Halifax International Airport Authority 2014 Business Plan STRENGTH THROUGH STRATEGY: Making It Happen Prepared in December, 2013 TABLE OF CONTENTS A EXECUTIVE SUMMARY ........................................................................................... 1 PLANNING PROCESS .................................................................................................. 1 2014 BUSINESS PLAN................................................................................................. 2 B STRATEGIC OVERVIEW ........................................................................................... 3 MISSION, VISION AND VALUES ................................................................................. 3 BUSINESS STRATEGIES .............................................................................................. 4 C 2014 PLAN ..................................................................................................................... 5 ECONOMIC OUTLOOK ............................................................................................... 5 Global Economy................................................................................................... 5 National View ...................................................................................................... 6 Regional View ...................................................................................................... 7 Aviation Industry ................................................................................................. 8 Halifax Stanfield International Airport ............................................................... 9 2014 GOALS ............................................................................................................. 11 FINANCIAL PLAN ...................................................................................................... 13 Revenue ............................................................................................................. 13 Expenses ............................................................................................................ 14 Capital Program ................................................................................................. 14 FINANCIAL SCHEDULES............................................................................................ 16 Proforma Balance Sheet ................................................................................... 16 Proforma Statement of Operations.................................................................. 17 Proforma Statement of Cash Flows .................................................................. 18 HALIFAX INTERNATIONAL AIRPORT AUTHORITY -i- 2014 BUSINESS PLAN Prepared in December, 2013 A EXECUTIVE SUMMARY PLANNING PROCESS Halifax International Airport Authority (HIAA) has a four-tiered planning process to guide airport operations and development in the short, medium and long term. The 20-year Master Plan serves as a framework to guide the long-term development of the facility to meet the needs of the community, our stakeholders and the industry. The 10-year Capital and Financial Plan determines HIAA’s infrastructure and funding requirements over the plan timeline. The Strategic Plan covers a five-year period and includes our Mission, Vision, Values and Goals. It also includes an assessment of the general economic conditions expected to prevail, as well as an evaluation of the current and future state of the aviation industry. The annual Business Plan draws its direction from the Strategic Plan and creates specific, measurable, actionable, results-oriented, and time-linked goals to support our long-term strategies. HALIFAX INTERNATIONAL AIRPORT AUTHORITY -1- 2014 BUSINESS PLAN Prepared in December, 2013 2014 BUSINESS PLAN The 2014 Business Plan for Halifax International Airport Authority (HIAA) has been developed using the 2013-2017 Strategic Plan, and it sets forth the business strategies and goals for the upcoming fiscal year from both a qualitative and quantitative perspective. Downside risks continue to exist and are associated with U.S. monetary policy and slowing growth in the emerging economies. As air transportation is a derived demand linked to economic growth, the above factors indicate that demand for air passenger and cargo services to and from Halifax will remain uncertain. The theme for the 2014 Business Plan is “Strength through Strategy – Making It Happen.” In 2014, HIAA will focus on the recovery of airline seat capacity, growth in aeronautical revenue, and development of non-aeronautical revenue. From an aeronautical standpoint, HIAA will concentrate on promoting and growing opportunities in both passenger and cargo services. A number of business strategies are planned to advance increases in cargo with the extended runway, and passenger volumes through joint partnerships and service offerings. Overall, the economic uncertainty and the stringent capacity discipline by North American airlines is expected to continue in 2014 and has led to a conservative outlook for