annual report 2006 - winnipeg james armstrong richardson ... · measures used by other companies....

2006F inancialReport

Annual Report 2006Consolidated Financial StatementsWinnipeg Airports Authority Inc.Year Ended December 31, 2006

Winnipeg Airports Authority Inc. Annual Report 2006 Consolidated Financial Statements

Management’s Responsibility for F inancial StatementsYear ended December 31, 2006

1

The consolidated fi nancial statements of the Winnipeg Airports Authority Inc. have been prepared

by management and approved by the Board of Directors and the Members of the Winnipeg Airports

Authority Inc. Management is responsible for the preparation and presentation of the information

contained in the consolidated fi nancial statements and other sections of this Annual Report. The

Winnipeg Airports Authority Inc. maintains appropriate systems of internal control, policies and

procedures which provide management with reasonable assurance that assets are safeguarded and

that fi nancial records are reliable and form a proper basis for the preparation of fi nancial statements.

The Winnipeg Airports Authority Inc.’s independent auditors, KPMG LLP, have been appointed by the

Members of the Authority to express their professional opinion on the fairness of these consolidated

fi nancial statements.

The Board of Directors ensures that management fulfi lls their responsibilities for fi nancial reporting

and internal controls through an Audit Committee which is comprised solely of directors who are

neither offi cers nor employees of the Authority. This committee reviews the consolidated fi nancial

statements and reports to the Board of Directors. The auditors have full and direct access to the

Audit Committee.

February 16, 2007

Barry W. RempelPresident and Chief Executive Offi cer

Catherine J. Kloepfer, CGA, FCASenior Vice President, Administration and Chief Financial Offi cer

2


Management’s Discussion and AnalysisFor the year ended December 31, 2006Dated February 16, 2007

Forward–Looking Statements

This Management’s Discussion and Analysis (“MD&A”)

contains certain forward-looking statements. By their

nature, forward-looking statements require assumptions

and are subject to inherent risks and uncertainties.

Please refer to the section titled “Caution Regarding

Forward-Looking Statements” contained at the end of

this MD&A for a discussion of such risks and uncertainties

and the material factors and assumptions related to

forward-looking statements.

Introduction

This Management Discussion and Analysis complements

and supplements the consolidated fi nancial statements

of Winnipeg Airports Authority Inc. (“WAA”) for the

year ended December 31, 2006. It is provided to explain

management’s view of the conditions and events that

shaped the information contained in the fi nancial

statements and help in understanding how these

conditions and events are expected to affect the

business of WAA moving forward. This MD&A should

be read in conjunction with the fi nancial statements.

WAA is responsible for the management, operation and

development of Winnipeg James Armstrong Richardson

International Airport, formerly known as the Winnipeg

International Airport, (the “airport”) under a 60 year

lease entered into in 1997 with Transport Canada. WAA

is a non-share, community based corporation. WAA is

responsible for fi nancing its capital investments and

all excess revenues are for re-investment in airport

infrastructure. WAA considers Earnings Before Interest,

Taxes, Depreciation and Amortization (“EBITDA”) to be an

appropriate indicator of its ability to service its debt as

EBITDA is a measure of the ability to generate cash fl ow

and is used by other airports in Canada, investors and

analysts for comparison purposes.

WAA uses non-GAAP measures, including EBITDA to

provide users with an alternate method for assessing

performance and to provide a consistent basis for

comparison. These measures are not in accordance

with or an alternative to GAAP and may be different from

measures used by other companies.

Operating Activity

In a year where the Manitoba economy grew at

a brisk pace, activity at the Winnipeg James

Armstrong Richardson International Airport also

grew at a very healthy rate. Total passenger traffi c

was recorded at 3.4 million. This fi gure continues a

trend in year over year increases averaging above

six percent over the period 2003 to 2006.

During 2006 a number of air service changes were

made, offering the traveling public more choices.

Air Canada entered the US market with twice weekly

service to Las Vegas. WestJet had previously been

operating the same route, however increased their

frequency per week from two to four for the winter.

New non-stop fl ights were added between Winnipeg

and London, Ontario. Zoom increased their service to

London-Gatwick from twice per month, to once per

week for the summer season. Aeromexico began service

between Winnipeg and Cancun for Toronto based tour

operator Sunwing for the winter charter season.

Passenger Traffi c for last fi ve years:

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

2002 2003 2004 2005 2006(in thousands)

3

Cargo movement through an airport is a key economic

indicator. Because of its geographic location, Winnipeg

is a strategic point for the movement of goods within

Canada and internationally. Winnipeg is Canada’s number

one freighter airport. Winnipeg handled a combined

total of 155,000 tonnes of freight in 2006, three percent

higher than the amount of freight handled in 2005 and

36% above the fi gure recorded in 2003. This performance

places Winnipeg in the top three airports in Canada for

cargo tonnage, behind only Toronto and Vancouver.

Cargo tonnage:

175,000

150,000

125,000

100,000

75,000

50,000

25,000

0

2002 2003 2004 2005 2006 (in metric tonnes)

Total

Domestic

Transborder

International

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Results of Operations

Net Operating Results

WAA’s operating results for the years ended December 31 are summarized in the following table:

(in thousands) 2006 2005

Revenue $ 60, 364 $ 56,707Operating expenses 31,849 30,497

Revenue over expenses1 28,515 26, 210

Amortization 6,026 3,515Interest expense 2,989 1,187Income taxes of subsidiaries (12) 23

Revenue over expenses 19,512 21,485

Note 1: Revenue over expenses before interest, income taxes, depreciation and amortization of capital assets (EBITDA)

The above table demonstrates that for each year,

the revenue generated by WAA were more than

suffi cient to cover operating expenses, amortization

and interest expense.

Revenue over expensesDespite an improvement in EBITDA in 2006 of $2.3

million (or 8.8%), revenue over expenses declined by

$1.9 million. This decline is a result of increased

amortization of $2.5 million and interest expense of

$1.8 million. These changes are a result of decisions

made to issue the Revenue Bonds in 2005 and to plan

for an end to the useful life of the existing air terminal

building in 2009.

RevenueTotal revenue for 2006 was $60.4 million compared to

$56.7 million for 2005. This 6.4% increase was generated

primarily from AIF revenues which were up $1.0 million,

or 5.3%. The AIF revenue is recorded net of the commission

paid to the air carriers for the collection of the AIF, which

is 6% of the $15 WAA charges per enplaned passenger.

AIF revenue is used for airport improvements such

as the Airport Redevelopment Program, including

associated debt service costs.

Aeronautical revenue (comprised of aircraft landing

fees, general terminal fees and passenger security fees)

increased to $21.3 million, up almost $1 million from the

prior year. In general, aircraft landing fees are charges

to cover the costs of operating and maintaining the

airfi eld while general terminal charges are designed

to cover the costs of operating and maintaining the air

terminal building. Aircraft landing fees are charged on

the basis of gross takeoff weight of each aircraft while

general terminal charges are based on number of

passengers. The passenger security fees are on a per

passenger basis and are charged on a cost-recovery basis

for specifi c security costs.

The increases in aeronautical revenue and AIF are a

result of a 4.8% increase in passengers and an increase in

scheduled fl ights. Because of the increased traffi c at the

airport, WAA has also experienced an increase in the

utilization of parking and concession facilities. This has

resulted in an increase of 5.5% in revenue from parking

and concessions combined.

Rental revenue from land and building occupancy has

increased from $4.3 million in 2005 to $4.6 million in

2006, an increase of 6.3%. Developments on the airport

lands include several new hangars and buildings for

customers such as Calm Air and Fast Air, and additional

space occupied by Bison Transport.

