Executive Summary
Transport Canada retained KPMG LLP (KPMG), in partnership with WSP (formerly MMM Group Limited), to carry out an Aviation Sector Analysis of the Pickering Lands. The Analysis comprises three primary reports and one additional contextual piece (an annex to the first report) to bridge the findings between the first and second reports:
- The Supply and Demand Report
- The Contextual Bridge Report;
- The Type and Role Report; and,
- The Revenue Generation and Economic Impact Report.
This Revenue Generation and Economic Impact Report is the third and final report comprising the Aviation Sector Analysis.
The Supply and Demand Report projected that passenger demand within southern Ontario will grow to approximately 73.9 Million Passengers Per Annum (MPPA) by 2036. It further concluded that the southern Ontario airports system has sufficient capacity to meet the forecast passenger demand and that a new airport on the Pickering Lands would not be needed before 2036 from a capacity standpoint. Collectively, southern Ontario airports have capacity to support 94.7 MPPA using existing runway infrastructure. Capacity improvements within the southern Ontario airports system, including the addition of runways and taxiways, could augment the overall capacity within southern Ontario to approximately 119.6 MPPA by 2036.
Following the completion of the Supply and Demand Report, Transport Canada commissioned an additional Contextual Bridge Report to demonstrate how the individual airports within the southern Ontario airports system could be expanded to meet forecasted passenger demand. The Contextual Bridge Report concluded that existing and future passenger demand could see secondary airports (such as Hamilton, Waterloo, and Billy Bishop) continue to grow and provide additional capacity within their existing boundaries (or with modest land assembly).
The results of the Supply and Demand Report and the Contextual Bridge Report led to a desire to examine potential roles and service types for a new airport on the Pickering Lands that could support economic growth as opposed to responding only to a need for additional passenger capacity within southern Ontario. The Type and Role Report developed and assessed options for the service type(s) and role of a potential new airport on the Pickering Lands, based primarily on market factors, the past experience of similar airports, and how a new airport would fit into the existing southern Ontario airports system. Five options were developed and assessed based on minimizing competition with airports within the existing network, and on their potential for sustainable financial success. The Type and Role Report concluded that three options would be most ideally suited for development on the Pickering Lands in order to minimize potential impact on other airports within the southern Ontario airport system. These type and role options were:
- an Industrial Airport,
- a Specialty Passenger Airport, or
- a combined Industrial and Specialty Passenger Airport.
Small, Medium and Significant development concepts were developed for each of the airport types. To enable the implementation of all of these airport scenarios (including scenarios beyond those considered), a proposed conceptual land use plan was also developed. Finally, the report examined various governance options, and analyzed them for their ability to support the success of a potential new airport. The report identified that the Municipally Owned and Airport Commission Operated governance option and the Transport Canada Owned and Airport Authority Operated governance option both feature desirable governance characteristics, including independent, knowledgeable, experienced and autonomous groups responsible for all aspects of airport planning, development, marketing, operations, and business management, with ultimate control of land use remaining with Transport Canada.
The overall purpose of this Revenue Generation and Economic Impact Report is to examine the potential financial outcomes associated with each of the airport types identified in the Type and Role Report (e.g., industrial, specialty passenger, and combined industrial and specialty passenger), and to assess the potential economic benefits that would be derived from each. The purpose of undertaking this analysis is to better understand whether there could be a business case that would support the development of a new (industrial, specialty passenger, or combined) airport on the Pickering Lands, including whether an investor could be interested in developing the airport.
The following paragraphs highlight the findings from the research and analysis contained within this Revenue Generation and Economic Impact Report.
Six Airport Scenarios Developed and Analyzed
To test the potential financial outcomes of a potential new airport on the Pickering Lands, six airport scenarios were developed. These scenarios were developed to reflect a small and a large version (referred to as Small and Significant, respectively) of each of the three airport types (industrial, specialty passenger, and combined industrial and specialty passenger). The infrastructure and facilities required for each of the six scenarios corresponds with the infrastructure and facilities put forward in the Type and Role Report for the following conceptual designs:
- Small Industrial Airport
- Small Specialty Passenger Airport
- Small Combined Industrial and Specialty Passenger Airport
- Significant Industrial Airport
- Significant Specialty Passenger Airport, and
- Significant Combined Industrial and Specialty Passenger Airport.
The facility scenarios served as the foundation for developing capital and operating cost estimates for each. Each of the six facility scenarios was complemented with the development of a corresponding air traffic scenario and tenant scenario, which served as the foundation for calculating the potential magnitude of the revenue streams associated with each. Additional financing assumptions were developed. These assumptions and estimates were then used to develop a financial model for each scenario, covering the construction period plus 30 years of operations.
Results of the Revenue Generation Analysis
While conclusions regarding actual financial outcomes of a potential new airport on the Pickering Lands, including the potential private sector interest, remain speculative at this time, the results of the financial analysis help to shed light on what might be expected for each of the scenarios presented. To assess the financial outcomes of each scenario, the minimum values for three key financial metrics that would likely be required for a private sector investor to consider investing in the development of a new airport were identified. These were:
- Project IRR (Internal Rate of Return) to be at least 8.0%
- EBITDA/Interest (Interest Coverage Ratio) should not fall below 1.2
- Annual cash flows are positive within five (5) years of beginning opening.
[Redacted]
Results of the Economic Impact Analysis
The Economic Impact Analysis was conducted for the three Significant airport scenarios (#4, #5 and # 6), to explore the potential upper range of the economic benefits that could be achieved, based on the six airport scenarios developed. [Redacted]
[Redacted] In this context (e.g., analyzing construction impacts), a job corresponds to one full-time position held for one year.
Concluding Remarks
The study conducted and documented within this report was exploratory in nature, and is based on a number of assumptions reflective of the early nature of the analysis conducted. From this perspective, the results should not be interpreted as providing conclusive evidence regarding the potential success (or lack of success) of a new airport on the Pickering Lands. However, they can be interpreted as indicative of what could be expected if the assumptions underpinning a given scenario materialize.