The Airport Authority earns revenue from three main sources:
- Aeronautical revenue: The Airport Authority collects landing and terminal fees to recover the operating and capital costs related to airline operations. This revenue amounted to $127.2 million in 2016, a decrease of $12.2 million from $139.4 million in 2015. In 2016, the Airport Authority introduced ConnectYVR, an innovative five-year program that freezes aeronautical rates for five years designed to incent growth and efficiency. ConnectYVR incents carriers to utilize the same aircraft gates for flights to allow the Airport Authority to best utilize its terminal infrastructure.
- Non-aeronautical revenue: This includes revenue from concessions, such as duty free and advertising, as well as car parking, kiosks and terminal and land rents. Revenue from these sources amounted to $212.1 million in 2016, an increase of $3.7 million from $208.4* million in 2015, due mainly to the increased concessions and car parking revenue partially offset by the decreased grant and kiosk revenue.
- Airport Improvement Fee (AIF): The revenue earned from aeronautical and non-aeronautical sources is not sufficient to cover both the costs of operating the airport and the required capital projects. To fund capital projects, the Airport Authority collects an Airport Improvement Fee (AIF). Total revenue earned in 2016 was $150.4 million, an increase of $13.5 million from $136.9 million in 2015, due mainly to the 9.7 per cent growth in passenger traffic over 2015. YVR’s AIF remains one of the lowest of the major airports in Canada and continues to provide one of the lowest fees for travel within B.C. and the Yukon.
* On page 49 of YVR’s 2015 Annual & Sustainability Report, we reported 2015 Non-Aeronautical Revenue as $219.5 million, which included $11.1 million for a fee that is no longer discretely charged and is now incorporated into our ConnectYVR rates and charges program. Therefore, the overall number was adjusted to reflect a year-over-year comparison.
Non-AIF revenue goes towards covering the costs of operating the airport, which include salaries, wages and benefits, materials, supplies and services, payments in lieu of taxes and insurance. In 2016, these costs increased to $190.6 million, an increase of $12.9 million from 2015. These increases were mainly due to materials, supplies and service costs for snow operations, marketing, baggage sortation, terminal repair and maintenance, legal services, customer care and cleaning, while salaries, wages and benefits costs increased based on the negotiated wage increases per the Collective Bargaining Agreement as well as from an increase in the number of employees.
The Airport Authority also uses a portion of its revenue to pay rent to the federal government under the Ground Lease, which amounted to $50.6 million in 2016, an increase of $1.3 million from 2015. The increase in rent resulted from the increase of the Airport Authority’s revenue upon which the rent payment is based. The Airport Authority also paid $16.2 million to City of Richmond, with a minor contribution to City of Vancouver, for payments in lieu of taxes.
Economic Impact: As a community-based organization, YVR is committed to providing economic benefits to the region. We are a jobs generator, a community contributor and a hub of innovation.
The total cash needed to pay for capital projects can exceed the amount available after payment of operating costs, ground lease and interest costs. In these situations, debt financing is required. The Airport Authority takes a conservative approach to debt levels and strives to achieve a reasonable balance between debt and sources of revenue. Consistent with the prior year, the Airport Authority had $550.0 million in outstanding debt financing consisting of a series of three long-term debentures with fixed interest rates and varying maturity dates. Interest cost, which included interest payments, standby fees and service charges, amounted to $29.9 million in 2016, a decrease of $1.6 million from 2015 due to the lower interest expense associated with the issuance of a 30-year Series F debenture ($200 million, 3.857 per cent) that replaced the matured Series E debenture ($200 million, 5.050 per cent) in November 2015.
As required under generally accepted accounting principles and in the statement of operations, the costs of capital projects are spread over the useful life of the assets, as opposed to being recognized as the total cash paid for the projects in the current year. This spreading of cost over the useful life is reflected as amortization on the statement of operations, which is a non-cash charge. Total amortization in 2016 amounted to $137.9 million, an increase of $9.4 million from 2015 as a result of new facilities that came into operation.
The Airport Authority earned $4.8 million in partnership income from the rental of buildings owned by the Airport Authority.
Total excess of revenue over expenses, which includes amortization, was $84.0 million in 2016, a decrease of $16.0 million from 2015. When amortization, a non-cash item, is removed, the Airport Authority generated $199.1 million of net cash flow, prior to its investment in capital projects.
During 2016, the Airport Authority invested $160.2 million in capital projects. The capital projects included baggage system upgrades, Runway End Safety Areas, the A-B Connector and District Energy.
In order to pay for these capital projects, the following amounts were used:
- Net cash flow (excluding AIF) of $54.7 million.
- Net AIF in the amount of $144.4 million.
These amounts in total were more than sufficient to pay for the 2016 capital project costs, which when combined with the cash available at the start of the year leaves $159.7 million in cash available to pay for capital projects in 2017 and future years.