Type and Role Report – Pickering Lands Aviation Sector Analysis

Executive Summary

KPMG LLP (KPMG) in partnership with WSP (formerly MMM Group Limited) has been retained by Transport Canada to carry out an Aviation Sector Analysis of the Pickering Lands. The Analysis is comprised of three primary reports and one additional contextual piece (an annex to the first report) to bridge the findings between the first and second reports:

  1. The Supply and Demand Report
    1. The Contextual Bridge Report;
  2. The Type and Role Report; and,
  3. The Revenue Generation and Economic Impact Report.

This Type and Role Report is the second report completed of three primary reports comprising the Aviation Sector Analysis.

The first report (Supply and Demand) projected that passenger demand within southern Ontario will grow to approximately 73.9 Million Passengers Per Annum (MPPA) by 2036. The Supply and Demand Report 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. Cumulatively, these airports have capacity to support 94.7 MPPA with existing 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 illustrated and concluded that existing and future passenger demand could see secondary airports (such as Hamilton, Waterloo, and Billy Bishop) continue to grow within their existing boundaries (or with modest land assembly) to provide additional capacity.

The overall purpose of this Type and Role Report was to develop and assess options for the service type(s) and role of a 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 airport system. Five options were developed and assessed based on their ability to minimize airport competition within the existing network, and on their potential for sustainable financial success. As a result, two airport types were identified as the most viable for the Pickering Lands: an industrial airport or a specialty passenger airport. Governance options to support the success of these two airport types in the context of the southern Ontario airport systems were also examined and assessed.

The third report (Revenue Generation and Economic Impact) will examine the revenue-generating potential of an airport that incorporates elements of an industrial airport and a specialty passenger airport these two airports types, as well as its potential economic impacts on the region.

The following provides additional detail regarding the research and analysis contained within this Type and Role Report.

Market Factors that could Influence Development of a New Airport

The Type and Role Report identified and analyzed how other factors (beyond a passenger capacity shortfall) could trigger and influence the development of a new airport. Key factors were identified based on perceived gaps in, or challenges with, the southern Ontario airport system. The factors included: general aviation trends in eastern GTA, accommodating Low-Cost Carriers (LCC), providing domestic point-to-point service, reducing surface travel times to airports, accommodating the growth of e-commerce, and key regional developments.

General aviation trends in eastern GTA: There is currently relatively low industrial service within the southern Ontario airport network, with Peterborough Airport being the only airport to offer industrial general aviation as a primary service type. Toronto Pearson, Billy Bishop, Oshawa and Hamilton Airports only offer industrial general aviation as a secondary service type. This factor influenced the consideration of an industrial airport option.

Accommodating low-cost carriers: Aviation industry trends are expected to influence the need and timing for a new airport on the Pickering Lands. LCC and Ultra Low-Cost Carriers (ULCC) have been gaining popularity in Canada. These carriers provide basic airfares at a low price and offer additional services such as checked baggage, seat selection, and priority boarding at an added cost. LCCs and ULCCs are common internationally, such as EasyJet and Ryanair in Europe, and Southwest and Allegiant in the United States. These airlines typically operate from secondary airports, offering a no-frills experience. While Hamilton Airport currently accommodates LCC and ULCC operations by Swoop, a new airport on the Pickering Lands could provide an alternative base of operations for LCC or ULCC operations in the eastern GTA, and has the potential to offer a cost-structure conducive to accommodating this type of air traffic.

Providing domestic point-to-point service: Air carriers, such as WestJet and Air Canada, could use a new airport on the Pickering Lands to provide domestic point-to-point air service. Point-to-point is a service offering where secondary markets are provided with low frequency, non-stop service, typically to long-range destinations, contrary to the traditional hub-and-spoke model. The Toronto Pearson Airport mega-hub strategy may see smaller point-to-point domestic services displaced to increase runway capacity. A new airport on the Pickering Lands could draw upon the population of the eastern GTA in addition to Toronto Pearson Airport’s catchment area.

Reducing surface travel times: Congestion on the GTA’s road network is increasing as the region grows. The Ontario Government projects that the GTA’s population will increase from 6.7 million in 2016 to 9.6 million in 2041. A new airport on the Pickering Lands could significantly improve access to air service for travellers in the eastern GTA, Durham Region, Peterborough County, Northumberland County, and points further east, by significantly reducing travel times.

Accommodating growth of e-commerce: E-commerce has experienced significant growth in recent years, facilitated in part by access to affordable and high frequency air transportation. For example, Amazon, a global leader in e-commerce, uses a network of fulfillment centres to ensure that sufficient inventory of popular consumer items is located strategically.

The just-in-time business model makes access to an airport and a major road network essential. An airport capable of supporting air cargo services in the east GTA would be highly desirable for e-commerce firms considering expanding operations in this area of the GTA.

Further, to better understand these and other factors that contribute to successful airport systems, three case studies were examined:

  1. Phoenix Sky Harbour Airport and Phoenix Mesa Gateway Airport in the United States;
  2. Vancouver International Airport and Abbotsford International Airport in Canada, and
  3. Pierre Elliot Trudeau International Airport and Montreal Mirabel International Airport in Canada.

