Victoria International Airport is projecting a 75-percent revenue drop this year
The pandemic has forced the industry to park its planes and wait for travel restrictions to be lifted—and consumer demand to rebound
When Geoff Dickson entered the aviation world 35 years ago, it was, he recalls, “quite a challenging time.” The federal government had just launched airline deregulation, and Dickson—hired as a financial analyst for Pacific Western Airlines—was helping the company shift from a “cost plus” structure to one where pricing and yield management were king.
Amalgamation in this new Wild West came fast and furious: Pacific Western purchased Canadian Pacific and became Canadian Airlines, before being swallowed whole by Air Canada in 2000. “It was a chaotic business, and the margins were skinny,” Dickson remembers.
Challenging might also describe the time he’s in now, too. Dickson has been president and CEO of the Victoria Airport Authority since January 2011. Last year, traffic at Canada’s 11th-busiest airport topped 1.9 million passengers—up 27 percent from when Dickson started—with Victoria International (YYJ) named one of CNN Travel’s “10 most loved airports in the world” in 2017. But as of mid-March, activity at Victoria, like many airports across Canada, has ground to a halt.
“Typically, we have 5,000 to 6,000 passengers a day go through the airport, and we immediately dropped to 1,000,” Dickson says. “By the time March was over, our business was down 50 percent year-over-year. Through the month of April, we were down 98 percent year-over-year. Just staggering.” For 2020, he’s projecting revenue will drop 75 percent.
As bad as things have been, Dickson and YYJ were better prepared than most for the “black swan event,” as he calls COVID-19. Victoria is one of only two major airports in Canada that are completely debt-free (the other is Saskatoon), which has allowed Dickson to spare the 55-person organization any layoffs. “I went to our board of directors early, and I said, Look, if I had 10 things to do in terms of cutting costs, layoffs would be No. 10,” he explains. “We are also taking advantage of the Canada Emergency Wage Subsidy, which is in place until August. We’re doing everything that we can.”
Until airline traffic picks up, much of the non-aviation revenue that airports rely upon—especially concessions and parking—won’t come back. For bigger airports such as YVR—where more than half of traffic comes from the U.S. and international markets—this period in the wilderness will be even longer. The Vancouver Airport Authority has had to lay off 25 percent of its 550 employees, with traffic at YVR projected to drop to as low as eight million passengers this year—down from over 26 million in 2019.
It will be an enormous challenge for YVR’s incoming CEO, Tamara Vrooman (who declined to talk to BCBusiness in advance of her July 1 start date), and throws the ambitious master plan inherited from her predecessor, Craig Richmond—with 75 major expansion projects on the books, slated to cost $9 billion over the next 20 years—up in the air.
“International traffic for YVR was huge, and that’s where their growth was, particularly in and out of China,” notes David Gillen, director of the Centre for Transportation Studies at UBC Sauder School of Business. “[YVR] is not going to grow nearly as fast as it was growing before. They might take a look at some of those projects and push them off into the future. Because the growth projections are simply not there. They’re not going to need that capacity at all.”
In the middle of 2020, few are willing to predict how quickly things might turn around for aviation. But according to Gillen, passengers should expect a fairly profound impact on the flying experience, similar to airport security post-9/11. “After SARS, I flew into Hong Kong, and they had thermal scanners there, right after you got off the plane,” he says. “If there was any indication at all [you were sick], you got put into a secondary treatment room. That’s the intelligent approach. To the extent that we don’t do that, I think it’s going to be a very slow comeback.”
Each and every airport process will have to be redesigned in the wake of COVID, from check-in to security screening, pre-departure screening to boarding; in early June, the International Civil Aviation Organization adopted new guidelines that could add up to two hours of pre-departure time for passengers at some airports. Just like safety is part of the culture of aviation, Gillen says, “hygiene now is going to be part of that culture as well.”
Geoff Dickson, for one, is up to the challenge. “Immediately, you’re going to see much more visible cleaning and sanitization and hand sanitizers,” he says. “You’re going to see much more visible physical separation and queuing.” He points out that many of the changes we associate with 9/11, including full-body screening, didn’t happen overnight, but down the road he expects more biometric technology at YYJ to recognize and isolate the health screening needs of a post-pandemic world.
“The experience will be different, but ultimately we’ll be judged relative to other airport experiences and how we make customers feel,” Dickson says. “We’re trying to do our best to make this new travel experience workable.”
From passengers to carriers, Victoria and Vancouver airports cater to different jet sets
YYJ - 86 percent
YVR - 48 percent
YYJ - 12 percent
YVR - 24 percent
YYJ - 2 percent
YVR - 28 percent
Airlines serving each airport
YYJ - 9
YVR - 56
Sources: Victoria Airport Authority, Vancouver Airport Authority