the northern rockies regional a irport business plan · 2014-12-22 · 2009 long-term strategic...

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Northern Rockies Regional Airport Business Plan

12 September 2011 Confidential

i

Executive Summary

This executive summary reviews the findings and recommendations of this business plan for the Northern Rockies Regional Airport (NRRA).

Findings Increasing responsibilities have made operations at regional airports more challenging. This section discusses key findings from this report and implications for the airport and the municipality. Note: the numbering has been adjusted to reflect the report sections in which these items are discussed. 2) Situational Analysis

(1) Fort Nelson Area is growing as a result of exploration and development of natural gas and petroleum resources in the Horn River Basin. Growth in this region and this sector is projected to be strong in the province.

(2) The NRRM population is projected to increase over the next five years to 8,000 (including temporary workers). This will require community and private investments.

(3) Rapid airport growth is stressing human resources and physical infrastructure.

3) SWOTCH (Strengths, Weaknesses, Opportunities , Threats and Challenges) Analysis (1) The top challengers raised in the SWOTCH1 analysis are

i. Weakness: political environment - competing for the attention of municipal council, MPs and MLAs

ii. Weakness: land ownership iii. Strength: growth in passenger traffic iv. Opportunity: economic growth v. Strength: ability to attract new business vi. Opportunity: commercial aeronautical revenue opportunities vii. Threats: competition for scarce infrastructure funding (P3).

4) Vision and Governance (1) The airport does not have a vision statement. A draft has been prepared by the staff of the

NRRM but has not yet been adopted:

We are Northeast BC’s Premier Gateway Regional Airport that connects British Columbia and Canada to the resilient people, rich resources and abundant opportunities

within the Northern Rockies Regional Municipality. (2) The NRRM owns and operates the airport. As the NRRA grows, it requires increased

governance attention. It is recommended that an independent organization should be

1 SWOT analyses are a common way of developing an environmental scan for an organization. Challenges are added here because they help transition a SWOT analysis from the environmental scan to a discussion of action items.



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created to govern the airport in the short- to medium-term. The benefits of an independent organization include increased oversight, independent financial and borrowing power, reduced liability, increased economic impact, and reduced time required by municipal council members.

5) Activity Forecast (1) Forecast passenger traffic at the airport is in-line with the medium growth scenario in the

2009 Long-Term Strategic Plan. (a) At this rate, passenger traffic could more than double before 2020; (b) Forecast aircraft movements are expected to grow on average by 5% annually

between 2008 and 2028. As passenger traffic increases at the NRRA, scheduled flights of larger aircraft are anticipated; decreasing the number of aircraft movements in the long-term.

6) Operations and Expenses (1) Over the past five years, operating costs have increased by 35%, rising approximately to

$900,000. This increase can be attributed to increased airport activity, lengthened hours of operations, volatile material cost, and age of airport infrastructure requiring increased maintenance work.

(2) The increasing level of airport activity and regulatory requirements place increasing time demands on airport staff to manage and operate the airport. Changes to the airport organizational structure and additional personnel are therefore required.

7) Revenues (1) At a little over $600,000 in 2010, revenues at the NRRA are low compared to other

regional airports in B.C and elsewhere in Canada. (2) Most airports transferred from Transport Canada in B.C. have modified or increased their

fees since airports transfer. (3) The biggest contributor of revenues at the NRRA is landing fees, followed by general

terminal fees. (4) In the past two decades, most Canadian airports have instituted per passenger fees and/or

airport improvements fees (AIFs) to support capital and/or operational expenses. (5) Other regional B.C. airports and those elsewhere in Canada receive considerably more

than Fort Nelson for similar aircraft and passenger movements. 8) Capital Requirements

(1) The airport requires capital investments of approximately $19 million dollars to airside and groundside airport facilities according to engineering analysis. This analysis is four years old and has not been adjusted for increasing material costs, or increased infrastructure needs with recent growth.



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(2) The cost per passenger at current traffic levels to cover $19 million dollars in capital investment and interest over 20 years would be approximately $30 per 2010 passenger arriving and departing.2

9) Options and Scenario Analysis (1) The NRRA is running at a deficit and the deficit will increase annually with increased air

services to and from Fort Nelson. In the status quo scenario (no significant changes to revenues or expenses) the operational deficit will increase steadily with time with no allowance for capital spending.

(2) Two alternate revenue scenarios are developed and show that significant revenue increases would be required to cover both operational and capital requirements over 20 years.

(3) An alternate source of funding needed capital improvements would be to obtain funding through the federal or provincial governments, or from private corporations.

Recommendations Table ES-1 summarizes the recommendations from each component of the document. Within each of these, recommendations are discussed, followed by timelines, e.g. short, medium or long-term. This is a high level overview of recommendations. Many of these relate to each other and they should be considered as a whole, rather than one by one.

Table ES-1: Summary of Recommendations for the Northern Rockies Regional Airport

Plan Component Recommendations Timeline

Vision and Governance

The airport does not now have a vision statement but it is recommended that the NRRM adopt one to clarify what its intention for the airport is. A proposed statement is:

We are Northeast BC’s Premier Gateway Regional Airport that connects British Columbia and Canada to the resilient people, rich resources and abundant opportunities within the Northern Rockies

Regional Municipality.

2011

In the case of the NRRM, it is recommended that the municipality retain control of the airport in the short-term but consider devolving it to an arm’s length organization quickly as it grows.

Short term

Operations and Expenses

Addition of an Airport General Manager position. 2012

An additional 1.0 FTE to maintain the terminal building and act as 2011

2 The need per passenger declines over time because passengers are forecast to increase.



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Plan Component Recommendations Timeline an additional airport technician.

Contracting of professional services integrated into budget. This would include services such as engineering, legal, marketing, and environmental services.

2012

Lease review and updating. All leases must be reviewed to ensure they are up to date. Provisions related to progressive fee increases and sharing activity numbers with the airport must be incorporated into all future leases.

2012

Revenues It is recommended that the airport conduct a study to examine managing fueling at the airport. Current fuelling practices at the airport have been identified as an environmental risk, and revenue from fuel sales would benefit the airport.

2012

It is recommended that a new fee structure be accepted and come into effect on January 1, 2012.

1 January 2012

Implement a pay parking system. Choosing which system to implement should be one of the initial tasks for the new Airport General Manager.

2012

Actively seek government support for capital investment through PPP and/or Infrastructure programs.

2011 ongoing

Capital Requirements

Seek speedy finalization of airport lands agreement with the province

2011 ongoing

Infrastructure assessment and capital requirements review by an experienced airport civil engineering firm

2012

Begin investment in significant capital projects at airport when new fees are implemented.

2012



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Table of Contents Executive Summary ........................................................................................................................ i

Findings .............................................................................................................................................. i Recommendations ............................................................................................................................ iii

1. Introduction ........................................................................................................................ 1

2. Situation Analysis ............................................................................................................. 3 2.1 Recovery from the Recession ............................................................................................. 3 2.2 Energy Industry Expansion ................................................................................................. 4 2.3 Community Growth ............................................................................................................. 5

3. Airport SWOTCH Analysis ................................................................................................ 6

4. Vision and Governance ..................................................................................................... 8 4.1 Vision and Mission .............................................................................................................. 8 4.2 Governance ......................................................................................................................... 8

5. Activity Forecast .............................................................................................................. 10 5.1 Passengers Scenario ........................................................................................................ 10 5.2 Aircraft Movements ........................................................................................................... 12

6. Operations and Expenses ............................................................................................... 14 6.1 Historical Expenses ........................................................................................................... 14 6.2 Operating Expenses .......................................................................................................... 15 6.3 Staffing .............................................................................................................................. 16

7. Revenues ......................................................................................................................... 20 7.1 Historic Revenues ............................................................................................................. 20 7.2 Comparative Airport Fees ................................................................................................. 22 7.3 Revenue Options .............................................................................................................. 27

8. Capital Requirements ...................................................................................................... 29 8.1 Land Tenure ...................................................................................................................... 29 8.3 Financial Analysis ............................................................................................................. 31

9. Options and Scenario Analysis ...................................................................................... 32 9.1 Situation Overview ............................................................................................................ 32 9.2 Alternative Approaches and Options ................................................................................. 33 9.3 Scenarios Including Capital ............................................................................................... 36 9.4 Comments and Options .................................................................................................... 38

10. Findings ........................................................................................................................... 39

11. Recommendations .......................................................................................................... 42



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Appendix A: SWOTCH Workshop ............................................................................................... 44 Introduction ...................................................................................................................................... 44 Exercice 1: Future Vision ................................................................................................................. 44 Exercise 2: SWOTCH Analysis ...................................................................................................... 45 Challenges Identified ....................................................................................................................... 48

Appendix B: Governance Options Review ................................................................................. 49

Appendix C: Recommended Fee Changes ................................................................................. 52

Appendix D: Fort McMurray Airport Case Study ....................................................................... 54

Appendix E: Funding Sources .................................................................................................... 56 Federal Sources .............................................................................................................................. 56 Provincial Sources ........................................................................................................................... 60

Appendix F: SMS Systems .......................................................................................................... 62 SMS ................................................................................................................................................. 62 SMS in Canada ............................................................................................................................... 62 Impacts on Airports .......................................................................................................................... 63 Observations ................................................................................................................................... 63

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The intent of this report is to provide a business plan that will guide future NRRA operations and development. The report is developed in the following manner:

Section 2, Situation Analysis, reviews the unique socio-economic situation driving activity at the NRRA, including rapid economic and passenger growth;

The Strengths, Weaknesses, Opportunities, Threats and Challenges (SWOTCH) of the airport are reviewed in Section 3;

A proposed vision statement for the site is discussed in Section 4, along with airport governance options;

Section 5 provides forecasts for passengers and aircraft movements; Both Operations and Expenses are discussed in Section 6, followed by revenues in

Section 7; The requirements for infrastructure improvements are reviewed in Section 8; Section 9 reviews options and financial scenarios for the airport; and Finally, Section 10 offers findings followed by recommendations in Section 11.



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2. Situation Analysis

This section examines trends which are significantly impacting the development of the NRRA. These include the recent recession, energy industry trends, and growth in the Northern Rockies region.

2.1 Recovery from the Recession The 2008 recession had a major impact on the B.C. economy. 2009 was the largest single year drop in the value of wealth and consumption generated in the economy. The same is true of employment and wage income. Job losses had the most impact in forestry and resources, manufacturing and processing, construction and the food services industries. According to the recently released BC Budget the provincial economy is forecast to grow by 2% in 2011 and by 2.6% in 2012, this following an estimated increase of 3.1% realized in 2010. The Economic Forecast Council (EFC) estimates that B.C.’s economy increased in 2010 by 3.4% and should show growth of 2.7% and 3% in 2011 and 2012, respectively. The lower forecast rates set by the Province may be attributed to a steady recovery in the private sector and the likelihood of much slower growth characterized by lower consumer spending, weak investment and slow employment growth. There are risks to the potential growth forecasts set by both the Province and the EFC. The forecasts continue to be weighted down by the ongoing uncertainty surrounding global economic activity in which the most significant risks include: Continued weakness in the U.S. economy which may be characterized by weaker consumer

spending, widespread deleveraging resulting in slower investment, slow job market recovery and further fiscal restraint at the state and local level.

The debt crisis experienced in some European countries which continues to threaten the stability of global financial markets.

Slower global growth resulting in lower demands for B.C.’s exports. Increase in the value of the Canadian dollar, contributing to further pressure on Canadian

exports. The price of natural gas has remained at a low level during 2010 relative to recent years despite some fluctuations experienced within the marketplace. The Plant Inlet price averaged $2.90 C/GJ during 2010, a slight decrease from the $3.00 C/GJ observed in 2009. The price of natural gas ended the year at $2.57 C/GJ in December 2010. The outlook remains positive based on the private sector forecasts, where natural gas prices are expected to strengthen. Between fiscal years 2010/11 and 2015/16, prices are projected to rise from $2.71 C/GJ to $5.49 C/GJ which will encourage an increase of exploration within the region.