Halifax Stanfield International Airport (HSIA) in terms of passenger and capacity projections. Passenger growth is budgeted to be 1.1% with airline seat capacity budgeted to increase by 1.4% in 2014. Operating revenue for 2014 is budgeted at $55.7 million, which represents an increase of 5.0% over the 2013 forecasted operating revenue. The budget for net Airport Improvement Fee (AIF) revenue is $33.9 million for the year, a slight increase over 2013 forecast. On the non-aeronautical side, there will be a focus on diversifying revenue through the growth of non-aeronautical opportunities. This will be accomplished through progress of the commercial development plan and expansion of the domestic/international hold room to create new leasable space. HIAA will continue to build on its culture of service excellence through “The Stanfield Way” program. Operating expenses for 2014 are budgeted at $51.2 million, a 4.3% increase over the 2013 forecast. HIAA’s operating margin is budgeted at $4.5 million in 2014. The bottom line excess of revenue over expenses is budgeted to be $4.5 million for 2014, as other non operating revenues are anticipated to be offset by other non operating expenses. The economic outlook indicates that the global economy will remain relatively weak, however the latest indicators point to somewhat better prospects in the near term with a moderate acceleration of activity, driven largely by the advanced economies. Also, the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is expected to bring additional growth opportunities, especially in the regional cargo market with the easing of tariffs on fish and seafood products. HALIFAX INTERNATIONAL AIRPORT AUTHORITY Capital investment in 2014 will concentrate on check-in and passenger processing improvements; advancing the commercial development plan; groundside road circulation improvements; and hold room concession development. The total estimated capital investment for 2014 is $44.5 million. -2- 2014 BUSINESS PLAN Prepared in December, 2013 B STRATEGIC OVERVIEW MISSION, VISION AND VALUES In 2012, as part of the Strategic Planning process, HIAA updated its Mission, Vision and Values as follows: Mission Values A world-class airport creating prosperity for our region by connecting Atlantic Canada to the world through flight At Halifax International Airport Authority, we are a team with a common vision and mission. The foundation of our vision and mission is built upon our core values. We are committed to these values to guide us in our decisions, actions, and behaviours, to support the success of the organization, each other, and our stakeholders. Integrity We are transparent and behave with integrity. We accept responsibility for our actions and take the initiative to improve our airport every day. Respect We value differences and diversity in individuals. We treat each other and our environment with respect. Vision Great people creating the best airport community in the world Inclusive We promote a trusting, open and inclusive environment. We approach each interaction with professionalism and pride and make our airport a welcome place for employees, stakeholders and visitors. Teamwork We celebrate our accomplishments and work together by listening and communicating effectively, building on each other’s strengths and helping each other to grow professionally. Corporate Citizenship We value the communities in which we do business and where we live. We are committed to contributing by providing leadership in economic development and social responsibility. HALIFAX INTERNATIONAL AIRPORT AUTHORITY -3- 2014 BUSINESS PLAN Prepared in December, 2013 BUSINESS STRATEGIES As part of HIAA’s Strategic Plan, a number of key business strategies have been developed to achieve the vision and will help guide the organization over the next four years. The business strategies are aligned with key strategic planning documents such as the Master Plan and the 10-year Capital and Financial Plan. Safety, Security & Environmental Excellence Professional Excellence Optimize organizational success through personal development, recognition, pride and best practices. Emphasize our leadership role in safety, security and environmental excellence. Facilities & Service Improvements Improve the infrastructure, services and processes to enhance the airport experience. Great people creating the best airport community in the world HALIFAX INTERNATIONAL AIRPORT AUTHORITY Deliver passenger and air cargo growth. Non-Aeronautical Revenue Growth Culture of Superior Service Strengthen our airport Community culture of superior service. Air Service Growth Accelerate revenue diversification through commercial development and other non-aeronautical revenue growth. -4- 2014 BUSINESS PLAN Prepared in December, 2013 C 2014 PLAN ECONOMIC OUTLOOK Global Economy 1 Although the global economy is expected to strengthen in the near term, overall growth is still weak; its underlying dynamics are changing and downside risks to the forecast remain. As a result, new policy challenges are arising. In particular, markets are increasingly