WAA is focusing on increasing the non-aeronautical

revenues generated on the airport campus,

including leasing and development opportunities.

Operating ExpensesTotal operating expenses incurred to operate and

maintain the airport campus were $31.8 million in

2006, an increase of $1.4 million over 2005. The majority

of operating expenses are incurred for salaries, wages

and benefi ts, reaching 47% of the consolidated total.

WAA has both union and non-union employees and

both groups are compensated with salaries and benefi ts,

including pension plan, medical and life insurance

benefi ts, and certain other benefi ts. The cost of providing

these benefi ts adds 28% to the salaries and wages expense.

The second largest area of expense is categorized as

materials, supplies and services. This is comprised of

expenses for such items as sand and ice melting sup-

plies for runways and ground side roadways, utilities,

maintenance costs for equipment, parking and security

services, and other administrative costs. This expense

was $11.2 million in 2006 versus $10.8 million in 2005, or

an increase of $.4 million.The majority of the costs in this

area are driven largely by weather conditions.

Property taxes paid to the City of Winnipeg and the

Rural Municipality of Rosser declined in 2006 to $1.7

million, a reduction of $0.5 million. In 2005 WAA incurred

an assessment for four years property taxes on a right

of way adjacent to WAA’s leased lands. The reduction

in the expense is also due partly to WAA successfully

lobbying the City to change the methodology used on

the assessment of the airport property.

An expense that is imposed upon WAA is the payments

required to the Government of Canada under the terms

of the Ground Lease. Total payments in 2006 amounted

to $3.9 million which represents an increase from 2006

of $30,000. Rent charges for 2007 will be $4.0 million

in accordance with the terms of the lease. Rent charges

are fi xed in the lease through 2009. Subsequent to

that point, escalation of rent payments will be tied to

revenues earned by WAA.

AmortizationAmortization expense has increased by $2.5 million over

2006 to $6.0 million. Increased amortization is a result

of two factors: accelerated amortization of the existing

air terminal building and some related equipment;

plus the beginning of amortization on the new parkade

structure (which came into service in November 2006).

Interest expenseInterest expense for 2006 was $3.0 million which is an

increase of $1.8 million over 2005. During 2005, interest

was incurred for the fi nal three months of the year after

the bonds were issued at the end of September 2005.

For 2006, interest was incurred for the entire year with

partial capitalization to the Airport Redevelopment

Program. The coupon rate on the issued bonds is at

5.205% while the effective rate is 5.75%, taking into

account forward contracts used in 2005 to limit WAA’s

exposure to interest rate risk.

Airport Site Redevelopment and Capital Program

WAA’s fi ve year Airport Site Redevelopment program

fi nished its second year with the completion of a 1,559

stall parkade at a cost of $37.5 million. This expands the

total car parking capacity at the Airport to approximately

4,000 stalls, an increase of 63%.

Total expenditures on the Airport Site Redevelopment

program in 2006 reached $92.9 million. Construction

of a new apron was started, including laying of base

materials and associated land drainage works. Tunnel

work and roadways were constructed to line up with

the new airport campus layout, and work began on

upgrades to the central utilities building.

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Plans are underway to begin construction of the new air

terminal building in the spring of 2007 along with an

elevated roadway, central utilities building and completion

of the new apron. Construction is expected to be

completed in late 2009 with eleven loading bridges

plus an additional seven ground loading position. In

2015 it is expected that the new air terminal building

will be expanded to add another three loading bridges

in order to meet expected passenger volumes.

Other expenditures in the capital program were $5.9

million for items including runway lighting rehabilitation,

runway fi llets, roadways and biometric access controls.

Assets and Liabilities

Assets Current assets, excluding cash and cash held in trust,

totaled $4.9 million at December 31, 2006, versus $6.5

million at the prior year end. The decline of $1.6 million

was primarily a result of a decrease in accounts receivable

of $1.6 million due to the timing of receipt of payments.

Capital assets have increased to $183.1 million for 2006.

This represents a net increase of $92.7 million over 2005.

During the year, $98.8 was invested in new capital asset

acquisition and construction related to the Airport Site

Redevelopment program.

The balance in investments has declined since 2005 as

payments are made for the Airport Site Redevelopment

program. At the end of 2006, the balance remaining

in investments was $195.3 million, a reduction of $68.4

over 2005’s balance. Investments are held with a third

party and are invested in short term debt instruments

with maturities less than one year.

Other assets include accrued pension asset, deferred

fi nancing costs and organizational costs. The increase in

the accrued pension asset of $2.4 million is a result of

funding payments being made in excess of the current

year’s pension expense, as determined by actuarial

estimate. The deferred fi nancing costs and organization

costs were amortized during the year which is the cause of

their decline in value to $10.4 million and nil respectively.

Liabilities

Current liabilities, excluding bank indebtedness,

increased by $11.7 to a total of $19.9 million. This

increase is due primarily to increased accounts

payable and accrued liabilities, due to the timing of

payments related to the Airport Site Redevelopment

program. Out of the total accounts payable and

accrued liabilities at December 31, 2006, $6.5 million

relates to this program.

Long term employee benefi ts relate to separation

and post-employment benefi ts for employees.

This liability is determined actuarially based upon

current employee and pensioner data. The balance at

December 31, 2006 has increased to $3.2 million versus

the 2005 balance of $2.5 million.

The Government of Canada agreed to defer lease payments

of $762,000 to be repaid over a 10 year period beginning in

2006. The reduction in the balance to $686,000 represents

the fi rst year of such payments.

In order to protect WAA from adverse changes in interest

rates, WAA entered into long term swap contracts in

mid-2005. Losses were incurred on these contracts up to

the point where adequate effectiveness documentation

was in place. These losses are being carried on the balance

sheet as a liability until the contracts expire in 2009. At

that time the fi nal loss/gain will be included as a cost of

issuing any subsequent debt.

The balance of the Revenue Bonds series A issued in 2005

are unchanged at December 31, 2006 at $250 million.

Principal payments on these bonds begin in 2010.

Cash Flows

OperationsThe cash fl ow generated from operations for 2006 was

$37.3 million. This is an increase of $13.8 million over

2005 or 59%. The primary driver of this increase was an

improved working capital position due to decreased

accounts receivable and increased accounts payable and

accrued liabilities, caused by the construction activity.

FinancingWAA had a net outfl ow of cash in 2006 for fi nancing

activities of $2.4 million as a result of re-payment of

operating line of credit. In 2005, $245.8 million was

generated from fi nancing activities via the issuance

of the Revenue Bonds.

InvestingThe net cash outfl ow on investing activities was $30.5

million as a result of incurring $98.9 million on construc-

tion costs and other capital additions, net of a reduction

in investments to pay for those additions. This compares

to a net outfl ow last year of $270.2 million, primarily

due to the movement of bond proceeds into investments.

Liquidity and Capital Resources

As a non-share corporation WAA is funded through

operating revenues, AIF revenue, reserve funds, the debt

capital markets and its syndicated bank credit facility.

An overall Capital Markets Platform was established

in 2005 by WAA with a Trust Indentures setting out

the terms of all debt, including bank facilities and

revenue bonds. The Platform is being used to fund the

Airport Site Redevelopment program. At December 31,

2006, $250 million of debt was outstanding in the

form of Revenue Bonds. The syndicated bank credit

facility is for $200 million related to the Airport Site

Redevelopment program plus an operating line of

credit for $20 million. WAA has not drawn on these

credit facilities at December 31, 2006.

Signifi cant Accounting Policies and Estimates

The signifi cant accounting policies adopted by WAA are

detailed in note 1 to the consolidated fi nancial statements.

In preparing fi nancial statements, management is

required to make certain estimates or assumptions,

including estimates for amortization of capital assets,

revenue recognition and the fair value of fi nancial in-

struments. Actual results could differ from estimates.