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2.2 Energy Industry Expansion The Horn River Basin is one of Canada’s top areas for natural gas resources. Studies have indicated that the potential gas in place could be in the vicinity of 700 trillion cubic feet. The Oil and Gas Industry is expected to see an increase in drilling. The Petroleum Services Association of Canada (PSAC) is forecasting a new total of 12,750 wells drilled across Canada for 2011. On a provincial level, the PSAC expects B.C. to have 700 wells drilled in 2011, which represents an increase of seven per cent from the previous year. Although the cost of oil has risen dramatically in the past weeks, the industry still faces weak natural gas prices which can be attributed to oversupply in the market. The increasing supply of natural gas, despite reduced levels of drilling, is a result of shale gas production. There is expected to be a rise, not only in the number of horizontal wells being drilled, but in the length of these wells. The industry is expected to have over 5,000 horizontal wells drilled in 2011, which gives a good indication of the type of capital being spent in the basin. Some key investments as outlined by the Canadian Centre for Energy include: EnCana Corp committed an initial investment of $400M for a gas processing facility with initial

capacity of 400 million cubic feet per day. Spectra Energy announced expansion of its existing facilities, to be completed in 2012. In the spring of 2011 Quicksilver Resources accelerated its plans to expand its facilities near

Fort Nelson. The Provincial Government is investing $187M into regional infrastructure to provide year

round access and increase traffic capacity. TransCanada Corp. has committed to invest $340M to build a pipeline from the Horn River

region to the Alberta system. TransCanada has secured initial shipper commitments for 374 million cubic feet per day. The pipeline is expected to be operational by mid-2012 subject to regulatory approvals.

Kitimat LNG is building a Liquid Natural Gas (LNG) plant to cool and ship natural gas for export to Asia and beyond. Completion date is targeted at 2015.

The natural gas and petroleum industry also impacts employment levels. According to the province of B.C. there are over 110,000 British Columbians that have direct, indirect or induced employment in the natural gas and petroleum industry. This is displayed graphically below.



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2.3 Community Growth The Northern Rockies region population is anticipated to grow in the coming years. The NRRM has projected that the population levels should increase to approximately 8,000 residents in the next 5 years. This does not include temporary workers which are forecast to add an additional 4,000 residents totalling 12,000 by 2016. There are various areas of growth planned within Fort Nelson that include light industrial/commercial, community investment, private investment and airport growth. Light Industrial A new South Industrial Subdivision was created in Fort Nelson that contains 250 acres of property that is available and zoned for light industrial and highway commercial uses. Community Investment The community has recently invested in building a new recreation centre located at the west end of town. In addition to the recreation centre many roads have been upgraded for safety and access purposes along with the upgrading of utility services. Private Investment With the anticipation of increased activities in the Horn River Basin, new retail and hotel expansions, increases in new business license applications and multi-million dollar building permit applications are telling signs that highlight the economic strength within Fort Nelson. Airport Growth The airport is a key economic driver for the NRRM. Airport traffic has been increasing over the years in particular in the charter sector where field workers arrive and depart on a weekly basis (fly in/fly out operations). The airport allows for travelers to access the region but also serves as a facilitation point to mobilize industry workers and supplies to and from the region. The growth is stressing the human and physical infrastructure



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3. Airport SWOTCH Analysis

Working with NRRM staff, a SWOTCH analysis for the airport was developed. A SWOTCH analysis identifies strengths, weaknesses, opportunities, threats and challenges inherent to the airport and the environment within which it operates. Strengths and weaknesses are factors that are internal to the airport and over which airport management exerts some control. Opportunities and threats are factors that are external to the airport’s control and are inherent to the environment within which the airport operates. Challenges are what the airport has to do to address its strengths, weaknesses, opportunities, and threats. During the workshop, a group brainstorming session was held to identify the main strengths, weaknesses, opportunities and threats to the future success of the NRRA. The participants identified these, and then rated them by scoring each item to provide a more precise assessment of the importance of each to the future of the airport. Based on the strengths, weaknesses, opportunities and threats that were given the highest priority by workshop participants, a list of seven main challenges that the NRRA faces were identified. The letter beside each identifies it is a strength (S), weakness (W), opportunity (O), or threat (T). Challenge 1 (S): Determine the most effective way to capitalize on passenger traffic growth. Challenge 2 (S): Determine how to best service new business at the NRRA and the surrounding area. Challenge 3 (W): Having an effective impact with senior government at provincial, federal and municipal levels. High turnover at the Provincial government represents an additional challenge. Challenge 4 (W): Obtaining positive, timely land transfer of airport and surrounding lands. Challenge 5 (O): The NRRA must develop a strategy to determine how to best capitalize on economic growth. Challenge 6 (O): Capitalizing on opportunities to increase commercial and aeronautical revenues to the airport. This involves several components including:

• Developing/strengthening industry relationships • Developing a Business Case for businesses to invest in the NRRA • Marketing these opportunities • Undertaking a review of fee structure at the NRRA

Challenge 7 (T): Competition for scarce infrastructure funding The items with the four highest ranks identified in the SWOTCH workshop are described below. While priority one and two were clear, two items tied for third and three tied for fourth.



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Table 3-1: Key Challenges

# Type Item

1 W Political environment – competing for MPs/MLAs and Council's attention

2 W Ownership of land

3 S Growth in passenger traffic

3 O Economic growth

4 S Ability to attract new business

4 O Commercial aeronautical revenue opportunities including review of fee structure

4 T Competition for scarce infrastructure funding (P3)



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4. Vision and Governance

In the modern context, a critical piece of infrastructure like an airport requires a clear vision and a governance (or oversight) system to ensure that its vision is met. This section discusses those themes.

4.1 Vision and Mission The airport does not have a vision statement now. A proposed one developed by NRRM staff is:

We are Northeast BC’s Premier Gateway Regional Airport that connects British Columbia and Canada to the resilient people, rich resources and abundant opportunities within the

Northern Rockies Regional Municipality. This vision implies the following mission: the airport’s activities will be organized to support the community and the regional economy. All decisions related to the airport can be weighed against this vision, and decisions can also be prioritized.

4.2 Governance The NRRA is a municipally owned and operated airport. Not including large National Airport System (NAS) airports,3 there are numerous governance arrangements in B.C. This sub-section briefly reviews these to lay out options for the municipality. Regional airport governance options in Canada include: Municipally owned and operated Independent Not for Profit (Society) Commission (Appointed) Head Lease to a private operator

Key differences between the organizational choices include objectives, board structure, appointments, financing, and activities. Key reasons that communities have considered or set up arm’s length or independent organizations for the airports include the following: Increased focus and oversight; Independent financial and borrowing power (ability to raise capital for infrastructure projects); Reduced liability; Increased economic impact; and Reduced responsibility for council members.

In the case of the NRRM, it is recommended that the municipality retain control of the airport in the short-term but seriously consider devolving it to an arm’s length organization as it grows over the

3 Vancouver, Victoria, Kelowna and Prince George in B.C.



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next few years. The reason for this is that in the Northern Rockies, the Regional Municipality is the significant governing body overseeing all important operations, and there is a limited pool of leadership volunteers in a relatively small community to take on responsibilities such as governing the airport. However, as the airport grows it will continue to require increased governance attention to the financial and operational issues, as well as growth at the site. It is already an operation with over $1 million per year in cost, and is projected to grow steadily.



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5. Activity Forecast

InterVISTAS developed an aviation forecast for the NRRA at the end of 2009. The analysis used a scenario based approach to project passengers and aircraft movements. Low, medium and high growth forecasts were developed through to 2028. The forecast was developed based on the outlook of the aviation industry, local and regional socio-economic environment and the development of the Horn River Basin. Natural gas related activity in the region has grown. Increased employment of local contractors remains a priority for industry producers, supported by high levels of employment recorded by Energy Services BC’s procurement offices in 2011. Other highlights of activities at the Horn River Basin include: Encana’s development of the Cabin Gas Plant in late 2012; Spectra’s planned Fort Nelson North Plant in mid 2012; and TransCanada’s planned pipeline to serve Encana and Spectra.

The developments of the Horn River Basin will continue to greatly influence air traffic levels at the NRRA. At the time of the last forecast, experts estimated that there are about 250 trillion cubic feet of Natural Gas in northeast BC of which 10-20% would be readily recoverable. Since then, the Horn River Basin has seen its estimated numbers grow from 250 to 500 trillion cubic feet of which 110 cubic feet are recoverable making it the third largest North American natural gas accumulation field (so far). The following section discusses some of the changes that have occurred since the previous InterVISTAS forecast in 2009.

5.1 Passengers Scenario Since the last forecast, scheduled passenger data for 2010 has been recorded by the NRRA. Charter traffic levels for 2010 have been estimated by InterVISTAS because the number of charter passengers was not available. Similar to the estimation of charter traffic in the 2009 forecast, charter traffic for 2010 has been estimated using charter flight operations data provided by the NRRA and applying an assumed load factor. Based on this analysis, it was estimated that total charter traffic in 2010 was approximately 23,374. Therefore, total passengers at the NRRA in 2010 were estimated to be 51,374. This estimate does not include passengers travelling by helicopter and small, local flights. There are approximately 4,000 helicopter operations per year at the airport. Looking at the 2011 scheduled passenger numbers up to August 2011 and extrapolating the actual number to account for the full year shows that approximately 34,000 scheduled passengers can be expected at the end of 2011. This accounts for an increase of scheduled passengers of about 20% compared to 2010 scheduled passengers. These are probably the highest growth rates in B.C. now. The annual average growth rates of combined scheduled and charter traffic from 2010 to 2011 estimated in the 2009 forecast were 9% (medium scenario) and 11% (high scenario) and thus substantially lower.

NRRA passenger traffic is on track to increase 20% in 2011, year over year.



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However, it should be noted that forecast growth rates are based on combined scheduled and charter traffic. The mix of aircraft is also changing. In 2010, 86 B737 flights used the airport. Currently, NRRA serves at least five weekly B737 operations and starting in October 2011 possibly six flights weekly. Assuming 110 seats and a load factor of 75% and further assuming year-around B737 service, in 2012 the airport can expect about 21,000 B737 passengers. In comparison, in 2010 B737 passengers were estimated to be approximately 7,100 passengers. Thus, B737 passengers alone are expected to triple within two years at NRRA. As an update to the last forecast, Figure 5-1 comparing the 2010 data with the forecast completed, passenger traffic at Fort Nelson Airport is absolutely in-line with the medium growth forecast. The 2010 data is only slightly below the medium growth forecast. Much of the future growth, will of course depend on future activities that support the development of the Horn River Basin. As of April 2010, many companies are at different stages of well development in the Horn River Basin; some operators including Imperial Oil/Exxon Mobil Canada, Quicksilver, Pengrowth and ConocoPhillips are in the exploratory stages and plan to drill test wells; while EnCana, Apache, Nexen, Devon, EOG and Stone Mountain are planning multi-well drilling programs. The progress of these activities, will ultimately determine the level of activity the NRRA will experience over the next few years; resulting in increased employment opportunities and enhanced municipal and provincial revenues. Increased employment is still expected to drive increased demand for air travel to and from Fort Nelson Airport.

NRRA B737 passengers are expected to triple within two years.



