Notes to the Financial Statements

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8 LONG-TERM DEBT

(in thousands of Canadian dollars)	2016 $	2015 $
6.973% Amortizing Revenue Bonds, Series B, due May 25, 2032, interest payable on May 25 and November 25 of each year until maturity commencing November 25, 2002, scheduled accelerating semi-annual instalments of principal payable on each interest payment date commencing November 25, 2004 through to May 25, 2032	131,157	134,429
4.733% Revenue Bonds, Series D, due May 2, 2017, interest payable on May 2 and November 2 of each year until maturity commencing November 2, 2007	200,000	200,000
3.933% Amortizing Revenue Bonds, Series E, due June 9, 2045, interest payable on June 9 and December 9 of each year commencing December 9, 2015 followed by scheduled semi-annual instalments of principal and interest of fixed $9,480,000 payable on each interest payment date commencing on December 9, 2020 through to June 9, 2045	300,000	300,000
Gross – long-term debt	631,157	634,429
Less: deferred financing costs	3,204	3,569
	627,953	630,860
Less: current portion	203,695	3,272
Long-term debt	424,258	627,588

a) Bond issues

The Authority issues revenue bonds (Collectively, “Bonds”) under a trust indenture dated May 24, 2002 (as amended or supplemented, the “Master Trust Indenture”). In May 2002, the Authority completed its original $270.0 million revenue bond issue with two series, the $120.0 million Revenue Bonds, Series A at 5.64% due on May 25, 2007 and the $150.0 million Amortizing Revenue Bonds, Series B at 6.973% due on May 25, 2032. In May 2007, the Authority completed a $200.0 million Revenue Bond issue, in part to refinance the Series A Revenue Bonds repaid on May 25, 2007. The $200.0 million Revenue Bonds, Series D at 4.733% are due on May 2, 2017 and a Sinking Fund has been set aside as at December 31, 2016 to extinguish the outstanding amount (see Series E below).

On June 9, 2015, the Authority completed a $300.0 million Amortizing Revenue Bonds, Series E issue which bear interest at a rate of 3.933% due on June 9, 2045. Part of the net proceeds from this offering were used to prefund the repayment of the Series D Bonds by depositing $200.0 million into a segregated fund (“Sinking Fund”) held by the trustee under the Master Trust Indenture (the “Trustee”) (see note 3). Prior to the closing of the offering, a bond forward transaction was entered into to protect from volatility in interest rates and it resulted in a $1.6 million gain being recorded. The Authority elected not to apply hedge accounting with respect to this forward transaction, therefore the related gain was recognized in the statement of operations and comprehensive income in 2015.

The Series B and D Revenue Bonds are redeemable, in whole or in part, at the option of the Authority at any time, and the Series E Bonds are redeemable until six months prior to the maturity date, upon payment of the greater of (i) the aggregate principal amount remaining unpaid on the Bonds to be redeemed, and (ii) the value which would result in a yield to maturity equivalent to that of a Government of Canada bond of equivalent maturity plus a premium. The premium is 0.24% for the Series B Bonds, 0.14% for the Series D Bonds and 0.42% for the Series E Bonds. If the Series E Bonds are redeemed within six months of the maturity date, the Series E Bonds will be redeemable at a price equal to 100.0% of the principal amount outstanding plus any accrued and unpaid interest.

The net proceeds from these offerings were used to finance the Authority’s infrastructure construction programs, and for general corporate purposes. These purposes included refinancing existing debt and bank indebtedness incurred by the Authority in connection with these construction programs and funding of the Debt Service Reserve Fund (see below).

Under the Master Trust Indenture, all of these bond issues are direct obligations of the Authority ranking pari passu with all other indebtedness issued. All indebtedness, including indebtedness under bank credit facilities, are secured under the Master Trust Indenture by an assignment of revenues and related book debts, a security interest on money in reserve funds and certain accounts of the Authority, a security interest in leases, concessions and other revenue contracts of the Authority, and an unregistered mortgage of the Authority’s leasehold interest in airport lands.

The Authority is unregulated in its ability to raise its rates and charges as required to meet its obligations. Under the Master Trust Indenture, the Authority is required to take action, such as increasing its rates, should its projected debt service coverage ratio fall below 1.0. If this debt service covenant is not met in any year, the Authority is not in default of its obligations under the Master Trust Indenture as long as the test is met in the subsequent year.

Under the Master Trust Indenture, the Authority is required to maintain with the Trustee, a Debt Service Reserve Fund equal to six months’ debt service in the form of cash, qualified investments or letter of credit. At December 31, 2016, the balance of cash and qualified investments held in the Debt Service Reserve Fund was $11.3 million. Furthermore, in order to satisfy the Debt Service Reserve Fund requirement for the Series E Bonds, $5.9 million of the Credit Facilities has been designated to an irrevocable standby letter of credit in favour of the Trustee. These trust funds are held for the benefit of the bondholders for use and application in accordance with the terms of the Master Trust Indenture. In addition, the Authority is required to maintain an Operating and Maintenance Reserve Fund equal to 25.0% of defined operating and maintenance expenses from the previous twelve months. As at December 31, 2016, $14.0 million ($13.2 million in 2015) of the Credit Facilities had been designated to the Operating and Maintenance Reserve Fund (see note 6).