convinced that U.S. monetary policy is reaching a turning point, which could pose risks for emerging market economies, where activity is slowing and asset quality weakening. At the same time, a fragmented financial system in the Euro area and problematic high public debt in all major advanced economies remain unresolved and could trigger new crises. The global economy is expected to strengthen moderately in the near term driven by a stronger U.S. economy, a substantial reduction in fiscal tightening, and highly accommodative monetary conditions. The growth rates for emerging markets and developing economies (e.g. China, India, and Brazil) are projected to remain considerably above those of the advanced economies but below the elevated levels seen in recent years, for both cyclical and structural reasons. According to forecasts from the International Monetary Fund (IMF), the world economy is expected to grow at about 2.9% in 2013 and 3.6% in 2014. Emerging and developing economies are expected to continue to lead the recovery with growth of 4.5% in 2013 and 5.1% by 2014, compared to growth of 1.2% and 2.0% respectively for the advanced economies. This has implications for the air passenger and cargo markets for HSIA in terms of the source of growth and demand. Uncertainties in the global economy, to the extent they may exist, suggest that the business environment for HIAA may be volatile over the next several years should there be another global downturn. 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% World Canada US Euro UK Japan Brazil China India 2012A 3.2% 1.7% 2.8% -0.6% 0.2% 2.0% 0.9% 7.7% 3.2% 2013F 2.9% 1.6% 1.6% -0.4% 1.4% 2.0% 2.5% 7.6% 3.8% 2014F 3.6% 2.2% 2.6% 1.0% 1.9% 1.2% 2.5% 7.3% 5.1% According to forecasts from the International Monetary Fund (IMF), the world economy is expected to grow at about 2.9% in 2013 and 3.6% in 2014. Figure 1 – Global Economic Outlook Forecast - Annual Growth in Real GDP 1 International Monetary Fund, World Economic Outlook, October 2013 HALIFAX INTERNATIONAL AIRPORT AUTHORITY -5- 2014 BUSINESS PLAN Prepared in December, 2013 National View domestic product (GDP) growth of 1.6% in 2013 and 2.2% in 2014. 4 Canada is an export-oriented economy and highly sensitive to developments in the global economy. Although trade with emerging economies such as China has increased in recent years, the United States remains Canada’s largest trading partner, accounting for 62% of trade (74% of exports and 50% of imports) by value. 2 As such, developments in that country will have an impact on the Canadian economy. As an export nation with a wealth of natural resources, Canada is also susceptible to world commodity prices. Therefore any change in the demand for natural resources will have a noticeable impact on the Canadian economy. The growth of Canada’s national economy has a direct impact on the growth and demand for air passenger and cargo services at HSIA, since a significant portion of air passenger and cargo traffic is domestic and directly impacted by the health of the national economic environment. Domestically, growth is expected to pick up in 2014 as export recovery and stronger business investment offset a slowdown in the housing market and deceleration of private consumption growth. The recently signed CanadaDomestically, growth is expected to pick up European Union Comprehensive Economic and Trade Agreement in 2014 as export recovery and stronger (CETA) has the potential to boost business investment offset a slowdown in Canada’s income by $12 billion 3 annually and bilateral trade by 20%. the housing market and deceleration of The agreement has been signed in private consumption growth. principle and is expected to take two years to finalize. Risks to consider include increases in housing prices and consumer debt. After posting growth of 1.7% in 2012, the IMF expects the Canadian economy to record gross 2 Industry Canada, Trade Data Online Database Summary of CETA Benefits, Prime Minister of Canada October 2013 3 HALIFAX INTERNATIONAL AIRPORT AUTHORITY 4 International Monetary Fund, World Economic Outlook October 2013 -6- 2014 BUSINESS PLAN Prepared in December, 2013 Regional View CETA is also expected to have a strong impact in Atlantic Canada as almost 96% of European Union tariff lines for fish and seafood products will be duty-free once in effect. This will have a positive impact on cargo exports from the region. 8 Over the next several years, economic growth in Halifax and Nova Scotia is expected to be driven by mega projects that total over $115 billion and include the federal shipbuilding contract, the Deep Panuke natural gas development, and the Lower Churchill hydroelectric development. The national shipbuilding contract is expected to generate 11,500 total jobs and $500 to $600 million in wages for Nova Scotia, along with a 2.4% rise in provincial GDP. 5 In 2014, Nova Scotia is poised to have the strongest GDP growth in the Atlantic region, as momentum in the province accelerates as production at the Deep Panuke and other mega projects across the province strengthen. The regional growth is anticipated to have a conservative but positive impact on 2014 and improve as more of the mega projects gain momentum. Growth is also expected in sectors such as finance and insurance, other business services, healthcare, aerospace and port transportation, among others. The regional economic growth is expected to drive the demand for air services. 