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Figure 5-1: Forecast Total E/D Passengers at the NRRA, 2008-2028

Source: InterVISTAS Forecast, 2009 and actuals based on NRRA data

5.2 Aircraft Movements Since the last forecast, aircraft movements in the medium growth scenario were forecast to grow on average by 5% annually between 2008 and 2028; reaching 47,100 movements by 2028. Figure 5-2 below represents forecast of total aircraft movements and actual aircraft movements recorded for 2010 at the NRRA. The dip in aircraft movements can be explained by the significant increase in the average aircraft size over the last two years. As passenger traffic grows, it is anticipated that larger aircraft will be used increasing terminal and apron congestion. In 2008, the NRRA received one B737 scheduled flight, while 86 B737 scheduled flights were recorded in 2010. This increase in the frequency of larger air carriers deployed at the NRRA correlates with the slight dip in aircraft movements illustrated below, and the steady rise in passenger traffic shown in Figure 5-1 above.

43.551.4

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Figure 5-2: Forecast Total Movements at the NRRA, 2008-2028 and Actuals, 2009-2010

Source: InterVISTAS Forecast, 2009 and actuals based on Statistics Canada Aircraft Movement Statistics TP577

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6. Operations and Expenses

Section Six to the end of the report discusses the operations of the airport, and makes recommendations on expenses, revenues, capital and related issues.

6.1 Historical Expenses Total expenses at the NRRA are categorized as operating, fiscal and maintenance & capital expenses. Figure 6-1 shows that overall expenses over the last three years were mainly operating expenses which accounted for 69% of total expenses in 2010. This shows how the expenses are represented in municipal reports. Total expenses decreased over the last five years from $2.1 million in 2006 to $1.3 million in 2010. Higher than average capital costs in 2006 relate to terminal expansion. Operating, fiscal and maintenance & capital expenses are discussed in further detail in the following sub-sections. Note that capital spending is discussed further in Section 7.

Figure 6-1: Historical Total Expenses at the NRRA, 2005-2010

Source: NRRA data

$133 $137

$1,032

$295 $152 $150

$762

$1,315

$279

$257 $382

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$ 1,384 $ 1,369$ 1,302



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6.2 Operating Expenses Not including maintenance/small capital projects, operating expenses at the NRRA are almost $900,000 per year, and have been increasing steadily in recent years from approximately $650,000 annually in 2005 to almost $900,000 in 2010, a 35% increase in five years. Reasons for the increased expenses include growing traffic numbers, longer hours of operation, and increased work required to maintain aging infrastructure. As can be seen in Figure 6-2 staffing expenses contribute almost half of total operating expenses, accounting for 49% in 2010 followed by utilities which accounted for approximately 12% in 2010. Main operating expenses at the NRRA consist of: • Staff accounting for 49% of total operational expenses. (For the sake of this analysis, it has

been assumed that all ATCO Frontec management contract costs go towards staffing); • Utilities such as BC Hydro and BC Gas (12%); • Materials and supplies such as electrical, plumbing, shop supplies etc. (8%); • Fuel, oil and lubricants; expenses are directly related to weather conditions, fuel cost, and cost

of operations and increases with traffic (6%); • Runway friction material which increased significantly in 2010 since price for chemicals

increased (5%); • Mobile and fixed equipment (5%); • Insurance cost such as insurance for vehicles (currently the NRRA operates between 12-15

vehicles) and property as well as aviation insurance (5%); • Janitorial; includes labor costs for janitorial services but also shoveling snow etc. (5%); • Deicing which only includes aircraft deicing and specifically contract labour for deicing (3%).

Issues which have led to increased operational costs in recent years include increased activity at the airport; lengthened hours of operations to support the increased activity; fluctuations in the cost of materials; and the need for significant levels of maintenance on the site because of aging infrastructure. It should also be noted that because of higher shipping costs and the area’s remoteness, the NRRA has to pay higher prices than other comparable airports further south for many items.



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Figure 6-2: Historical Operating Expenses at the NRRA, 2005-2010

Source: NRRA data

6.3 Staffing Figure 6-3 highlights the current airport organization chart. Airport operations and staff at the airport are provided via contract by ATCO Frontec. The airport has one Airport Manager (1FTE), two Airport Technicians (2FTEs), seasonal employees and one administration staff member, for a total of approximately 4.7 FTEs. The Airport Manager is responsible for managing all day to day operations at the site. The Operations Manager also has to deal with items pertaining to environmental issues, SMS (Safety Management System) and liaising with Government and private organizations such as Nav Canada, Transport Canada and Local, Provincial and Federal Government. The airport manager also repairs vehicles and airport infrastructure, drives snow clearing equipment and other vehicles, and is the contact for air carriers. The airport manager reports to the municipal CAO.

$304 $313 $365

$407 $419 $435

$99 $100

$84

$117 $104 $103

$59 $55 $55

$58 $67 $73

$43 $44 $37

$60 $47 $52

$24 $22 $21

$25 $23 $49

$44 $39 $43

$38 $45

$45

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2005 2006 2007 2008 2009 2010

Oper

atin

g Ex

pens

es ($

Tho

usan

ds)

Operating Maintenance OtherM&S: Deicing JanitorialInsurance M&S: Mobile & Fixed EquipmentM&S: Runway Friction Material Fuel, Oil & LubricantsOther Materials&Supply Total UtilitiesStaff

$ 662

$ 725

$ 667

$ 832 $ 835

$ 895



17

Figure 6-3: Current Organization Chart for the NRRM Airport

For the sake of comparison Figure 6-4 shows the relationship of annual passengers to Full-Time Equivalent (FTE’s) at select regional and international airports in Canada. While Yellowknife has the lowest ratio, both the Northwest Regional and Whitehorse International Airports have similar ratios to the NRRM Airport.

Figure 6-4: Annual Passengers Per Full-Time Equivalent Staff at Various Canadian Airports

Airport Total FTEs Annual Passengers per FTE Yellowknife Airport 60 5,072 Fort McMurray Airport 50 14,293 Comox Valley Airport 21 13,808 Erik Nielsen Whitehorse International Airport 20 11,435 Kamloops Airport 7 30,481 Northwest Regional Airport (Terrace/Kitimat) 11 11,161 Canadian Rockies International Airport (Cranbrook) 7 15,966 Northern Rockies Regional Airport 4.65 11,048 Average 14,654

Source: Statistics Canada and Individual Airport Statistics

As a result of traffic growth at the airport in recent years, infrastructure problems requiring ongoing attention, and increased regulatory requirements (such as SMS), the current airport manager already has a higher than desirable level of responsibility, tasks and work. (This analysis has not reviewed whether some of these existing skills could be “pushed down” to other workers.) As airport traffic increases, and given the need for infrastructure improvements and related projects, the airport organizational structure will require change and additional personnel are required. The addition of an Airport Manager to whom an Airport Operations Manager would report would create a position responsible for management of the site. The current managerial role is taken up largely with day-to-day



18

management of the site rather than medium- and long-term management of key issues such as planning for capital improvements and obtaining funding for them. The Airport Manager will be able to strictly focus on management and growth at the airport. Items that require increased attention that this role could oversee include air carrier relations, lease management, infrastructure project planning, interactions with regulators, apron management, and environmental review. The increased staff would also ensure that safety and security matters could receive a high level of ongoing care and attention. As well, an additional FTE to maintain the terminal building and act as an additional airport technician should be considered. The janitorial contract is now approaching the level where the airport should consider replacing this contract with a multi-use employee. Adding two FTE’s would bring the NRRM Airport more in line with airports such as the Northwest and Yellowknife Airports at approximately 7,725 annual passengers per FTE. Figure 6-5 highlights the proposed changes to the airport organization chart which includes the addition of an Airport Manager and Terminal Technician as shown by the dashed boxes.

Figure 6-5: Proposed Organization Chart for NRRM Airport

Another alternative would be to increase contracting for professional services such as marketing and environmental review. Given the need for increased staffing at the airport and for specialized expertise, some combination of increased contracting and additional staff may be required.



19

6.3.1 Maintenance & Capital Expenses Maintenance and capital expenses fluctuated over the last five years as demonstrated in Figure 6-6, while total capital expenses were high in 2006 ($1.2 million) as a result of airport terminal building improvements. In 2010 capital expenses dropped to $13,000. Maintenance expenses, instead, increased over the last two years. In 2010, water system upgrades took place while in 2009 the garage roof needed maintenance, both accounting for a great part of total maintenance expenses. These are interim measures, and the need for major infrastructure investment remains to be met.

Figure 6-6: Historical Maintenance & Capital Expenses at the NRRA, 2005-2010

Source: NRRA data

$412

$104 $33 $19

$366

$244

$350

$1,211

$246 $238

$16

$13

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2005 2006 2007 2008 2009 2010

Capi

tal &

Main

tena

nce E

xpen

ses (

$ Tho

usan

ds)

Total Capital Expenses Total Maintenance Expenses

$ 762

$ 279

$ 1,315

$ 257

$ 382

$ 257



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7. Revenues

7.1 Historic Revenues Revenues at the NRRA consist of both operating revenues, raised at the site, fiscal and transfer revenues, transferred from the municipality or another level of government. Historically, operating revenues have been fluctuating over the last six years reaching a total of $603,000 in 2010 (an increase of 19% compared to the previous year 2009) as can be seen in Figure 7-1. The lowest operating revenues over the last six years occurred in 2008, $423,000. For an airport of Ft. Nelson’s scale, these are low revenues. It should be noted that most other regional airports in B.C. have modified and increased their fees since airport transfer.

Figure 7-1: Historical Operating Revenues at the NRRA, 2005-2010

Source: NRRA data

Landing fees contributed the most to total operating revenues at the NRRA, 41% in 2010. In 2005, landing fees accounted for 33% of total operating revenues. The second largest contributor to revenues is general terminal fees (18%), followed by land rentals/leases (12%). (These haven’t change since 2002). Other categories contributing to operating revenues at the NRRA in 2010 included: • Rental car concession (7%) (by comparison Fort McMurray rental car revenues account for

11% of total revenue even with much higher aviation fees);

$175 $181 $153 $152

$179

$246

$57 $65

$57 $48

$68

$107

$66 $57 $94

$67

$62

$71

$26 $31 $22

$30

$44

$41

$42 $34 $57

$36

$42

$35

$3

$12

$19

$30

$28 $20 $22

$30

$35

$22

$133

$54 $61

$48

$61

$51

$-

$100

$200

$300

$400

$500

$600

$700

2005 2006 2007 2008 2009 2010

Oper

atin

g Re

venu

es ($

Tho

usan

ds)

Other Power DeicingBuilding/Warehouse Rentals & Leases Car Rentals Land Rentals & LeasesGeneral Terminal Fees Landing Fees

$ 528

$ 441$ 471

$ 423

$ 509

$ 603



21

• Power, paid by tenants (4%); • Building and warehouse rentals/leases (6%); • De-icing; revenues from charged out labor and truck equipment (5%); and • Other (8%), which includes rental offices (office rents refer to rents paid by the air carriers for

office and other space at the terminal, advertisement (in terminal building etc.), car parking (for electrical stall reservations etc.), aviation gasoline piston, vending machines, taxi licenses, and misc.

In 2005, operating revenues and expenses were relatively similar. Since then operating expenses have grown faster than revenue because expenses have increased with traffic, but the revenue structure does not allow for revenue to match traffic growth because it is primarily tied to aircraft operations rather than passengers. In 2005, the operating deficit was approximately $35, 000, but in 2010 it was $300,000. Fiscal and transfer revenues have been important to the airport, but are primarily transfers from senior government or the municipality to the airport to cover capital projects. Whereas in 2006, total fiscal and transfer revenues reached $1.1 million and consisted of interest income, federal and provincial conditional transfers and transfers from own airport reserves. The history of these transfers since 2005 is shown in Figure 7-2.

Figure 7-2: Historical Fiscal and Transfer Revenues at the NRRA, 2005-2010

Source: NRRA data

The NRRA fee structure does not grow revenues as quickly as traffic is growing.