At December 31, 2016 the Authority was in full compliance with the provisions of its debt facilities, including the Master Trust Indenture’s provisions related to reserve funds, the flow of funds and the rate covenant.

b) Interest Expense (net)

(in thousands of Canadian dollars)	2016 $	2015 $
Bond Interest	30,561	25,589
Other interest and deferred financing expense	367	636
	30,928	26,225
Less: Interest earned on Debt Service Reserve Fund and Sinking Fund investments	1,899	2,120
Total interest expense (net)	29,029	24,105

c) The future annual principal payments for all long-term debt are as follows:

(in thousands of Canadian dollars)	2016 $	2015 $
2017	203,695	–
2018	4,152	–
2019	4,643	–
2020	8,753	–
2021	13,116	–
After five years	396,798	–

d) Deferred financing costs

(in thousands of Canadian dollars)	2016 $	2015 $
Deferred financing costs	5,975	5,975
Less: Accumulated amortization	(2,771)	(2,406)
	3,204	3,569

9 AIRPORT IMPROVEMENT FEE (AIF)

The AIF is paid by the air carriers to airport authorities on the basis of estimated enplaned passengers, net of air carrier administrative fees (6.0%), under an agreement between the Authority, the Air Transport Association of Canada and the air carriers serving the airport. Under the agreement, AIF revenues may only be used to pay for the capital and related financing costs of major airport infrastructure development. As the air carrier administrative fee is the property of the air carriers, AIF revenues are recorded net of the 6.0% fee of $3.0 million (2015 – $2.9 million).

AIF funding activities on the year are outlined below:

(in thousands of Canadian dollars)	2016 $	2015 $
Earned revenue	49,915	48,383
Air carrier administrative fees	(2,995)	(2,949)
Net AIF revenue earned	46,920	45,434
Eligible capital asset purchases	(21,178)	(22,566)
Eligible interest expense	(30,669)	(24,394)
Eligible other expenses	(286)	(227)
AIF expenditures	(52,133)	(47,187)
Deficiency of AIF revenue over AIF expenditures	(5,213)	(1,753)

AIF funding activities on a cumulative basis since inception of the AIF are outlined below:

(in thousands of Canadian dollars)	2016 $	2015 $
Earned revenue	535,809	485,894
Air carrier administrative fees	(32,149)	(29,154)
Net AIF revenue earned	503,660	456,740
Eligible capital asset purchases	(615,997)	(594,820)
Eligible interest expense	(312,068)	(281,398)
Eligible other expenses	(765)	(479)
AIF expenditures	(928,830)	(876,697)
Deficiency of AIF revenue over AIF expenditures	(425,170)	(419,957)

The AIF will continue to be collected until the cumulative excess of expenditures over AIF receipts is reduced to zero.

Back

The Ottawa Airport was the setting for the two-week Canadian Police Canine Association “Train the Trainers” canine behavior shaping course for law enforcement canine teams from across the country. The dynamic and complex airport environment was ideal for specific training exercises, and the teams had the opportunity to hone their skills before taking their newfound tips and techniques back to their respective communities.
Ottawa Macdonald-Cartier International Airport Authority Annual Report 2016 13 Travelling from Winnipeg was no small feat for Edith who had come to spend her first Christmas in Ottawa. Although this 90-year-old grandmother had looked forward to the trip to visit her son and his family (and to meet her granddaughter’s new boyfriend), moving throughout the terminal with limited mobility had concerned her. The assistance she received and the accessibility of the airport made her passage from the gate to the arrivals area easy and comfortable. As Edith put it, “it’s a lovely place to pass through, and the welcome has been wonderful.”
Saying goodbye is never easy – especially when you’re parting ways for as much as a year. The members of the 2016-2017 National Evangelization Team know that all too well, and the Ottawa Airport has been the back-drop for many of their bittersweet goodbyes as they head off to do their mission work. The youths are like a family, so their time spent together at the airport before they leave is very important to them, and like they put it, “one for the scrapbook”.
Maya and Clara thought that offering a stuffed animal to a child arriving at the airport would be the perfect way to say “Welcome to Canada”. The girls learned of the crisis in Syria and the impact it was having on Syrian children. When they found out that most families would be arriving in Ottawa by air, they decided to launch a ‘Stuffies for Syria’ campaign. They collected more than 700 stuffed animals and handed them out at the airport, along with a lot of compassion and reassuring smiles to some grateful newcomers.
Stittsville native Erica Wiebe was overwhelmed with the warm welcome she received in the arrivals area following her gold-medal win for wrestling at the Rio 2016 Olympics. She was greeted by Ottawa Mayor Jim Watson and City Councillor Marianne Wilkinson, and about a hundred friends, family, and fans. Having the group cheering and holding flags and signs as she came down the escalator, following a bagpiper, gave her a well-deserved hero’s hometown welcome. She was very gracious and made her way through the crowd, greeting each person who had come out, signing autographs, posing for photos, and even letting people touch her gold medal.
Each step that Boniface and Isaac took at the airport years ago was a step towards a new beginning and a promising future, filled with hope, freedom, and success. Originally from the Congo, they were welcomed at the Ottawa Airport as refugees. Nowadays, visiting the airport means something completely different to them. It bridges the distance between them and their brother and enables them to renew and maintain relationships abroad.
Charities like the Ottawa Food Bank rely on donations from the community in order to provide much-needed support to those who need it. The Ottawa Airport and its campus partners have been supporters of the Ottawa Food Bank for the past seven years, raising funds during the holidays, or donating the coins from the fountains. Our support has helped the 41,500 people who, every month, turn to a food bank when they would otherwise go hungry. Rachael Wilson, the Director of Communications and Development at the Ottawa Food Bank, was thrilled to also receive 800 pounds of non-perishable food items that were donated by airport employees and packed up by volunteers.