onward - halifax stanfield international airport

HALIFAX INTERNATIONAL AIRPORT AUTHORITY 2005 ANNUAL REPORT

ONWARD

UPWARDand

ONWARD

UPWARDand

HALIFAX INTERNATIONAL AIRPORT AUTHORITY

Message From the Chair 4

6Message From the President & CEO

Improving Facilities and Services 9

Leveraging Technology 10

Corporate Governance 32

2005 Board of Directors 29

Sustaining Financial Stability 20

Strengthening Community Partnerships 19

Increasing Air Service 15

Enhancing Customer Service 13

Left and Cover:Architectural renderings of Arrivals area upon completion of U.S. pre-clearance facility.

Financial Statements 22

Five-Year Forecast 34

CONTENTS2005 ANNUAL REPORT

Vice President Operations, Peter Clarke. From February to

August, Peter held both positions, demonstrating leadership

during that time, and assisting Eleanor as she immersed

herself in her new role.

In 2005 there were changes to the Board of Directors.

In June, we welcomed new member Cheryl Newcombe.

Cheryl is Comptroller of Lighthouse Lumber Wholesalers

Limited, and replaces Bernie Miller as the Board nominee

from the Halifax Regional Municipality.

The year marked the end of Bernie’s term as Chair of the

Board, a position he held for 10 years. The entire Board

extends their sincerest gratitude to Bernie for his tireless

dedication to the Authority over his distinguished and

prolific tenure as Chair. As well, a special thanks to Bernie

for stepping in, once again, on an operational level as

interim Chief Executive Officer from February to August.

Bernie remains on the Board as a nominee of the Board itself,

the position vacated by Jim Cowan when he was appointed

to the Senate in March. Congratulations to Jim on this

well-deserved accomplishment, and our kindest thanks

In keeping with tradition, this annual report will look

back over the past 12 months and recount the year’s many

activities. We believe this year’s theme ‘onward and upward’

is fitting – it not only acknowledges where we’ve come

from, but also aptly describes our desire to continue striving

for excellence.

During 2005 we laid the foundation for significant terminal

expansion, as well as new leadership, welcoming Eleanor

Humphries as President & CEO in August.

Prior to joining Halifax International Airport Authority

(HIAA), Eleanor was the President & CEO of Credit Union

Atlantic (CUA). She holds her Bachelor of Science and her

Masters in Business Administration degrees, both from

Dalhousie University. She has also obtained the Executive

Management designation from McGill University and her

FICB (Honours). She has been honoured on three occasions

as one of the Top 50 CEOs in Atlantic Canada and received a

Distinguished Alumni Award from Armbrae Academy in 2004.

We would also like to recognize the tremendous efforts of

our interim President & Chief Operating Officer, and current

From the Chair

Message‘Onward and Upward’ is a

phrase most often heard when

transitioning from the completion

of one phase to the next. In the

case of Halifax International

Airport Authority, the organization

has moved onward from

expansion, technology and

runway upgrades completed in

2005 and upward in anticipation

of U.S. pre-clearance, in-transit

facility, and common use

technology in 2006.

Construction has brought its own

challenges but the results are

worth it. Necessary infrastructure

and runway safety improvements,

new common use technology,

and the south-end commuter

expansion have served to further

solidify us as a world-class,

passenger-focused airport. These

are just a few of the milestones

that will help the Airport continue

upward momentum in 2006.

ONWARD

UPWARDand


States announced amendments to the 1995 Open Skies

Agreement. These amendments, to take effect in

September 2006, will provide greater access and pricing

flexibility for carriers in both countries. This is an exciting

development for our industry and one that will result in

increased traffic at airports nation wide.

In early 2006, the election of a new federal government

has led to the appointment of a new Minister of Transport,

Infrastructure and Communities, the Honourable Lawrence

Cannon. We have also seen several changes on the

provincial front with the Honourable Rodney MacDonald

becoming Premier and the appointment of new cabinet

ministers. We will continue to work with officials at all levels

of government to keep them well informed, garner their

support, and together, achieve our vision for our Airport

and our community.

I am pleased to have been a part of the Airport community

during the past year, and look forward to my new role as

Chair, as we journey onward and upward together.

for his exemplary service to the Board since its inception

in 1995. We truly appreciate his decision to continue his

association with us as Secretary to the Board.