7.0% 5.5% 4.0% 2.5% 1.0% -0.5% -2.0% -3.5% -5.0% NL NB PE NS 2012A -4.8% -0.6% 1.2% 0.2% 2013F 6.0% 0.0% 1.1% 0.8% 2014F 0.6% 0.9% 1.3% 2.0% Figure 2 - Atlantic Canada Economic Outlook Forecast - Annual Growth in Real GDP This growth will come over time; the result in the near term is that the provincial economy is expected to post GDP growth of approximately 0.8% in 2013, but rise to 2.0% in 2014. 6 Halifax’s real GDP was over $15 billion for the first time in 2012, accounting for 54.6% of the total value of goods and services produced in Nova Scotia. 7 The regional economic growth is expected to drive the demand for air services. 5 Shipsstarthere.ca APEC Outlook – Fall 2013 7 Greater Halifax Partnership, The Halifax Index – May 2013 6 HALIFAX INTERNATIONAL AIRPORT AUTHORITY 8 Summary of CETA Benefits, Prime Minister of Canada – October 2013 -7- 2014 BUSINESS PLAN Prepared in December, 2013 improvements 10. The main Canadian airlines, Air Canada and WestJet, are both expected to post strong pre-tax operating incomes for 2013 11. Aviation Industry The global aviation industry has been faced with a number of challenges over the last several years that have impacted the demand for air services and air passenger traffic; however, the long-term trend has always been continued growth as the industry rebounds. This is due to globalization and the importance of air travel for trade and commerce, along with the increasing demand for tourism worldwide. The long-term outlook for the aviation industry is continued growth. Another trend developing in the aviation industry is the growing popularity of airline incentives. Many airlines now require risksharing incentives from airports in order to commit to a new air service. If used properly, incentives can bridge the gap between the airport’s confidence in its market and the airline’s perceived risk. Incentives will increasingly become an important part of the business case for new air services. 12 A key trend which has continued to evolve over the past several decades is the growth of international air traffic relative to domestic air traffic. In 1990, international air passengers made up 24% of all global air passenger traffic and this is forecasted to grow to 40% in 2016. 9 This trend is expected to continue due to globalization and the increasing accessibility of international travel as a result of economic growth and new aircraft technology. This has important implications for air services development in terms of market opportunities and new routes. Specifically, this suggests that the demand and growth for international air travel will continue to outpace the growth of domestic travel. Fuel is projected to account for approximately 31% and 30%10 of total airline operating costs in 2013 and 2014 respectively. As costs rise and fluctuate, airlines may adjust seat capacity, which in turn affects the airport business. An increase in air services and seat capacity supports the airport business by generating revenue opportunities (e.g. landing fees) while a decline in seat capacity has the opposite effect. Consideration must also be given to the new and changing types of aircraft and related market opportunities. The new aircraft can offer lower costs, smaller capacities and longer ranges that could be beneficial to smaller markets and also create more non-stop routes. The airline industry is expected to post $11.7 billion in profits for 2013, a slight decline over previous forecasts, reflecting a spike in oil prices due to the Syrian crisis and disappointing growth in several key emerging markets. Airlines are expected to see a significant boost in 2014 with profits of $16.4 billion due to rising business and consumer confidence levels. However, the financial performance of airlines varies considerably by region, country and individual air carrier. Contrary to recent trends, North America is expected to be particularly strong in 2014 ($6.3 billion profit) as the economy improves and with airline seat capacity discipline by airlines driving yield 9 Improvement in the financial performance of the global aviation industry will facilitate air services development, and regional and air carrier differences must be taken into account when assessing potential opportunities. In 2012 and 2013, the impact of the seat capacity discipline driving yield improvements for airlines was evident in declining passenger numbers and seat capacity reductions at several Canadian airports, including HSIA. 10 International Air Transport Association, Revised 2013 Outlook – September 2013 11 CIBC 2013 Transportation Outlook – January 2013 12 InterVISTAS Consulting Inc. – September 2013 International Air Transport Association (IATA) HALIFAX INTERNATIONAL AIRPORT AUTHORITY -8- 