Winnipeg airport debt nearly triples over 9 years, now stands at $728M

Long-term debt at Winnipeg's airport has nearly tripled over the past decade to $728 million, but officials say they're managing the liability responsibly.

Long-term debt incurred to pay for Richardson International's modernization

The construction of this terminal at Richardson International Airport in 2011 contributed to a tripling of airports-authority debt over the course of a decade. (CBC)

Long-term debt at Winnipeg's airport has nearly tripled over the past decade to $728 million, but officials say they're managing the liability responsibly.

At the end of 2008, the Winnipeg Airports Authority (WAA) reported $256 million worth of long-term debt.

The authority's long-term debt stood at $728 million at the end of 2017, the most recent year captured by a WAA annual report.

Most of the rise in debt can be attributed to Richardson International Airport's new terminal, which opened in 2011, as well as other improvements and expansions undertaken in an effort to increase passenger and cargo traffic.

WAA vice-president Tyler MacAfee said the expenditure was worth it.

"The airport has become a real source of pride in the community," MacAfee said Monday in an interview at the airport. "There's a cost associated to that, for sure, and that's something that we're vigorously dealing with now."

MacAfee said the airports authority plans to reduce its debt without relying on significant increases to the airport's improvement fee, which stands at $25 per passenger. The debt does not represent a risk to the organization, he added.

"I don't think we have concerns about sustainability," he said. "We are running the airport in a really fiscally prudent way. We made the decision to invest in a new airport, and we've seen the benefits. I mean we see the carriers coming in, and we've seen increased traffic. I mean we're at almost a million more people than we were in 2012."

Approximately 4.5 million passengers travelled through Richardson International in 2018, a rise of 200,000 from the previous year. MacAfee attributed part of the increase to the addition of new direct flights to destinations such as Miami and Tampa, Fla., on seasonal routes operated by Flair, a newer carrier.

MacAfee also touted a rise in air-cargo traffic through Winnipeg as evidence of the need to make additional investments in the airport. 

For now, the WAA continues to post modest deficits every year, mainly because of the cost of servicing the airport's overall debt.

In 2017, the WAA posted a $26.1-million profit prior to making $32.8 million in interest payments, according to its annual report.

The WAA also incurred  $124 million worth of new debt in 2017, but plans to use these funds to retire $135 million worth of bonds that will come due in 2019.

MacAfee explained the move was, in essence, a hedge against the prospect of higher interest rates in the future.

"It's a strategic decision we made, seeing where the market was going with interest rates," he said. "We decided that the best bet for us, at that point, was to borrow early so that we could pay off the bond that was coming due."

Winnipeg Airports Authority vice-president Tyler MacAfee said the investments into Richardson International Airport have paid off. (Warren Kay/CBC)

The WAA has another $111 million worth of bonds coming due in 2022, by which time it expects annual interest payments to drop to $27 million, according to its annual report.

The lower interest payment, combined with increased passenger and cargo revenue, could allow the WAA to begin posting annual profits during the next decade.

MacAfee said the WAA plans to pull out of annual deficits without raising airport improvement fees.

"Our goal is certainly to try to hold that constant," he said.

Todd MacKay of the Canadian Taxpayers Federation said consumers ought to keep an eye on those fees, given this revenue is paying back the borrowing that financed the airport's renovation and expansion.

"We all like nice things, but we all know there's risks associated with borrowing" MacKay said. "Hopefully, the airport authority is being really careful on that front."


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