The Toronto Island Airport has always been financially challenged, and the loss of subsidies in 1999 (from both the federal government and the City of Toronto) made the challenge worse.
The Island Airport is owned (mostly), and operated, by Ports Toronto. Mostly, because the City owns an essential piece of the Airport lands, and leases it to Ports Toronto for nominal rent.
The Airport is one of its three businesses – the other two are the actual port, and the Outer Harbour Marina.
Ports Toronto was established in 1999, with the enactment of the Canada Marine Act, that converted what was a City of Toronto controlled Harbour Commission into a federal controlled Port Authority. It is the only Port Authority that operates a port and an airport.
The intention of that Act was to put Canadian ports onto a more business like footing and eliminate large subsidies that had been being paid – by both the federal government and the City.
The Island Airport has always been financially challenged, and the loss of subsidies made the challenge worse. Ports Toronto opted to address that challenge by pursuing an aggressive Airport expansion strategy, relying heavily on a new airline, Porter, to which it gave $20M cash, exclusive use of the Airport for commercial flights for its first five years, and modest airport operating charges – even though the Airport lands are some of the most valuable in Canada.
Ports Toronto fought hard, and finally won the right to avoid paying property taxes on the same basis as most other taxpayers.
Did the strategy work?
The Airport’s dramatic business growth – mostly with Porter ceased in 2013.
And by 2019 (that’s pre COVID)
It has been significantly reducing the number of flights out of the Island Airport,
it threatened to leave the Island Airport, and
it has announced plans to buy and operate a lot of jets out of Pearson
Porter has blamed two things for its lack of success – the Union Pearson Express, that makes access to Pearson as easy (or even easier, given downtown traffic) as getting to the Island Airport, and its 2015 failure to get approval to fly jets out of the Island Airport, which drastically limits the number of destinations it can offer to its customers. That leaves Nieuport with less and less business, and the real prospect of it ending entirely in ten years.
Now it’s in a serious fight with the owner of the terminal it built. A court has recently held it is obliged to pay fees for use of the terminal that are up to 3x the fees Pearson charges. Charges were based on what Porter cited in selling the Terminal for >$700M
The arrears of fees, that a court has now ordered Porter to pay, total over $131M.
Two airlines have failed to succeed at the Airport:
City Express ceased operating out of the Island Airport in 1991, and declared bankruptcy in 1996
And Air Ontario then operated a modest service out of the Airport – dwindling to 22,321 passengers in all of 2006 and ceasing entirely when Porter evicted it from the terminal it had been renting
The facts as we know them today, suggest that Porter is likely to be the third.
If that happens, it is extremely unlikely that a new airline can be found that could replace the business that Porter delivers to the Airport. Ports Toronto can’t limp along like it did before, as the subsidies it relied upon back then, aren’t available. It could run through its considerable reserves – having sold 30 Bay for $96M in 2017, that it was allowed to pocket, it still has a lot of that cash that it could use, until it runs out.
One might ask, though – would that a good use of money that is, essentially, a public asset?
by Brian Iler