2014 BUSINESS PLAN Prepared in December, 2013 mobility. There is increasing demand to move people to specific job sites across Canada, including Alberta and Labrador, to support the booming oil, mining and energy sectors. Within the past twelve months, aircraft movements specifically for workforce mobility have increased by over 130% as compared to the prior year. With the development of the mega projects in Atlantic Canada, including Halifax, these movements and passengers are expected to continue to grow. Halifax Stanfield International Airport Passengers HSIA is served by 16 scheduled and charter passenger air carriers that provide services to a network of 42 destinations, including 16 in Canada, 12 in the United States and 14 in international markets including Europe and the Caribbean. In 2012, air passenger traffic at HSIA reached a record of over 3.6 million enplaned/deplaned (E/D) passengers; however due to seat capacity constraints by the airlines, E/D passengers are forecasted to decrease by 1.4% in 2013. An increase in passenger traffic for 2014 of 1.1% is budgeted, as airlines begin to slowly add back seat capacity to the market. Approximately 80% of passenger traffic at HSIA is domestic, followed by 11% transborder and 9% international. An increase in passenger traffic for 2014 of 1.1% is budgeted, as airlines begin to slowly add back seat capacity to the market. A growing segment of the aircraft movements and passengers at HSIA is related to workforce 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2008 2009 2010 Domestic Figure 3 - Overview HSIA Passenger Traffic HALIFAX INTERNATIONAL AIRPORT AUTHORITY 2011 Transborder 2012 2013* 2014* International * Denotes forecasted passenger traffic. -9- 2014 BUSINESS PLAN Prepared in December, 2013 Figure 4 – HSIA’s Current Non-Stop Destinations Major air exports via HSIA include seafood, electric parts and machinery, and industrial equipment. The completed runway extension to 10,500 feet is expected to facilitate further growth of air cargo business at HSIA by allowing service from larger freighters. Cargo Air cargo at HSIA includes both mail and commercial shipments carried in the belly-hold of passenger aircraft and in all-cargo freighters. Cargo service providers at the airport include Air Canada, Air St. Pierre, Air Transat, Cargojet, Condor Flugdienst, Icelandair, Purolator, FedEx, UPS, Skylink Express and WestJet. HIAA’s outlook, as detailed in the 2013-2017 Strategic Plan, suggests a compound annual growth rate of approximately 6% for cargo traffic at HSIA from 2013 to 2017. Cargo traffic at HSIA reached 29,570 metric tonnes in 2012 and is forecasted to be up slightly, at approximately 30,000 metric tonnes in 2013. The estimated tonnage for 2014 is budget at 33,000 metric tonnes. 40,000 Actual 35,000 Forecast Metric Tonnes 30,000 25,000 20,000 15,000 10,000 5,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Figure 5 – HSIA Air Cargo Traffic HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 10 - 2014 BUSINESS PLAN Prepared in December, 2013 2014 GOALS The following goals were established in the 2013-2017 Strategic Plan and flow from the key business strategies. Safety, Security & Environmental Excellence Exercise high levels of safe work practices throughout HIAA and foster work safety in the HSIA community. Continue to enhance the highest level of airport security. Enhance standards of environmental stewardship and increase awareness in the HSIA community. Professional Excellence Implement revised recruitment and retention strategies. Build organizational capability and capacity. Improve current succession and workforce planning processes. Sustain positive labour relations. Improve delivery of Human Resource services. Air Service Growth Increase passenger and cargo volumes. Increase passenger and cargo destinations. HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 11 - 2014 BUSINESS PLAN Prepared in December, 2013 2014 GOALS (cont’d) Non-Aeronautical Revenue Growth Develop and begin implementing a commercial development plan to facilitate the growth of an Airport City at HSIA. Influence key government stakeholders to provide zoning, regulation and adequate services to support airport operations and growth. Increase other non-aeronautical revenue. Generate revenue growth through the provision of services to external parties. Culture of Superior Service Improve customer satisfaction levels. Integrate The Stanfield Way into existing HSIA programs. Expand and diversify Tartan Team volunteer host program. Implement processes and adapt facilities to minimize barriers within our facility resulting in a seamless airport experience. Facilities & Service Improvements Deliver a capital program that optimizes the airport experience, supports growth, and improves efficiency and productivity. Improve the processes and systems used to manage infrastructure data and to support delivery of infrastructure initiatives and ongoing operations. Deliver enterprise business solutions by leveraging airport technology. HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 12 - 2014 