We also thank and acknowledge retiring Board members

Stephen Wallace, another one of our original members, and

Carole Cushing, who joined the Board in 2004, for their

respective service and contributions to HIAA.

Throughout 2005 and early in 2006, a number of issues

arose that the Board will watch closely over the coming

year, and will no doubt have an impact on our industry

in the future. In May, the federal government announced

a new rent policy for federally-owned airports effective

January 1, 2006. While we have always promoted, and

will continue to promote, the elimination of airport rent,

the new policy gives us a reasonable long-term solution

and methodology that can be applied across the country.

This reduction in airport rent is a compromise solution, but

one that will mean a reduction in rent for HIAA.

In November, the governments of Canada and the United

Frank Matheson


the traveling public and our airline partners with improved and more efficient facilities.

But in 2005 we also faced challenges.

In July, at a critical phase in our runway reconstruction project, when the Airport’s instrument landing system was unavailable to pilots, we experienced weather conditions that caused major inconvenience for visitors.

During the first two weekends of July, the Airport was engulfed by dense fog for upwards of 14 hours. Flights were delayed. Passengers were impacted. Travel plans were affected.

We learned a lot in 2005 about our responsibilities to the traveling public, and these lessons have been taken to heart as we prepare for the 2006 phase of runway rehabilitation and complete the air terminal building renovations.

What sets our Airport apart is the commitment of the whole Airport community to address challenges, as much as we celebrate achievements. I would like to thank our management team and all our employees and volunteers who worked hard during the summer of 2005, and who put customers first throughout the year.

Everything we do at the Airport is geared toward ensuring

My arrival in August 2005 coincided with major renovations both within the air terminal building and to airport runways. And while my first six months have been memorable, I can already see that these changes made in 2005 have set the stage for an exciting future.

The theme of this year’s annual report ‘onward and upward‘ is particularly fitting as we look back on 2005 – a year that was defined by changes inside and outside the air terminal building in preparation for the arrival of U.S. pre-clearance in Halifax.

U.S. pre-clearance is one of the most significant announcements for the Airport, and is slated to open in 2006. The addition of U.S. pre-clearance provides an opportunity to increase routes to and from the United States. The ability for more direct and efficient travel will benefit both tourism and business, and will positively impact economic growth in both Nova Scotia and the Atlantic region.

To facilitate the opening of U.S. pre-clearance we have expanded the north-end of the terminal and constructed a new wing to the south-end of the building. We have added more departure gates and implemented new technology and tools throughout the Airport to provide

From the President & CEO

Message

Eleanor Humphries


Halifax International Airport was rated as the best airport in the Americas of any size for overall satisfaction, the best domestic airport in the world, and placed first worldwide with under five million passengers.

One of the milestones of 2005 was the celebration of the renamed Robert L. Stanfield Terminal Building in honour of one of Nova Scotia’s most distinguished native sons, the Right Honourable Robert L. Stanfield, who passed away on December 16, 2003. An official ceremony unveiling the new name was held in the Airport’s Observation Flight Deck on September 9, 2005. While Stanfield never sought honours or such recognition during his lifetime, the Robert L. Stanfield Terminal Building at Halifax International Airport serves as a fitting tribute to his integrity and principles that made our province and country stronger.

I’m proud to have joined the Halifax International Airport community.

My vision for the Airport’s future is one without limits. The opening of U.S. pre-clearance, new construction, including a new hotel and parking facilities, and the completion of runway upgrades, are just the beginning. The year 2005 set the stage for our journey onward and upward.

that airline passengers – our guests – have the best experience possible while they are in our terminal.

We also know that when visitors to our province arrive at the Airport, it is often the first impression they have of Nova Scotia. We take this responsibility very seriously.

And to make this happen, every day we look at new ways to leverage the best available technology. Every day we explore new ways to partner with other businesses, our community, stakeholders and retailers. Every day we look for new ways to improve customer service for passengers. The Airport community is working together to build a transportation facility that goes beyond service to travelers, by offering amenities and services that appeal to the surrounding community and make the Airport a destination itself for all to visit and enjoy. Very significant strides were taken in 2005 to prepare for the next stage of our evolution.