Capital assets of WAA include improvements to leased

land, runways, terminal and other buildings, equipment

and roadways. These assets are recorded at cost and each

asset type is amortized over their estimated useful lives.

Amortization of such assets begins when the asset is

completed and brought into service.

The timing of revenue recognition depends on the type

of revenue and the specifi c arrangements in place.

Landing fees, terminal charges and car parking are

recognized as the facilities are used. Airport improvement

fees, net of the airline administration fee, are recorded

based upon the estimated enplanement of passengers.

Revenues from concessions, ground transportation, and

space or property rentals are recognized in accordance

with their respective agreements. At each month

end there are certain estimates for the number of

passengers, aircraft movements, sales and other criteria

to determine the revenue earned for each of these

respective revenue types.

Financial Instruments and Other Instruments

In 2005, the Canadian Institute of Chartered Accountants

issued three new accounting standards: Handbook Section

1530, Comprehensive Income, Handbook Section 3855,

Financial Instruments – Recognition and Measurement,

and Handbook Section 3865 – Hedges. These new

standards are effective for WAA on January 1, 2007.

Section 1530 and the guidance report entitled Financial

Instruments – Proposed new Accounting Standards –

A Summary for Not-for-Profi t Organization issued by the

Accounting Standards Board introduces the concept of

Unrealized Changes in Net Assets (“UCNA”). UCNA

represent unrealized gains and losses on fi nancial

assets classifi ed as available-for-sale and changes in the

fair value of the effective portion of cash fl ow hedging

instruments. UCNA and the cumulative amount,

Accumulated Unrealized Changes in Net Assets (“AUCNA”)

will be presented as a new category of Net Assets, in the

Consolidated Statement of Operations and Net Assets.

Section 3855 establishes standards for the recognition

and measurement of fi nancial assets, fi nancial liabilities

and non-fi nancial derivatives (“fi nancial instruments”).

Section 3855 requires changes in the value of certain

fi nancial instruments to be recorded in the fi nancial

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statements of a company. All fi nancial instruments are

to be recognized on the balance sheet and are to be

measured at fair value at inception. Measurement in

subsequent periods depends on whether the fi nancial

instrument has been designated as held-for-trading,

available-for-sale or held-to-maturity. Changes in the

value of fi nancial instruments designated as held-for-

trading will be recognized in Revenue over Expenses.

Unrealized gains and losses on fi nancial instruments

designated as available- for-sale will be recognized in

UCNA. Financial instruments designated as held-to-

maturity are measured at amortized cost using the

effective interest method of amortization. Other

signifi cant accounting implications arising on the

adoption of Section 3855 include the use of the effective

interest method of amortization for any transaction costs

of fees, premiums or discounts earned or incurred for

fi nancial instruments measured at amortized cost.

Section 3865 specifi es criteria under which hedge

accounting can be applied and how hedge accounting

should be executed for permitted hedging strategies.

Hedge accounting is optional. WAA has in place forward

swap derivative contracts in the notional amount of $200

million to fi x the benchmark interest rate on planned

bond issues. As of August 10, 2005 hedge accounting was

applicable for these derivative contracts. The effectiveness

of these derivative contracts is re-evaluated each quarter.

As of January 1, 2007, the effectiveness criteria of Section

3865 will be applied. Any ineffectiveness in the hedge

relationship will be recognized in Revenue over Expenses.

Section 3855 requires certain opening adjustments to the

fi nancial statements effective January 1, 2007. Financial

liabilities must be recognized at their fair value and as a

result the value of debt will be adjusted by unamortized

transaction costs such as bond issue costs. The unamortized

portion of the deferred loss on long-term swap contracts at

December 31, 2006 will be recorded in the January 1, 2007

opening balance of UCNA. Other impacts of section 3855

on the fi nancial statements are not expected to be material

in nature. The overall amounts of these adjustments to the

fi nancial statements are still being quantifi ed.

Risks and Uncertainties

WAA faces certain risks beyond its control which may or

may not have a signifi cant impact on its fi nancial condition.

Airport revenues are largely a function of aircraft size

and frequency which are driven by overall demand.

Over the past few years several signifi cant events have

demonstrated the volatile nature of air travel demand.

In addition, economic conditions, global health epidemics,

political unrest, government regulations, the price

of oil and consequently airfares, all contribute to traffi c

patterns.

The ongoing fi nancial instability of the airline industry

globally has an impact on WAA’s ability to generate

revenue. However, the risk to WAA is mitigated by the

85% origin and destination characteristics of WAA’s

passenger traffi c plus 12% which connect to the north

through Winnipeg.

Another potential impact to the stability of WAA’s

earnings is the trend to use smaller gauge aircraft to

shorter routes. Such changes in the mix of aircraft

impact WAA’s ability to project aircraft landing fees and

to plan for adequate capacity on the airfi eld and in the

terminal. Aeronautical revenue may therefore be lower

than expected if passenger or aircraft activity volumes

are not realized.

Large scale construction projects such as the Airport Site

Redevelopment program are subject to cost escalation

risks. However, as 90% of the total project cost is already

incurred or under contract, limited escalation risk remains.

The availability of adequate insurance coverage is subject

to the conditions of the overall insurance market and

WAA’s claims and performance record. WAA participates

with an insurance buying group that also includes

airports in Halifax, Montreal, Ottawa, Calgary, Edmonton

and Vancouver. This group has been successful in placing

all of its insurance needs. The Government of Canada has

issued an Order in Council to provide indemnity for

“war risk and allied perils” up to April 25, 2007, which is

renewable for further periods of 120 days at the option

of the Minister of Transport, until December 31, 2007.

Financial Outlook for 2007

WAA has expectations of continued consumer demand

for air travel. The forecast for 2007 incorporates an

increase in passenger traffi c of 3.3%. Based on this

expected traffi c increase, coupled with an expected

increase in cargo activity, revenues from aeronautical

fees are planned to increase. Concession and parking

revenues are linked to the increase in passenger traffi c.

The consolidated revenues for 2007 are therefore

planned to be $63 million.

Based on this projected revenue, and continued efforts

to control operating expenses, the planned EBITDA is

$29 million, an increase over 2006 of 8%.

Capital spending on Airport Site Redevelopment program

is estimated to be $179 million with an additional

$6 million on other improvements.

Caution Regarding Forward-Looking Statements

This Management’s Discussion and Analysis (“MD&A”)

contains certain statements about WAA and its future

expectations. By their nature, forward-looking statements

require WAA to make assumptions and are subject to

inherent risks and uncertainties. There is signifi cant risk

that predictions, forecasts, conclusions and projections

will not prove to be accurate, that WAA’s assumptions

may be not correct and that actual results may differ

materially from such predictions, forecasts, conclusions

and projections. WAA cautions readers of this MD&A

not to place undue reliance on the forward-looking

statements as a number of factors could cause actual

results, conditions, actions or events to differ materially

from the targets, expectations, estimates or intentions

expressed in the forward-looking statements.

Words such as “believe”, “expect”, “plan”, “intend”,

“estimate”, “anticipate” and similar expressions,

as well as future or conditional verbs such as

“will”, “should”, “would” and “could” often identify

forward-looking statements. Specifi c forward-looking

statements in this MD&A include, among others,

statements regard: future demand for air travel, budgets

and expenditures relating to capital programs; insurance;

liquidity; and annual debt requirements.