BUSINESS PLAN Prepared in December, 2013 FINANCIAL PLAN This section provides supporting data on the 2014 Business Plan’s revenue and expense budget. It addresses the way in which the financial component of the plan links to the goals, allowing HIAA to achieve its stated objectives. The financial plan for HIAA is summarized as follows: 2014 Budget ($ millions) Operations Revenues Expenses Operating Margin Other Revenue and Expenses Airport Improvement Fee (net) Interest Expense (net) Depreciation and Amortization 55.7 51.2 2013 Forecast ($ millions) 53.0 49.1 4.5 33.9 14.3 19.6 - 3.9 33.6 14.1 17.7 1.8 Excess Revenue Over Expenses 4.5 5.7 Capital Program Expenditures 44.5 44.8 283.5 283.5 Total Long-Term Debt as at Dec. 31 Figure 6 – Financial Plan Summary Revenue total HSIA passenger traffic for 2014 is budgeted to increase from the 2013 forecasted levels by 1.1%. This includes an increase of 0.3% in total passenger aircraft movements from the 2013 levels. Although aircraft movements are expected to remain relatively flat, aircraft seats are forecasted to increase by 1.4% in 2014 as airlines shift to larger size aircraft for certain routes. To provide context, this represents an increase in passenger seat capacity of approximately 90 seats per day and is equivalent to the arrival and departure of one large regional jet per day. In 2014, through a combination of increases in seating capacity, increases in aircraft movements, increases in specific aeronautical fees and the addition of During 2013, HIAA continued to experience a reduction in airline seat capacity that impacted operating revenue. Through the implementation of the annual plan, HIAA’s operating revenue budget in 2014 is $55.7 million. This represents an increase of 5.0% over the 2013 forecasted revenue of $53.0 million. Airport Improvement Fee (AIF) revenue is budgeted to be $33.9 million. Interest revenue of $300,000 is budgeted from the investment of surplus funds based on HIAA’s investment guidelines and Master Trust Indenture. When considering published airline schedules, Transport Canada aviation forecasts and other related information available as of October 2013 when budget assumptions were prepared, HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 13 - 2014 BUSINESS PLAN Prepared in December, 2013 Capital Program two new fees, aeronautical revenue is budgeted to be 5.9% greater than the 2013 forecast. The estimated 2014 capital program investment is $44.5 million and will result in the completion of a number of significant capital projects that are currently in progress, including the development of new leasable area in the Air Terminal Building (ATB) and the planned construction of a new groundside road circulation network. Non-aeronautical revenue is budgeted to increase by 4.0% in 2014 over the 2013 forecast. The more significant non-aeronautical revenue generators are parking, concession and rental revenues. The most significant driver of the budget increases relates to parking due to rate increases in 2014. Groundside 2014 Total Revenues = $89.9M Groundside Road Circulation Improvements Aeronautical 32.7% $29.4M AIF 37.7% $33.9M The groundside road network is planned to be redeveloped from the existing two-way road system with multiple intersections into a new one-way loop road system with multiple lanes to serve free flowing traffic to and from the ATB. The new system will provide increased capacity for growing traffic demand, eliminate signalized intersections and crossover turning movements, provide more efficient access to Non Aeronautical 29.6% $26.6M Other 3.9% $3.5M Concessions 11.9% $10.7M Parking 13.8% $12.4M Expenses Total expenses for 2014 are budgeted to be $85.3 million. Operating expenses are budgeted to be $51.2 million, which represents an increase of 4.3% or $2.1 million over the 2013 forecasted operating expense. Total interest to be paid in 2014 on HIAA’s Series A and Series C bonds at an annual interest rate of 5.503% and 4.888% respectively is $14.9 million. 2014 Total Expenses = $85.3M Materials, Supplies & Services 21.2% $18.1M Interest 17.1% $14.6M General & Administration 5.6% $4.7M Ground Lease Rent 7.0% $6.0M groundside facilities, simplify signage and way finding, and improve road surface conditions. Realty Taxes 1.7% $1.5M Depreciation 22.9% $19.5M Commercial Development Work will continue to further advance the Commercial Development plan for the purpose of enhancing non-aeronautical revenue. Salaries & Benefits 24.5% $20.9M HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 14 - 2014 BUSINESS PLAN Prepared in December, 2013 Air Terminal Building (ATB) Airside Check-In and Passenger Processing Improvements The emergency response vehicle replacement program will conclude in 2014 with the delivery of the rapid intervention vehicle to supplement the two new crash trucks and the new pumper truck, which were delivered in 2013. These vehicles replace aging vehicles in the fleet of firefighting equipment while enhancing the capability and flexibility of HIAA’s emergency response service. The significant redevelopment of the baggage