We have been recognized with three top place finishes in the AETRA airport customer satisfaction survey for the second year in a row. Against such world renowned airports as London (Heathrow), Sydney (Australia), Beijing, Denver and Amsterdam, as well as other Canadian airports including Vancouver, Edmonton, Ottawa and Toronto,

HALIFAX INTERNATIONAL AIRPORT AUTHORITY �2005 ANNUAL REPORT

PROJECT COORDINATORCharles Clow

Our staff has risen to

the challenges that a

larger facility presents.

Working with the Canadian Air Transport Security Authority,

this equipment enables new screening procedures for

checked baggage to ensure passenger security.

“With all of this development comes increased responsibility

for operation and maintenance,” says Peter Clarke, Vice

President Operations. “Our staff has risen to the challenges

that a larger facility presents because they know that

growth means success for our business.”

Also in 2005, HIAA began the first phase of its multi-

year airfield rehabilitation program. This work is vital to

maintaining the integrity and operation of Airport runways

that are reaching the end of their lifecycle, to ensure safety

and meet regulatory standards. In July, at a critical phase in

the project when the Airport’s instrument landing system

was unavailable to pilots, severe and unanticipated dense

fog caused major flight delays and cancellations. Going

forward, HIAA is committed to keeping the traveling public

informed about potential impacts of construction activity.

Bigger, better and safer – that was the focus of HIAA’s

Airport Improvement Program during 2005.

Throughout the year, the terminal building expansion

program was in full swing. To the south, the terminal was

transformed into a dedicated commuter facility, housing

three new jet bridges, 12 new gates, a rotunda feature with

terrazzo floor, larger waiting areas, improved ground

access to aircraft, and more room for new retail shops and

passenger services. To the north, work progressed on the U.S.

pre-clearance and in-transit facilities, scheduled to open

in October 2006.

A new Park’N Fly™ service opened in February with an

additional 1,000 parking spaces, offering passengers more

choice and a 24-hour shuttle to the terminal.

In September, HIAA, along with airports across the country,

installed new state-of-the-art baggage processing

technology, resulting in increased efficiencies in baggage

processing for the airlines and ground service providers,

along with increased overall baggage handling capacity.

Facilities and Services

Improving

PROJECT COORDINATORCharles Clow


MAINTENANCE

Malcolm Phippen

the equipment at the Airport had been proprietary to the

airlines themselves – everything from check-in systems

to loading bridges were operated by the airlines. Other

advancements include new security systems, information

technology fibre optics, and a public address system, with

more enhancements to come.

“Now the Airport has shifted to technically advanced

systems run by us. In 2005 we initiated programs to take

over ticket counters, gates, loading bridges, and now we

operate and maintain them on behalf of all the airlines,”

says Healy. “The result – better service for our passengers

and more flexible operations for our airline partners.”

As our facilities expand, so does our horizon. Throughout

the planning and construction phases of our Airport

Improvement Program, priority was given to utilizing

technology to modernize facilities, improve processes, and

maximize efficiencies.

“This year we installed systems that made a real difference

in the way we operate – improvements that will have a

direct impact on the experience of our airline partners,

our tenants, and our guests,” says Michael Healy, Vice

President Infrastructure & Technology.

Much of this work was focused on bringing in a system

of Common Use Terminal Equipment. In the past, most of

Technology

Leveraging HALIFAX INTERNATIONAL AIRPORT AUTHORITY 102005 ANNUAL REPORT

MAINTENANCE

Malcolm Phippen

This year we installed systems that made a real difference in the way we operate.

Customer Relations Manager

Kelly Martin

It’s our people that really make the difference at this Airport.

information about and directions to facilities, services and retail stores. They also provide extra assistance to people with special needs. These volunteers are the first and last impression for many visitors to Nova Scotia.

The Airport’s commitment to customer service is what sets us apart. And it’s a major reason why the Airport has been recognized internationally for its quality service with three top place AETRA customer service rankings for the second year running. Halifax International Airport was rated as the best airport in the Americas of any size for overall satisfaction, the best domestic airport in the world, and placed first worldwide with under five million passengers. This annual survey was conducted by the International Air Transport Association and co-sponsored by Airports Council International.