$30 $57 $39 $94

$702

$195

$8

$160

$327

$36

$473

$513

$150 $149

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

2005 2006 2007 2008 2009 2010

Fisc

al &

Tran

sfer

Rev

enue

s ($ T

hous

ands

)

Transfer from own Reserves Prov Govt Conditional TransfersFederal Govt Conditional Transfers Interest Income

$ 1,205

$ 83

$ 1,092

$ 254

$ 150 $ 149



22

7.2 Comparative Airport Fees At the time when ownership of airports was transferred from the federal government to individual municipalities, the fee structures implemented at each site were similar. Over time each airport transferred under the National Airports Policy revised and changed their airport fees structure to meet their operational, maintenance and development needs. For example, most airports in B.C. and Canada implemented per passenger fees or Airport Improvement Fees (AIFs). AIFs are collected per passengers to pay specifically for airport (capital) improvements. These fees are typically charged directly to air carriers, are included in the ticket price, and are “invisible” to passengers. Figure 7-5 (below) shows a list of AIFs collected at select airports in Canada as well as two examples of AIFs implemented to support development at Fort McMurray and Prince George Airports. The major air carriers have a process to develop, approve and charge AIFs.

Figure 7-5: Airport Improvement Fee Examples Airport AIF Bathurst, NB (ZBF) $40 Fort McMurray (YMM) $30 Mont Tremblant. (YTM) $20 Prince George (YXS) $18 Smithers (YYD) $15 Fort St. John (YXJ) $12 Nanaimo (YCD) $10 Comox (YQQ) $5

Source: http:// www.aircanada.com/shared/en/common/flights/pop_surcharge.html

7.2.1 Comparator: Fort McMurray Airport AIFs are levied for each departing passenger using the terminal building at Fort McMurray airport; and these AIFs make up the largest component of the airport’s source of revenue (37%). For 2010, the total amount of AIFs collected for Fort McMurray amount to $6.2 million. Other fees collected at the airport include Airside revenue from airlines (30%), Parking (13%), Car Rental Agencies (11%), Land Leases (3%), Building Lease (3%) and Other (3%) fees. Fort McMurray Airport utilizes AIFs to fund the development of their new airport terminal building and interest. Effective July 2011, YMM has increased its AIF for departing passengers from $20 to $30 to help fund capital improvements and the rehabilitation of its infrastructure.

An AIF is levied on each passenger departing Fort McMurray Airport, and these fees are the largest source of airport revenue.



23

Figure 7-6 compares the sources of revenue at Fort McMurray Airport with those at NRRA. The NRRA has no comparable fee. Airside fees such as landing fees account for 30% of revenue at Fort McMurray, but almost 60% of fees at the NRRA. Parking is significant at Fort McMurray, but not at Fort Nelson. Car rental related revenue is 11% of Fort McMurrary revenue, and 7% at Fort Nelson. A significant amount of revenue at NRRA (34%) comes from leases and a variety of fees, such as those for power and deicing. The revenue structure at Fort McMurrary is more typical of regional airports in Canada.

Figure 7-6: Fort McMurray versus NRRA Revenue Shares Compared

Source: Ft. McMurray Airport Authority and the NRRM.

AIF, 37%

Airside Revenue,

30%

Parking, 13%

Car Rental, 11%

Leases and Other, 9%

Fort McMurray Airport

Airside Revenue,

59%

Car Rental, 7%

Leases and Other, 34%

NRRA



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7.2.2 Comparator: Prince George Airport Similar to Fort McMurray, an AIF is collected at Prince George Airport to fund capital programs. The air carriers charge approximately 7% of the fee value as a handling fee. For 2010, the Prince George Airport received approximately $3.1 million in AIFs and this made up the largest component of its revenue (39%). Other fees collected at the airport included Landing Fees (21%of revenue), Parking (14%), General Terminal Charges (13%), Rentals/Leases (4%), Concession (3%), and Other (4%).

7.2.3 Regional Airport Comparisons To provide background to fees at B.C. regional airports and Fort McMurray, the following tables explain fees at different airports. The comparative fees in Figure 7-7 (below) are for the NRRA, Fort McMurray, Fort. St. John, Smithers, and Terrace-Kitimat (Northwest Regional). All five airports have continued with a modified version of the fee structure of Transport Canada, including landing fees, and aircraft parking. The significant difference between the five airports is that all have a per passenger fee except for the NRRA. These fees provide airports with a significant revenue stream.



25

Figure 7-7: Fees at Select Airports

NRRA Fort McMurray Fort. St.

John Smithers Terrace-Kitimat

Minimum Charge for Jet/Turbo Prop

(Domestic) $16.00 $25.00 $16.96 $16.81 $11.50

General Terminal Charges (Seats) 0-9 $16 $14.69 $3.20 $14.91 $12

10-15 $28 $29.34 $3.20 $29.82 $23.99 16-25 $40 $45.20 $3.20 $45.91 $36.95 26-45 $75 $79.23 $3.20 $80.5 $64.78 46-60 $125 $113.15 $3.20 $114.95 $95.52 61-89 $190 $188.40 $3.20 $184.02 $148.12

90-125 $275 $249.21 $3.20 $253.15 203.76 126-150 $249.49 $3.20 $299.16 $240.80

Aircraft Weight Charges (/1000kg) <21,000 kg. $5 $4.63 /

0 to 10,000 kg $4.83 /

0 to 9999 kg $4.80 $5.25

$5.46 / 10,000 to 18,999 kg

21,000 kg. to 45,000 kg. $6.50

$5.85 / 10,001 to 45,000

kg

$6.92 / 19,000 to 44,999 kg

$6.04 $6.61

>45,000 kg $8 $6.93 /

45,001 to 79,000 kg

$7.54 $7.27 $7.87

80,000 to 125,000 $7.20 / 80,000 to

125,000 kg

Per Passenger Fee $0 AIF $30 (D) $12 (D) AIF $15

(E&D) $11 (E&D)

Source: Transport Canada, Pacific Region, and Fort McMurray Airport Authority Notes: Fort. St. John charges a general terminal charge per passenger fee for enplaning and deplaning passenger. Most airports charge a flat fee based on seats on the aircraft. Fort .McMurray and Ft St. John charges aircraft weight charges differently than the other three sites. Per passenger fees are generally charged on departing passengers only. Smithers and Terrace-Kitimat charge them on enplaning and deplaning passengers. E = passengers enplaning, or getting on an aircraft. D = passengers deplaning or departing the aircraft.



26

To show how the charges are applied at different airports, the charges at different sites have been applied to specific aircraft in scenarios below. All three scenarios show fees for a specific airport assuming that the aircraft arrives and departs with the same number of passengers. This is done because some airports charge fees for both arriving and departing passengers. Figure 7-8 below shows the comparative fees for a Beech 1900 with 15 passengers arriving and departing at each of the airports. The final row shows how much greater the fees at each site are comparing the NRRA to the other airports. The differences in total fees are significant and competitor airports all receive more fees per comparable flight.

Figure 7-8: Fees per Beech 1900 with 15 Passengers, Arriving and Departing NRRA Fort

McMurray Fort. St.

John Smithers Terrace-Kitimat

General Terminal Charges (Seats) $28 $45 $96* $30 $24

Aircraft Weight Charges (fee/ 1,000kg * weight) $37 $34 $35 $35 $38

Per Passenger Fee $0 $450 $180 $450 $330** TOTAL $65 $529 $311 $515 $392

% of Fort Nelson 820% 483% 798% 608%

Notes: Estimated weight of Beech 1900 is 7,300kg with 19 seats. *Fort. St. John charges a General Terminal Charge per passenger enplaning and deplaning. ** Smithers and Terrace-Kitimat charge a per passenger fee for each passenger enplaning and deplaning

Figure 7-9 shows the comparative fees charged for a Dash 8-100 with 32 passengers. Again the differences are significant.

Figure 7-9: Fees per Dash 8-100 Departing with 32 Passengers

NRRA Fort McMurray

Fort St. John Smithers Terrace-

Kitimat General Terminal Charges (Seats) $75 $79 $205* $81 $65

Aircraft Weight Charges $107 $76 $90 $99 $109

Per Passenger Fee $0 $960 $384 $960** $704**

TOTAL $182 $1,115 $703 $1,140 $878 % of Fort Nelson 1729% 1090% 1767% 1361%

Notes: Estimated weight of Dash 8 – 100 is 16,465kg with 37 seats. *Ft. St. John charges a general terminal charge per passengers enplaning and deplaning. ** Smithers and Terrace-Kitimat charge a per passenger fee enplaning and deplaning.



27

The key difference is the per passenger fees. Figure 7-10 shows the comparative fees charged for a Boeing 737-200 with 84 passengers. Again the differences are significant. The scale of differences are less for a B737-200 than for a Dash 8-100, but are still extremely large measured in dollars and cents.

Figure 7-10: Fees per Boeing 737-200 Departing with 103 Passengers

NRRA Fort McMurray Fort St. John Smithers Terrace-

Kitimat General Terminal Charges (Seats) $275 $249 $330 $253 $241

Aircraft Weight Charges $218 $160 $189 $165 $180

Per Passenger Fee $0 $3,090 $1,236 $1,545 $1,133

TOTAL $493 $3,499 $1,754 $1,963 $1,554 % of Fort Nelson 709% 356% 398% 315%

Notes: Estimated weight of a Boeing 737-200 is 27,290kg with 120 seats. *Ft. St. John charges a general terminal charge per passengers enplaning and deplaning. ** Smithers and Terrace-Kitimat charge a per passenger fee enplaning and deplaning.

7.3 Revenue Options The major potential sources of revenue at a regional airport are typically per passenger fees, per aircraft fees, or fuel flowage fees. When considering revenue options the following options are the most likely to lead to significant additional revenue generation for the NRRA: Passenger Fees: Many airports in Canada and around the world have implemented a per

passenger fee to cover operational and/or capital expenses. Some airports collect these fees at the airport at time of departure; others are collected at the time of ticketing and are reflected in the additional charges portion in the fare. Most airports in Canada now bill air carriers a per passenger fee in some form.

Airport Improvement Fees (AIF): At the NRRA, an AIF could be charged to air carriers per passenger to support the capital improvement of the airport. This fee is the source of revenue for debt servicing. The implementation of an AIF is essentially the same as the per passenger fee. The difference is that revenues from AIFs are used explicitly for airport improvement projects. AIF should also usually be removed after a certain amount of time (when airport infrastructure has been improved sufficiently). AIFs usually involve consultation with air carriers on the capital projects to be completed.

Terminal Fees: These fees are typically charged to an air carrier for the use of the air terminal building with the intention of covering operating costs. Air carriers using the NRRA’s terminal building are charged a certain amount depending on the number of seats on the aircraft.



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Seat Fees: A charge per landed seat (based on maximum seating capacity of aircraft) can be collected separately from terminal fees or landing fees. This is less common but can be used when the terminal building is not heavily used.

Landing Fees: Landing fees are paid by an aircraft to the NRRA for landing. Charges generally depend on the type of the aircraft. These fees are typically based on aircraft weight, with heavier aircraft paying higher fees. This is because heavier aircraft also require more infrastructure and services, and wear infrastructure out more quickly.

Fuel Flowage Fee: Many airports control fuel operations via concession agreements, manage fuel directly, or charge fuel flowage fees at an airport. The types of arrangements vary considerably but can yield significant revenue to airports. .

Parking Fees: An hourly or daily parking fee for vehicles could be implemented at the NRRA to generate additional revenues.

Implementation. Most airports charge fees to air carriers on a monthly basis. To do this requires an accurate knowledge of activity at the airport such as flights and passengers. Most airports require this type of information from air carriers within their lease documents, and make providing this type of information a condition of airport use agreements or air terminal leases.



