International

the power of
resilience
Halifax International Airport Authority 2002 Annual Report
Message from the President & CEO
The theme of this report is "gaining altitude," which aptly
describes our efforts to regain our financial footing, rebuild air service,
and move forward with our flight plan in the face of intense downward
pressure on the industry and the economy.
Despite serious financial and operational challenges, we ended
the year with an operating margin of $4.8 million, approximately $1
million below 2001. Given the massive losses in the industry and the
significant declines in passenger traffic and revenues in the first quarter,
this was nothing short of remarkable.
In 2002, the airline industry lost almost $13 billion worldwide,
the result of changing business fundamentals and the devastating
human and economic toll of September 11th. By the end of the first
quarter, passenger numbers at Halifax International Airport were 14 per
cent below the same period the previous year and revenues lagged
seriously behind forecasts. At the same time, operating expenses grew
due to a number of planned increases in taxes and financing costs and
substantial, unanticipated increases in insurance and security costs.
Our finance team projected that if we did not take immediate
measures to remedy the situation, we would experience an annual $2.3
million operating shortfall beginning in 2003. Clearly, this was
unacceptable; clearly, we had to act.
When presented with this severe financial situation, HIAA
employees responded by identifying nearly $500,000 in combined
revenue-generating and expense-cutting measures. This was a
tremendous help, but it was not sufficient to eliminate our projected
shortfall, particularly given the introduction of $3.2 million in rent
charges beginning in 2003. It became evident that we would not be
able to stabilize our financial situation without reducing our major
expense – personnel costs.
In April, we announced the elimination of 37 seasonal
and full-time positions. To accommodate these staff reductions while
ensuring service and safety would not be compromised, we restructured
our operations and realigned the way we
do business.
Cutting costs, however, was only part of the journey toward
financial recovery. Our entire team was relentless in its efforts to grow
revenues and expand services to customers. In spite of airline cutbacks
around the world, HIAA added over a dozen new passenger and cargo
carriers and routes in 2002, and we leased the first lot in our airside
subdivision. The airport also handled a record volume of air cargo,
significantly growing our cargo revenues.
By the third quarter, we had turned the corner: revenue and
passenger numbers were on the way up. In July, Halifax International
Airport was the first major airport in the country to show a growth in
passenger traffic over 2001, and by year-end, we were one of only two
major airports in Canada to record an increase in passenger activity year
over year.
Also in 2002, we completed the largest project in our Airport
Improvement Program, a major milestone in our long-overdue
expansion. On December 18th, we celebrated the official opening of
the new domestic arrivals area, the final element of the north-end
expansion and an impressive introduction to the province. We also
made significant progress on our main lobby retail expansion, adding
more space and new retailers. This project brings us closer to our goal
of creating a diverse and attractive marketplace to serve our
passengers, airport employees and surrounding communities.
In 2003, there will be additional financial and operational
challenges. The federal government’s rent policy continues to be a
major concern for the airport authority, adding $5 million annually to
our operating expenses by 2006. These charges, combined with
increased insurance and security costs and higher property taxes, will
place a significant burden on our finances as we move ahead.
I would like to convey my sincere gratitude to our management
team for their efforts throughout 2002. I am proud to be associated
with such a knowledgeable and dedicated group of professionals. I
would also like to thank Eloi Gaudet, director of operations, who retired
in June following 26 years of exemplary service in the airport business.
The past year has taught us a lesson in the power of resilience,
and nowhere was this more evident than among the staff of the airport
authority. We have managed to put the organization back on sound
financial ground due largely to the dedication and resolve of our
employees in the face of very trying circumstances. For that and for
their tremendous support over the last 12 months, I offer my heartfelt
thanks. Together we are gaining altitude.
Reg Milley, President & CEO
Halifax International Airport Authority
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