“We work closely with our volunteers, Visitor Information Centre, airlines, and retail partners to uphold a high standard of customer service. We’re the first airport in North America to achieve Superhost status – a worldwide recognition of customer service. We’ve had colleagues from around the world visit our Airport to learn what we’re doing right. Other airports might have more resources and more facilities, but it’s our people that really make the difference at this Airport,” says Martin.

In Nova Scotia, the one thing you can count on is the weather. Snowstorms, hurricanes, fog, rain. We have it all. In all kinds of weather, for all kinds of reasons, airline passengers spend unanticipated time in airports. “It’s our job to make that wait as comfortable as possible,” says Kelly Martin, Customer Relations Manager.

“You’d be surprised how much we’ve learned about keeping airline passengers happy. Something as simple as a bottle of water or a deck of cards can make the wait a little more bearable,” says Martin. That is why the Airport Authority stocks necessities such as blankets, baby food and other supplies, and makes movies available to help entertain delayed passengers.

“And most importantly, we have a team of volunteers who seem to know exactly what to say, or when to offer help,” says Martin. “In times when there are delays and it seems like passengers are most in need of a friendly face, they’re there, doing what they can to make the wait easier.”

Launched in 2000, HIAA’s Volunteer Host Program proved to be an invaluable asset again in 2005, with almost 100 volunteers logging more than 15,520 hours serving passengers and visitors. The tartan-vested volunteers are on hand daily to meet and greet visitors, providing

Customer Service

Enhancing HALIFAX INTERNATIONAL AIRPORT AUTHORITY 132005 ANNUAL REPORT

AIR SERVICE SPECIALIST

Richard Garson

Zoom added a Belfast seasonal service to Halifax on a trial

basis in 2005, and announced a year round weekly service

between London (Gatwick) and Halifax.

Provincial Airlines, Condor, Northwest Airlines, Thomas Cook,

American Eagle, Canadian Affair, and Continental Airlines all

increased service through Halifax.

On March 11, 2005, Jetsgo’s bankruptcy meant the loss

of 19 flights a week to Toronto. While this is a well served

route from Halifax, losing a carrier is always disappointing

for the Airport and the community.

By the end of the year, the total number of passengers

processed through the Airport remained level with 2004

at 3.2 million. While air cargo activity was down 1� per

cent over 2004, due to the loss of MK Airlines and Polar

Air Cargo focusing on China routes, positive developments

included the return of Icelandair Cargo and Air Canada’s

dedicated freighter in October.

HIAA entered into a partnership with the Nova Scotia

Department of Tourism, Culture and Heritage in 2005,

HIAA is committed to improving service to both carriers and

passengers alike. For the sixth consecutive year since

management of the Airport was transferred from the federal

government to the community, landing and terminal fees were

not increased. HIAA is sensitive to the financial pressure

on the entire industry to meet changing market demands,

and will continue to maintain the decreased domestic

landing and terminal fees introduced in January 2005.

Improved and expanded air service and new partnerships

marked our air service development efforts in 2005.

Air Canada and Air Canada Jazz improved service to both

Boston and Goose Bay by upgrading turbo prop service

to regional jets. CanJet added frequencies to Toronto,

St. John’s and Deer Lake. CanJet and WestJet introduced

daily service to winter vacation destinations. Also in 2005,

WestJet added daily direct service to Calgary and increased

frequency to Toronto and St. John’s.

In 2005 we became partners with Finnair, as they began

technical service stops between Finland and winter sun

destinations.

Air Service

IncreasingAIR SERVICE SPECIALIST

Richard GarsonHALIFAX INTERNATIONAL AIRPORT AUTHORITY 152005 ANNUAL REPORT

New retail outlets, a car rental service centre currently

under construction, land development projects, and other

new amenities are all part of the plan to improve services.

“We feel a responsibility to our community, and to the

region, to be ambassadors and to provide the services this

area needs as it grows. With U.S. pre-clearance on the

horizon, and the recent developments on the Canada-U.S.

Open Skies Agreement, the stage is set for positive growth

at Halifax International Airport. When the region grows,

we grow,” says Staples.

to raise awareness and develop additional air service to

European destinations.

As well, HIAA’s business development team organized its

second Air Access Forum, bringing together some 150

participants representing airlines, airports and business

partners, to meet and discuss growth opportunities.

