Yellowknife Airport: Governance and Revenue Generation June 2016

Purpose To provide an overview of the planned next steps for Yellowknife Airport governance and revenue generation options.

About YZF Yellowknife Airport is one of 26 Canadian Airports included in the National Airport System. NAS Airports are considered strategic infrastructure assets essential to Canada’s Air Transportation System. Yellowknife Airport handles 58,000 flights per year and over 500,000 passengers. Statistics Canada places Yellowknife in the top 20 Airports, with respect to passenger throughput. The Department of Transportation employs 32 people at the Airport: engaged in management, firefighting, trades and heavy equipment operations. On a national perspective, Yellowknife Airport compares with Prince George, BC; London, ON; and Charlottetown ,PEI, which operate successfully as Airport Authorities.

Current Operating Environment YZF provides value to the NWT by being a safe and cost-effectively managed Airport. The GNWT subsidizes the Airport operations by $4 million per year, and provides capital funding as part of the GNWT Capital Plan. The airport competes with hospitals, schools and all other GNWT programs for O&M and Capital funding. User fees and charges are much lower at YZF than at its peers. Decisions on the operation of YZF are politically influenced rather than based on business practices that airports require. YZF Governance has been a priority on GNWT’s work plan for several years. The GNWT’s current fiscal challenges provide the opportunity to consider increasing revenue and moving to a more suitable business environment.

Aircraft Turnaround Costs

Economic Impact of YZF 1000 people are employed directly through activity at the Yellowknife Airport. The Airport supports a total of 2000 jobs in a number of sectors. The Airport’s total economic impact, which includes supplier industries, is $170 million in direct GDP. Each job associated with the Airport results in $374,000 in direct output. Activity at the Airport contributes over $45 million in various forms of taxes. Yellowknife Airport improves connectivity to Canada and the world, and could functions as a catalyst to enhance business and tourism growth. YZF benefits industry, the City of Yellowknife and the territory as a whole.

Governance Options In 2015, the Program Review Office in Finance and the Department of Transportation engaged the Institute on Governance to review a number of different governance models, that range across a continuum. Government Department Special Operating Entity (Revolving Fund) Crown Corporation Airport Authority P3 Concession Privatization September 22, 2018

Benefits of Governance Change Most airports have moved away from traditional line department model for several key reasons Traditional inefficiencies associated with running a commercial operation in a government department In a business environment, clear price signals force change and adaptation Airports within line departments do not have the freedom to support infrastructure investment, economic development and business management practices airports require There is value in having community, air carrier, and business engagement in airport operations Arms length agencies are more opportunistic and entrepreneurial to pursue business development/economic growth opportunities. September 22, 2018

Findings of Governance Review As a government run airport, natural constraints of government operations have historically driven operational decisions and business management practices. Without changes to the governance and operations of the Yellowknife Airport, taxpayers will continue to subsidize YZF unnecessarily. With a revenue and expenditure structure in place similar to other airports, Yellowknife Airport could be self sustaining with all O&M and capital funded from airport revenue. The Airport would not require annual subsidies from the GNWT. With a change to governance, YZF could be more opportunistic and entrepreneurial to pursue business development/economic growth opportunities. Comprehensive change management will be needed in order to facilitate a change in governance. September 22, 2018

Current Status of Change Change to YZF Governance brought forward as part of budget reduction/revenue generation by DOT. Governance change included in GNWT 2016-2017 Budget Address Propose to establish a Revolving Fund in making a Governance change at YZF: All Revenues and expenses for YZF handled separately All user fees generated stay within YZF Dedicated source of funding for capital Fee increases will allow Yellowknife airport to be self-sustaining. September 22, 2018

Revenues Implement an Airport Improvement Fee for all outgoing flights: $20 per Southbound Passenger $10 per Northbound Passenger Increase existing aeronautical fees (Landing Fees, General Terminal Fees) by approximately 3.5 times to bring to industry average for similar sized airport The net impact to passengers is anticipated to be average of 3-4% on a southbound ticket and 1-2% on passengers travelling within the NWT. September 22, 2018

Next Steps Stakeholder Engagement Inform stakeholders and public Airline Consultative Committee (ACC) Promotion of YZF Economic Opportunities Economic Development Partnering Establish Airport Economic Advisory Council Liaison with Edmonton International Airport Complete Yellowknife Airport Business Plan Rates and Charges Study Capital Needs Analysis Develop Airport Agreements Airline Operating Agreements AIF/YZF Improvement Fee