May 12, 2020
TORONTO, ONTARIO – The Greater Toronto Airports Authority (“GTAA”) today reported its financial and operating results for the first quarter ended March 31, 2020. Passenger activity decreased 17.4 per cent during the first quarter of 2020 as compared to 2019, due to global aviation industry challenges, specifically the COVID-19 pandemic.
“The first quarter of this year has brought unprecedented and dramatic challenges to the aviation industry due to COVID-19. The sharp reduction in air travel has had a significant negative impact on our business at Toronto Pearson, that is expected to continue for some time to come,” said Deborah Flint, President and CEO of the GTAA. “As we continue to weather this current storm, we are focused on supporting the essential movement of goods through increased cargo activity. We are also looking to the future and working with our partners to explore new processes, technology solutions and facility enhancements to ensure that Toronto Pearson is positioned to deliver an even better Airport experience. We are working with our airline partners to support the eventual recovery and once again connect passengers to points across this great country and eventually, across the globe.”
The COVID-19 pandemic and resulting economic contraction has had, and is expected to continue to have, a negative impact on demand for air travel globally. Toronto Pearson has experienced significant declines in passengers and flight activity during March and April of 2020, as compared to the same periods in 2019. This is due to travel advisories and restrictions by governments, flight and route cancellations and fleet groundings by air carriers, in response to the pandemic, as well as the current economic contraction. The reduced activity is having a significant negative impact on the GTAA’s business and results of operations, including aeronautical and commercial revenues and airport improvement fees. Apart from the impact of the pandemic on GTAA revenues and operations, there may also be disruptions, including to supply chains and third-party service providers, and potential disruptions to the workforce at Toronto Pearson. The pandemic may also impact the cost of capital in the future which may arise from disrupted credit markets, and possible credit ratings watch or downgrade of GTAA debt. Many GTAA stakeholders and counterparties are experiencing financial distress which has precipitated delays in payments and requests to the GTAA for contractual relief, and has resulted in temporary or permanent shutdown of their operations, which have adversely impacted our revenues and operations.
During the first quarter of 2020, 9.6 million passengers travelled through Toronto Pearson, representing a decrease of 2.1 million passengers as compared to the same period of 2019. Passenger activity in the international sector decreased by 1.4 million passengers reflecting 17.9 per cent reduction and the domestic sector decreased by 700,000 passengers reflecting 16.2 per cent reduction. During the first quarter of 2020, aircraft movements were down 10.3 per cent while the number of seats decreased by 9.0 per cent, as compared to the same period of 2019, reflecting the reduction in global air travel activity.
The GTAA recorded net income of $6.6 million during the first quarter of 2020 compared to $10.9 million in the same period of 2019. This decrease in net income was primarily due to significant revenue reductions and an increase in amortization partially offset by cost savings from the waiver of the ground lease rents granted by the federal government for March to December 2020. The GTAA has increased its gross debt per enplaned passenger by 10.0 per cent to $285 and net debt per enplaned passenger by 2.1 per cent to $247, when compared to the same period of 2019, due to lower passenger volumes and higher debt.
During the first quarter of 2020, the GTAA reported total revenues of $339.1 million, representing a decrease of $23.3 million over the same period of 2019. The decline in revenues was a reflection of lower passenger volumes and corresponding decreases in airport improvement fees and commercial revenues.
Total expenses reported during the first quarter of 2020 for the GTAA were $332.5 million, representing a decrease of $19.0 million over the same period of 2019. The decreased costs were primarily related to the waiver of ground lease rents from March to December 2020 by the Government of Canada in response to the COVID-19 pandemic and its impact to the global air travel industry.
Earnings before interest and financing costs and amortization (“EBITDA”) during the first quarter of 2020 were $154.8 million, representing an increase of 0.1 per cent over the same period of 2019 primarily due to cost savings from the waiver of the ground lease rents granted by the federal government for March to December 2020 offset by operational losses due to significant revenue reductions.
Given the rapidly evolving situation, Management continues to analyze the extent of the financial impact, which is and continues to be material. While the full duration and scope of the recent coronavirus pandemic is not yet known, Management does not believe, however, that the outbreak will have a long-term impact on the financial sustainability of the Airport. The GTAA is currently undertaking a review of its capital program and is implementing significant reductions to current operating and capital expenditures and will continue to review future needs to better align itself with air travel activity and cash flow requirements.
On March 26, 2020, the GTAA drew $480.0 million of cash from its committed revolving operating credit facility ("Operating Credit Facility") to provide additional flexibility in light of the continuing impact of the COVID-19 pandemic on the GTAA’s revenues and operations. The excess cash was invested in short-term highly liquid investment instruments in line with the GTAA's Investment Policy and the Master Trust Indenture. The GTAA has unrestricted cash of $460.3 million and available undrawn credit under its Operating Credit Facility of $875.0 million as at March 31, 2020. The next bond maturity requiring refinancing will occur in September 2022.
In relation to COVID-19 and its impact on the Corporation in the second quarter of 2020, Management is working diligently to help protect the safety of airport workers and passengers and to ensure the GTAA is supporting Airport stakeholders affected by the pandemic. Passengers travelling through the Airport in April 2020 had dropped by approximately 98.0 per cent over the same period of 2019. Additionally, the GTAA and the Canadian Airports Council are actively engaging with governments at all levels to discuss financial support and the essential role Toronto Pearson plays in Canada’s supply chain. On March 30, 2020, the Government of Canada announced that it would waive ground lease rent from March 2020 to December 2020 for Canadian Airport Authorities that pay rent to the federal government, to help the air transport sector deal with COVID-19. This support will help airports reduce cost pressures and preserve their cash flow. On April 30, 2020, the GTAA received confirmation from the Canada Revenue Agency that the GTAA, as a Canadian airport authority, could be eligible to benefit from the Canada Emergency Wage Subsidy (“CEWS”) program, subject to final approval by the CRA of the GTAA's application. The CEWS program provides a 75 per cent wage subsidy (up to a maximum of $847 per week per employee) to eligible employers for up to 12 weeks, retroactive to March 15, 2020.
The GTAA’s first quarter 2020 financial results are discussed in more detail in the GTAA’s Consolidated Condensed Interim Financial Statements and Management’s Discussion and Analysis, each for the period ended March 31, 2020, which are available at www.torontopearson.com and on SEDAR at www.sedar.com.
This news release contains forward-looking information within the meaning of applicable securities laws. By its nature, forward-looking information requires the GTAA to make assumptions and is subject to inherent risks and uncertainties. These statements reflect GTAA management’s current beliefs and are based on information currently available to GTAA management. There is a risk that predictions, forecasts, conclusions and projections that constitute forward-looking information will not prove to be accurate, that the GTAA’s assumptions may not be correct and that actual results may differ materially from such forward-looking information. Additional detailed information about these assumptions, risks and uncertainties is included in the GTAA’s securities regulatory filings, including its most recent Annual Information Form and Management’s Discussion and Analysis, which can be found on SEDAR at www.sedar.com.
About the Greater Toronto Airports Authority
The Greater Toronto Airports Authority (GTAA) is the operator of Toronto Pearson International Airport.
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