“What’s most important for us is that we understand the

needs of the carriers, and match that with the needs of

our community stakeholders. This forum and the many

others we attend around the world, provide us with an

opportunity to consult and determine the right services

to bring to Halifax,” says Jerry Staples, Vice President

Marketing & Business Development.

Air Service

Increasingcontinued


SCHEDULED PASSENGER AIR CARRIERS7 Domestic Air Carriers

Air Canada Air Canada Jazz Air Georgian CanJet Airlines Jetsgo (discontinued in March 2005)Provincial AirlinesWestJet Airlines

6 Transborder (USA) Air Carriers

American Eagle Air Canada Jazz CanJet AirlinesDelta Airlines Continental ExpressNorthwest Airlines

1 International Carrier

Air St. Pierre

SCHEDULED PASSENGER SERVICES16 Domestic Destinations

Calgary, AB Charlottetown, PE Deer Lake, NL Fredericton, NB Gander, NL Goose Bay, NLHamilton, ON Moncton, NB Montreal, QC Ottawa, ON Quebec, QC Saint John, NBSt. John’s, NLStephenville, NLSydney, NSToronto, ON

6 Transborder (USA) Destinations

Boston, Massachusetts Detroit, Michigan Newark, New Jersey New York (JFK), New York Orlando, FloridaSt. Petersburg, Florida

3 International Destinations

Hamilton, Bermuda London (Heathrow), United Kingdom St. Pierre et Miquelon

Airlines and Direct Destinations in 2005

CHARTER AIR CARRIERS5 Charter Air Carriers

Air Transat Condor Flugdienst Skyservice Thomas Cook (UK) AirlinesZoom Airlines

CARGO CARRIERS7 Cargo Carriers

Air Canada CargoJet Icelandair Kelowna Flightcraft Morningstar ExpressPrince Edward Air Provincial Airlines

CHARTER PASSENGER SERVICES15 International Destinations

Cuba Camaguey Cayo Coco Holguin Varadero

Dominican Republic La Romana Puerto Plata Punta Cana

Germany Frankfurt Munich

Jamaica Montego Bay

Mexico Cancun

United Kingdom Belfast Glasgow London (Gatwick) Manchester

HALIFAX INTERNATIONAL AIRPORT AUTHORITY 1�2005 ANNUAL REPORT

VOLUNTEER HOSTS

Joyce and John Patriquin

HIAA values its role in the community, and its employees are actively involved as well.

Council completed two major studies – a Strategic Plan and an Economic Impact Study – setting the stage for further advocacy and activities that will help position Halifax as an international gateway to the world.

Again in 2005, Halifax International Airport hosted the Nova Scotia International Air Show (NSIAS). Through ongoing consultation between the NSIAS Organizing Committee, HIAA, and all airlines, this community event was successfully held with minimal disruption to commercial activity.

To better understand the community we serve, all HIAA employees underwent diversity training in 2005. As well, our Employment Equity/Diversity Action Team completed an employment systems analysis, which will form the basis of an employment equity plan.

As a responsible member of the corporate community, HIAA follows best practices for the environment, with ongoing attention to water treatment, and workplace health and safety, with a focus on reducing workplace injuries. Airport security is always a priority, and in 2005, HIAA developed iWatch, a unique airport community-wide security action program. The iWatch program was developed to build and sustain an active security culture within the Airport community, by increasing employee awareness, understanding and reporting of suspicious activity.

HIAA values its role in the community, and its employees are actively involved as well.

In 2005, HIAA employees raised over $12,000 for such organizations as the United Way; Nova Scotia amateur sport, entering a team in the annual dragon boat race; Breast Cancer Research, participating in a casual day promotion; and the Parker Street Food and Furniture Bank, by donating school supplies and food. Through its Community Outreach Program, HIAA supported over 200 organizations with close to $13�,000 in corporate donations, as well as promotional items and public display space in the terminal building.

Through the Humanities Fund, members of the Union of Canadian Transportation Employees Local 80829 contribute $.01 for each hour worked and HIAA doubles that contribution. In 2005 the Humanities Fund donated $6,�50 to seven organizations chosen from employee suggestions.

