ModalisInfrastructure
Partners Inc.
bringing a world of experience to the airport industry
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Phase II: YQL Business Planning & Development
Updated Jan 24, 2020
Phase I - YQL Operations & Management Assessment
Contents
Phase I - Operations & Management Assessment
• Methodology
• General Outputs
• Key Observations & Recommendations
Phase II: Business Planning & Development
• Strategic Assessment & Approach
• Traffic & Revenues
• Operations
• Marketing & Stakeholder Communication
• Capital Improvements
• Corporate Governance
• Economic Impact
• Recommendations for Discussion/Consideration
Methodology
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Approach & Methodology
• Assessment based on ISO 9001 and 18001 principles
• Focus on Regulatory Compliance and Opportunities for Improvement
• To include Stakeholder Engagement and input
• Findings and Recommendations issued for review and approval by City of Lethbridge
• Improvement plans drawn for inclusion in Phase III
Airport Management
Safety Management
Environment
Airport Organization
Airport Assets
Aerodrome Operations
Aviation Security
General Approach
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General Outputs• Effective airport operations and management, ahead of similar regional airports
• Airport generally meets, and in some cases, exceeds its regulatory requirements
• New and dynamic airport team, however too lean to take on additional duties
• Very robust safety management approach, which exceeds what would normally be expected of an airport of its size
• Excellent in-house computer-based management system - risk management, safety management, wildlife, personnel training, inspections, etc.
• Well maintained assets however aging infrastructure lacks resilience in areas -in particular, the Airfield Ground Lighting (AGL) system
• Compliant Aviation Security Plan however development of Security Management System (SeMS) in anticipation of incoming/new regulations
• Development of Environmental Management Plan (EMP) recommended
Key Observations & Recommendations
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Key Observations & Recommendations• CCompliance: A number of small non-compliances were observed, notably the absense of a
standing Airport Security Committee. It is recommended that these non-compliances are addressed in the short term.
• Organization: The airport organization lacks the additional resources required towards (a)administration assistance and (b) future security management requirements. It is recommended that additional resources are considered to address these gaps.
• Management: Absense of a comprehensive set of Key Performance Indicators (KPIs) to support day-to-day operations as well as management activities and associated decision making. It is recommended that a Balanced Scorecard set of KPIs are developed/introduced
• Aerodrome Assets: Airfield Ground Lighting system is well maintained but in precarious condition as components are no longer available. It is recommended that a short-term contingency plan for AGL failure is developed.
Key Observations & Recommendations (continued)
• AAerodrome Assets: Commercial aircraft operations take place in Apron I which has no dedicated aircraft stand markings. It is recommended that an apron stand marking design is completed and markings implemented.
• Airport Assets: The Air Terminal Building is outdated and under capacity as it only offers one boarding gate which is currently used occasionally for dual flight boarding. In addition, the terminal building systems (electrical, HVAC) are outdated and are increasingly difficult to maintain. It is recommended that short, medium and long-term plans for terminal improvement and eventual extension are developed and implemented.
• Security: While an Airport Security Program is in place at the airport, no regular and on-going management of security activities takes place. It is recommended that an Aviation Security Management Plan is developed and implemented.
• Environment: No environment management plan is in place at the airport. It is recommended that an environment management plan is developed and implemented.