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8. Capital Requirements

The airport has some pressing capital issues related to land tenure and capital spending requirements.

8.1 Land Tenure According to the Long Term Strategic Plan set for the NRRA, land designated for airport use in the OCP and Municipal Bylaw is approximately 2790 acres in size. 520 acres (19%) is land granted to the Fort Nelson Airport. The remaining designated airport land (2270 acres) remains under a 20 year license of occupation with the crown that was initiated on December 1, 2001. Some land use areas are found to extend outside of the airport boundary. Recommendations have been made to consider extending the airport boundaries to protect long-term airside and commercial lands for development. This will allow for unconstrained long term development at the airport and will reduce future and long term land use conflicts.

8.2 Immediate Capital Needs The Master Plan analysis estimates that the airport’s capital requirements are approximately $19 million dollars. If the airport’s annual revenue is estimated at $500,000 and all revenues could be used for these estimated capital expenses, it would take 38 years to pay for them, longer than the projected life of some of the capital improvements. Financial analysis completed during the Long Term Strategic Plan for the NRRA showed that the airport’s annual revenues were declining and was generating less revenue than comparable airports. The airport’s recommended capital spending outlined from the Master Plan is highlighted in Figure 8-1, on the following page. These numbers are based on analysis previously completed for the Regional Municipality. They are therefore considered low, because they have not been adjusted for inflation or the increasing cost of materials. As well, long-term needs such as further Air Terminal Building expansion are not incorporated into these numbers.

It should be noted that long-term needs such as further Air Terminal Building expansion are not incorporated into these numbers.



30

Figure 8-1: Costing Priorities and Timeline for the Northern Rockies Regional Airport Project Projected Capital Costs Priority Apron II $2,200,000

1

Apron I Expansion $2,000,000

Apron III $3,900,000

Parking Area $200,000

Bell Road $270,000

Taxiway “B” $650,000

Astar Road $250,000

Water Well Relocation $300,000

Piper Road $120,000

Cessna Road $450,000

Priority 1 Sub Total $10,340,000

Water System Improvements $100,000

2

Sanitary System Improvements $200,000

Wildlife Perimeter Fence $800,000

Water, Sewer, Utility Extension $3,000,000

Main Runway 03/21 Lighting $1,500,000

Maintenance Building $760,000

Secondary Runway 08/26 Lighting $2,300,000

Priority 2 Sub Total $8,660,000

GRAND TOTAL $19,000,000



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8.3 Financial Analysis The airport currently has a $19 million capital shortfall which has been outlined above and detailed within the Long Term Strategic Plan. There are a wide variety of capital projects, the largest of which include: $3.9 million for Apron III $3.0 million for sewer, water, utility extensions $2.3 million for Secondary Runway 08/26 lighting $2.2 million for Apron II $2.0 million for Apron I expansion

The Regional Municipality’s engineer considered $10.3 million of these to be category 1 priorities, and $8.7 million to be category 2. This prioritization from the engineering was completed in order to ensure that these capital projects relating to safe airport operations and functionality are undertaken in a timely manner so as to not disrupt short to medium term operations. Figure 8-2 highlights the annual payment and fee scenarios that would be required to cover the $19 million in capital costs over a 20 year period. The table shows how much money would be required if the airport paid for 100%, 66%, or 33% of the capital cost. This is a theoretical discussion, but provides a range of options, and assumes that senior government or other funders may provide a portion of the capital required for infrastructure. The purpose of this figure is to show how much money is required to cover capital requirements at a relatively small site.

Figure 8-2: Annual Payment and Fee Scenarios to Cover Capital Improvements

Annual payment and fee scenarios ($19 million in capital improvements)

Portion paid by airport / municipality 100% 66% 33%

Annual average cost per year over 20 years (principal and interest payments) $1.6 million $1.1 million $550,000

Annual payment per passenger (2010) $31.11 $21.34 $10.67

Annual payment per passenger (2010) to cover capital and operating deficit $41.81 $32.03 $21.36



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9. Options and Scenario Analysis

9.1 Situation Overview Figure 9-1 below removes all revenue transfers from other sources and tax revenue, as well as all capital and maintenance spending to give a better view of only operating revenue and expenses. The table shows that the airport’s revenues have not topped $600,000 in five years, and expenses have not topped $900,000. This results in an ongoing operational deficit of between approximately $200,000 and $400,000 annually.

Figure 9-1: Historic Operating Revenues and Expenses ($ millions)

2006 2007 2008 2009 2010

Operating Revenue 0.4 0.5 0.4 0.5 0.6

Operating Expenses 0.7 0.7 0.8 0.8 0.9

Surplus (Deficit) (0.3) (0.2) (0.4) (0.3) (0.3)

Source: NRRA Note: These numbers have been rounded. Transfers for and to capital spending, and property tax revenues have been removed.

Figure 9-2 provides a view to five-year historic capital spending at Northern Rockies Regional Airport, and considers budgeted capital spending in 2008 and 2009. Between 2005 and 2009, $2.9 million was spent on capital and maintenance. In the last two years, the capital budget increased but was not matched by spending. In 2008 the capital budget was $4.7 million, followed by a capital budget of $8.5 million in 2009. No complex analysis is required to show that with operating revenues of $0.5 million and a $300,000 operating deficit, it would be a stretch to provide funding for the capital requirements.

Figure 9-2: NRRA Historic Capital Spending and Budgets ($ millions)

2006 2007 2008 2009 2010

Actual 1.3 0.3 0.1 0.4 0.0

Budget 4.7 8.5 19

Source: NRRA Note: These numbers have been rounded.

As can be seen in Figure 9-3, if nothing will change and operational expenses and revenues will just grow in line with the traffic levels, the operational gap will continuously grow leading to a year-over-year growing operational deficit. Whereas the operational deficit in 2010 reached close to



33

$300,000, the deficit in 20 years is projected to be about three times as high (or close to $900,000). Thus, there is clearly a need to change gears and implement a new fee structure combined with other alternative revenue generators.

Figure 9-3: Projected Operational Deficit/Surplus for the Base Scenario

Source: InterVISTAS analysis To cover increasing operating costs and capital costs the airport must find new sources of revenue. Reducing operations or closing capital is not considered as an option particularly given increasing demand. The current financial situation is not considered sustainable.

9.2 Alternative Approaches and Options As the current financial situation is not considered sustainable, alternative approaches for expenses and revenues are considered below.

9.2.1 Expenses Modelling Expense projections for a period of 20 years (up to 2032) have been prepared using an Excel spreadsheet based financial model. The projections are based on the medium case traffic scenario and are linked to aircraft movements and passenger growth rate projections. For the expenses, only one set of assumptions has been used, which are:

-$292

-$247

-$292 -$282-$266

-$298-$279

-$309-$288

-$341 -$346

-$401 -$408

-$465 -$480

-$546-$565

-$635-$658

-$733-$761

-$841-$876

-$1,000

-$900

-$800

-$700

-$600

-$500

-$400

-$300

-$200

-$100

$02010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

Oper

atio

nal S

urpl

us/D

efici

t (in

Tho

usan

ds)



34

An annual average growth rate of BC consumer price index (CPI) of 2% based on the average of CPI projections of major Canadian banks.

Salaries increase the same as CPI (2% per year). A general airport manager will be added (1 FTE) beginning of 2012 with a salary of $90,000

plus 30% benefits. A skilled airport technician (1FTE) will be added for every additional 15,000 passengers per

year with a salary of $50,000 plus 30% benefits. An additional $80,000 per year is added in 2013 to cover legal, engineering, environmental,

planning and marketing services. $120,000 is budgeted in 2012 to support the legal work which may be required to update the lease agreements at the airport.

These assumptions have been used in the two scenarios which follow

9.2.2 Revenue Modelling and Scenarios Two detailed revenue scenarios have been prepared, both using the expense assumptions described above. Detailed revenue projections for Scenario A and B for a period of 20 years (up to 2032) have been developed using an Excel based model. The projections are based on the medium case traffic scenario and are linked to aircraft movements and passenger growth rate projections. The revenue projections assume the following: A new fee structure will be implemented in January 2012. Passenger load factor is assumed to be 75%. Any per passenger fee will be charged to departing passengers only. The minimum seat capacity of an aircraft that would be charged for weight charges rather than

the minimum movement fee is 10 seats. This includes helicopters. Minimum fees will apply to all fixed and rotary wing aircraft with less than 10 seats. All fixed wing aircraft are charged the terminal fee because of the apron related congestion

they cause, and because in the medium-term the plan of the airport should be to move all major passenger operations to the terminal.

Aircraft weight fees and/or terminal fees will be charged to scheduled and charter aircraft only (not including helicopters).

Annual fuel consumption is assumed to be about 1,000,000 liters in 2012 which is based on actual annual fuel consumption at Comox Valley Regional Airport and scaled to estimated passenger numbers at the NRRA.

Parking fee, lease and other payment increases in line with CPI or industry practice. The parking fee is assumed to be $7.50 per day and it is assumed that 40 vehicles will be parked at the airport per day in 2012. Parking usage would increase at the same growth rate as passenger numbers.



35

The scenarios are both based on the base case (medium) air traffic scenario. The base scenario was developed under the assumption that nothing will change and expenses and revenues will simply grow with traffic levels.

Scenario A without Capital Costs Scenario A suggests the introduction of a simple passenger fee combined with a fuel surcharge and simple parking fee structure. InterVISTAS made the following assumptions for Scenario A: A per passenger fee will be implemented in 2012 charging $30 for each departing scheduled or

charter passenger in an aircraft with 10 or more seats. For general aviation (GA) traffic, a flat fee of $16 is charged for each landed piston aircraft and

helicopter. (General aviation refers to everything that is not military, scheduled passenger or cargo traffic.)

Aircraft fees and terminal fees have been removed from the fee structure. The NRRA obtains a net two cents per litre fuel flowage charge. The fuel surcharge will be

implemented in 2012 and the estimated fuel consumption reached approximately one million litres (based on annual fuel consumption at Comox Airport and scaled to the NRRA’s estimated passenger traffic level in 2012). Fuel consumption will increase at the growth rate of aircraft movements.

The NRRA would quickly reach an operational surplus with this fee structure. The surplus would steadily increase from year to year without capital expenditures. In 2012, the first year after implementation, the airport may show an operational surplus of more than $800,000.

Scenario B without Capital Costs Scenario B involves a more complex fee structure: a combination of passenger/AIF fees, and landing and terminal fees. InterVISTAS made the following assumptions for Scenario B: A per passenger fee will be implemented in 2012 charging $5 for each departing scheduled or

charter passenger and a $10 AIF. For GA traffic, a flat fee of $16 is charged for each landed aircraft with less than 10 seats. Landing fees remain the same and are not increased. General terminal fees are increased to:

• $60 (10-15 seats) • $100 (16-25 seats) • $180 (26-45 seats) • $240 (46-60 seats) • $300 (> 60 seats)

No fuel flowage fee is included



36

In this scenario the NRRA would also show a rapid shift to an operational surplus in 2012. In 2012, the first year after implementation of the suggested fee structure, an operating surplus of over $700,000 is projected. Capital is not taken into account in this analysis either.

9.3 Scenarios Including Capital While the revenue growth appears rapid and strong, neither scenario described included spending to cover the airport’s capital requirements. To examine these two scenarios further, it is assumed that all of the $19 million in capital requirements are funded in 2012, obviously a theoretical assumption. If $19 million was funded at 6.5% interest, the first year of repayment would start at $2.2 million and decline to $1 million per year in 2032, the last year of payments.