In June, HIAA signed on as one of the first members of Nova Scotia’s Come to Life campaign charter, pledging to promote Nova Scotia and its attributes wherever they do business. HIAA is also an active member of the Halifax Gateway Council, a not-for-profit organization established to promote growth in the transportation sector and related industries in the region. In 2005, the

Community Partnerships

Strengthening

VOLUNTEER HOSTS

Joyce and John Patriquin


Twila GrosseSUPERVISOR MANAGEMENT ACCOUNTING

government under the new rent policy. This was offset by several factors negatively impacting revenue, including shifts in air service by major carriers, the bankruptcy of Jetsgo, and the reduction of international cargo flights.

Airport Improvement Fee revenue in 2005 was $11.� million, up slightly from $11.4 million in 2004.

Operating expenses increased in 2005 to $32.4 million compared to $30.0 million in 2004. These increased expenses are mainly related to the operation of Park’N Fly™, increases in amortization due to a larger asset base, property taxes under the transition year of our development grant agreement with Halifax Regional Municipality (to stabilize after 2005), contract salary increases, and inflationary increases in the cost of goods and services.

Looking ahead, 2006 will be a year of building our future and managing our growth. We will complete the air terminal building expansion, including the opening of U.S. pre-clearance. As well, we will commence the planning and design for a parkade, develop and implement a comprehensive revenue diversification strategy, develop and introduce an integrated risk management strategy, and complete a succession planning framework. An ambitious financial plan is in place for 2006, and does not include any change in general terminal and aircraft landing fees.

Financial Stability

Sustaining

Halifax International Airport is a significant economic force for the region. In November, HIAA released the results of an economic impacts study conducted by SGE Acres Limited. The report concluded that the Airport and its aviation community generated $1.135 billion in gross output in 2004, and achieved consistent growth over the past 15 years.

“As the Airport operator, HIAA plays a major role in the Airport’s impact on our economy,” says Joyce Carter, Vice President Finance. “We initiate construction, capital improvements, and bring in new business, but it is the contribution of the entire Airport community that makes Halifax International Airport such an economic driver.”

For HIAA’s part, 2005 was a year marked by construction, technology improvements and better airline service. In the long term, it has set the stage for the services that we will provide to both air carriers and passengers.

Financial OverviewOperating revenue for 2005 was $34.4 million compared to $33.2 million in 2004. A number of factors contributed to this increase in revenue. Positive impacts included the opening of a Park’N Fly™ lot in February, representing an additional $61�,000 in revenue, and a gain of $1.2 million due to the elimination of the Transport Canada final chattels repayment, as announced in May by the federal


Twila GrosseSUPERVISOR MANAGEMENT ACCOUNTING

It’s the contribution of the entire Airport

community that makes Halifax International

Airport such an economic driver.

Financial Statements

Auditor’s Report

To the Directors of Halifax International Airport Authority

We have audited the balance sheet of Halifax International Airport Authority as at December 31, 2005 and the statements of operations and changes in net assets and cash flows for the year then ended. These financial statements are the responsibility of the Authority’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Authority as at December 31, 2005 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. As required by the Canada Corporations Act, we report that, in our opinion, these principles have been applied on a basis consistent with that of the preceding year.

Halifax, Canada February 10, 2006 Chartered Accountants

Balance SheetIn thousands of dollars

2005$

6,0655,380

320570

12,335

117,935

130,270

24,227736

26,08151,044

72446

1,88753,701

76,569

130,270

2004$

8,��92,944

329500

12,552

63,328

�5,880

�,93�226

1,3039,466

1,885--

1,60312,954

62,926

�5,880

ASSETSCurrentCashAccounts receivableInventoriesPrepaid expenses

Capital assets [note 3]

LIABILITIES AND NET ASSETSCurrentAccounts payable and accrued liabilitiesDeferred revenue [note 9]Current portion of long-term debt [note 4]

Long-term debt [note 4]Accrued benefit liability [note 7]Security deposits

Net assetsEquity in capital assets [note 5]

Commitments [note 6]

See accompanying notes

On behalf of the Board:

Year ended December 31

Director Director


2005$

8,5958,2917,7895,3682,0182,299

34,36011,70746,067

11,0429,0613,4124,3613,3611,187

32,424

13,64362,926

76,569

2004$

9,22�8,�59�,5804,3902,0931,16�

33,21611,43�44,653

10,6838,0013,4284,2402,�95

86130,008

14,64548,281

62,926

REVENUESLanding fees Terminal and passenger security fees Concessions Parking Rentals Other [note 4]

