2017 Financial Review

This Financial Review reports on the results and financial position of the Ottawa Macdonald-Cartier International Airport Authority (“Authority”) for its year ended December 31, 2017. This review should be read in conjunction with the audited financial statements and related notes of the Authority. This review contains forward–looking statements, including statements regarding the business and anticipated financial performance of the Authority. These statements are subject to a number of risks and uncertainties that will cause actual results to differ from those contemplated in the forward–looking statements.


Earnings before depreciation for the year ended December 31, 2017 were $32.8 million compared to $22.8 million for the year ended December 31, 2016. The Authority recorded depreciation of $29.0 million in 2017 compared to $28.0 million in 2016, reflecting depreciation of the terminal building, airfield facilities and other assets over their estimated economic lives. After subtracting depreciation, the Authority generated net earnings of $3.8 million in 2017 compared to net loss of $5.3 million in 2016.

The Authority’s net operating results for the three years ended December 31, 2017 are summarized as follows:

(in millions of Canadian dollars) 2017
Revenues 128.3 121.9 118.2
Expenses 95.4 99.1 90.4
Earnings before depreciation 32.8 22.8 27.8
Depreciation 29.0 28.1 25.9
Net earnings (loss) 3.8 (5.3) 1.9
Total assets 495.0 698.9 711.6
Gross – long-term debt 427.5 631.2 634.4


Operating Activities

During 2017, the Ottawa Macdonald-Cartier International Airport (the “Airport”) saw positive passenger volumes with increases of 2.0% over 2016 and 3.9% over 2015. The Canadian economy experienced solid growth with key financial indicators and employment trends moving positively throughout the year with economic forecasts suggesting continued positive trends for 2018. Federal government policy and infrastructure initiatives combined with fiscal and monetary measures designed to improve economic conditions should contribute to incremental passenger growth in 2018 and beyond. Nevertheless, the impact of increasing short term interest rates, variability in the Canadian dollar, unpredictability in energy prices and evolving political trends in global markets will be monitored over the course of the coming year.

The following table summarizes passenger volumes for the last three fiscal years:

% change – 2017 versus
2017 2016 2015 2016 2015
Domestic 3,813,672 3,679,232 3,488,629 3.7% 9.3%
Transborder 647,574 673,434 735,755 (3.8%) (12.0%)
International 378,431 390,425 431,976 (3.1%) (12.4%)
Total 4,839,677 4,743,091 4,656,360 2.0% 3.9%

Domestic passenger volumes were 3.7% higher on a year over year basis with increased traffic to Toronto, Halifax and Edmonton, together with a second operator to Fredericton and new service to Saint John. All major Canadian air carriers experienced higher year over year passenger volumes. Unfortunately due to the airlines’ push to increase load factors, smaller gauge aircraft were deployed on many popular routes impacting unfavorably our year over year departed seat volumes.

Transborder volumes were 3.8% lower than 2016. U.S. air carrier capacity stabilized to their primary hubs, including Chicago, Dulles, Newark, Detroit and Philadelphia. New service to LaGuardia performed well. Reductions in U.S. leisure service to Fort Lauderdale (FL), Fort Myers (FL) and Las Vegas (NV) was offset slightly by increases in capacity to Melbourne (FL) late in 2017. The continued practice of Air Canada and WestJet flowing YOW-transborder traffic through Toronto-YYZ is the leading cause of the reduction of YOW-U.S. nonstop passenger volume.

International volumes declined 3.1% from 2016. Growth in the Air Canada sun destination portfolio was offset by WestJet’s reduced frequencies as they increased their focus on the business traveller. Air Transat and Sunwing’s operations to Cancún, Punta Cana and the Bahamas in the 2017 winter season are lower than the comparable period in 2016. Air Canada’s daily year-round London (LHR) flight remains stable.