Scenario A with Capital Costs Using Scenario A projections, the operating surplus was applied to the capital requirements. Over a 20-year repayment schedule (not taking into account cash flow issues): Scenario A revenue projects are able to cover all $19 million in capital spending and related

interest, allowing for the airport to make all necessary capital improvements. The annual cumulative surplus/deficit for the airport including capital payments is shown in Figure 9-4. This scenario shows that the initial years would include a significant cumulative deficit, switching to a small surplus in 2029. Given the scale of the projected annual deficit in the initial years, it may not be possible to fund all $19 million in capital spending immediately even with the fees proposed in this scenario. This would mean deferring some of the proposed capital projects to meet cash flow requirements. However, it should also be kept in mind that other as yet unidentified capital projects will be required at the airport beyond the planned $19 million in spending within the period of the projection.



37

Figure 9-4: Scenario A, Annual Cumulative Surplus/Deficit (2012-2032)

Source: InterVISTAS analysis

Scenario B Using Scenario B projections, the operating surplus was applied to the capital requirements. Over a 20-year repayment schedule: Scenario B revenue projects are not able to cover all $19 million in capital spending and

related interest; Throughout the 20-year period the airport does not generate enough revenue to cover capital

spending costs. In other words, while Scenario A revenue increases may appear aggressive, they cover the current capital requirements of the site. The Scenario B approach may also appear aggressive, but would fail to cover all capital requirements and leave a deficit at the end of 20 years, and therefore could not be financed.

2030

2030

-$8,000

-$6,000

-$4,000

-$2,000

$0

$2,000

$4,000

$6,000Cu

mul

ative

Sur

plus

/Def

icit (

in T

hous

ands

)

2020 2030



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Figure-9-5: Scenario B, Annual Cumulative Surplus/Deficit (2012-2032)

Source: InterVISTAS analysis

9.4 Comments and Options Scenario A and B display the difficulty that the NRRA will have covering capital replacement with different fee increase scenarios. The only possible alternative to fairly significant fee increases at the airport would be to obtain capital funds from the federal or provincial governments, or corporate donours. Both the federal and provincial government have provided significant capital grants or public-private partnership monies to deserving infrastructure programs over the last decade. Given the strategic importance of the airport to resource development, seeking capital from senior government in particular is critical.

2030

-$12,000

-$10,000

-$8,000

-$6,000

-$4,000

-$2,000

$0Op

erat

iona

l Sur

plus

/Def

icit (

in T

hous

ands

)

2020 2030



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10. Findings

Increasing responsibilities from Transport Canada has made operations at regional airports under the National Airports Policy more challenging. The NRRA was one of the airports transferred from Transport Canada to a regional organization. This section discusses key findings from this report and implications for the airport and the municipality. Note: the numbering has been adjusted to reflect the report sections in which these items are discussed. Increasing responsibilities have made operations at regional airports more challenging. This section discusses key findings from this report and implications for the airport and the municipality. Note: the numbering has been adjusted to reflect the report sections in which these items are discussed. 2) Situational Analysis

(1) Fort Nelson Area is growing as a result of exploration and development of natural gas and petroleum resources in the Horn River Basin. Growth in this region and this sector is projected to be strong in the province.

(2) The NRRM population is projected to increase over the next five years to 8,000 (including temporary workers). This will require community and private investments.

(3) Rapid airport growth is stressing human resources and physical infrastructure.

3) SWOTCH (Strengths, Weaknesses, Opportunities , Threats and Challenges) Analysis (1) The top challengers raised in the SWOTCH4 analysis are

i. Weakness: political environment - competing for the attention of municipal council, MPs and MLAs

ii. Weakness: land ownership iii. Strength: growth in passenger traffic iv. Opportunity: economic growth v. Strength: ability to attract new business vi. Opportunity: commercial aeronautical revenue opportunities vii. Threats: competition for scarce infrastructure funding (P3).

4) Vision and Governance (1) The airport does not have a vision statement. A draft has been prepared by the staff of the

NRRM but has not yet been adopted:

We are Northeast BC’s Premier Gateway Regional Airport that connects British Columbia and Canada to the resilient people, rich resources and abundant opportunities

within the Northern Rockies Regional Municipality.

4 SWOT analyses are a common way of developing an environmental scan for an organization. Challenges are added here because they help transition a SWOT analysis from the environmental scan to a discussion of action items.



40

(2) The NRRM owns and operates the airport. As the NRRA grows, it requires increased governance attention. It is recommended that an independent organization should be created to govern the airport in the short- to medium-term. The benefits of an independent organization include increased oversight, independent financial and borrowing power, reduced liability, increased economic impact, and reduced time required by municipal council members.

5) Activity Forecast (1) Forecast passenger traffic at the airport is in-line with the medium growth scenario in the

2009 Long-Term Strategic Plan. (a) At this rate, passenger traffic could more than double before 2020; (b) Forecast aircraft movements are expected to grow on average by 5% annually

between 2008 and 2028. As passenger traffic increases at the NRRA, scheduled flights of larger aircraft are anticipated; decreasing the number of aircraft movements in the long-term.

6) Operations and Expenses (1) Over the past five years, operating costs have increased by 35%, rising approximately to

$900,000. This increase can be attributed to increased airport activity, lengthened hours of operations, volatile material cost, and age of airport infrastructure requiring increased maintenance work.

(2) The increasing level of airport activity and regulatory requirements place increasing time demands on airport staff to manage and operate the airport. Changes to the airport organizational structure and additional personnel are therefore required.

7) Revenues (1) At a little over $600,000 in 2010, revenues at the NRRA are low compared to other

regional airports in B.C and elsewhere in Canada. (2) Most airports transferred from Transport Canada in B.C. have modified or increased their

fees since airports transfer. (3) The biggest contributor of revenues at the NRRA is landing fees, followed by general

terminal fees. (4) In the past two decades, most Canadian airports have instituted per passenger fees and/or

airport improvements fees (AIFs) to support capital and/or operational expenses. (5) Other regional B.C. airports and those elsewhere in Canada receive considerably more

than Fort Nelson for similar aircraft and passenger movements. 8) Capital Requirements

(1) The airport requires capital investments of approximately $19 million dollars to airside and groundside airport facilities according to engineering analysis. This analysis is four years old and has not been adjusted for increasing material costs, or increased infrastructure needs with recent growth.



41

(2) The cost per passenger at current traffic levels to cover $19 million dollars in capital investment and interest over 20 years would be approximately $30 per 2010 passenger arriving and departing.5

9) Options and Scenario Analysis (1) The NRRA is running at a deficit and the deficit will increase annually with increased air

services to and from Fort Nelson. In the status quo scenario (no significant changes to revenues or expenses) the operational deficit will increase steadily with time with no allowance for capital spending.

(2) Two alternate revenue scenarios are developed and show that significant revenue increases would be required to cover both operational and capital requirements over 20 years.

(3) An alternate source of funding needed capital improvements would be to obtain funding through the federal or provincial governments, or from private corporations.

5 The need per passenger declines over time because passengers are forecast to increase.



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11. Recommendations

Table 11-1 outlines a summary of recommendations from each component of the document. The table is organized by area of interest, or business plan component. Within each of these, recommendations are discussed, followed by timelines, e.g. short, medium or long-term. This is a high level overview of recommendations. Many of these relate to each other and they should be considered as a whole, rather than one by one.

Table 11-1: Summary of Recommendations for the Northern Rockies Regional Airport


Vision and Governance

The airport does not now have a vision statement but it is recommended that the NRRM adopt one to clarify what its intention for the airport is. A proposed statement is:

We are Northeast BC’s Premier Gateway Regional Airport that connects British Columbia and Canada to the resilient people, rich resources and abundant opportunities within the Northern Rockies

Regional Municipality.

2011

In the case of the NRRM, it is recommended that the municipality retain control of the airport in the short-term but consider devolving it to an arm’s length organization quickly as it grows.

Short term

Operations and Expenses

Addition of an Airport General Manager position. 2012

An additional 1.0 FTE to maintain the terminal building and act as an additional airport technician.

2011

Contracting of professional services integrated into budget. This would include services such as engineering, legal, marketing, and environmental services.

2012

Lease review and updating. All leases must be reviewed to ensure they are up to date. Provisions related to progressive fee increases and sharing activity numbers with the airport must be incorporated into all future leases.

2012

Revenues It is recommended that the airport conduct a study to examine managing fueling at the airport. Current fuelling practices at the airport have been identified as an environmental risk, and revenue from fuel sales would benefit the airport.

2012

It is recommended that a new fee structure be accepted and come into effect on January 1, 2012.

1 January 2012



43


Implement a pay parking system. Choosing which system to implement should be one of the initial tasks for the new Airport General Manager.

2012

Actively seek government support for capital investment through PPP and/or Infrastructure programs.

2011 ongoing

Capital Requirements

Seek speedy finalization of airport lands agreement with the province

2011 ongoing

Infrastructure assessment and capital requirements review by an experienced airport civil engineering firm

2012

Begin investment in significant capital projects at airport when new fees are implemented.

2012



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Appendix A: SWOTCH Workshop

Introduction A Strategic Planning workshop was held with key personnel from the Northern Rockies Regional Municipality (NRRM) to identify the key issues affecting the current state and future direction of the Northern Rockies Regional Airport (YYE). The workshop was held January 26, 2011 and included the following attendees: Jack Stevenson, Director of Planning and Community Development, NRRM Jaylene Arnold, Economic Development & Tourism Officer, NRRM Renee Jamurat, Planner, NRRM Jim Ogilvie, Airport Manager, ATCO Doug Toft, Community Resource and Planning Officer, NRRM Ross Coupe, Management Intern, NRRM Stacey Loe, Deputy Corporate Manager, NRRM

The results of this workshop are presented and summarized in the following sections of this report.

Exercice 1: Future Vision

Future Vision Exercice During the workshop, participants were broken into two groups. Each group was asked to work together to develop a vision of what the airport would look like 10 years from today. This vision involved an airport that had overcome the immediate challenges that the airport faces today. From this exercise, the following airport visions were created.

Future Vision Results The following comments and visions were raised in the meeting: All roads at the airport are paved and wildlife fencing is complete Clean bill of health with respect to environmental remediation Crosswind runway has been rebuilt Aircraft deicing is offered / expanded Forestry has been relocated YYE has become a regional fire service centre for Northeast BC YYE has a tie into town water system Significant improvements have been made to the aprons: infill next to the aprons is completed;

Apron 2 has been opened and Apron 3 has been reconstructed



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A long-term infrastructure maintenance plan is in place with new maintenance facility and equipment and the operational structure has been expanded to support efficient operations

An environmental management plan and safety audit plan are in place CATSA screening service in place Clear land ownership Existing terminal is expanded and a charter terminal has been built YYE now offers a larger terminal with appealing inner terminal area including a café and food

offerings Terminal development includes the addition of sufficient washroom facilities, and meeting

space/facilities for on-site tenant and stakeholder meetings The look and feel of the airport reflects the historical significance of the facility. The terminal

contains an area to display historical items such as WWII photos and other aviation photos and memorabilia

YYE is served by a major airline such as WestJet or Air Canada and offers daily flights to Vancouver and Calgary and seasonal direct flights to tourist destinations such as Las Vegas or Mexico

Commercial uses are located near the airport and airport facilities are easily accessible for services industries both airside (with good apron access) and landside

Parking capacity has been expanded to support airport and service industries, with appropriately priced parking rates such as long term and short term parking rates

Potential for a solar farm development and other innovative land development projects has been assessed

Commercial land development has proceeded, including airside and landside developments for commercial and industrial uses and truck stop/brake check development

Airport has become a significant revenue generator and is financially self-sustaining with a financial plan in place

YYE is seen by the community and industry as a high quality service airport

Exercise 2: SWOTCH Analysis

SWOT Exercise A SWOTCH analysis was utilized to identify strengths, weaknesses, opportunities and threats inherent to the airport and the environment within which it operates. Strengths and weaknesses are factors that are internal to the airport and over which airport management exerts some control. Opportunities and threats are factors that are external to the airport’s control and are inherent to the environment within which the airport operates. During the workshop, a group brainstorming session was held to identify the main strengths, weaknesses, opportunities and threats to the future success of the NRRA. The participants



46

identified these, and then rated them by scoring each item with coloured dots to provide a more precise assessment of the importance of each to the future of the airport. The results are provided in the following four tables which list all items and ranks each of them according to the importance score they received during the exercise.

