explains. "It's very far-sighted, and even our future north-south parallel runway is included in that noise protection."

National issues; Local impact
While Atkinson is very bullish about the future of his airport, he expresses concern over issues being discussed in Ottawa that he says would have negative implications for Calgary International and other commercial airports in the country. At the top of the list is the rent review discussion that has been ongoing for several years, which involves the amount of money authorities pay the federal government under the lease agreements.
"In 2002, airports in Canada paid about $250 million (CAN) to the federal government, and have paid over $1 billion since 1992," he explains. "That $250 million could double in the next ten years if nothing is done. In Calgary, our rent in 2002 is about $22.5 million, so it's a big issue."
Since the authorities are directed by law to reinvest any surplus revenues into their facilities, Atkinson says the federal government is in effect taking money away from local airports - the opposite intent of the transfer of airports program.
"We have an evolved model that I think is the best in the world: a not for profit, local authority, board of directors model," he says. "It gets you away from having the government in airport operations, and doesn't take you to where governments are using their monopoly power. That's why I think we've leapfrogged the U.S."
Another major concern, he says, is the current drafting of the Canada Airports Act which he sees as bringing undue regulation back to the airport environment on the part of Transport Canada. Working through the Cana-dian Airports Council, Atkinson is trying to keep any new airport regulation at a minimum.
"Regulation, one way or another, increases costs," he explains, "either directly or indirectly, and one thing this industry does not need right now is increased costs.
"The other concern is, when you look at the transfer of airports, the Canadian model has been unbelievably successful. Service levels have gone up; there's been new investment. Our position is nothing's broken. What is it you're trying to fix?
"Our message is to be very, very careful. The U.S. has a vast regulatory model around its airports, and they have capacity crises and other problems. Why? Well, look at the regulatory environment. They're trying to dig themselves out of this regulatory burden; it's not a good model."