Mark Laroche - Ottawa Chamber of Commerce, Eggs N Icons

SPEECH – MARK LAROCHE
President & CEO
Ottawa International Airport Authority
Eggs N Icons Breakfast
December 3rd, 2014
Mark Laroche
Eggs N Icons Breakfast Address
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December 3 , 2014
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Good morning, and thank you this opportunity to tell you about the Ottawa International
Airport Authority, and the role we play in your community.
Before I get to my formal remarks, I would like to welcome several members of the Airport
Authority’s Board of Directors, including our Chairman Gilles Lalonde, Craig Bater, John Boyd,
Chris Carruthers, Pat Kelly, Brendan McGuinty and Susan St. Amand.
J’aimerais également vous présenter les membres de l’équipe de la haute direction de
l’Administration de l’aéroport qui m’accompagnent aujourd’hui.
Louise Bergevin, secrétaire générale et adjointe du président; Michael Crockatt, vice-président,
Expansion commerciale et marketing; Lisa Dwyer, vice-présidente, Affaires juridiques et
Ressources humaines; John Weerdenburg, vice-président et chef des finances; et Ian Bell, viceprésident, Infrastructure et technologie.
Krista est absente .
I’d like to start this morning by telling you that the Airport Authority is at times a
misunderstood organization.
In many people’s minds, we are a federal government department. Others are sure we are a
crown corporation.
Some just don’t know what we are!
So let’s set the record straight.
The Airport Authority is a private, not-for-profit, non-share Capital Corporation.
Non-share means that we do not have shareholders and therefore we do not pay dividends.
Instead, any revenues generated at the airport are exclusively reinvested in the airport, in
support of our mission.
We are a 100 million dollar business that is governed by a community-nominated, 14-member
Board of Directors.
Our Directors are duty-bound to act in the best interest of the Authority, which they do.
Organizations that nominate Directors to the Board include the City of Ottawa, City of Gatineau
and their respective chambers of commerce, Ottawa Tourism, the federal government, the
government of Ontario, and Invest Ottawa.
While there are thousands of people who work at the airport, chances are travelers will almost
never come into contact with any of the Authority’s 160 employees.
They are a diverse and interesting mix of skills and talents, running the gamut from accountants
to plumbers to firefighters.
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They keep the facilities running efficiently and securely, they manage the common-use kiosks
that facilitate check-in and baggage tagging, they keep the roadways and runways clean and
clear, and they keep the administration of the entire operation running smoothly.
All so we can welcome more than 4.6 million passengers through the doors each year.
In addition to our own team, there are countless other organizations, and literally thousands of
employees, that play roles in the travel process, including the government agencies that protect
the travel process and the border, like the CATSA, CBSA, and US CBP to name a few.
There are ground handlers, fuel and de-icing service providers who work for or on behalf of
airlines.
So when you choose the airline you fly with, you also choose the company that services the
aircraft, that marshals the aircraft to the gate and that delivers your bag to the right carousel,
within a decent time.
And let’s not forget the hundreds of retail and concession employees who serve our clients, day
in and day out.
The Authority’s mandate is to manage, operate and develop airport facilities and lands in
support of the economic growth of the National Capital Region, and it operates under a lease
with Transport Canada that runs through to 2077.
Notre bail foncier, des règlements très stricts, la surveillance assurée par le gouvernement
fédéral ainsi que la bonne gouvernance exercée par notre solide Conseil d’administration, font
en sorte que notre mode d’exploitation est sécuritaire, sûr et très transparent.
Many believe that we are funded by the federal government.
We are not. In fact, it is quite the opposite.
In exchange for the right to invest in a piece of public infrastructure, we are required to pay
rent to the government to the tune of approximately 8 million dollars per year.
The amount of rent is determined based on a formula that includes passenger volumes and
revenues.
The inclusion of revenues in the formula results in a double hit for airport authorities.
For example, airport policing and security, which used to be partially paid for by the
government, has been fully downloaded to airports.
Because we have to recover these costs, which amount to approximately 3.5 million dollars per
year, we must levy terminal fees to airlines, which are embedded in the ticket price charged to
travelers.
This cost recovery is then included in our revenues and thus we are required to pay additional
rent as a result. Approximately 10% of each dollar we earn, whether from airlines, passengers,
or third parties, goes back to government in the form of rent.
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Comme toutes les autres entreprises établies à Ottawa, nous sommes contents de payer des
taxes municipales pour les services que nous recevons.
L’an dernier, nous avons versé environ cinq millions de dollars à la municipalité compte tenu du
nombre de passagers que nous avons desservis.
