Traffic collapse means ADM needs a loan to fund REM
Drastic drop in traffic, revenue means financial aid needed to build REM station
The COVID -19 pandemic has hit the civil aviation industry hard and with no real revenues coming in, Aéroports de Montréal says it won’t be able to contribute its part of the REM line as its forecasts do not see things improving soon.
Pierre Elliott Trudeau International Airport in Dorval was designated in March by the federal government as one of four airports in Canada to remain open to receive the relatively small number of international flights considered essential during the pandemic. ADM executives who spoke during the airport authority’s annual meeting on Monday characterized this as a burden for an airport whose revenues have dropped by 98 per cent since February.
Overall, ADM anticipates a 60-per-cent drop in traffic for 2020. The figure is much bleaker than what they anticipated in April as they now realize that it will take much longer for civil aviation to fully recover than what was estimated at the start of the crisis, said Ginette Maillé, ADM’S vice-president of finance.
She added that ADM has to pay off its debt while having to remain open for international flights carrying, for example, supplies for health-care employees “while our revenues are quasi non-existent.”
To deal with the lack of liquidity, the airport authority has cut costs by shutting down sections of the airport. It also “successfully completed an unprecedented bond issue for the organization amounting to $500 million at the lowest-ever rate. This will enable ADM to finance its corporate activities and continue some of its capital projects,” Maillé said, adding that ADM’S credit ratings have not been affected by the hardship.
ADM president and CEO Philippe Rainville said he never thought we would have to address an ADM annual meeting “in such a difficult and uncertain context.”
“COVID-19 and the closure of borders has caused the collapse of aviation traffic. No other event of this magnitude has arisen since the start of civil aviation,” Rainville said.
“Traffic collapsed. The decline was 48 per cent in March. In April, the drop was 97 per cent, and in May it was 98 per cent. For an airport authority manager, these figures are staggering. The dramatic drop in passenger numbers is obviously affecting our revenues proportionately.”
Rainville said that while building the REM station at the airport remains a priority, the reality of ADM’S revenues being reduced so drastically means it needs financial aid to do its part.
“In the short term, we will have to make choices to explain the possibility of reviewing or frankly stopping the project to be able to maintain our activities and our development as an international airport,” he said.
The overall costs of renovating the airport, between this year and 2035, are estimated at $2.5 billion. That will include creating another 10 to 15 gates for a 30-per-cent increase in the airport’s capacity. The cost of the REM project at Dorval, which is supposed to start later this year, is estimated to be between $500 million and $600 million, Rainville told reporters after Monday’s annual meeting.
Last week, Rainville made a public appeal to the federal and provincial governments seeking “a loan with flexible repayment terms” to help ADM build the airport’s REM station. On Monday, Rainville said he hasn’t received an answer yet.
The CEO said 2020 has been especially “brutal” because 2019 was a record one for the airport authority. Last year, the number of passengers who used Trudeau airport for arrivals and departures reached 20.3 million, an increase of 4.5 per cent over the previous year. International traffic increased 9.3 per cent.
Danielle Laberge, ADM’S chairperson, opened the meeting by saying it almost “seems futile” to report 2019’s progress given the reality of 2020.
After the meeting, Rainville was asked by a reporter if closing the airport in March was an option taken away when the federal government designated it as one of the four that had to stay open.
“I think we would have had to provide an essential service, but we could have been more strict about the hours we remained open. We are trying to accommodate and reduce our costs, so I think we could have been more strict on how many flights arrived at Montreal Trudeau,” Rainville said. “But for now we are able to operate in the current context.”