gaining altitude Halifax International Airport Authority’s 2002 annual report describes the difficult climb back to financial stability after the catastrophic events of 2001. It celebrates a remarkable achievement in the face of immense downward pressures that, like wind shear, threatened to cut short the ascent. Gaining altitude is not the end of the journey but the point at which the early efforts to produce speed, momentum and lift are complete and the journey is under way. Halifax International Halifax Airport Authority 2002 Annual Report gaining altitude is a steep and rapid climb requiring decisive action, singular focus, great skill, and full power to the engines. The new domestic arrivals area officially opened on December 18, 2002. a journey to new heights 2002 Annual Report The new and expanded food court offers travellers and airport Halifax International Halifax Airport Authority Message from the Chairman employees more choice. It is this early foundation that has guided our decision-making, particularly during times of great upheaval. In 2002, we made many tough decisions and presided over the difficult work of cutting costs and the ensuing impacts on staff. But there were also times of celebration. In December, I was delighted to take part, along with the Honourable Myra Freeman, Lieutenant Governor of Nova Scotia, and Mayor Peter Kelly, in the official opening of our new domestic arrivals area. Once an overcrowded and aging facility, it is now a welcoming and stunning introduction to our t the end of 2002, the board of directors and staff of region. Indeed, when I look back at our achievements over the past 3 AHalifax International Airport Authority (HIAA) are able to look back on three years, it is the growth and development of the HIAA team and the our first three years of operation with a real sense of accomplishment. transformation of the facilities that give me the greatest satisfaction. The turbulence caused by the events of 2001 has at least temporarily Halifax International Airport was the first major airport in Canada abated, and our recovery is well under way. to show signs of recovery after the extraordinary challenges of 2001. On behalf of HIAA’s board of directors, I commend airport That speaks volumes about the strength and maturity of the authority employees for their hard work in bringing the organization organization. It is a clear sign that we are, indeed, gaining altitude. back on a solid financial footing in the face of enormous challenges. In 2002, Reg Milley was appointed vice chair of the Canadian The board made a number of critical decisions in 2002, always Airports Council (CAC) just as I was completing my term as chair of that mindful of the impact these decisions would have on the organization’s organization’s Council of Chairs. HIAA continued to work diligently ability to rebound despite crushing industry losses. When you face such throughout the year to protect the community’s interests in the adversity, it is important to be able to rely on the people around you to development of the Canada Airports Act and to lobby the federal help you make the best decisions. I am fortunate to work with an government to revisit its policy on rent. Because of its active involvement extremely talented and experienced board with a deep understanding at the executive level of the CAC, the airport authority continues to have of the industry and with years of leadership experience. a strong voice on issues of national concern. Our board is comprised of CEOs and senior officers from some On behalf of the board of directors, I would like to express our of Atlantic Canada’s leading organizations, including executives with appreciation – and congratulations – to Arthur Pickup, QC, who resigned extensive air transportation industry experience. These directors bring in December following his appointment to the Supreme Court of Nova to HIAA diverse skills and expertise in corporate governance, law, Scotia. Justice Pickup was a founding member of our board and has human resources, accounting, real estate and facilities, engineering, made a major contribution to the success of the airport authority. and marketing. Good decisions stand the test of time. While no one knows what At the outset, the board created an organization founded on tomorrow will bring, world events and the ongoing volatility in the air sound and proven business principles: accountability, transparency and transportation industry will continue to test us and our ability to make good governance. Our priorities were to: the best decisions under difficult circumstances. I am confident that the • build a framework for success by incorporating the disciplines and airport authority has the solid foundation, the necessary discipline, the business practices necessary to support the continued growth and sound practices, and the committed people to ensure that it continues stability of the organization; to thrive long into the future. • build a strong leadership team to create an environment that motivates and energizes our people; and Bernie Miller, Chairman • invest wisely in the airport’s infrastructure to ensure we are equipped Halifax International Airport Authority to capitalize on the opportunities ahead. Board of Directors the power of resilience 2002 Annual Report In July, CHC Helicopters International leased the first lot in the airport authority's new airside subdivision. By December, CHC had constructed a $3.5 million passenger terminal and helicopter facility to serve Nova Scotia's offshore industry. Halifax International Halifax Airport Authority Message from the President & CEO Cutting costs, however, was only part of the journey toward financial recovery. Our entire team was relentless in its efforts to grow revenues and expand services to customers. In spite of airline cutbacks around the world, HIAA added over a dozen new passenger and cargo carriers and routes in 2002, and we leased the first lot in our airside subdivision. The airport also handled a record volume of air cargo, significantly growing our cargo revenues. By the third quarter, we had turned the corner: revenue and passenger numbers were on the way up. In July, Halifax International he theme of this report is "gaining altitude," which aptly Airport was the first major airport in the country to show a growth in 5 Tdescribes our efforts to regain our financial footing, rebuild air service, passenger traffic over 2001, and by year-end, we were one of only two and move forward with our flight plan in the face of intense downward major airports in Canada to record an increase in passenger activity year pressure on the industry and the economy. over year. Despite serious financial and operational challenges, we ended Also in 2002, we completed the largest project in our Airport the year with an operating margin of $4.8 million, approximately $1 Improvement Program, a major milestone in our long-overdue million below 2001. Given the massive losses in the industry and the expansion. On December 18th, we celebrated the official opening of significant declines in passenger traffic and revenues in the first quarter, the new domestic arrivals area, the final element of the north-end this was nothing short of remarkable. expansion and an impressive introduction to the province. We also In 2002, the airline industry lost almost $13 billion worldwide, made significant progress on our main lobby retail expansion, adding the result of changing business fundamentals and the devastating more space and new retailers. This project brings us closer to our goal human and economic toll of September 11th. By the end of the first of creating a diverse and attractive marketplace to serve our quarter, passenger numbers at Halifax International Airport were 14 per passengers, airport employees and surrounding communities. cent below the same period the previous year and revenues lagged In 2003, there will be additional financial and operational seriously behind forecasts. At the same time, operating expenses grew challenges. The federal government’s rent policy continues to be a due to a number of planned increases in taxes and financing costs and major concern for the airport authority, adding $5 million annually to substantial, unanticipated increases in insurance and security costs. our operating expenses by 2006. These charges, combined with Our finance team projected that if we did not take immediate increased insurance and security costs and higher property taxes, will measures to remedy the situation, we would experience an annual $2.3 place a significant burden on our finances as we move ahead. million operating shortfall beginning in 2003. Clearly, this was I would like to convey my sincere gratitude to our management unacceptable; clearly, we had to act. team for their efforts throughout 2002. I am proud to be associated When presented with this severe financial situation, HIAA with such a knowledgeable and dedicated group of professionals. I employees responded by identifying nearly $500,000 in combined would also like to thank Eloi Gaudet, director of operations, who retired revenue-generating and expense-cutting measures. This was a in June following 26 years of exemplary service in the airport business. tremendous help, but it was not sufficient to eliminate our projected The past year has taught us a lesson in the power of resilience, shortfall, particularly given the introduction of $3.2 million in rent and nowhere was this more evident than among the staff of the airport charges beginning in 2003. It became evident that we would not authority. We have managed to put the organization back on sound be able to stabilize our financial situation without reducing our financial ground due largely to the dedication and resolve of our major expense – personnel costs. employees in the face of very trying circumstances. For that and for In April, we announced the elimination of 37 seasonal their tremendous support over the last 12 months, I offer my heartfelt and full-time positions.