When the Airport Authority assumed responsibility for the airport, it was a cost burden to the
government, and the value of the asset was estimated at $75 million dollars.
Since 1997, the Authority has invested more than six hundred million dollars in the asset,
including a new terminal building, a new combined services building, new parking facilities,
rebuilt runways, new technology, environmental stewardship, and the list goes on.
As mentioned earlier, our operation generates revenues from aeronautical sources, or the
landing and terminal fees we charge airlines, and through non-aeronautical revenues such as
parking, retail and concession rent, advertising, land development, etc.
The total amount is 66 million with 55% coming from aeronautical and 45% non-aeronautical.
We are continually pushing ourselves to increase our non-aeronautical revenue through new
and better services, in order to keep the tariffs that we charge airlines amongst the lowest in
Canada.
We are also very cautious about expansion as we want to “sweat the asset”, as we like to say,
and prefer small creative ways to add capacity or new services within the existing footprint.
That said, these revenues are not enough to fund all the necessary major capital projects that
are required.
Projects like our current baggage system upgrade which will cost 55 million dollars, or our 30
million dollar runway reconstruction project from this past summer, require an additional
source of revenue.
To fill the gap, the Authority introduced the Airport Improvement Fee in 1999, as a dedicated
revenue stream to support major capital projects and related financing costs.
We will continue to collect the AIF, which is currently 23 dollars per enplaned passenger, until
the debt is retired.
Our AIF is one of the lowest among major airports in Canada.
Quand la nouvelle aérogare a été inaugurée en 2003, plusieurs avaient cru que notre
magnifique installation moderne attirerait automatiquement de nouveaux vols et de nouvelles
destinations.
The old saying that if you build it they will come, does not hold true in the aviation world.
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In reality, our business development and marketing team spends a great deal of time meeting
and talking with airlines to present the realistic business case for those airlines to add service to
our community.
Long gone are the days where air carriers were willing to introduce new routes that made little
economic sense initially in the hope that demand would grow. If a route is not expected to
generate a profit from the start, it will simply not happen.
We have been able to achieve success in recent years, with new non-stop flights to places as
diverse as Yellowknife, Fort Myers, Charlottetown, Washington-Reagan, Moncton, and Las
Vegas, to name just a few.
Because Ottawa sits between two sizeable hub airports, a good deal of traffic flows through
both Montreal and Toronto where more major international flights are available.
Pour compenser le peu de liaisons directes, nous assurons d’excellentes correspondances vers
ces deux aéroports en offrant 43 vols quotidiens vers Toronto et 8 vols quotidiens vers
Montréal.
Et nous travaillons avec ces aéroports pour réclamer une meilleure qualité de desserte pour les
voyageurs et leurs bagages.
We are also fortunate to have international non-stop flights between Ottawa and LondonHeathrow and also Frankfurt, although the latter is currently operating on a seasonal basis, in
Spring, Summer, and Fall. Both are major international hubs that connect us to other major
global destinations.
So let’s talk about airlines.
If you have seen the financial results for Canada’s major airlines recently, you know that airlines
are in the business of making money. They will redeploy an aircraft to a more profitable route if
necessary. That means that the support of the local market is critical to attracting and keeping
routes.
And, that means that we need your help to attract and sustain routes.
Your business depends on being able to move people and goods around the world.
We know that more direct flights helps you do that better.
But, as I mentioned, airlines need these flights to make money.
In simple terms it means that flights need business travellers, leisure travellers, and cargo, to
combine to generate more revenue than it costs to operate the flight.
Aircraft are very mobile, so if our community doesn’t fill our flights with profitable passengers
and cargo from the get-go, other communities will and do line up to get a shot at proving that
they can.
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When you fly from Ottawa, you help us build the business case for more seats and more direct
flights.
It’s that simple.
Un aspect où Ottawa excelle c’est comme porte d’entrée du Nord canadien. Tous les trois
principaux transporteurs canadiens présents dans le Nord du pays desservent Ottawa.
Air North a une liaison entre Ottawa, Yellowknife et Whitehorse, et Canadian North dessert
Iqualuit à partir d’Ottawa et assure des liaisons vers le restant de son réseau.
And Ottawa’s only hometown airline, First Air also serves Iqaluit with 9 weekly passenger
flights, plus dedicated wide body cargo flights.
First Air has been servicing the North for more than 60 years. And, as one of the main points for
passengers and cargo to connect to Canada’s North, hundreds of jobs are supported in Ottawa,
many of which are with First Air at their headquarters, and in their maintenance and cargo
facilities at the airport.
So let’s keep talking about jobs and economic impact.