handling and passengers processing systems in the ATB, which began in 2013, will be completed in 2014. Following the implementation of the new domestic/ international baggage handling system, the new transborder system will go into operation in the first half of 2014. New self-serve baggage drop devices will be deployed in the newly renovated and expanded domestic/ international check-in hall. The transborder check-in hall will be renovated to provide additional check-in counters and to expedite passenger processing. Information Technology The enterprise systems upgrade program will be completed in 2014 with continued investments in the service and asset management system to expand its functionality and capability, as well as extensive replacements of common use terminal equipment which has reached the end of its useful operating life, and with the implementation of a business intelligence and corporate reporting platform. Hold Room Concessions Development To enable further development of nonaeronautical revenue, the domestic/ international hold room is planned to be expanded to create a significant area of new, leasable space for retail or food and beverage concession operators. A first floor roof area adjacent to the existing second floor hold room is planned to be enclosed and finished as new second floor space. Minor/Maintenance Capital Projects The balance of the capital funding requirements for 2014 consists of minor capital projects categorized as new initiatives, minor works, capital acquisitions, mobile equipment replacement, preliminary design for the 2015 capital program and 2013 carryover projects. ATB Airside Tenant Space Leasable airside space is planned to be developed on the ground floor of the ATB to address airline demand for operational and maintenance space. HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 15 - 2014 BUSINESS PLAN Prepared in December, 2013 FINANCIAL SCHEDULES Halifax International Airport Authority PROFORMA BALANCE SHEET as at December 31 ($000’s) 2014 BUDGET ASSETS 2013 FORECAST Current Assets Cash and Short Term Investments Accounts Receivable Other 15,876 4,950 1,764 45,851 4,800 1,696 Total Current Assets 22,590 52,347 Long-Term Assets Capital Assets Debt Service Reserve Fund Accrued Pension Asset 379,443 7,427 - 354,505 7,427 6,581 Total Long-Term Assets 386,870 368,513 TOTAL ASSETS 409,460 420,860 23,338 2,092 827 81 26,338 31,320 902 81 32,303 LIABILITIES and EQUITY Current Liabilities Accounts Payable & Accrued Liabilities Accrued Pension Liability Deferred Revenue Current Portion of Long Term Debt Total Current Liabilities Long-Term Liabilities Long-Term Debt Due to Transport Canada Less: Current Portion Total Long-Term Liabilities 283,371 81 (81) 283,349 161 (81) 283,371 283,429 TOTAL LIABILITIES 309,709 315,732 99,751 105,128 409,460 420,860 EQUITY IN CAPITAL ASSETS TOTAL LIABILITIES and EQUITY HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 16 - 2014 BUSINESS PLAN Prepared in December, 2013 FINANCIAL SCHEDULES Halifax International Airport Authority PROFORMA STATEMENT OF OPERATIONS for the year ended December 31 ($000’s) 2014 2013 BUDGET FORECAST REVENUES Aeronautical Parking Concessions Other Investment Revenue Airport Improvement Fee 29,358 12,415 10,678 3,219 300 33,890 27,722 11,612 10,536 3,145 700 33,571 TOTAL REVENUES 89,860 87,286 EXPENSES Salaries, Wages & Benefits Depreciation and Amortization Materials, Supplies & Services Interest Expense Ground Lease Rent General and Administrative Realty Taxes 20,880 19,562 18,097 14,575 6,001 4,743 1,486 19,829 17,671 17,555 14,861 5,795 4,452 1,468 TOTAL EXPENSES 85,344 81,631 4,516 5,655 105,128 99,393 EXCESS REVENUES OVER EXPENSES NET ASSETS (Jan 1) Adjustment for the cumulative effect on prior years of applying the new method of accounting for employee future benefits Amortization of Deferred Financing Charges NET ASSETS (Dec 31) HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 17 - (9,973) - 80 80 99,751 105,128 2014 BUSINESS PLAN Prepared in December, 2013 FINANCIAL SCHEDULES Halifax International Airport Authority PROFORMA STATEMENT OF CASH FLOWS for the year ended December 31 ($000’s) 2014 BUDGET 2013 FORECAST CASH BALANCE JANUARY 1 45,851 59,812 OPERATING ACTIVITIES Excess Revenues over Expenses excluding Non-Cash Items Adjustment for Changes in Working Capital 22,880 (8,274) 22,153 9,486 Total Operating Activities 14,606 31,639 FINANCING ACTIVITIES Transport Canada Rent Deferral Deferred Contribution from the Province of Nova Scotia (81) - (81) (719) Total Financing Activities (81) (800) INVESTING ACTIVITIES Expenditures on Capital Assets (44,500) (44,800) Total Investing Activities (44,500) (44,800) Increase (Decrease) in Cash & Cash Equivalents (29,975) (13,961) CASH & CASH EQUIVALENTS AS AT DECEMBER 31 15,876 45,851 HALIFAX INTERNATIONAL AIRPORT AUTHORITY - 18 - 2014 BUSINESS PLAN Prepared in December, 2013 Halifax International Airport Authority 1 Bell Boulevard, Enfield, Nova Scotia, Canada B2T 1K2 Tel: 902.873.4422 Fax: 902.873.4750 www.flyhalifax.com
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