By sector, a quarterly view of 2017 passenger volumes compared to comparable quarters in 2016 is as follows:

Domestic Transborder International
Q1 Higher by 2.9% Lower by 9.4% Lower by 5.8%
Q2 Higher by 4.3% Lower by 5.2% Higher by 3.8%
Q3 Higher by 3.2% Lower by 2.7% Lower by 0.5%
Q4 Higher by 4.1% Higher by 3.6% Lower by 5.1%
Total Higher by 3.7% Lower by 3.8% Lower by 3.1%
By quarter, total passenger volumes were as follows:

2017 2016 % change
Q1 1,185,327 1,191,350 (0.5%)
Q2 1,191,719 1,157,771 2.9%
Q3 1,246,839 1,218,575 2.3%
Q4 1,215,792 1,175,395 3.4%
Total 4,839,677 4,743,091 2.0%

The size of an aircraft (based on maximum takeoff weight) and the number of “landed” seats on an aircraft (regardless of whether those seats are occupied by passengers) are the most significant drivers of landing and terminal fees. In 2017, the number of landed seats decreased by 2.0% compared to 2016. Domestic landed seats decreased 1.0% on a year over year basis while transborder and international declined by 5.8%. While transborder and international reductions mirror the changes in passenger volumes as explained above, reductions in domestic landed seats are primarily due to air carriers increasing load factors by deploying smaller gauge aircraft. The smaller size of these aircraft in both seat count and lower takeoff weight have unfavorably impacted aeronautical revenues.


Total revenues increased by 5.2% to $128.3 million in 2017 compared to $121.9 million in 2016.

Revenues by category
(in thousands of Canadian dollars)
$ %
Airport improvement fees 49,110 46,920 2,190 4.7%
Terminal fees and loading bridge charges 27,350 26,432 918 3.5%
Landing fees 13,005 12,861 144 1.1%
Concessions 14,255 12,521 1,734 13.8%
Car parking 15,320 14,344 976 6.8%
Land and space rentals 6,453 6,349 104 1.6%
Other revenue 2,765 2,485 280 11.3%
128,258 121,912 6,346 5.2%

Airport improvement fee (“AIF”) revenues of $49.1 million in 2017 increased by 4.7% from $46.9 million in 2016. The increase is attributed to the 2.0% year over year increase in passenger volume in 2017 combined with a higher average number of departing passengers originating their flight in Ottawa in 2017 at 96.0% as compared to 94.0% in 2016. Under an agreement with the air carriers, AIF is a fee imposed by the Authority and is paid by the air carriers to the Authority on an estimated basis, net of air carrier administration fees of 6.0%, on the first of the month following the month of enplanement of passengers. Final settlement based on actual passenger enplanements occurs at the end of the month following the month of enplanement.

At $40.4 million in 2017, total aeronautical revenues, which include terminal fees, loading bridge charges and landing fees charged to air carriers, were 2.7% higher than revenues of $39.3 million in 2016. The year over year increase is the result of an increase in aeronautical rates and charges excluding police and security charges of 3.5% effective February 1, 2017. Police and security charges were increased 11.1% ($0.25 per landed seat) also effective February 1, 2017. This increase to aeronautical rates and charges was offset by the unfavorable impact of the 2.0% decrease in landed seats. With air carrier seat volume growth declining year over year and trending lower than inflationary growth and with increases in operating and regulatory expenses that are beyond the Authority’s ability to control growing at a rate that is notably beyond inflation, the Authority has increased its aeronautical rates and charges by 2.5% effective February 1, 2018. Despite these increases, the Authority’s average aeronautical fee rates remain among the lowest in Canada.

Concession revenues of $14.3 million increased 13.8% as compared to 2016. The $1.7 million increase was attributable to the addition of a private transportation company service to the ground transportation offering in late 2016, strong performance in car rentals, favourable adjustments to minimum annual guarantees provided under concession agreements and the impact of increased passenger volumes on all concession areas.

Car parking revenues increased to $15.3 million from $14.3 million in 2016, an increase of $1.0 million or 6.8%. The year over year increase was attributable primarily to the March 1, 2017 parking rate price increase. Adjustments to the rate structure continue to focus on optimizing pricing models and revenues based on passengers’ profiles and their specific needs as domestic passengers tend to park for shorter periods of time for business purpose day-trips while leisure, transborder and international passengers tend to park at the airport for longer periods of time.