Our growth since 1997 has positioned the Ottawa Airport as a major economic engine and
employer in this region.
Based on an economic impact study in 2010, which is available on our website, our direct
impact includes 5,000 full time equivalent employees, 271 million in wages paid, 503 million in
gross domestic product, and an overall economic output of 1.1 billion dollars each year.
When you consider the indirect and induced economic impact, our employment reaches more
than 10 thousand person years, we have a tax impact of about a quarter of a billion dollars
annually, and generate more than 2.2 billion dollars in economic output.
These numbers are by no means insignificant, and yet we continue to be challenged in terms of
communicating the importance of the airport in our community.
This is just one of many challenges that we face as an industry.
In terms of others, I know federal government cutbacks have impacted many of the businesses
that are represented in this room.
Because business travel comprises close to half of our passenger volumes, and because the
federal government is the largest employer in the region, we have felt the declines too.
Perhaps the most noticeable effect was Air Canada’s decision to reduce its direct service to
Frankfurt to a seasonal, April to October, schedule, as I mentioned earlier.
There has been much discussion in the media concerning access to and from the airport.
I would like to further that discussion.
Mark Laroche
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December 3 , 2014
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Intermodal transportation and access is important and we continue to address it with our
partners at the City of Ottawa.
We are participants in the current environmental assessment to expand the Airport Parkway.
The Parkway is the main access to the airport and it is getting more and more congested at
peak hours, which causes concern for clients our clients and your clients, who are catching a flight at the end of the business day, or rushing
downtown after arriving in Ottawa in the morning.
Just last week, Bloomberg published a study that they called “The Airport Frustration Index”.
In it, airport commute times were ranked in terms of their frustration factor.
While Ottawa fared very well at number 8 in the overall survey, we were ranked number 28 out
of 36 North American airports in the commute section.
This means that people are already frustrated by the time they set foot in the airport which is
not a good scenario.
Put simply, no matter what we do at the airport, the overall travel experience will not be
pleasant if it begins with a challenging commute. This area needs to be addressed or the
situation will only get worse and will make it more and more difficult for the City to attract new
conventions , tourists and businesses that rely on airport connectivity.
We are also currently cost-sharing the environmental assessment for the extension of the OTrain to serve the airport.
Let me be clear.
We think extending the O-Train to the airport is the right thing to do if we truly want Ottawa to
be a world-class city, and to offer the alternative that air travellers expect when they travel to
other world class cities.
International passengers expect this intermodal connectivity to the downtown core and we
cannot miss the opportunity to find a way to make rail to the airport a reality when the NorthSouth line is constructed.
Our work with the City is about finding the right solution now to serve the airport, and then
working together to determine how to fund that solution.
It is too important for business, for tourism, and for residents.
If you also think connecting the O-Train to the airport is important, please say so…
Tell us about it.
Mark Laroche
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Tell the City about it.
Tell the Province and Federal Government about it.
La compétitivité du système d’aviation canadien, plutôt son manque de compétitivité, est un
autre thème récurrent dans les médias.
Le coût relativement élevé du transport aérien chez nous est réel et suscite énormément de
préoccupation.
The high cost of rent that I’ve already mentioned, coupled with increasing fuel tax in Ontario, as
well as the rest of the club sandwich of fees that are applied to every airline ticket in Canada
can price us out of the market when we compare our prices to those in the US.
For example, according to the Air Transport Association of Canada, these fees and airport rents
total over 1 billion dollars each year.
While the airline industry pays more than its share, other modes of transportation such as Via
Rail, benefit from government subsidies to the tune of 475 million dollars each year.
This is an uneven playing field, and it is hurting our industry.
If not the highest, Canadian fees are amongst the highest in the world. So, despite Ottawa
airport having among the lowest fees in Canada, we are increasingly concerned with our
competiveness in North America.
You have no doubt seen the news coverage of the investments that the American federal and
state governments are making in their airports that sit just south of the Canadian border – in
our case, Ogdensburg Airport in northern New York.
This week they received confirmation that their federal government will be funding an
expansion to allow a commercial airline to serve the area.
Their market is squarely aimed at attracting passengers from Ottawa and Gatineau.
Sadly, to paraphrase one airline CEO, the fastest growing airports in Ontario are or will be
Buffalo and Ogdensburg, New York.
I would be less than honest if I said that they were of no concern.
We need our governments to recognize aviation as an economic sparkplug, rather than as a toll
booth to subsidize other modes of transportation, as is the case with the Ontario jet fuel tax
increase, which is slated to subsidize other modes of transit, government operations and
programs.