Strengths

Weaknesses Weaknesses Rank Political environment ‐ MP/MLA and competing for council's attention 26 Ownership of available land 20 Infrastructure deficit/ lack of capital funding (water/sewer) 10 No wildlife fencing 8 Poor airport layout with respect to fixed wing vs. rotary aircraft 6 Lack of unified voice/message 6 Inherited historical problems ‐ leases and remediation issues 4 Lack of relationship/communication with airlines 4 No CATSA service 3 Insufficient meeting room facilities at airport 0 Servicing a population greater than the tax base 0 Increasing resources requirements due to unique/erratic growth 0

Narrow/limited revenue streams 0

Strengths Rank Growth in passenger traffic 18 Ability to attract new business 15 Large land mass 6 Currently, no local competition 6 Good location and access 6 Committed staff 5 Large main runway can accommodate large aircraft 3 Airport not constrained by residential development 3 Committed stakeholders/tenants/industry 3 Strong economy 1

Access to municipal servicing and MOU's in place with municipality 1



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Opportunities Opportunities Rank Economic growth 18 Commercial aeronautical revenue opportunities including review of fee structure 15 Freedom to change governance structure and/or institute airline consultative committee 14 Unique funding opportunities ‐ P3, government, oil and gas industry

9 Fort Nelson as a tourist and living(population growth) destination rather than a stop‐over 7 More airline services 6 Market and raise the profile of YYE 6 Communication/feedback/input /relationships with airlines and tenants 3 Increasing gas prices 0 Deliver business case to council ‐ partnering with airlines, stakeholders and business partners 0

Threats Threats Rank Competition for scarce infrastructure funding (P3) 15 Undeveloped industry relationships 10 Regulatory burden 10 Global/US economic decline 8 High/costly airfares to/from YYE 8 Cost and availability of resources 3 Environmental issues / climate change 1 Positioning /marketing of potential competitor airports 1 Lack of federal/provincial environment 0



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The items with the four highest ranks identified in the SWOTCH discussion are described below. There are seven items listed because there were two items tied for third and three tied for fourth.

# Type Item Rank

1 W Political environment ‐ MPs/MLAs and competing for council's attention

26

2 W Ownership of land 20

3 S Growth in passenger traffic 18

3 O Economic growth 18

4 S Ability to attract new business 15

4 O Commercial aeronautical revenue opportunities including review of fee structure

15

4 T Competition for scarce infrastructure funding (P3) 15

Challenges Identified Based on the strengths, weaknesses, opportunities and threats that were given that highest priority by workshop participants, a list of seven main challenges, that the NRRA faces, were identified. Challenge 1 (S): Determine the most effective way to capitalize on passenger traffic growth. Challenge 2 (S): Determine how to best service new business at YYE and the surrounding area. Challenge 3 (W): Having an effective impact with senior government at provincial, federal and municipal levels. High turnover at the Provincial government represents an additional challenge. Challenge 4 (W): Obtaining positive, timely land transfer of airport and surrounding lands. Challenge 5 (O): YYE must develop a strategy to determine how to best capitalize on economic growth. Challenge 6 (O): Capitalizing on opportunities to increase commercial and aeronautical revenues to the airport. This involves several components including:

• Developing/strengthening industry relationships • Developing a Business Case for businesses to invest in YYE • Marketing these opportunities • Undertaking a review of fee structure at YYE

Challenge 7 (T): Competition for scarce infrastructure funding



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Appendix B: Governance Options Review

How these organizations would perform compared to each other, based on case studies, legal structures, and professional judgement, is shown in Table B-1. This table sets six key categories for review. These are Safety & Security, Economic Development, Financial Viability, Strategic Oversight, Community Interface, and Ease of Implementation. Key factors to be considered in each category are listed below the category heading. For example, cost and resources are listed under Ease of Implementation. For each of these categories, the potential organization structures are compared to determine which would lead to the most significant potential positive improvement. The most significant potential positive change is marked with a 5. The least significant potential positive change is marked with a 1. In this type of scale, the status quo generally scores 1s. The scores could be described as 1, Little change; 2, some changes; 3, positive change; 4, better positive change; and 5, best positive change. These scores are totalled on the right hand side of the table to show which types of organizations would score highest for potential positive change. This table is provided on the following page. In Table B-1, the organizational models are shown in the order that they were discussed from the beginning of the report. If the models are reordered to show which models score highest, the results are shown in Table B-2. They begin with the two independent Not for Profit options rated the highest and continue through to the Status Quo option. As this analysis has been scored to reflect potential changes, it is anticipated that the status quo will score the lowest, and this is not to be read as a score of current operations. Table B-2: Ranking of Organization Models

Model Total Score

Independent Not-for-Profit (Lease) 26

Independent Not-for-Profit (Land Transfer) 24

Commission (Appointed) 22

Head Lease 21

Commission (Elected, Land Transfer) 19

Status Quo plus AAC 15

Status Quo 13



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Table B-1: Comparison of organizations based on case studies, legal structures and professional judgement.

Objectives Board Structure

Appointments Financing Activities

Status Quo Set municipal council via bylaws

Municipal council

Council is elected Municipality subject to provincial restrictions and guidelines. Airport competes with other municipal priorities.

Municipality manages airport as a department

Status Quo plus ACC

Set municipal council via bylaws

Municipal council

Council is elected. ACC would be appointed by council.

Municipality subject to provincial restrictions and guidelines. Airport competes with other municipal priorities.

Municipality manages airport as a department

Independent Not for Profit (Lease)

Set in letters patent of organization at time of incorporation

Board As an independent organization, the municipal council would not appoint more than 20% of board members. There are many options regarding the board member appointment process.

Self‐financing. Financing may be problematic on a lease as there is no significant cash flow and the airport organization would not own land .

The sole function of the organization is overseeing airport development and operations

Independent Not for Profit (Land Transfer)


Board As an independent organization, the municipal council would not appoint more than 20% of board members. There are many options regarding the board member appointment process.

Self‐financing. Increased ability to finance itself resulting from land ownership.


Commission (Appointed)


Board As a subsidiary, the municipal council could appoint all board members

Self‐financing, but would require approval of council as it would impact the municipality.


Head Lease Objectives are set in the head lease agreement

CAO oversees lease agreement

None Head lessee responsible for airport finances

Head lessee operations the airport. Municipality ensures lessee meets terms of agreement.

Commission (Elected, Land Transfer)

Set by municipality when it forms the organization

Board of residents

None. The board would be elected like a school board

Self‐financing and independent of municipal approval

The function of the organization is overseeing airport development and operations



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Key areas where there were significant differences in the results included: Safety and security. Organizations where they board was solely responsible for operating the

airport were scored higher because their involvement would be more immediate and focused on airport operations.

Economic development. Organizations with the most control of the facility and least political involvement were scored the highest in this category, though this was moderated by concern for creating a return for the municipality.

Financial Viability. The one model which owned the land scored highest as it was considered that they had the greatest financial independence and ability to operate cost effectively. Others were scored largely in relationship to their financial independence.

Strategic Oversight. Models with a board directly responsible for strategy were scored highest. The score was moderated if political involvement was involved in choosing directors. For example, an independent board scored higher than a board appointed solely by the municipality.

Community Interface. Organizations which had more than one community interface. In the case of the Independent Not for Profit, it has been assumed that it would have to report to the municipality as the airport would be leased, and report directly to the community via its board, the highest score. The comparable organization where the land is transferred was scored lower because it would not be as motivated to listen to public complaints.

Ease of Implementation. The status quo scores highest here. Organizations that involve land transfer scored the lowest.



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Appendix C: Recommended Fee Changes

This appendix provides recommendations on proposed changes to fees and charges. Given the low level of revenue at the site, and lack of revenue growth to match traffic growth, all revenue sources at the site require further review by the proposed airport general manager.

Proposed Fee Amount Rationale Timing

Departure Fee $30 per departing passenger

To help cover operational shortfall and capital costs and ensure the viability of the airport. This fee could potentially be divided into a per passenger fee and an airport improvement fee, but there is no immediate advantage from this approach for a small site such as NRRA or to the air carriers operating at the site.

1 January 2012

Minimum Landing Fee for piston aircraft

$16 per landing It is recommended that all landing fees be ended except for a minimum $16 landing fee for rotary and fixed wing aircraft. This is the current minimum fee.

No change

Terminal and Landing Fees $0 It is proposed that with the exception of the piston aircraft landing fee above, these fees be ended.

1 January 2012

Parking Fees tbd Parking is increasing at the site. It is recommended that the new airport manager determine a method of collecting fees and an appropriate fee.

Short term

Leases tbd All lease payments should be reviewed in line with standard airport practices and lease payment in Ft Nelson. All future agreements should reflect market rates. It is recommended that the proposed airport manager review these and propose new lease rates and a strategy for increasing rates to reflect inflation

Short term



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Fuel sales tbd Fuel use practices at the site has been identified as an environmental risk. It is recommended that the NRRA should contract with a specialty consultant to review how the airport should manage fuel use at the site and related lease arrangements.

Car rental concession tbd The concession agreement should be reviewed in line with standard airport practice.

Short term



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Appendix D: Fort McMurray Airport Case Study

Fort McMurray Regional Airport is situated on 523 hectares of land in the Regional Municipality of Wood Buffalo. The airport operates a single 2,286 meter runway with a 2,950 square meter building that opened in 1986. In the past decade, like the NRRA, the airport has experienced substantial growth driven by the oil and gas industry. In 2000, the airport served approximately 200,000 annual passengers. By 2011, the airport served more than 700,000 annual passengers. This increase in growth has put strain onto existing airport facilities, especially the airport terminal building. Based on moderate growth scenario, the airport forecast 883,000 annual passengers by 2014; 1,010,000 by 2019; and 1,183,000 by 2030. To meet the current demand and forecast growth at the airport, a new terminal building will be built for 2014. This terminal will have five-times the capacity (14,000 sq. m.) of the current terminal building with peak-hour holding capacity for 300 passengers versus the current 200 passengers holding capacity. Annually, the new terminal building will serve 1.5 million annual passengers and provide visitors with new amenities and services. The new terminal building aims to meet the forecast growth and provide passengers with a higher level of guest services. The following table summarizes the transformation between the old and proposed terminal building for development.

Figure D-1: Comparison between the old and proposed terminal building Future Terminal Building Features Old Terminal Building Features

• 1.5 million passenger capacity • 8 gates, 3 bridges with extra room

for another bridge if needed • To be completed Spring 2014 • New access road to HWY 69 • New water distribution system • More vehicle parking and car rental

services • Locally inspired art to create the

ambiance of the region

• 235,000 passenger capacity • 2 gates, 1 bridge • Built mid-1980s

In 2010, Fort McMurray Airport achieved $16.7 million in revenues composed of Airport Improvement Fee (AIF); Concessions; Terminal; Landing; Car Parking; Car Rental; and Ground Lease fees. AIF represents the largest component (37%) of this revenue stream generating $6.2 million in capital funding for the redevelopment and expansion of the new terminal building. To help further generate funds for its terminal expansion project, the airport recently (July 2011) increased its AIF by $10 dollars. Overall, with $8.9 million in expenses, the airport had net earnings before taxes of $7.8 million. Looking ahead, the airport sees itself expanding its air services and capability as additional streams of revenues. Specifically, these include business initiatives: aviation and non-aviation



55

industrial development opportunities, obtaining chartered services to Las Vegas and Mexico, and investing in freight handling facilities at the airport. The following table summarizes the capital expenditures projected at Fort McMurray, showing the amount of investment committed to develop the new terminal building.