Land and space rental revenues of $6.4 million increased 1.6% as compared to 2016. Increases are attributable to favourable lease renewal activities with existing tenants and inflationary adjustments embedded within land leases.

Other revenue of $2.8 million increased by $0.3 million as compared to 2016. Higher utility recoveries from tenants and deicing pad snow clearing recoveries from airlines were the prime factors for the increase.


Expenses before depreciation decreased $3.7 million to $95.4 million in 2017 from $99.1 million in 2016. Depreciation reflects the allocation of cost over the useful life of the assets and investments in property, plant and equipment. In 2017, depreciation of $29.0 million was $0.9 million higher than 2016. The incremental depreciation is related to capital projects completed in 2016 and in 2017 including boarding bridge replacement, new major airfield equipment, non-passenger screening-vehicle facilities, apron and taxiway refurbishment, flooring replacement, heating and cooling systems repair and information technology initiatives.

Expenses by category
(in thousands of Canadian dollars)
$ %
Interest 23,087 29,029 (5,942) (20.5%)
Ground rent 9,626 8,994 632 7.0%
Materials, supplies and services 33,839 33,404 435 1.3%
Salaries and benefits 23,774 22,690 1,084 4.8%
Payments in lieu of municipal taxes 5,110 5,017 93 1.9%
95,436 99,134 (3,698) (3.7%)

Interest expense reflected in the statement of operations results from borrowing to invest in the Authority’s capital programs and offset by interest income earned on bank and investment account balances. Interest expense has decreased $5.9 million due to the maturity and repayment of the $200 million Series D Revenue Bonds at 4.733% on May 2, 2017.

Rent payable to the Government of Canada increased by 7.0% to $9.6 million in 2017 due to higher revenues in 2017. The Authority operates the Airport under the terms of a ground lease (as amended, the “Lease”) with the Government of Canada that sets out the formula for calculating annual rent. The amount reflected as rent expense is estimated based on that formula. The formula calculates rent as a royalty based on a percentage of gross annual revenues on a progressive scale. Rent is calculated as a percentage of gross annual revenues as defined in the Lease, with no rent payable on the Authority’s first $5 million in annual revenue and an increasing rent percentage payable as revenue increases, on a cumulative basis. Rent is levied at a maximum 12.0% rate on annual revenues in excess of $250 million as follows:

Gross revenues Rent payable Cumulative maximum rent
On the first $5 million of revenues 0% 0
On the next $5 million 1.0% 50 thousand
On the next $15 million 5.0% 800 thousand
On the next $75 million 8.0% 6,800 thousand
On the next $150 million 10.0% 21,800 thousand
On revenues over $250 million 12.0%

Based on the Authority’s projections, estimated rent payments under the Lease for the next five years are as follows:

2018 10.0 million
2019 10.6 million
2020 11.0 million
2021 11.3 million
2022 11.7 million

The cost of materials, supplies and services increased to $33.8 million in 2017 as compared to $33.4 million in 2016, an increase of 1.3%. The $0.4 million increase over 2016 is due to volume and contracted rate increases for terminal services including policing and security, maintenance contract costs, baggage handling services, building repairs, utilities and other outsourced and professional services.

The cost of salaries and benefits increased $1.1 million to $23.8 million in 2017, an increase of 4.8%. The increase was a result of contracted increases for salaries and related benefits, the successful hiring of planned new and replacement positions combined with higher usage of seasonal on call staff as a result of more snow events and complex weather conditions during the extended winter operations season early in the year.

Payments in lieu of municipal taxes have increased by 1.9% and reflect the prescribed impact of the provincial legislation which dictates the calculation of this payment. Under this legislation, payments in lieu of municipal taxes are based on a fixed legislated rate for the Authority, multiplied by the previous year’s passenger numbers, but to a maximum increase of 5.0% over the previous year’s amount. The $5.1 million paid for 2017 reflects this prescribed calculation. The number of passengers travelling through the Airport in 2016 increased from 2015 by 1.9%. Payments in lieu of taxes will increase in 2018 by 2.0% from the 2017 amount based on this prescribed calculation reflecting the increase in passenger volume that occurred in 2017.