Nous avons besoin que nos gouvernements s’assurent que les Canadiens puissent soutenir
leurs aéroports locaux et le fassent, plutôt que de se rendre au sud de la frontière là où leurs
dépenses en billets d’avion ne rapportent rien à l’économie locale.
Une baisse du loyer et des taxes serait facilement récupérée au moyen d’une hausse d’activité.
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This issue also directly affects tourism, which is an important piece of economic activity in the
Region.
Each traveller who visits Ottawa/Gatineau brings with them dollars that are spent in hotels,
stores and restaurants in our community, thus creating jobs and prosperity here.
The more tourists, visitors and convention delegates we bring to Ottawa, the better off we all
are.
We are fortunate to have a Mayor who gets it, a province that invests in tourism, and one of
the best destination marketing organizations in the country, in Ottawa Tourism.
Programs and efforts to shine a spotlight on this region, such as the planned 2017 celebrations,
must be supported and must continue, for the benefit of everyone in our community.
Just recently we had three great announcements concerning events that are coming to this
area, including the Brier in 2016, One Young World in 2016 and the Video Game Awards in
2017.
More announcements are coming, and as always, the community can count on the Ottawa
Airport to play its part in attracting such prestigious events, and providing a warm welcome
when they arrive.
Given the realities we face going forward, we have much to do to in order to meet the stated
challenges head on.
What have we done to effectively respond to these many challenges and opportunities?
We started by creating a Strategic Plan in collaboration with our Board of Directors.
The obvious goals of ensuring safety and security are included, and we’ve added more where
our economic footprint and route development efforts are concerned.
We have been very vocal about our commitment to customer service, but we have taken it a
step further in this Plan.
While we don’t “own” every aspect of the travel process, we are taking ownership of customer
facilitation by providing the tools that will help our passengers travel effortlessly.
In other words, even if your travel difficulty is not our responsibility, we will help you.
To that end, we launched a mobile app, called FlyCanada, which provides the tools and
information that our clients need, with push notifications and alerts that will be particularly
useful as the winter season’s sun flights are getting into full swing, and as the weather starts to
affect schedules and passengers.
You can even pre-book your parking spot in the Parkade via the app, save yourself some
money, and ensure your car is not covered in snow when you return from Florida in February.
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We hope that initiatives such as FlyCanada and our ongoing campus-wide efforts to delight our
clients will differentiate us, and perhaps make someone think twice about driving to a US
airport or to Montreal when they make their travel plans.
One last thing that I would like to talk about is our commitment to this this region.
We exist to serve this community, and we take that responsibility very seriously.
Among the many events we participate is our own in-house charitable initiative called Project
Clear Skies, which is well known in charitable circles, but perhaps not as much in the general
public.
Le Projet ensoleillement assure aux organismes de bienfaisance de la région d’OttawaGatineau les fonds dont ils ont grandement besoin pour financer leurs projets
d’immobilisations.
Ce sont en général des projets qui ne sont pas admissibles à une aide financière auprès d’autres
sources.
Since the program’s inception, 10 years ago, we have funded 1.2 million dollars-worth of
projects in our region. This, is in addition to the other support we provide local charities in the
form of sponsorships, donations and volunteer time.
We are well known for our annual Plane Pull Challenge for Charity, which we host each
September.
This year we were thrilled to have our hometown airline joining in the fun, as we brought
thousands of people together at the airport, and teams of 20 competed to see who could pull a
First Air 737 the quickest.
Not surprisingly, the team that takes the event the most seriously – the Airport taxi drivers –
won the event again this year.
In reality of course, the community was the winner, as the event raised $50,000 Project Clear
Skies and our event partner, the Sens Foundation.
We look forward to all of YOU competing in 2015 when we celebrate our 10th Anniversary!
That, in a nutshell, is the Ottawa International Airport Authority.
We have enjoyed much success since 1997, and much of that success is thanks to the support
of the community, including many of you.
We appreciate it enormously and are doing everything to continue to earn that support each
day.
Mark Laroche
Eggs N Icons Breakfast Address
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December 3 , 2014
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If you take anything from this presentation, I hope it is that the airport is a very important part
of this community, and that it needs the community’s ongoing support if it is to continue to
connect Ottawa-Gatineau with the world.
In closing, I hope that if you have travel plans in your future, whether business or leisure, you
will choose to fly Ottawa first.
Here’s one more glimpse of the Airport…..
Je vous remercie. Si vous avez à vous déplacer, faites bon voyage et joyeuses Fêtes à tous.
Mark Laroche
Eggs N Icons Breakfast Address
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December 3 , 2014
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