Strategic Assessment & Approach
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Business Plan Table of Contents11. Introduction
1.1.Background
1.2.Study Scope
1.3.Study Approach
2. Observations
2.1.Interviews and Site Visit Observations
2.2.SWOT
2.3.Other Plans and Information
3. Strategic Direction
4. Traffic
4.1.Historical Traffic
4.2.Current Traffic
4.3.Preliminary Projections
4.4.Air Service Development (ASD)
4.5.Strategic Action
5. Revenues
5.1. Existing Airport Revenues
5.2. Aeronautical Revenues
5.3. Non-Aeronautical Revenues
5.4. Potential Opportunities
5.5. Strategic Actions
6. Operations
6.1.Phase I Key Findings
6.2.Organization
6.3.Operating Expenses
6.4.Key Performance Indicators
6.5.Strategic Actions
7. Strategic and Marketing Planning
7.1.Strategic Plan
7.2.Marketing
7.3.Strategic Actions
8. Capital Expenses
8.1.ATB facelift – immediate projects
8.2.Airfield Ground Lighting
8.3.Indicative Capital Expense Program
8.4.Strategic Actions
9. Governance
9.1.Governance Structure
9.2.Strategic Actions
10. Economic Impact Potential
10.1.Introduction
10.2.Categories of Economic Impact
10.3.Quality of Life Benefits (non-economic)
10.4.Airport Case Studies
11. Risk Matrix
12. Summary of Strategic Actions
Modular Approach through Workstreams• Assessment of all key areas of operations lead to recommendations if and as required
SWOT Summary
StrengthsNew owner ready to invest in and further develop the airportGood air service with six flights a dayShort distance from curb to aircraft seat with effective passenger movementsLarge catchment area with stronggovernment and institutional travel
WeaknessesAging and somewhat outdated infrastructure
Overall service levels related to the total passenger experience
Opportunities900 acres of land can be developed
ATB upgrade, improved service-level, create “sense of place”“Sleeping” asset can be better utilized
ThreatsLow average load factors
Lack of adequate external funding for required upgradesTraffic leakage
Two-pronged Path to Profitability
• Passenger Traffic Growth• Maximize utilization of
aviation assets on site• Implement marketing
strategy to secure and grow current traffic levels and related businesses
• Strategic Land Development• Integrate the airport land
market/managed with other City-held land/economic development initiatives
• Provide services and utilities for a long-term approach to revenue generation
Traffic & Revenues
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Solid Traffic Growth• 52.0% growth in 2018• 19.2% growth in 2019
Limited Seasonal Variations
• The instant monthly increase after added seat supply indicates pent up demand
• Stable monthly traffic levels are good for airline planning and aircraft utilization
2015 2016 2017 2018 2019
Cancelled Flights in 2019
Total Operated Cancelled % operated
AC 2,688 2,608 80 97.0%WestJet 2,049 1,982 67 96.7%Total 4,737 4,590 147 96.9%
2019
Month CancelledJan 12.9%Feb 24.5%Mar 10.2%Apr 1.4%May 3.4%Jun 1.4%Jul 6.8%Aug 3.4%Sep 17.0%Oct 1.4%Nov 12.2%Dec 5.4%
100.0%
• Cancelled flights limited to 3.1% of total scheduled flights
Revenue Mix in Line with Canadian Regionals
• PFF: 38% / Aero: 22% / Non-Aero: 40%
• Non-aero revenue generation ensures competitive aero fees and charges
• Airlines generally prefer per passenger fees
Commercial Development
Car Rental
Advertising
ATM
F&B
Parking
Solid revenue growth; single operator, issue RFP for lease/concession
No advertising today; seek feedback from market, issue RFP is positive
Basic service level and nominal revenue
Insufficient traffic for full outletExplore opportunity for delivery from local operation
Review/optimize parking fee structure. Collect parking data to analyze need for overflow lot
Land Development
Power Generation
900 acres of land available to be developed in conjunction with City industrial developmentconcept planning (i.e. Distribution Hub); can attract similar and complementary tenants
Common approach at airports as technology develops. Generates higher value from land that has otherwise limited development potential due to height restrictions and security considerations.Three-pronged study in planning stages (feasibility, investment, governance)
• Focus on new business generation
Operations
21211212
Site Organization
• Propose to add one staff (Reception) to back fill for a new position as Admin and Security Support
• Short term City and external resources required to create a commercial focus
• The Airport Manager needs to eventually ”own” the commercial development activities
• Choice of governance structure may significantly impact the organization and workload
• Roughly $2.4 million in operating expenses expected for 2019
e
• Currently, YQL has a lean organization with a strong operational focus
Additional OPEX • Rough order of magnitude additional OPEX for the next six years
2020 2021 2022 2023 2024 2025+
StaffAdministration and
Security Support122,000$ 122,000$ 122,000$ 122,000$ 122,000$ 122,000$
