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irports are a strategic component of any country’s transportation system.
In 1994, the operations, management and development of Canada’s major airports, which until then were government-owned, were handed over to local airport administrations. The federal government retained ownership of the airports’ assets under the term of a 60-year lease requiring airport administrations to pay a rent to the federal government in order to operate.
The new structure has enabled national airports to develop, focus on customer service and become more competitive. However, the model implemented in 1994 is far from perfect and has produced unfortunate side-effects.
For instance, it will become more difficult for large airports to obtain capital on financial markets as the end of the 60-year lease approaches. It is also frustrating for airport leaders to invest in improving infrastructures that their organizations do not own. They also complain about having to pay rent to the federal government as well as local taxes.
The federal government is often accused of using airports as cash cows instead of as tools for economic development — an ill-advised approach given the transportation challenges that low-density population countries like Canada face.
This regulatory environment is the one which Keith Collins, who is ending his 15-year term at the helm of St. John’s International Airport this month, had to operate in. He has done so quite successfully. Collins graduated from the Memorial University’s bachelor of commerce program in 1973. He started his career at NewTel (now Bell), became CEO of Paragon Information Systems, and was eventually in charge of the Irish operation of Xwave Solutions (into which Paragon and other IT entities had been consolidated).
After 30 years in the telecom and IT industry, Collins decided that he needed a change. He retired from Xwave in 2003 and took a year off to find his next challenge. He was eventually offered the St. John’s airport’s CEO position. The board was looking for someone without an aviation background but with a business mindset. The success of St. John’s airport under Collins’ leadership adds to the ample evidence of the benefits that can come from appointing a top manager from a different industry.
According to the St. John’s International Airport Authority’s annual report, the annual volume of passengers has grown to over 1.5 million.
This is twice as much as when Collins joined the airport in 2005. Things are running more smoothly since the completion of the 2014-2018 expansion, now that the airport has three security lines instead of one.
Another notable improvement is the Category III Instrument Landing System (Cat 3 ILS), which was implemented in January 2016 and required a $37.5-million investment.
As we know, fog is a major problem in St. John’s and used to cause several flight cancellations each year. The Cat 3 system allows aircraft to land even if the visibility is as low as 600 feet. The airport invested $10.5 million to implement Cat 3 and convinced federal and provincial governments to pay the rest. This investment might never be recouped, but the positive impact on the community and the reduced number of cancelled flights is highly valuable.
The airport has not only grown in size and improved its efficiency over the last few years; the nature of its activities has also evolved. The name of the game in the airport’s business nowadays are non-aeronautical revenues. The traditional airport revenue stream comes from the fees that airlines pay to land and use the terminal.
In this asymmetrical buyer-supplier relationship, airports — particularly secondary ones — rarely occupy the dominant position. When WestJet decided to move its direct flight to Dublin from St. John’s to Halifax earlier this year, there was not much that the airport could do.
In order to mitigate the risk inherent to their business, airports have to diversify their revenue streams. Now that travellers can have a drink and a proper meal at YellowBelly Brewery and buy Newfoundland chocolate before boarding their flight from St. John’s, the airport is able to collect additional concession fees.
Likewise, more space is now available for car rental companies, which further increases non-aeronautical revenues.
Departing from St. John’s is now a much nicer travelling experience than it used to be, thanks to Collins’ leadership.
He has done well as CEO of the airport supported by a talented management team, and it is hoped that his successor will continue on a successful path.
No matter how striking the publicity campaign designed to attract tourists to Newfoundland, we need to make sure that a proper transportation system is available to travellers who come to visit the province. St. John’s International Airport plays a key role in that system and hopefully will continue to do so under its new leadership.
Isabelle Dostaler, PhD, is Dean of Business at Memorial University. She writes from St. John’s
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