The Authority’s quarterly results are influenced by passenger activity, aircraft movements, maintenance project decisions, and other factors such as weather conditions and economic conditions and do not necessarily fluctuate consistently over time based on the season. Due to these external factors, the historic results on a quarterly basis cannot be relied upon as a predictor of future trends.

Selected unaudited quarterly financial information for the eight most recently completed quarters is set out below:

Quarter ended
(in millions of Canadian dollars)
2016 2017
Revenues 31.0 29.6 30.2 31.1 31.9 31.5 32.5 32.3
Expenses 25.0 24.1 23.2 26.8 26.3 23.3 21.8 24.0
Earnings before depreciation 6.0 5.5 7.0 4.3 5.6 8.2 10.7 8.3
Depreciation 6.6 6.6 7.7 7.2 7.0 7.1 7.6 7.3
Net earnings (loss) (0.6) (1.1) (0.7) (2.9) (1.4) 1.1 3.1 1.0


In accordance with the Authority’s mandate, all earnings are retained and reinvested in Airport operations and development, including investment in property, plant, and equipment to meet ongoing operating requirements.

During 2017, the Authority invested $35.5 million in its capital expenditure programs including significant spending of $7.2 million on the departure check-in upgrade program, $6.5 million on apron and taxiway paving, $2.7 million on non-passenger screening-vehicle facilities, $2.6 million on major fleet vehicles, $2.3 million on apron drainage, $1.6 million on runway approach lighting, $1.5 million on completion of boarding bridge upgrades and $1.2 million on the primary inspection kiosks program.


In addition to rent payments noted above, the Authority has operating commitments in the ordinary course of business requiring payments which diminish as contracts expire as follows:

(in thousands of Canadian dollars) Payments for years ending December 31
Long-term debt (Note 1) 427,462 4,152 4,643 8,753 13,116 14,023 382,775
Operating commitments 16,887 11,707 4,191 842 147
Capital commitments 18,524 18,524
Total contractual obligations 462,873 34,383 8,834 9,595 13,263 14,023 382,775

Note 1 – Further information on interest rates and maturity dates on long-term debt are provided in Note 8 to the Authority’s financial statements.


As a non-share capital corporation, the Authority funds its operating requirements, including debt service, through operating revenues and AIF revenues. The Authority manages its operations to ensure that AIF revenues are not used to fund regular operational expenses or operational capital. AIF revenues are used to fund debt service costs and other expenses related to the Authority’s major infrastructure investment programs including Airport expansion projects. The Authority finances major infrastructure expenditures by borrowing in the capital markets and by using bank credit.

The Authority maintains access to an aggregate of $140 million in committed credit facilities (“Credit Facilities”) with two Canadian banks. The 364-day Credit Facilities that expired on October 13, 2017 have been extended for another 364-day term expiring on October 13, 2018. The following table summarizes the amounts available under each of these Credit Facilities, along with their related expiry dates and intended purposes:

Type of facility Dec 31, 2017
$ (millions)
Dec 31, 2016
$ (millions)
Maturity Purpose
Revolver – 364 day 40 40 October 13, 2018 General corporate and capital expenditures
USD contingency ($10 million USD) 14 14 October 13, 2018 Interest rate hedging
Letter of credit 6 6 October 13, 2018 Security for the Debt Service Reserve Fund
Revolver – 5 year 80 80 May 15, 2020 General corporate and capital expenditures
Total 140 140

The Authority’s cash and cash equivalents decreased by $0.5 million during 2017 to $29.5 million as at December 31, 2017.