Professional ServicesForecast, Route
Profitability and Route Development Study
24,000$
Professional Services Surveys 18,000$ 5,000$ 5,000$ 5,000$ 5,000$ 5,000$
Legal ServicesLegal Drafting / RFP
Implementation20,000$ 10,000$ 5,000$ 5,000$ 5,000$ 5,000$
MarketingAirport Marketing
Initiatives25,000$ 25,000$ 25,000$ 25,000$ 25,000$ 25,000$
Professional Services Modalis Phase III Services 87,230$ 77,730$ 77,730$ 77,730$ 77,730$
Professional ServicesCommercial Development
Support 25,000$ 25,000$
TOTAL 321,230$ 264,730$ 234,730$ 234,730$ 234,730$ 157,000$ (*) Initial estimates based on current assumptions, excluding inflation
OPEX Area Development Initiative Indicative Values (*)
Marketing & Stakeholder Communication
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Marketing Mind Map
Market Research & Development
• Passenger profiles and detailed market knowledge leads to efficient air service proposals
• Route development is driven by external and local demand as well as quality of facilities, pricing strategies and close airport/airline dialogue
TRAFFIC FORECAST
ROUTE PROFIT-ABILITY
DEMAND RESEARCH
AIRPORT STRATEGY
AIR SERVICE MARKETING
AIRPORT SURVEYS
DESTINATIONS and
FREQUENCIES
Marketing Initiatives• Local marketing and stakeholder communication often overlap
BRANDING CORPORATE CITIZEN COMMUNITY ENGAGEMENT NICHE MARKETING
Seamless continuum of a safe, secure, on time,
efficient, hassle free and pleasing experience
Support charities, provide opportunities
for students locally, offer terminal space
for local artists
mYQL campaign:Relate to the emotional aspect of “owning” the
airport, personal stories, promotional
material
Cost effective to connect at YYC,
“One-Stop to the World” through YYC,
Convenience and choice
Stakeholder Engagement• A structured stakeholder communication plan is good local marketing
Stakeholder Groups Key Issues & Activities Main Communication Methods, Tools & Resources
Elected Representatives
AAirport Staff
Business Plan development Meetings and reports
Telephone calls / emails
Air Service Providers
AAirside / Groundside Tenants
Agencies
Current state of affairs, issues and challenges, plans and (strategic) activities
Airport plans
Introductory letter/emails, presentations, meetings, e-mail communications, bulletins/updates, website, social media
Scheduled meetings
Other Significant Groups
Inform community about on-going activities and plans
Seek input related to service levels, types of services
Introductory letter/emails, bulletins/updates, website, social media
Survey, general on demand information (social media, website), ability to comment and send feedback
General Public
Inform community about on-going activities and plans
Seek input related to service levels, types of services
Introductory letter/emails, bulletins/updates, website, social media
Survey, general on demand information ((social media, website), ability to comment and send feedback
Note: Activity plan under development
Capital Improvements
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ATB upgrade
• Undersized hold-room for multiple departures
• Lack of washrooms in the hold-room• Aged facility with no sense of place • End of life mechanical systems• Lack of water fountain or water bottle• Upgraded facilities will be a key feature to
increase service levels and passenger satisfaction
• Sufficient total area based on “rule-of-thumb” of 1,000m2 per 100,000 pax, however current layout is inefficient/sub-optimal
• Current ATB no longer fit-for-purpose
Airfield Ground Lighting System (AGL)
• System is well maintained however parts and components are no longer available due to the age/obsolesces
• A long-term project/solution is already in the planning stage
• Application for ACAP funding in process
• AGL in urgent need of replacement
CAPEX
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
CAPEX Estimates by Requirement(2020 - 2033)
Required Development I Development II
• An estimated $7.5 million in capex required the next two years• Required: Upkeep/rehabilitation for ongoing operations and pax processing
(AGL, ATB, other ACAP projects)• Development Enablers I: Required to further develop the Airport as a commercial enterprise• Development Enablers II: Long-term investments for airside safety and preparation for expansion
Corporate Governance
33333333
Broad Spectrum of Governance Models
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• What is the “right” direction for YQL’s future?
- Every airport is s unique with its own “DNA” … so there is no single answer !- The question can only be answered once a series of “qualifiers” are thoroughly
considered/identified including;- who does the airport serve, who are the clients/customers?- what are the opportunities and obstacles to growth/development? - what are the key drivers (i.e.: growth, service-levels, safety, etc.)- who bears the various risks (i.e.: political, operational, financial, etc.)?