These were selected for analysis based on their similarities with Toronto Pearson Airport and a potential new airport on the Pickering Lands. They were also selected to understand both the factors that led to successful airport pairs (as in the first two cases), and the factors that are widely considered by industry experts to have led to failure (the third case). Based on this analysis, factors that appear to contribute to the success of secondary airports include:

  1. geographic proximity to urban centres and suburban areas (which is fixed, given the location of the Pickering Lands is known),
  2. an appropriate governance model (which is discussed in this report),
  3. the orderly and planned development of airport infrastructure and development areas (which is addressed in this report through a proposed conceptual land use plan), and
  4. competitive aeronautical fees and land lease rates (which will be explored in more detail in the Revenue Generation and Economic Impact Report).

Airport Options and Assessment

In summary, the five options assessed for primary airport roles and service types were:

Option A: Industrial Airport – assumes a new airport on the Pickering Lands would be developed primarily for aviation-related industrial purposes. This could include provisions for the development of large scale aviation industrial businesses, including but not limited to: aircraft/component manufacturing, maintenance, repair, and overhaul firms, avionics installation/repair, or aircraft parts supply and distribution.

Option B: Specialty Passenger Airport – explores developing a new airport on the Pickering Lands for the accommodation of specialized passenger air services, such as ULCCs, point-to-point domestic air service, and charter air services catered to leisure travel.

Option C: Primary Hub International Airport – considers an airport with a primary focus on international passenger service. This option, beyond typical airport infrastructure, would require the inclusion of large scale terminal facilities to accommodate significant traffic on trans-Atlantic and/or trans-Pacific routes.

Option D: Passenger Feeder Airport – investigates a passenger feeder airport on the Pickering Lands that would direct passengers to hub airports with the intent of connecting them to their final destinations.

Option E: Major Air Cargo Airport – assesses the viability of developing a new airport primarily for air cargo operations. Air cargo operations include dedicated cargo aircraft, warehouse space, freight forwarding, and distribution.

These options were assessed based on two criteria: 1) minimizing service overlap with existing airports in the system and 2) the potential for financial and operational success.

The assessment of the five options resulted in the identification of Option A: Industrial Airport and Option B: Specialty Passenger Airport to be studied further and designed conceptually. These options were identified to have minimal service overlap with other airports within the southern Ontario airports system, and were most likely to have the potential for financial and operational success. The remaining options were discounted primarily due to their direct conflicts with the existing or planned roles of other airports.

Potential Implementation of Options A and B

To explore what the potential implementation of an industrial airport and a specialty passenger airport could be, development concepts were prepared for a new airport on the Pickering Lands that would be capable of fulfilling the requirements of both Option A and Option B. To demonstrate the growth of Options A and B to accommodate market demand over time while maintaining flexibility, three development concepts were identified for both options:

  1. Small Development Concept: Representing the anticipated minimal infrastructure requirements and development areas of a new airport on the Pickering Lands.
  2. Medium Development Concept: Demonstrating the first stage of potential growth as activity at the airport increases. The expansions might include new airfield infrastructure, improved groundside access, terminal buildings, and additional land parcels.
  3. Significant Development Concept: Assuming substantial growth in aviation activity at a new airport on the Pickering Lands.

The Medium and Significant Development Concepts build upon the infrastructure requirements identified and described in the Small Development Concept. However, it is not necessary for the airport to evolve through each of the phases of development, as the concepts provide flexibility to respond to local economic demands and aviation industry trends.

The primary infrastructure elements that define Option A as an industrial airport are the prepared development lots that could support aviation industrial and commercial uses. Option B focuses on the air terminal building and related groundside development to support specialty passenger air services. Both Options A and B were conceptually designed to demonstrate how a new airport on the Pickering Lands could develop as both an Industrial Airport (Option A) and as a Specialty Passenger Airport (Option B), concurrently and without major infrastructure reconfigurations. The parallel runways, crosswind runway, and taxiway infrastructure, as well as their protective operational areas, demonstrate the ultimate development of the Airport in accordance with the Pickering Lands Airport Zoning Regulations which accords full coverage for a seven-runway airport on all the lands.) Given the large assembly of land available, the conceptual land allocations do not preclude a new airport on the Pickering Lands from developing to accommodate Options C, D, or E.

From the conceptual designs for the Industrial and Specialty Passenger Airport options, a conceptual land use plan was developed to help ensure adequate land is protected for future development according to the requirements of each use.

Land uses identified for the proposed conceptual land use plan include: airfield, air terminal area, aviation commercial, non-aviation commercial, airport operations, and airport reserve. Again, this conceptual land use plan does not preclude a new airport on the Pickering Lands from developing to accommodate Options C, D, or E.

How a New Airport would fit into the Southern Ontario Airports System - Governance Considerations

The success of a new airport on the Pickering Lands may be impacted by the governance option selected. There are a range of governance options that are used by airports across Canada. Governance options explored for a new airport on the Pickering Lands include Privately Owned and Operated, Municipally Owned and Operated or Contractor Operated, Municipally Owned and Airport Commission Operated, Municipally Owned and Airport Authority Operated, Transport Canada Owned and Airport Authority Operated and Transport Canada Owned and Operated. In examining the governance option or options that may be appropriate when developing and operating an airport on the Pickering Lands, many factors were considered, including: land control, initial capital investment, initial operating investment, stakeholder representation, rate of economic development, and system competition. Each of the governance options were evaluated against the governance considerations to determine the option(s) most applicable. It was found that the Municipally owned and Airport Commission Operated option and the Transport Canada Owned and Airport Authority Operated option feature desirable governance characteristics including independent, knowledgeable, experienced and autonomous groups responsible for all aspects of airport planning, development, marketing, operations, business management with ultimate control of land use remaining with Transport Canada.

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