August 13, 2020
TORONTO, ONTARIO – The Greater Toronto Airports Authority (“GTAA”) today reported its financial and operating results for the three- and six-month periods ended June 30, 2020. Passenger activity decreased 58.6 per cent during the first six months of 2020 as compared to 2019. This decrease is due to global aviation industry challenges, specifically the COVID-19 pandemic.
“In the face of the most challenging period in the history of aviation, we have delivered on a clear program for financial sustainability and a comprehensive approach to support the restart of our business through our Healthy Airport program,” said Deborah Flint, President and CEO, Greater Toronto Airports Authority. “This investment in leading health measures and innovative new hygiene practices positions Toronto Pearson to create a safe air corridor to other low risk countries. We realized these accomplishments while making the most difficult sacrifice in the form of job reductions for 300 of our valued team members and 200 vacant roles. The future success of Toronto Pearson rests proudly on the contributions of our former colleagues.”
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 material declines in passengers and flight activity during the first and second quarters of 2020, as compared to the same periods in 2019. This is due to government restrictions, border closures, and flight and route cancellations by air carriers in response to declining passenger demand, as well as the economic contraction caused by the pandemic. The reduced activity is having a material negative impact on the GTAA’s business and results of operations, including aeronautical and commercial revenues and airport improvement fees.
The GTAA has implemented significant reductions to operating and capital expenditures, including the reduction in 2020 capital spend by $265 million and temporary closure of over 40 per cent of its terminal facilities. In addition, the reduction of approximately 500 jobs announced in July 2020, represents a reduction of 27 per cent of the GTAA's workforce.
The Government of Canada has waived ground lease rent for the period of March 2020 to December 2020. The GTAA is also participating in the Canadian Emergency Wage Subsidy ("CEWS") program.
Many of the GTAA's airlines, commercial partners, and tenants are experiencing financial hardship which has precipitated delays in payments and requests to the GTAA for contractual relief. The GTAA is working with affected parties to review their situations and consider payment deferrals as necessary. Since April 2020, the GTAA has provided payment deferrals on a case-by case basis with repayment required in 2020.
Key Financial and Passenger Information
For the periods ended June 301. Please refer to Non-GAAP Financial Measures at the end of this document for further details.
During the three- and six-months ended June 30, 2020, passenger activity through Toronto Pearson and resultant revenues were materially lower as a direct result of the impact of COVID-19.
Earnings before interest and financing costs and amortization (“EBITDA”) and net income for the three- and six-month periods ended June 30, 2020 were materially lower as compared to the same periods in 2019 due to significant revenue reductions caused by the impacts of COVID-19 offset by the cost savings mentioned above.
As at June 30, 2020, the GTAA has unrestricted cash of $231.6 million and available undrawn committed credit under its Operating Credit Facility of $875.0 million for total available liquidity of $1.1 billion.
On July 27, 2020, the GTAA successfully completed an amendment to the Corporation's Master Trust Indenture ("MTI"). The MTI amendment temporarily waives the GTAA from complying with its rate covenant prescribed under the MTI, which is comprised of two covenant tests, for fiscal years 2020 and 2021. The waiver was sought in light of the significant decline in passenger and flight activity at Toronto Pearson. In addition, the GTAA extended its committed revolving operating credit facility in July 2020 by an additional year to May 22, 2023.
As a result of COVID-19 there is very limited visibility on travel demand given changing government restrictions in place around the world. These restrictions and concerns about travel due to COVID-19 are severely inhibiting demand. Management continues to analyze the extent of the financial impact of COVID-19, which is and continues to be material. While the full duration and scope of the COVID-19 pandemic cannot be known at this time, Management believes that the pandemic will not have a material impact on the long-term financial sustainability of the Airport.
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. The pandemic may also impact the cost of capital and the ability to access the capital markets in the future which may arise from disrupted credit markets, and possible credit ratings watch or downgrade of GTAA debt.
The GTAA 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. Additionally, the GTAA and the Canadian Airports Council are actively engaging with governments at all levels to discuss financial support and the practices and requirements to remove travel restrictions.
The GTAA knows that the passenger experience is a "home to home" one. That means that the passenger views the safety of travel in every step, from their home, to and through the terminal, the airplane environment, and destination surface travel and accommodation, followed by the return trip. Any concern in any component will diminish the traveler’s confidence in the safety of their journey. Accordingly, it is imperative that to restore confidence in the safety of air travel, each participant has a responsibility to deliver service flawlessly on a consistent basis. That is why in June 2020 Toronto Pearson launched its "Healthy Airport" commitment with its partners, government agencies and stakeholders designed to set strong, consistent, reliable standards for passenger and airport worker health protection. The Healthy Airport commitment is a comprehensive program that outlines the steps that the Airport and its partners are implementing to restore confidence in air travel given the new realities of air travel.
The GTAA’s June 30, 2020 financial results are discussed in more detail in the GTAA’s Condensed Interim Consolidated Financial Statements and Management’s Discussion and Analysis, each for the three- and six-month periods ended June 30, 2020, which are available at www.torontopearson.com and on SEDAR at www.sedar.com.
Caution Regarding Forward-Looking Information
This news release contains forward-looking information within the meaning of applicable securities laws. This forward-looking information is based on a variety of assumptions and it subject to 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.
Non-GAAP Financial Measures
Throughout this press release, there are references to the following performance measure which in Management’s view is valuable in assessing the economic performance of the GTAA. While this financial measure is not defined by IFRS, and is referred to as non-GAAP measure which may not have any standardized meaning, it is a common benchmark in the industry, and is used by the GTAA in assessing its operating results, including operating profitability, cash flow and investment program.
EBITDA is earnings before interest and financing costs and amortization. EBITDA is a commonly used measure of a company's operating performance. This is used to evaluate the GTAA’s performance without having to factor in financing and accounting decisions.
About the Greater Toronto Airports Authority
The Greater Toronto Airports Authority (GTAA) is the operator of Toronto Pearson International Airport. Toronto Pearson served more than 50 million passengers in 2019, making it Canada's busiest airport.
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