These forward-looking statements are based on a variety

of factors and assumptions including but, not limited

to: long-term growth in population; employment and

personal income as the basis for increased aviation

demand; the Canadian and U.S. economies growth

expectation in the near term; the growth and sustain-

ability of low fare and other air carriers contribution

to aviation demand; continued transborder and

international travel growth; the cost of enhancing

aviation security will not overly burden air carriers or

WAA; the commercial aviation industry will not be

directly affected by terrorism; and no signifi cant event

will occur which impacts the ordinary course of

business such as a natural disaster or other calamity.

These assumptions are based on information currently

available to WAA, including information obtained by

WAA from third party experts and analysts.

Factors that could cause actual results or outcomes

to differ materially from the results expressed or

implied by forward-looking statements include, among

other things; levels of aviation activity; air carrier

instability; aviation liability insurance; construction

risk; geographical unrest; terrorist attacks; war; health

epidemics; labour disruptions; capital market and

economic conditions; changes in laws; adverse regulatory

developments or proceedings; lawsuits; and other risks

from time to time.

The forward-looking statements contained in this

MD&A represent WAA’s expectations as of the date of

this report and are subject to change. Except as required

by applicable law, the WAA disclaims any intention or

obligation to update or revise any forward-looking

statements included in this MD&A whether as a result of

new information, future events, or for any other reason.

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Financial and operating highlights

(In thousands) 2002 2003 2004 2005 2006

Revenue $ 42,425 $ 46,083 $ 49,014 $ 56,707 $ 60, 364Operating expenses (other than ground lease) 22,469 24,434 24,451 26,586 27,908Ground lease 3,625 3,755 2,905 3,911 3,941Earnings before interest & depreciation 16, 331 17,894 21,658 26, 210 28,515Capital expenditures 4, 304 16, 371 18,098 32,753 98,854

Total passengers 2,675 2,812 3,031 3, 227 3, 387Itinerant Aircraft movements 155. 3 151. 7 138.9 136.9 144. 6Major Revenue movements1 - - 37. 7 42. 0 42. 7Cargo Handled (tonnes) 100.8 113. 5 141. 5 149. 5 154. 71 Major Revenue movements were not tracked prior to 2004.

Summary of Five Year Forecast

(In thousands) 2007 2008 2009 2010 2011

Revenue $ 62,853 $ 69,438 $ 73,175 $ 77,000 $ 79, 309

Lease rent 3,997 4,088 4, 264 4,960 5,145

Other operating expenses 29,832 30,457 31,189 33, 237 34,060

Revenue over expenses before undernoted 29,024 34,893 37,722 38,803 40,105

Amortization 7,500 7,846 8,554 19,528 19,538

Interest 1 ,589 128 - 29, 327 28,531

Revenue over expenses 19,936 26,919 29,168 (10,052) ( 7,964)

A summary of Winnipeg Airport Authority’s Business Plan can be found at www.waa.ca

Auditors’ ReportTo the Directors of Winnipeg Airports Authority Inc.

We have audited the consolidated balance sheet of Winnipeg Airports Authority Inc. as at December 31,

2006 and the consolidated statements of operations and net assets and cash fl ows for the year

then ended. These fi nancial statements are the responsibility of the Authority’s management. Our

responsibility is to express an opinion on these fi nancial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those

standards require that we plan and perform an audit to obtain reasonable assurance whether the

fi nancial statements are free of material misstatement. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes

assessing the accounting principles used and signifi cant estimates made by management, as well as

evaluating the overall fi nancial statement presentation.

In our opinion, these consolidated fi nancial statements present fairly, in all material respects, the

fi nancial position of the Authority as at December 31, 2006 and the results of its operations and its

cash fl ows for the year then ended in accordance with Canadian generally accepted accounting

principles. In accordance with the Canada Corporations Act, we report that, in our opinion, these

principles have been applied, after giving retroactive effect to the correction in accounting for certain

post-employment benefi ts as explained in note 2 to the fi nancial statements, on a basis consistent with

that of the preceding year.

Chartered Accountants

Winnipeg, CanadaFebruary 16, 2007

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Consolidated Balance Sheet(In thousands of dollars) December 31, 2006 December 31, 2005

(Restated)AssetsCurrent assets: Cash $ 5,170 $ 692 Cash held in trust 97 97 Accounts receivable 4,078 5,648 Income taxes recoverable 11 25 Prepaid expenses 400 440 Inventory 394 376 10,150 7, 278

Capital assets (note 3) 183,129 90,434Investments (note 4) 195, 318 263,673Future income taxes 1 – Accrued pension asset (note 11) 5,072 2,704Deferred fi nancing costs (note 7) 10,444 10,734Organizational costs – 294

$ 404,114 $ 375,117

Liabilities and Net AssetsCurrent liabilities: Bank indebtedness (note 6) $ 26 $ 2,815 Accounts payable and accrued liabilities 19,505 7,861 Security deposits 97 97 Deferred revenue 264 209 19,892 10,982

Long-term liabilities: Long-term employee benefi ts 3,156 2,497 Deferred lease payments (note 9) 686 762 Future income taxes – 8 Long-term swap contracts (note 8) 1 ,173 1,173 Revenue bonds series A (note 7) 250,000 250,000 255,015 254,440

Net assets 129, 207 109,695

Commitments (note 10) $ 404,114 $ 375,117

See accompanying notes to consolidated fi nancial statements.

On behalf of the Board:

Director Director

Consolidated Statement of Operations and Net Assets(In thousands of dollars) Year ended Year ended December 31, 2006 December 31, 2005

(Restated)Revenue: Aircraft landing fees $ 11 , 207 $ 10, 378 General terminal fees 5,890 5,677 Concessions 5,464 5,178 Parking 5,806 5,500 Space rental 2,731 2,667 Land rental 1 ,858 1,648 Passenger security fees 4,189 4, 266 Other revenue 2,542 1,758 Airport improvement fees (note 5) 20,677 19,635 60, 364 56,707

Operating expenses: Salaries, wages and benefi ts 14,999 13,548 Materials, supplies and services 11 , 217 10,830 Property taxes 1 ,692 2, 208 Ground lease (note 10) 3,941 3,911 31,849 30,497

Revenue over expenses before the undernoted 28,515 26, 210

Amortization 6,026 3,515Interest expense [note 7(c)] 2,989 1,187Revenue over expenses before income taxes 19,500 21,508

Income taxes of subsidiaries: Current (recovery) (3) 27 Future (recovery) (9) (4) (12) 23

Revenue over expenses 19,512 21,485

Net assets, beginning of year, as previously reported 109,695 89,551Prior period correction (note 2) – (1 , 341)Net assets, beginning of year, as restated 109,695 88, 210

Net assets, end of year $ 129, 207 $ 109,695

13

14


Consolidated Statement of Cash F lows(In thousands of dollars) Year ended Year ended December 31, 2006 December 31, 2005

(Restated)Cash provided by (used in):

Operations: Revenue over expenses $ 19,512 $ 21,485 Adjustments for: Amortization: Capital assets 5,732 3, 221 Organizational costs 294 294 Deferred fi nancing costs 309 77 Future income taxes (9) (4) Loss (gain) on sale of capital assets (31) 19 Long-term swap contracts – 1,173 Increase in long-term employee benefi ts 659 465 Increase (decrease) in deferred lease payments ( 76) 193 Increase in accrued pension asset (2, 368) (1 ,620) Change in non-cash operating working capital 13, 305 (1,821) 37, 327 23,482

Financing: Increase (decrease) in bank indebtedness (2,789) 2,815 Proceeds on revenue bonds series A – 250,000 Deferred fi nancing costs (19) (10,811) Contribution for capital assets 418 3,844 (2, 390) 245,848

Investing: Net decrease (increase) in investments 68, 355 (237,555) Additions to capital assets (98,854) (32,753) Proceeds on disposal of capital assets 40 68 (30,459) (270, 240)

Increase (decrease) in cash 4,478 (910)

Cash, beginning of year 692 1,602

Cash, end of year $ 5,170 $ 692

Supplementary cash fl ow information: Income taxes paid (received) $ (17) $ 56 Interest expense paid 13, 301 220 Interest income received 9, 285 2,477

See accompanying notes to consolidated fi nancial statements.

