March 24, 2021
TORONTO, CANADA - The Greater Toronto Airports Authority (“GTAA”) today reported its financial and operating results for the fiscal year ended December 31, 2020. Passenger activity decreased 73.6 per cent during 2020 as compared to 2019. This decrease is due to global aviation industry challenges, specifically the COVID-19 pandemic.
“Our full-year passenger and financial results make clear the impact that COVID-19 has had on Toronto Pearson,” said Deborah Flint, President and CEO, Greater Toronto Airports Authority. “While we have pushed toward leading hygiene practices, and advocated for a stronger approach to passenger testing, there is more that must be done with our government and aviation sector partners to develop a recovery framework that permits the safe restart of air travel. Canada’s airports must be given the tools they require to rebound in a post-COVID world or our aviation sector and the country’s competitiveness will suffer.”
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 2020, as compared to the same periods in 2019. Due to the pandemic and the resultant severe financial impacts and economic contraction, there have been multiple travel restrictions including border closures and flight and route cancellations by air carriers. 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 the 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 positions announced in July 2020, represents a reduction of 27 per cent of the GTAA's workforce. The GTAA has also successfully completed an amendment to the Corporation's Master Trust Indenture ("MTI") that temporarily exempts the GTAA from complying with its rate covenant, which is comprised of two covenant tests, for both fiscal years 2020 and 2021.
The Government of Canada has waived ground lease rent for the period of March 2020 to December 2020. In addition, the Government of Canada has deferred ground lease rent payments from January 2021 to December 2021 to be repaid over a ten-year period commencing in 2024. The GTAA is also participating in the Canadian Emergency Wage Subsidy ("CEWS") program.
The pandemic has also had a significant negative impact on air carriers operating at the Airport, including Toronto Pearson’s key hub airlines, Air Canada and WestJet. During the third quarter of 2020, the GTAA amended its long-term aeronautical fees agreements with each of these carriers in part to adjust the fees paid under the agreements to reflect the reduced current and projected flight activity. While considerable uncertainty remains over the near-term demand for air travel, the new fee regime is expected to result in reduced overall aeronautical revenues to the GTAA over the remaining term of the agreements.
Many of the GTAA's commercial partners, concessionaires and tenants have experienced significant negative impacts to their businesses. The GTAA has provided financial accommodation and other assistance through a number of programs including payment abatements, deferrals and contract relief through proposed and amended contracts. The GTAA has taken a measured approach so as to offer these arrangements to partners that are in good standing and that the GTAA believes will be critical partners post COVID-19. These accommodations have, and will continue to have, over the period covered by the accommodation, an adverse impact on the GTAA's business and related cash flows. The majority of deferred payments have been paid in late 2020, while the remaining deferrals are expected to be paid in 2021.
Key Financial and Passenger Information
During 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”) during 2020 was materially lower as compared to 2019 due to significant revenue reductions caused by the impacts of COVID-19 offset by the cost savings mentioned above. For these same reasons, the GTAA incurred a net loss during 2020 as compared to the net income in 2019.
From March 1, 2020 until December 31, 2020, the GTAA drew $690.0 million of cash from short-term borrowings in light of the continuing impact of the COVID-19 pandemic on the GTAA’s revenues and operations. On November 3, 2020, the GTAA issued $500.0 million Series 2020-1 Medium-Term Notes ("MTNs") due May 3, 2028 at a coupon rate of 1.54 per cent for net proceeds of $497.8 million. The net proceeds partially paid down the outstanding short-term debt. The GTAA's net liquidity position (including cash) as at December 31, 2020 was $1.4 billion.
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 air carriers, 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.
Toronto Pearson has cooperated with all levels of our government which has resulted in programs like on-site testing.
On January 6, 2021, the Ontario government launched a voluntary pilot COVID-19 testing program at the Airport. Then between February 1 and 21, 2021, the Ontario government ordered nearly all international passengers landing at the Airport and staying in Ontario to take a mandatory COVID-19 test at the Airport before following existing federal quarantine rules.
Effective February 22, 2021, the federal government modified its quarantine rules by ordering all international passengers landing at the Airport (with certain exceptions) or connecting to other cities in Canada to take a mandatory COVID-19 test at the Airport and quarantine in a designated hotel at their own expense while they await results. Those with negative test results must quarantine for the remaining two weeks in a hotel or at home, while those with positive test results must quarantine in designated government facilities. Passengers are able to take their connecting flights within Canada once negative test results are received. International travellers that are connecting to destinations outside of Canada are exempt from the order provided they stay on the secure side of the terminals.
On March 8, 2021, the GTAA, with a financial contribution from the Government of Canada, initiated a COVID-19 Antigen test study. There are currently 285 Airport workers who have volunteered to be tested three times per week for a period of 8-12 weeks.
Effective March 16, 2021, departing passengers to the U.S. were eligible to be tested at the Airport as part of the testing study using Antigen COVID-19 tests. Negative results from such tests may be relied on for travel to the U.S.
The GTAA’s December 31, 2020 financial results are discussed in more detail in the GTAA’s Consolidated Financial Statements and Management’s Discussion and Analysis, each for the fiscal year ended 2020 and 2019, 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 the International Accounting Standards Board (“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 GTAA is the operator of Toronto Pearson International Airport.
GTAA Media Office (416) 776-3709