- - Ultimately, it comes down to determining the desired ,
d levele -el-ofoo -, )
ff-controlto be retained/delegated versus
etermining ts transfer
ng te -
g tr-of
thtoo -
desiredd leveeel oooff ontrolocdhehff-risk and accountability
Government Department/Agency
Not-for-Profit Authority or Commission
Management Contract
Private Ownership& Operation
Government-owned Corporation
Airport Governance & Oversight Continuum
Government Committee/Board
Private Concession
Joint Venture
Focus on Three Governance Options
Option + ve - ve
City Department - Easy implemnetation, managed as other City assets and operations
- Might require more flexibility and and commercial focus
Airport Authority/ (Commission)
- Tested under the AA Act - Regulates relationship with Federal Goverment under a not for profit structure
- Not applicable at YQL
Government CorporationMunicipal Corporation
- Allowing for clearer view of profit/loss, capital requirements and operational performance
- Can act in a commercial manner
- Dependent on the City (as owner) for some CAPEX funding
• Management Agreements (O&M, TSA) are often used to ensure a commercial focus and efficient operations
• Governance option will impact organization and should be determined within a short period of time
Economic Impact
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“A mile of road takes you a mile, a mile of runway can take you
anywhere”
Airports are Economic Drivers• Around one full time employee per thousand passengers is a common benchmark
Recommendations for Discussion/Consideration
38388383
Traffic Related
Business Areas and Actions
Description Intended Impacts
Long Term Forecast Generate a detailed long-term forecast, required to understand the long-term potential to retain and grow a solid traffic base to Calgary and to other destinations at a later stage
Support air-service development
Route Profitability Understand the yield on current routes (to Calgary and connections beyond) to understand the financial viability of the current operations
Support air-service development
Future Route DDevelopment
Analyse the cities with the highest demand from Lethbridge Support air-service development
Airport Surveys ((passengers)
Understand the passenger demographics, travel habits, destinations beyond YYC
Understand passengers view and desires at YQL
Measure current perceived levels of service (should be done every year or two to create a timeline of data)
Support air-service development
Support ATB business development
Support ATB business development and YQL operations
• A thorough undertsanding of passenger characteristics helps shape marketing and facility development
Revenue Initiatives• Immediate revenue opportunities should be implemented
Business Areas and Actions
Description Intended Impact
Land Leases - Draft and negotiate a standard land land-lease agreement with all tenants on site, including a scheduled rent increase over the next 3-5 years
- Develop the power generation concept- Plan, develop and implement land lease concepts (i.e. Distribution Hub)
Revenue growth
Terminal Leases • Review and negotiate amendments (if required) of leased space in the ATB Revenue growth
Car Rental • Develop an RFP and tender the car rental concession, selecting two proponents if the terms are attractive and acceptable
Revenue growth
Increase service levelsAdvertising • Develop an RFP and tender an advertising concession. Select one proponent if the
terms are attractive and acceptable, alternatively research the possibility of managing advertising in-house
Revenue growth
Enhance ATB appearance
ATM • Re-negotiate the terms of the ATM in the ATB Revenue growth
Parking • Assess parking rates and potentially decrease hours until a full day’s pay is required. Collect parking data to analyze need for overflow lot
Revenue growth
F&B • Explore opportunity for limited outlet with a local vendor or college Increase service levels
Operations• Enhance already solid operating procedures with additional tools
Business Area and Actions
Description Intended Impacts
Organization Secure additional support with regards to (a) administration support and (b) security management
Improved operations, add capacity for growth
Management Develop KPIs Decision making tool
Aerodrome Assets Develop contingency plan for the failure of the AGL Risk mitigation before replacement
Airport Assets Design ATB Increase service and capacity levels
Aerodrome OOperations
Design and implement Apron I aircraft stand plan Improved apron operations and safety
Security Develop, implement and provide on-going support to an Airport Security Management System
Improved operations
Environment Develop, implement and provide on-going support to an Airport Environmental Management System
Improved operations
Airport Security Implement Airport Security Committee Compliance
Marketing• Promotion, Community Engagement and Governance
Business Area and Actions
Description Intended Impact
Branding Develop the YQL brand Enhance YQL awareness
Good Corporate CCitizen
Engage in community charity projects Enhance YQL awareness
Community EEngagement
Engage in community organizations
Seek ventures with the University and College for student projects
Enhance YQL awareness
Governance Discuss, debate and analyze the most appropriate form of long term governance
Efficient and accountable governance structure leading to implementation of strategic initiatives
Indicative Budget (EBITDA)
434334334
EBITDA Positive in 2022• Estimates based on placeholder and simplified traffic projections
Performance per Pax
-10.0
-5.0
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
YQL Financial Estimated Performance per Pax(2018-2030)
Revenue per pax OPEX per pax EBITDA per pax
• Estimates based on placeholder and simplified traffic projections
Solid Short Term Revenue Growth
-5%
0%
5%
10%
15%
20%
25%
30%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Revenues and OPEX Growth(2019 - 2030)
Revenue growth OPEX growth
• 2019 and 2020 largely due to fee increases + select initiatives
Modalis Infrastructure Partners Inc.Oceanic PlazaSuite 2300-1066 West Hastings Street Vancouver, BC, Canada | V6E 3X2
Bringing a world of experience to the airport industry
Regional/Project Offices:London, United Kingdom
Tokyo, JapanSantiago, Chile
Kuala Lumpur, Malaysia
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