Notes to Consolidated F inancial StatementsYear ended December 31, 2006

15

General:

Winnipeg Airports Authority Inc. (the Authority)

is incorporated under Part II of the Canada Corporations

Act as a corporation without share capital. The Authority

operates the Winnipeg James Armstrong Richardson

International Airport (the “Airport”) under a long-term

lease with the Government of Canada for the benefi t of

the community. Revenue in excess of expenses is used to

fund airport capital improvements.

The Authority is governed by a fi fteen member Board of

Directors of whom eleven members are nominated by

the City of Winnipeg, the Rural Municipality of Rosser,

Destination Winnipeg, the Winnipeg Chamber of

Commerce, The Assiniboia Chamber of Commerce

and the Federal and Provincial governments, with the

remaining members appointed by the Board from the

community at large.

1. Signifi cant accounting policies:

(a) Presentation and basis of accounting:

The Authority’s fi nancial statements are prepared

on a consolidated basis in accordance with Cana-

dian generally accepted accounting principles and

include the accounts of its subsidiaries, Winnipeg

Airport Services Corporation, Avion Services Corp. and

5388946 Manitoba Ltd. All inter-company balances

and transactions have been eliminated.

(b) Cash held in trust:

Cash held in trust is restricted to be available

to repay security deposits.

(c) Inventory:

Inventory is valued at the lower of cost and

replacement cost.

(d) Investments:

Investments are carried at the lower of cost

and market value. If the market value of the

investments becomes lower than the cost and this

decline is considered to be other than temporary,

the investments are written-down to market value.

(e) Capital assets:

Capital assets are recorded at cost and amortized on

a straight line basis as follows:

Assets Rate

Airfi eld Infrastructure 10 to 40 years

Buildings and other structures 5 to 40 years

Leasehold improvements 3 to 40 years

Vehicles, machinery and equipment 5 to 20 years

Computer equipment 3 years

Construction in progress is transferred to the

appropriate capital asset category when the capital

project is completed and the asset is placed in service.

Interest incurred during the construction of a capital

project is included in the cost of the asset.

Capital assets are reviewed for impairment whenever

events or changes in circumstances indicate that the

carrying amount of an asset may not be recoverable.

No assets have been deemed to be impaired.

(f) Organizational costs:

Organizational costs represent due diligence,

planning and start-up expenditures incurred by

the Authority in preparation for the transfer of the

airport operations to the Authority and have been

amortized on a straight-line basis over ten years.

16


(g) Revenue recognition:

Landing fees, general terminal fees, parking revenue,

passenger security fees and airport improvement

fees are recognized as the airport facilities are

utilized. Concession revenues are recognized on the

accrual basis and calculated using agreed percentages

of reported concessionaire sales, with specifi ed

minimum guarantees where applicable. Rental

revenues are recognized over the term of respective

leases, licenses and permits.

Deferred revenue consists primarily of concession

revenue for minimum guarantees and rental

revenue received in advance.

(h) Employee future benefi ts:

The Authority sponsors a defi ned benefi t pension

plan covering some of its employees. The benefi ts

are based on years of service and the employee’s

compensation during the member’s fi ve best

consecutive years’ earnings.

The Authority accrues its obligation under the

employee defi ned benefi t plan as the employees

render the services necessary to earn the pension

and other employee future benefi ts.

The cost of pensions and other post-employment

benefi ts (which includes separation, health care and

insurance benefi ts) earned by employees is actuarially

determined using the projected benefi t method pro-

rated on service and management’s best estimate

of expected plan investment performance, salary

escalation, retirement ages and expected health care

costs. The cost of providing other post-employment

benefi ts is accrued as long-term employee benefi ts

and charged to expense based on yearly service

entitlements.

For the purpose of calculating expected return on

plan assets, those assets are valued at fair value.

The net actuarial gain or loss in excess of 10 percent

of the greater of, the benefi t obligation and the

market value of plan assets, is amortized over the

average remaining service period of active employees.

The transitional asset arising from adopting the new

accounting standard on the pension plan is being

amortized on a straight-line basis over 13 years.

(i) Deferred fi nancing costs:

Costs relating to the issue of revenue bonds series A,

including underwriting fees, professional fees, and

termination of swap agreements, are deferred and

amortized on a straight line basis over the term of

the debt.

(j) Government assistance:

The Authority periodically applies for fi nancial

assistance under available government incentive

programs. Government assistance relating to capital

expenditures is refl ected as a reduction of the cost

of such assets. Government assistance relating

to operating expenses is recorded as revenue to

offset current year expenses when the related

expenditures are incurred.

(k) Financial instruments:

The Authority uses certain derivative fi nancial

instruments to fi x interest rates on its revenue

bonds. The Authority does not engage in the trading

of derivative fi nancial instruments for profi t.

The Authority applies hedge accounting for these

fi nancial instruments whereby payments and re-

ceipts designated as effective hedges are recognized

as adjustments to interest expense in the same

period that the underlying hedged transactions are

recognized. The Authority formally documents the

relationship between the hedging instrument and

the hedged item, as well as the nature of the specifi c

risk exposure being hedged and the intended term

of the hedging relationship. The effectiveness of the

hedge is assessed at inception and throughout the

term of the hedge. Any hedging transactions that

do not qualify for hedge accounting are marked-to-

market at each period end with any resulting gains

or losses recorded in income.

17

(l) Income taxes:

The Authority is exempt from income taxes

under Government of Canada legislation. The

subsidiaries are taxable corporations and follow the

asset and liability method of accounting for income

taxes. Under this method, future tax assets and

liabilities are recognized based on expected future

tax consequences of differences between the carrying

amount of the balance sheet items and their corre-

sponding tax basis, using the substantively enacted

income tax rates for the years in which the differ-

ences are expected to reverse. The effect on future

tax assets and liabilities of a change in tax rates is

recognized in income in the period that includes

the date of enactment or substantive enactment.

(m) Use of estimates:

The preparation of fi nancial statements requires

management to make estimates and assumptions

that affect the reported amounts of assets and

liabilities, the disclosure of contingent assets and

liabilities at the date of the fi nancial statements and

the reported amounts of revenues and expenses during

the year. Signifi cant areas requiring the use of

management estimates relate to the determination

of net recoverable value of capital assets, useful lives

for amortization, provision for contingencies and

actuarial assumptions. Actual results could differ

from those estimates.

2. Prior period correction:

The Authority has an obligation to provide certain

health and insurance benefi ts to retired employees.

In previous years, the costs for these benefi ts were

recorded as an expense when paid rather than on

an accrual basis. In 2006, the Authority corrected its

basis of accounting to accrue these costs over the

period in which employees render services in return

for these benefi ts. This correction has been applied

retroactively and has resulted in an increase

in salaries and benefi ts expense, a decrease in

excess of revenue over expenses, a decrease in net

assets and a corresponding increase in long-term

employee benefi ts of $389,000 for the year ended

December 31, 2005. The cumulative effect of the

correction on periods prior to 2005 is a decrease in

net assets of $1,341,000.

