Debt-heavy and pandemic-bruised, why some airports are raising fees

Despite a return of passengers to the sky, many airports across the country are struggling to balance their books, manage their bloated debt levels and raise enough money to make necessary infrastructure repairs and improvements.

In some cases, that includes hiking passenger fees to help alleviate financial pressures.

The largest airports are recovering much faster compared with those in smaller cities, as passenger activity and reduced airline service continues to hamper their financial situation.

In Fort McMurray, Alta., the airport can handle up to two million passengers annually, but currently the facility is on pace to see only about 300,000 travellers this year. The 19 daily flights before the COVID-19 pandemic began three years ago have been reduced to between nine and 11, depending on the day of the week.

The airport authority is carrying what it describes as a "significant" debt of $167 million after a major expansion project was completed in 2014. The organization is running a deficit and relying on its reserve funding to balance the books, as management doesn't expect passenger activity to fully rebound until at least 2025.

Airports in Canada operate as not-for-profits, relying on passenger, aircraft and fuel fees to generate most of their revenue.

"The [passenger] numbers are still not where we'd hoped they would be," said Denean Robinson, president and CEO of the Fort McMurray Airport Authority, which received about $36 million in pandemic financial support from all three levels of government.

"We're struggling as many airports in Canada are," she said. "The level of debt that we had taken on when this terminal was open was certainly sustainable with the volume of passengers that we had going through with the level of fees. The issue is that we don't have that top-line revenue now to support that debt payment."

The airport charges an airport improvement fee of $40 per passenger, which is among the highest in the country. Management will review the fee at the end of the year.

"We do what we can to try to maintain our fee structure. But when all else fails, if we need to raise that top-line revenue growth, we will have to look at raising those fees," Robinson said, adding that financial pressures could also result in more congestion and longer lineups as airports delay necessary improvements.

Toronto's Pearson International Airport boosted its fees on Jan. 1, while Regina's airport is increasing its rates beginning April 1.

"This user-pay system works fine, but when we went into the pandemic there were no users," said Barry Prentice, a professor at the University of Manitoba's Asper School of Business in Winnipeg who specializes in transportation. He described the escalating charges as "outrageous."

The fees are often criticized by airlines and passengers because they drive up the cost of air travel in the country.

"A number of our airports did have to increase their airport improvement fees throughout the pandemic," said Monette Pasher, president of the Canadian Airports Council (CAC).