The Authority issues revenue bonds (collectively, “Bonds”) under a trust indenture dated May 24, 2002 (as amended or supplemented, the “Master Trust Indenture”) setting out the terms of all debt, including bank facilities and revenue bonds. Under the Master Trust Indenture, the Authority is required to maintain with the trustee under the Master Trust Indenture (the “Trustee”), a debt service fund (“Debt Service Reserve Fund”) equal to six months’ debt service in the form of cash, qualified investments or letter of credit. At December 31, 2017, the balance of cash and qualified investments held in the Debt Service Reserve Fund for the Series B Amortizing Revenue Bonds was $6.5 million. Furthermore, in order to satisfy the Debt Service Reserve Fund requirement for the Series E Amortizing Revenue Bonds, $5.9 million of the Authority’s Credit Facility had been designated to an irrevocable standby letter of credit in favor of the Trustee.

The Master Trust Indenture also requires that the Authority maintain an operating fund (“Operating and Maintenance Reserve Fund”) in an amount equal to 25.0% of defined operating and maintenance expenses for the previous year. This fund may be maintained in the form of cash and investments held by the Authority or the undrawn availability of a committed credit facility. As at December 31, 2017, $14.4 million of the Authority’s Credit Facilities had been allocated exclusively to the Operating and Maintenance Reserve Fund.

At December 31, 2017, the Authority was in full compliance with the provisions of its debt facilities, including the Master Trust Indenture provisions related to reserve funds, the flow of funds and the rate covenant.

During 2017, Standard & Poors and Moody’s reaffirmed the Authority’s credit ratings with stable outlooks in respect of the Authority’s Bonds under the Master Trust Indenture at A+ and Aa3, respectively.


The Authority’s account receivable of $9.5 million decreased by $5.2 million from the prior year and was due to the receipt from CATSA of $5.2 million in 2017 that was related to their contribution toward the costs of the new baggage handling system.

Accounts payable and accrued liabilities decreased by $3.3 million to $15.0 million at December 31, 2017. This was as a result of $1.8 million lower holdbacks and trade payables and accrued charges as they were released for payment based on the completion of several capital projects including the baggage handling system. In addition, there was $1.5 million lower accrued interest on Series D Revenue Bonds which matured on May 2, 2017.

The reduction in the current portion of long-term debt balance was a result of the May 2, 2017 maturity and repayment of the $200 million Series D Revenue Bonds at 4.733%. $200 million of funds raised as part of the Series E financing in June 2015 were set aside in a segregated Sinking Fund and used to redeem the Series D Revenue Bonds.

Other post-employment benefit liability increased by $0.7 million in the year to $9.2 million at December 31, 2017 and is due to the year over year increase in the benefit obligation through recognition of current service costs and minor adjustments to the underlying assumptions.


Aviation Activity

The Federal Government is considering the divestiture of its interests in Canadian airports. The Authority has expressed its concerns about the potential impact of such a divestiture on passenger fees and on the airport governance model. The Authority will remain engaged with other airports and stakeholders in this dialogue as a divestiture would be a significant event that could have a substantial impact on the Authority and the Airport business model.

The Authority will continue to face certain risks beyond its control which may or may not have a significant impact on its financial condition. Airport revenue is largely a function of passenger volumes. Passenger volumes are driven by air travel demand. The events of the past several years have emphasized the volatile nature of air travel demand and the impact of external factors such as economic conditions, health epidemics, geopolitical trends, government regulation, price of airfares, additional taxes on airline tickets, leakage of passengers to nearby airports, alternative modes of travel and the financial uncertainty of the airline industry.

The financial uncertainty of the airline industry, although currently relatively stable in Canada, remains an ongoing risk to the Authority. This is mitigated by the fact that approximately 96.0% (94.0% in 2016) of the passenger activity originates or terminates at the Airport, as opposed to connecting through the Airport. Connecting passenger volumes are more vulnerable to fluctuation due to routing and scheduling changes by airlines. In addition, a greater percentage of the traffic through the Airport is business and government travellers, whose travel decisions are less discretionary than those of leisure travelers.

Aviation Liability Insurance

The availability of adequate insurance coverage is subject to the conditions of the overall insurance market and the Authority’s claims and performance record. The Authority participates with an insurance buying group that also includes airport authorities from Vancouver, Edmonton, Calgary, Winnipeg, Montreal and Halifax. This group has been successful in placing all of its insurance needs.

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