Figure D-2: 5-Year Capital Expenditures

Capital Expenditures 2011 2012 2013 2014 2015

Maintenance $1,705,000 $1,400,000 $1,400,000 $1,400,000 $1,400,000

ATB Project $65,784,624 $82,000,000 $28,156,584 $14,078,292 -

Other Expansion - - - - -

Total Capital Expenditures $67,489,624 $83,400,000 $29,556,584 $15,478,292 $1,400,000

Net Assets

Net Assets transferred from the Regional Municipality of Wood Buffalo, January 1, 2010 $143,373,908

Less Net Book Loss for the four quarters ended December 31, 2010 $(3,041,700)

Net Assets, December 31, 2010 $140,332,208

Source: Fort McMurray Airport Authority - 2010 Annual Report



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Appendix E: Funding Sources

Federal Sources

Airports Capital Assistance Program (ACAP) The Airports Capital Assistance Program (ACAP) provides funding for capital projects related to safety, asset protection and operating cost reduction. In order for an airport to receive this funding, it must receive year-round regularly scheduled passenger service(1,000 passengers per year for two consecutive years), meet Transport Canada’s airport certification requirements, and not be owned or operated by the Government of Canada. Contributions for ACAP, as defined by Transport Canada, are considered for the following types of projects: First priority projects include safety-related airside projects, such as rehabilitation of runways, taxiways, aprons, lighting and other utilities, visual aids and sand storage sheds. This category also includes related site preparation and environmental costs, aircraft firefighting vehicles and ancillary equipment and equipment shelters that are necessary to maintain the level of protection required by regulation. Second priority projects include heavy safety-related airside mobile equipment, such as runway snowblowers, runway snowplows, runway sweepers, spreaders and decelerometers (winter friction testing devices), and heavy airside mobile equipment shelters. Third priority projects include safety-related heavy air terminal building and groundside projects, such as sprinkler systems, asbestos removal and barrier-free access. Fourth priority projects include asset protection and refurbishing, and operating cost reduction related to air terminal building or groundside access. Priorities are also established based on detailed technical analyses of facility conditions and maintenance histories, airport traffic and certification requirements. The following tables highlight ACAP funding at various airport within Canada and between the provinces. The last table highlights the types of projects funded at various airports located within British Columbia. Table E-1: ACAP funding by airport, 2008-12

Airport ACAP Funding 2008 - 2012* Waterloo $ 6,837,900 Prince Albert $ 6,356,395 Yellowknife $ 5,725,400 North Bay $ 5,666,900 Gatineau $ 4,879,400 Fort St. John $ 4,793,800 Port-Menier $ 3,895,745 Tofino $ 3,760,900



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Airport ACAP Funding 2008 - 2012* Sioux Lookout $ 3,108,100 Kangisqsujuaq $ 2,141,200 St. Andrews $ 2,120,400 Alma $ 1,840,251 Kingston $ 1,644,800 Powell River $ 1,631,500 Puvirnituq $ 1,411,700 Attawapiskat $ 1,247,500 Sarnia $ 956,100 Tasiujaq $ 950,711 Saint-Hubert $ 916,200 Mont-Joli $ 914,200 Kamloops $ 905,700 Red Deer $ 851,025 Val-d’Or $ 825,500 Prince Rupert $ 762,800 Sudbury $ 759,600 Kashechwan $ 720,000 Gillam $ 694,100 Baie-Comeau $ 688,635 Rouyn-Noranda $ 653,073 Fort Frances $ 594,600 Toronto City Centre $ 594,200 Sault Ste. Marie $ 592,500 Sydney $ 555,400 Red Lake $ 504,600 Stephenville $ 460,000 Kenora $ 375,000 Timmins $ 372,000 Terrace $ 357,383 La Ronge $ 344,500 Goose Bay $ 327,600 Nakina $ 324,000 Grande Prairie $ 313,504 Nanaimo $ 295,638 Thompson $ 266,300 Moosonee $ 252,000 Rimouski $ 245,312 Campbell River $ 218,700 La Grande Rivière $ 199,000



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Airport ACAP Funding 2008 - 2012* Trail $ 195,700 Medicine Hat $ 188,000 Anahim Lake $ 171,300 Webequie $ 170,000 Kapuskasing $ 167,400 Fort Nelson $ 166,100 Aupaluk $ 126,000 Whitehorse $ 105,400 Akulivik $ 105,000 Kuujjuarapik $ 105,000 Salluit $ 105,000 Dryden $ 28,300 Grand Total $ 76,484,972 *Excludes 2010 - 2011 Data

Table E-2: ACAP funding by province

Province ACAP Funding 2008 - 2012*

Alberta $ 1,352,529 British Columbia $ 13,259,521 Newfoundland and Labrador $ 787,600

Northwest Territories $ 5,725,400 Nova Scotia $ 555,400

Ontario $ 24,915,500

Québec $ 20,001,927 Saskatchewan $ 6,700,895

Yukon $ 105,400

Manitoba $ 3,080,800

Grand Total $ 76,484,972

*Excludes 2010 - 2011 Data



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Table E-3: ACAP funding by BC airport and project type

Airport / Project ACAP Funding 2008 - 2012*

Anahim Lake Replace towed runway sweeper $ 171,300

Kamloops Purchase fire fighting vehicle and equipment $ 905,700

Nanaimo Purchase runway de-icer $ 117,538 Runway sweeper $ 178,100

Powell River Rehabilitate main apron and taxiway A $ 1,631,500

Prince Rupert Purchase wet/dry chemical spreader $ 146,500 Runway 13-31 pavement joint repair — Phase 2 $ 616,300

Terrace Purchase self-propelled snow blower $ 357,383

Tofino Rehabilitate Runway 11-29 $ 3,760,900

Trail Replace snowplow truck and plow $ 195,700

Campbell River Runway sweeper and sand spreader $ 218,700

Fort Nelson Snowplow truck $ 166,100

Fort St. John Taxiways A and B, apron rehabilitation and edge lighting $ 4,793,800

Grand Total $ 13,259,521

*Excludes 2010 - 2011 Data



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P3 Canada Funds The P3 Canada Fund supports public infrastructure projects in sixteen different eligible categories. The following three categories are applicable to the Fort Nelson Airport. Water Infrastructure Drinking water treatment infrastructure Drinking water distribution systems

Wastewater Infrastructure Wastewater collection systems and/or wastewater treatment facilities or systems (which may

include grey water reuse) Separation of combined sewers and/or combined sewer overflow control, including real-time

control and system optimization Separate storm water collection systems and/or storm water treatment facilities or systems. Wastewater sludge treatment and management systems

Regional and Local Airport Infrastructure Construction projects that enhance local and regional airports that are accessible all year-round, through the development, enhancement or rehabilitation of aeronautical and/or non-aeronautical infrastructure: Aeronautical infrastructure includes, but is not limited to, runways, taxiways, aprons, hangars, lighting, Navaids, maintenance sheds, airside mobile equipment and associated shelters, air terminal building, and groundside safety-related Non-aeronautical infrastructure such as groundside access, inland ports, parking facilities, and commercial and industrial activities. Although there have not been any recent P3 projects listed at regional airports, the most recent project related to a P3 partnership is the project regarding the pedestrian tunnel at the Toronto City Centre Airport. Other airports have used P3 projects primarily to fund major infrastructure projects such as developing rail links to the terminal as found at Vancouver International Airport.

Provincial Sources

Towns for Tomorrow Since 2007, the province has invested close to $70 million to fund 201 Towns for Tomorrow projects. This program aims to help B.C. communities address their infrastructure needs while creating jobs and supporting the economy. The program covers up to 80 percent of eligible project costs, with a maximum provincial contribution of $400,000 for communities with fewer than 5,000 residents. The program also covers up to 75 percent of eligible project costs, with a maximum provincial contribution of $375,000 for communities of 5,000 - 15,000 residents.



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Funding coverage for projects that are eligible for the Towns for Tomorrow program include, but are not limited to: Water projects; Wastewater projects; Public transit projects; Environmental energy improvement projects; Local road projects; Recreation and cultural projects; Tourism projects; Protective and emergency services infrastructure projects; and Community development projects.

The table below highlights airports which have been funded by the provincial program. Table E-4 Airport projects which have been funded by the Towns for Tomorrow program

Proponent Project Name Grant Year Grant

Cariboo Regional District

Anahim Lake Airport Improvements – Construction of Terminal Building and Extension of Runway

2011 $400,000

Castlegar Castlegar Airport Servicing Strategy 2011 $375,000

Castlegar Hazard Beacon Project (Castlegar Airport Night Aircraft Operations) 2009 $356,250

Masset Masset Airport Terminal 2011 $400,000



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Appendix F: SMS Systems

SMS Safety Management System (SMS) is becoming a standard in the aviation industry worldwide. It is recognized by International Civil Aviation Organization (ICAO) and the U.S. Federal Aviation Authority (FAA), and product/service providers as the next step in aviation safety. SMS is also becoming a standard for the management of safety in areas outside of aviation. The basic idea of any SMS is to provide a systematic approach to achieving acceptable levels of risk, and thereby reducing insurance costs. SMS is comprised of four functional components, including an intangible, but always critical, aspect called safety culture. These are shown in the figure below.

Source: FAA

SMS in Canada Transport Canada began preparing to implement SMS in 2000. The following bullets outline the implementation of SMS at airports in Canada:

2000 - present: changes to the Aeronautics Act; 2001: Published Introduction to Safety Management Systems (TP 13739); 2004: Published Safety Management Systems for Small Aviation Operations - A Practical

Guide to Implementation (TP 14135); 2004: Safety Management Systems: Transport Canada’s Implementation Plan; 2005: Began implementation of airport SMS regulations.



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Implementation of SMS at Canadian airports began in 2007 and continues to the present. The implementation is a multi-phase approach. Each airport must obtain initial certification and then modify these over three subsequent steps.

Impacts on Airports

Quantification of the impacts of SMS on airports is difficult to obtain, but U.S. airports have attempted this as the FAA is working through the implementation of SMS there. For example, “Phoenix Sky Harbor International Airport (PHX) calculated that the initial development and implementation of a robust SMS program at Sky Harbor will cost approximately $400,000. The airport further identified that initial and recurrent safety training costs as well as funding the staff positions and resources necessary to manage the program will cost the airport and its tenants at least $500,000 each year.” 6 The AAAE also questioned FAA assumptions that implementing the SMS would not be burdensome:

We strongly disagree with these assumptions and feel that the FAA should reevaluate the anticipated costs and staffing requirements to airports, particularly small airports. Costs that should be taken into consideration are anticipated costs associated with tenants, employees and other parties accessing the non-movement areas. Also, costs related to any potential contract and lease negotiations (modifications to short and long term lease agreements will be required to ensure the maintenance of consistent terminology and to ensure that the airport has the appropriate level of control), costs associated with record keeping, training, reporting and new regulatory compliance measures.7

Observations SMS is clearly the way of the future and international organizations and other countries continue to implement these systems. However, while governments have assumed that the costs are low, feedback from airport managers in Canada is that SMS is difficult for smaller airports to implement, and that it increases labour costs by requiring increased time from staff to record work completed and observations on a daily basis.

6 Letter from American Association of Airport Executives (AAAE) to the FAA, 5 July 2011. 7 Ibid


Prepared by InterVISTAS Consulting Inc. Airport Square – Suite 550

1200 West 73rd Avenue Vancouver, BC

Canada V6P 6G5 Telephone: 604-717-1800 Facsimile: 604-717-1818 www.interVISTAS.com

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