Sweeping changes are being made at Vancouver International Airport (YVR) in response to its direct impact by the accelerating global aviation depression, as a result of COVID-19.
The airport announced on Friday it is now forecasting a 40% to 50% year-over-year decline in passengers in 2020, which would bring passenger numbers from the record of 26.4 million in 2019 to as low as approximately 13 million this year.
This passenger figure estimate for 2020 translates into the lowest passenger traffic volumes at YVR since 1995, when the airport saw about 12 million passengers and just a year before the completion of the modernized and expanded terminal facilities.
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Currently, the airport is experiencing between 10,000 and 20,000 passengers per day — down from the 70,000 per day it typically sees during the busy March spring break period.
“These numbers will continue to decline as Canadians finally make their way home, our visitors leave the country, and as other restrictions take effect around the world,” warned Craig Richmond, president and CEO of YVR.
He expects US transborder and international passenger volumes to further drop to near zero in the weeks to come, while domestic traffic will fall to about 30% of its normal volume.
For context in January, when aviation operations and passenger volumes were still relatively stable and largely unaffected by the coronavirus, YVR saw about 942,000 domestic passengers and two million international passengers, including 495,000 US transborder passengers.
“Frankly, it’s going to get worse before it gets better, and you’ll notice it as you won’t see as many planes in the sky,” he said. “The impact can be seen and felt everywhere in closed stores, empty terminal spaces, and open parking stalls.
“No person or industry has been spared, and this is very apparent with global aviation, which is facing a crisis that surpasses 9/11, SARS, and the global economic downturn in terms of longevity, depth, and human cost. It’s the biggest challenge YVR has faced.”
With plummeting revenues, Richmond says the Vancouver Airport Authority anticipates Sea Island businesses that depend on the airport’s activity will have to lay off 50% of their staff.
As well, airport authority staff — about 500 people — are being redeployed to key roles, and new hiring has been suspended, with a deep focus on critical roles. And just weeks earlier, YVR suspended its green coat volunteer program.
The not-for-profit entity does not receive any funding from any governments, and has had a self-sustaining financial business model since the authority was formed in 1992. In 2018, aeronautical revenues from airline usage fees accounted for 25%, totalling $143 million, while non-aeronautical revenues — such as parking, food and beverage, and retail, including McArthurGlen Vancouver Airport Outlet Mall — account for 44% or $250 million.
The airport is focusing on ensuring it has sufficient cash for its operations, and is now seeking for potential assistance from government, including a relief from the federal government’s annual rent of about $60 million. It will also use its AAA credit rating to help weather through the crisis.
“To every airport worker, please know we’re doing everything in our power to support your eventual return,” said Richmond. “We’re doing everything we can to protect airport authority jobs, because we have an amazing, highly skilled team that will be needed for the recovery.”
As another measure, Richmond says the authority is cutting its operating costs, reducing its active terminal footprint given that the current passenger and aircraft capacity does not warrant the use of the entire sprawling terminal building.
A terminal consolidation plan centralizing resources is being implemented, with the first phase of shutting down 11% of the terminal building now complete. If necessary, the terminal building’s active use can be reduced to just 42%, and operation levels can be diminished to just 15% of normal levels.
As additional terminal capacity is not needed today and for the foreseeable future, YVR has just suspended ongoing construction and implementation work of its $9.1 billion, 20-year expansion and improvement project.
The first components of this project include the suspension of the construction of the parkade expansion, new geoexchange and central utilities building, and the major Pier D expansion of the international terminal building.
The terminal building expansion — adding eight new gates and new retail, food, and amenities — was to reach completion in June 2020. That is no longer the case, with construction before the pandemic supporting 2,000 jobs on-site and another 2,000 jobs off-site.
Moreover, most recently, the airport improvement fee (AIF) collected from every passenger raised about $172 million annually for YVR to fund new construction and renovations. But for now, with highly unstable passenger traffic volumes, it can no longer count on the AIF to raise a majority of the funding required for airport improvements.
There is no telling when the pandemic or the government restrictions and airline route cancellations will ease.
And it took years for airports and airlines around the world to recover to their normal levels after 9/11 and the 2008 financial crisis, but COVID-19 is markedly worse, with the makings of being the largest global shock since the Second World War.
“We’ve always had a focus on planning decades out and building responsibly, but it’s difficult to know when we’ll be able to restart some of these projects given the uncertainty,” he said, adding that the halt on construction is also driven by the need for the health safety of construction crews.
The airport will remain open, as it is a critical hub in Canada for supply chains, including freight carrying food and medicine.
But with the airport operating with just a small fraction of its usual traffic, its economic impact has been immense. Its activity supports 26,000 jobs on Sea Island and over 100,000 jobs across the province.
In November of last year, Richmond announced he would be retiring this June, ending seven years in the leadership role of the airport authority.
However, given the crisis the airport faces and the unlikelihood of finding a replacement given the current conditions, he will stay on as the airport authority’s president and CEO temporarily until further notice.
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Editor’s note: This article has been edited to clarify layoffs are impacting Sea Island workers, not Vancouver Airport Authority staff.