3. Capital assets: 2006 2005 Accumulated Net book Net book(In thousands of dollars) Cost amortization value value

Airfi eld Infrastructure $ 40,166 $ 5,786 $ 34, 380 $ 32,457Buildings and other structures 43,235 1,078 42,157 5,488Leasehold improvements 20,788 7,909 12,879 14,621Vehicles, machinery and equipment 8,717 3,168 5,549 5,643Computer equipment 2,902 2, 240 662 785Construction in progress 87,502 – 87,502 31,440

$ 203, 310 $ 20,181 $ 183,129 $ 90,434

18


7. Revenue bonds series A:

(a) Bond issue:

(In thousands of dollars) 2006 2005

5.205% revenue bonds series A, due September 28, 2040, interest payable semi annually on March 28 and September 28 of each year until maturity, semi-annual installments of principal payable of $2,595 on each interest payment date commencing September 28, 2010 $ 250,000 $ 250,000

4. Investments


Revenue bond proceeds $ 188,812 $ 236, 241Airport Improvement Fees – 20,926Debt service reserve, held in trust (note 7(a)) 6,506 6,506

$ 195, 318 $ 263,673

Investments are held in short term notes and other debt

instruments with a maturity of less than one year, with

interest rates ranging from 3.9% to 4.4% (2005 - 3.0% to

3.7%) with a total market value of $195 million (2005

- $269 million).

5. Airport improvement fees:

The Authority charges airport improvement fees

(“AIF”) on the basis of $15 per local boarded

passenger through an agreement with the Air

Transport Association of Canada and major air

carriers serving the Airport. AIF revenue is collected

by the airlines for the benefi t of the Authority and

is recorded net of a 6% handling fee. AIF revenues

can only be used to pay for airport infrastructure

development and related fi nancing costs as jointly

agreed with air carriers operating at the airport.

6. Credit facilities:

The Authority has authorized credit facilities with

three Canadian banks. Under these credit facilities

the Authority is provided with a revolving operating

facility in the amount of $20.5 million plus a

revolving term credit facility in the amount of

$200 million for the fi nancing of construction costs

related to the Authority’s capital investment plan.

These facilities are secured under the Master Trust

Indenture [note 7(a)] and will be reduced with any

new debt issuance. They are available by way of

overdraft, prime rate loans, or bankers’ acceptances.

At December 31, 2006, the Authority has not drawn

on any of these facilities.

Interest of $1.0 million has been capitalized with

respect to capital assets in 2006 (2005 - $ nil). In 2006

government assistance for the purchase of equipment

of $0.4 million (2005 - $3.8 million) was recorded as a

reduction of the cost of leasehold improvements related

to security enhancements.

The revenue bonds are direct obligations of the

Authority ranking pari passu with all other indebt-

edness issued under a Master Trust Indenture. All

indebtedness, including indebtedness under bank

credit facilities are secured under the Master Trust

Indenture by assignment of revenue and related

accounts receivable, a security interest in money in

the investment of debt service reserve and certain

accounts of the Authority, and an unregistered

mortgage of the Authority’s leasehold interest in

the Airport.

Pursuant to the terms of the Master Trust

Indenture, the Authority is required to establish and

maintain with a trustee a debt service reserve with

a balance at least equal to 50 percent of annual

debt service costs. At December 31, 2006 the debt

service reserve included $6.5 million in interest

bearing deposits held in trust (note 4). These trust

funds are held for the benefi t of the bond holders

for use and application in accordance with the

terms of the Master Trust Indenture. In addition the

Authority is required to maintain an operating and

maintenance reserve of approximately $5.8 million.

The operating and maintenance reserve may be

satisfi ed by cash, letter of credit or the availability

under a committed credit facility.

(b) The future annual principal payments commencing

in 2010 required to retire the revenue bonds are as

follows:

(In thousands of dollars)

2010 $ 2,595 2011 5, 327

Total thereaft er 242,078

(c) Interest expense (income):


Bond interest $ 13,013 $ 3, 387 Other interest and fi nancing costs 288 277 Interest income (9, 285) (2,477)

4,016 1,187

Less capitalized interest (note 3) 1 ,027 –

$ 2,989 $ 1,187

19

(d) Deferred fi nancing costs:


Deferred fi nancing costs $ 10,830 $ 10,811 Less accumulated amortization 386 77

$ 10,444 $ 10,734

20


8. Long-term swap contracts:

The Authority uses certain derivative fi nancial in-

struments to fi x interest rates on its revenue bonds.

In June and July 2005, the Authority entered into

two sets of derivative contracts to fi x the benchmark

interest rate on planned bond issues. On August 10,

2005, the Authority achieved the appropriate hedge

accounting documentation and effectiveness testing.

(a) Revenue bonds series A

The Authority entered into bond forward

derivative contracts in the notional amount

of $182 million with expiry dates in September

2005 to fi x the effective interest rate at 5.75

percent on the revenue bonds series A issued

on September 28, 2005. The loss incurred on

the settlement of the 2005 contracts is being

deferred and amortized over the life on the

revenue bonds issued.

(b) Future bond issues

The Authority entered into forward swap

derivative contracts in the notional amount of

$200 million, with expiry dates in January 2040,

to fi x the benchmark interest rate on

2009 planned bond issues.

The loss incurred, to the date of application of

hedge accounting on August 10, 2005, on these

contracts was $1,173,378 and has been recorded

as a liability until the planned bonds are issued,

at which time it will be amortized over the life

of those bonds.

9. Deferred lease payments:

In accordance with an amendment to the Ground

Lease Agreement (note 10), the Government of

Canada has deferred lease payments of $762,000.

These deferred lease payments are repayable with-

out interest on a straight line basis over a ten year

period commencing January 1, 2006.

10. Commitments:

(a) Ground Lease Agreement:

Effective December 31, 1996 the Authority

signed the Ground Lease Agreement (the

Agreement) with the Government of Canada

(the Landlord) which provides that the Authority

will lease the Airport facilities for an initial term

of 60 years. A 20 year renewal option may be

exercised. At the end of the renewal term, unless

otherwise extended, the Authority is obligated

to return control of the Airport to the Landlord.

The operating lease for the Airport requires

the Authority to calculate rent payable to the

Landlord utilizing a formula refl ecting annual

airport revenues.

The estimated lease obligations for the next fi ve

years are approximately as follows:

(In thousands of dollars) 2007 $ 3,997 2008 4,088 2009 4,264 2010 4,960 2011 5,145

21

(b) Airport site redevelopment:

At December 31, 2006, the Authority had

outstanding contractual construction

commitments amounting to approximately

$39.8 million (2005 - $53.7 million).

Subsequent to year end the Authority

has entered into additional contractual

construction commitments in the amount

of approximately $310 million.

(c) Letter of credit:

At December 31, 2006, a subsidiary of the

Authority has a letter of credit outstanding

in the amount of $60,400 in connection with

a service agreement.

11. Employee future benefi ts:

(a) Pension plan:

Information for the defi ned benefi t pension plan, based on the latest actuarial reports, measured as of

December 31 is as follows:


Fair value of plan assets $ 28,925 $ 23,526 Accrued benefi t obligation 32,866 26,537 Funded status - plan defi cit (3,941) (3,011)

Unamortized net actuarial loss 8,924 5,786 Unamortized transitional obligation (asset) 89 ( 71)

Accrued pension asset $ 5,072 $ 2,704

The signifi cant weighted average assumptions used are as follows:

2006 2005

Accrued benefi t obligation: Discount rate 5. 25% 5. 25% Long-term average rate of compensation increase 3. 5% 3. 5% Benefi t costs: Discount rate 5. 25% 6. 25% Expected long-term rate of return on plan assets 7. 0% 7. 0% Long-term average rate of compensation increase 3. 5% 4. 5%

22


Other information about the Authority’s defi ned benefi t plan is as follows:


Employer contributions $ 3,456 $ 2,620 Employee contributions 279 221 Benefi ts paid 712 644 Pension expense 1 ,040 1,000

The plan assets consist of the following asset mix: 2006 2005

Money market funds 4% 3% Equity funds 54% 56% Debt and mortgage funds 32% 31% Real estate funds 10% 10%

The effective date of the most recent actuarial valuation for funding purposes was December 31, 2005 and

the next required valuation will be as of December 31, 2006.

(b) Post employment benefi ts: Information for the post employment benefi ts (health care and insurance benefi ts), based on the latest

actuarial reports, measured as of December 31 is as follows:


Accrued benefi t obligation $ 4, 227 $ 3,873 Unamortized net actuarial loss (1 ,427) (1 ,531) Unamortized transition asset (524) (612)

Accrued benefi t liability $ 2, 276 $ 1,730

Other information about the Authority’s post employment benefi ts (health care and insurance benefi ts)

is as follows:


Benefi ts expense $ 570 $ 409 Payments made (24) (20)

23

The signifi cant weighted average assumptions used are as follows:

2006 2005

Accrued benefi t obligation: Discount rate 5. 25% 5. 25% Long-term average rate of benefi t cost increases Initial rate 16. 0% 16. 0% Annual decrease 1. 0% 1. 0% Ultimate trend rate 3. 0% 3. 0% Year of ultimate 2018 2014

Benefi t costs: Discount rate 5. 25% 6. 25%

12. Financial instruments:

Fair value

The fair value of cash, cash held in trust,

accounts receivable, bank indebtedness,

accounts payable and accrued liabilities and

security deposits approximates their carrying value

due to their relatively short term to maturity.

The fair value of the revenue bonds series A is

$253.9 million (2005 - $254.2 million). The fair value

of investments is disclosed in note 4. The fair value

of revenue bond series A and the investments is

determined by reference to external market sources

Credit Risk

The Authority is subject to credit risk through its

accounts receivable and investments. The Authority

performs ongoing credit valuations of these

balances and maintains valuation allowances for

potential credit loss. The investments are limited

to short term debt instruments with high quality

credit ratings in order to minimize credit exposure.

The Authority derives a substantial portion of

its revenues from air carriers through landing

fees and terminal charges and through the

airlines’ collection of airport improvement fees

on its behalf. Passenger activity at the airport is

approximately 85% origin and destination traffi c,

and although there is concentration of service with

three air carriers, the Authority believes that any

change in the airline industry will not have a

signifi cant impact on revenues or operations.

13. Policing contribution agreement:

In 2002, the Authority entered into a policing

contribution agreement with the Canadian Air

Transport Security Authority (CATSA), an agent

of the Government of Canada, for the purposes

of contributions by CATSA to the costs of policing

incurred by the Authority in carrying out its

responsibilities. Contributions are determined

annually by CATSA up to a maximum amount

not to exceed the actual allowable costs incurred

by the Authority in providing these services. This

agreement is to be extended annually as required.

In connection with this agreement, the Authority

has recorded this government assistance of

$999,000 (2005 - $999,000) as a reduction of

the related expenses.

14. Comparative fi gures:

Certain comparative fi gures have been reclassifi ed

to conform with the fi nancial statement presentation

adopted in the current year.

24


2007 Annual General Meeting

Winnipeg Airports Authority’s Annual General Meeting

will be held at 1:30 pm on Wednesday, May 2, 2007 at

The Fairmont Winnipeg, Winnipeg, Manitoba.

We invite the community to attend and meet the

Offi cers and Directors of the company.

Disclosure of Corporate Governance Systems

Governance Principles

The Board recognizes that it has stewardship

responsibility of a valuable community resource.

This has resulted in a governance system that

rests on the following four principles:

1. Accountability

2. Clear delineation of responsibilities between

the Board and Management

3. The full Board, not Board committees, are

involved in decision making

4. Transparency

Board Committees

The Board has organized its affairs around three standing

committees – Governance, Audit and AIRplan. They are

complemented by the use of Task Forces on an as required

basis to deal with particular matters. The full Board

meets on a regular basis (at least six meetings annually).

The mandate of the Governance Committee is to assist

the Board in effectively meeting its responsibilities.

The Audit Committee attends to matters that are

fi nancial and/or risk related. The purpose of the AIRplan

Committee is to provide guidance on the Airport

Infrastructure Redevelopment Plan (AIRplan) on behalf

of the Board. Board members are rotated through the

standing committees and/or may serve on one or more

Task Forces. All Task Forces have a sunset provision.

Public Accountability Principles

Incorporated into the By-laws of Winnipeg Airports

Authority is a set of accountability principles that were

accepted by the Board as part of the airport transfer

conditions. Following is a summary of these principles.

Board Composition and Director Requirements

The Board shall be comprised of 15 members of which

11 shall be nominated by seven different public and

private sector agencies:

City of Winnipeg (3)

The Assiniboia Chamber of Commerce (1)

Province of Manitoba (1)

R.M. of Rosser (1)

Government of Canada (2)

Destination Winnipeg (1)

Winnipeg Chamber of Commerce (2)

A maximum of four members may be nominated by the

Board of Directors.

The Board cannot consist of fewer than seven or more

than 15 members at any time.

The qualifi cation and eligibility requirements of Board

members prescribe that a Director may serve for a

term not exceeding three years and that no more than

three terms (or nine years) may be served. Directors

can be neither elected to nor employed by any level

of government. The Chairperson cannot be an elected

offi cial or government employee at any time during

the two years prior to the appointment as Chairperson.

Winnipeg Airports Authority has met all of the above

principles.

Community Consultative Committee

The Ground Lease requires that Winnipeg Airports

Authority establish a community consultative committee

(CCC) to provide for effective dialogue and dissemination

of information on various matters, including airport

planning, operational aspects of the airport and

municipal concerns. The CCC shall meet not less

than twice each Lease Year, and shall be comprised

of members who are generally representative of the

community, including persons representing the interests

of consumers, the traveling public and organized labour,

aviation industry representatives and appropriate

provincial and municipal government representatives.

Winnipeg Airports Authority has fully met this require-

ment, with the establishment of a Board-appointed CCC

in January 1998, which meets quarterly.

25

Corporate Reporting & Disclosure Requirements

• Winnipeg Airports Authority must disclose any

non-arm’s length transactions.

• Any nominating entity may cause a meeting to be held

on matters of public interest concerning the business

of Winnipeg Airports Authority.

• Directors must make a general report annually to

their respective Nominator and the Board should

report collectively to all Nominators.

• As a general practice, Winnipeg Airports Authority must

optimize the use of Canadian resources and supplies

and employ a competitive public tendering

process for contracts in excess of $75,000 (1996 dollars).

• In the event Winnipeg Airports Authority should

increase airport user charges it shall provide 60 days

advance public notice.

• Full audits in accordance with generally accepted

auditing standards shall be conducted and Transport

Canada has the right at any time to cause a complete

audit to be conducted.

• Winnipeg Airports Authority will publish its Annual Re-

port and shall include specifi c performance comparisons

and disclose the remuneration paid to Board members

and to its senior offi cers. The Annual Report shall be

distributed in advance of the Annual General Meeting

to all Nominators and the Minister of Transportation.

• At least once every fi ve years Winnipeg Airports

Authority shall cause a comprehensive independent

review of Winnipeg Airports Authority’s management

operation and fi nancial performance to be conducted

by a qualifi ed independent person. The report shall

be distributed on a timely basis to the Minister of

Transportation and to each Nominator and shall be

available to the public on request.

• Winnipeg Airports Authority shall provide for public

access: its Airport Master Plan, its fi ve-year business

plan, its past fi ve-year annual fi nancial statements and

business plans, its incorporation documents, and all

signed airport transfer agreements.

Winnipeg Airports Authority has met all of the

applicable principles.

Specifi c TSX Corporate Governance Criteria Disclosure

Winnipeg Airports Authority Governance Systems

are fully aligned with the TSX Corporate Governance

Guidelines. The full Disclosure of Corporate Governance

Systems document is available in hard copy upon

request at the corporate offi ces or on the Winnipeg

Airports Authority Web site at www.waa.ca.

Winnipeg Airport Authority Inc.Board of Directors 2006

Appointed by the City of WinnipegArthur Mauro, Chair

Dr. Glenn Feltham, Dean, I.H. Asper School of Business

Otto Lang, Senior Counsel, Fleischman-Hilard

Appointed by Th e Assiniboia Chamber of CommerceWarren Thompson, President, Prairie Edge Management

Appointed by Destination WinnipegDoug Harvey, Vice Chair, President and GM, Maxim Transportation Services

Appointed by the Government of CanadaGeoffrey Elliott, Vice President, Corporate Affairs, CanWest Global Communications Corp.

André Thibeault, Armand Communications Corp. (term ended December 31, 2006)

Appointed by the Province of ManitobaElaine Cowan, Sales and Leasing Executive, Commercial Real Estate, Coldwell Bankers National Preferred

Appointed by the R.M. of RosserCarl Havixbeck, Farmer

Appointed by the Winnipeg Chamber of CommerceDoneta Brotchie, President, FUNdamentals Creative Ventures

Tom Bryk, FCA, President and CEO, Cambrian Credit Union

Appointed by the Winnipeg Airports Authority BoardJim Carr, President and CEO, Business Council of Manitoba

David Friesen, President and CEO, Friesens Corporation

Garth Smorang, Lawyer, Myers Weinberg

Bill Watchorn, FCA, President and CEO, Ensis Corporation Inc. (term ended September 23, 2006)

26


2006 Board Committees (as of December 31, 2006)

AuditTom Bryk (Chair)

Doneta Brotchie

Glenn Feltham

Garth Smorang

André Thibeault

Warren Thompson

GovernanceGeoffrey Elliott (Chair)

Jim Carr

Elaine Cowan

David Friesen

Warren Thompson

AIRplanDoug Harvey (Chair)

Geoffrey Elliott

David Friesen

Carl Havixbeck

Otto Lang

Lloyd McGinnis (Advisor)

Board of Directors Compensation for 2006

Lawrie Cherniak $ 783

Otto Lang 33,100

Bill Watchorn 14,233

Walter Hill 833

Arthur Mauro 41,533

Doug Harvey 22,767

Jim Carr 16,000

Elaine Cowan 14,900

Carl Havixbeck 17,900

Irene Merie 583

Warren Thompson 18,700

Tom Bryk 21,933

André Thibeault 15,900

Doneta Brotchie 13,500

Garth Smorang 15,317

Glenn Feltham 14,717

Geoffrey Elliott 4,300

Total $ 266,999

Executive Offi cers 2006

Barry Rempel, President and CEO

Catherine Kloepfer, Senior VP Administration and CFO

R. (Bob) Edgar, Senior VP Airport Redevelopment

Michael Rodyniuk, Senior VP Marketing and Operations

Executive Offi cers 2006 – Salaries

The salary range for the President of the Authority is

$180,000 to $200,000.

The salary range for each of the Senior Vice Presidents is

$120,000 to $160,000.

Public Competitive Tendering

Winnipeg Airports Authority Inc., under the terms of

its lease agreement with the Government of Canada,

reports all contracts in excess of $90,000 ($75,000 in

1992 dollars) entered into during the year that were not

awarded on the basis of a public, competitive, tendering

process. In 2006, Winnipeg Airports Authority Inc.

entered into fi ve contracts as described for the reasons

indicated in the following table.

27

Sole Source Contracts over $90,000

Vendor Name Description Value Basis for Selection

Airport Technologies Inc. Re-Life Runway Sweeper $135,000 C

ADT Security RAIC Deployment & Mantrap Implementation $195,000 B

Dillon Consulting Ltd. Update fi nal design services and related work

for Proposed Calm Air Hangar $91,000 A

Manitoba Hydro Relocate Manitoba Hydro electric feeders $111,000 B

Pivotal Research Inc. Passenger Route Tracking Program $95,000 C

Basis for SelectionA – Cost and/or time effectiveness benefi ts resulting from previous company or industry experience

B – Only supplier able to meet specifi c requirements

C – Extension of previously tendered contract or service

Community Consultative Committee and their Affi liations

Joseph D. Barnsley, Acting Chair

Nominated by The Winnipeg Chamber of Commerce

Mr. Dave BoldtNominated by the Government of Canada –

Western Economic Diversifi cation

Ms. Ainley BridgemanNominated by Winnipeg Airports Authority’s

Univeral Design Advisory Committee

Mr. Tim FeduniwNominated by Destination Winnipeg

Ms. Roxanne GeorgisonNominated by the R.M. of Rosser

Mr. Vic GerdenNominated by the Manitoba Aerospace Association

Mr. Daniel HaugheyNominated by Winnipeg Airports Authority’s

Environmental Advisory Committee

Ms. Debbie O’BrayRepresentative from the traveling public

Ms. Judy SaxbyNominated by the Manitoba Aviation Council

Mr. Peter ThomsonRepresentative from the traveling public

Mr. Gordon TuftsNominated by the Province of Manitoba –

Transportation and Government Services

Ms. Jacqueline WasneyNominated by the Consumers Association of Canada

Col. Tom WhitburnRepresentative from 17 Wing

Mr. Kerry Williams

Nominated by the Manitoba Federation of Labour

Corporate Information

Auditors: KPMG LLP

Lead Bank: Canadian Imperial Bank of Commerce

Legal Counsel: Aikins, MacAulay & Thorvaldson and

Duboff Edwards Haight & Schachter

28


Winnipeg James Armstrong Richardson International Airport Services

Passenger Carriers (serving Main Terminal Building)

Aeromexico (operated by Sunwing Vacations)

Air Canada

Air Transat

Bearskin Airlines

Calm Air

Delta Air Lines (operated by Delta Connection

carrier SkyWest Airlines)

First Air

Jazz Airlines

Northwest Airlines

Northwest Airlink (operated by Pinnacle Airlines)

Skyservice Airlines

United Express (operated by Air Wisconsin Airlines

and SkyWest Airlines)

WestJet Airlines

Zoom Airlines

Passenger Carriers (other)

Air Nunavut

Canadian North

Execaire

Fast Air

Keystone Air Service

Kivalliq Air (a division of Keewatin Air)

Missinippi Airways

Nolinor

North American Charters 2000

Northway Aviation

Perimeter Aviation

Thunder Airlines

Voyageur Airways

Wasaya Airways

West Wind Aviation

Air Cargo CarriersCargojet

DHL

FedEx

Kelowna Flightcraft

Morningstar Air Express

Purolator

Transwest Air

UPS

Restaurants/BarsThe Exchange Brew Works & Eatery

Express Deli

Four Points Sheraton Hotel: Restaurant and Local Heroes

Sports Bar

Harvey’s Serving Swiss Chalet Chicken

Second Cup

Tim Hortons

Toast! Café and Bar

Retailers$15 Boutique

Aer Rianta North America (Duty Free)

Bentley

DeLaga

Inter-City Leisure

Relay (Newsstand)/Canadian Scene

Showcase Manitoba

The UPS Store

Travelex Canada

Virgin Books and Music

HotelFour Points Sheraton

Car RentalsAvis Rent A Car

Budget Rent A Car

Dollar Thrifty Car Rental

Enterprise Rent-A-Car

Hertz Rent A Car

National Car Rental

annual report 2006 - winnipeg james armstrong richardson ... · measures used by other companies....

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