Airport improvement fees [note 5]

OPERATING EXPENSESSalaries, wages and benefitsMaterials, services and suppliesGeneral and administrativeGround lease rentAmortizationProperty taxes

Excess of revenues over expensesNet assets, beginning of year

Net assets, end of year [note 5]



Statement of Operations and Changes in Net AssetsIn thousands of dollars

Statement of Cash FlowsIn thousands of dollars

2005$

13,643

3,361

3,94920,953

(48,581)(48,581)

26,000(1,086)24,914

(2,714)8,779

6,065

2004$

14,645

2,�95

2311�,6�1

(12,438)(12,438)

42�(3,265)(2,838)

2,3956,384

8,��9

OPERATING ACTIVITIESExcess of revenues over expenses Items not involving cash: Amortization Net change in non-cash working capital balances related to operations Cash provided by operating activities

INVESTING ACTIVITIESExpenditures on capital assets Cash used in investing activities

FINANCING ACTIVITIESProceeds of long-term debtRepayments of long-term debtCash provided by (used in) financing activities

(Decrease) increase in cashCash, beginning of year

Cash, end of year




Notes To Financial StatementsDecember 31, 2005

1. General

The Halifax International Airport Authority (the “Authority”) was incorporated on November 23, 1995 as a corporation without share capital under Part II of the Canada Corporations Act. On February 1, 2000, the Authority signed a 60-year ground lease with Transport Canada and assumed responsibility for the management, operation and development of the Halifax International Airport. Excess revenues over expenses are retained and reinvested in airport operations and development.

The Authority is a dynamic and multi-faceted aviation enterprise that provides air access to the world, facilitates personal and business connections and promotes regional economic growth.

The Authority is governed by a Board of Directors whose members are nominated by the Halifax Regional Municipality, the Province of Nova Scotia and the Federal Government, as well as the Halifax Chamber of Commerce. The nominated members can also appoint additional members who represent the interests of the community.

The Authority is exempt from federal and provincial income tax, federal large corporation tax, and Nova Scotia capital tax.

2. Significant Accounting Policies

The Authority’s financial statements have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities at the date of the financial statements and the reported amounts of certain revenues and expenses during the year. Actual results could differ from those estimates.

Inventories Inventories consist of materials, parts and supplies and are stated at the lower of cost determined on an average cost basis and estimated replacement cost.

Ground lease The ground lease with Transport Canada is accounted for as an operating lease.

Capital assetsCapital assets are recorded at cost including interest on funds borrowed for capital purposes,net of contributions and government assistance and are amortized over their estimated usefullives on a straight-line basis as follows:

Assets RateComputer hardware and software 20% - 33%Leasehold improvements 2.5% - 10%Machinery, equipment, furniture and fixtures 5% - 20%Vehicles 5% - 1�%

Construction in progress is recorded at cost and is transferred to leasehold improvementswhen the projects are complete and the assets are placed into service.

Revenue recognitionLanding fees, terminal fees, parking revenues and passenger security fees are recognized asthe airport facilities are utilized. Concession revenues are recognized on the accrual basis andcalculated using agreed percentages of reported concessionaire sales, with specified minimumguarantees where applicable. Rental revenues are recognized over the lives of respective leases, licenses and permits. Airport improvement fees (“AIF”) are recognized when originating departing passengers board their aircraft as reported by the airlines.

Deferred revenue consists primarily of concession revenue for minimum guarantees and license fees received in advance of services being rendered.

Employee benefit plans The Authority sponsors a pension plan on behalf of its employees which has defined benefit and defined contribution components. In valuing pension obligations for its defined benefit component, the Authority uses the accrued benefit actuarial method prorated on services and best estimate assumptions. Pension plan assets are valued at current market values. The excess of the accumulated net actuarial gain or loss over 10% of the greater of the accrued benefit obligation and the fair value of the plan assets is amortized over the average remaining service life of employees. Defined contribution component amounts are expensed as incurred.


In thousands of dollars

4. Long-term Debt

2005$

--

26,000

80526,80526,081

724

2004$

6

--

3,1823,1881,303

1,885

Halifax Regional Municipality deed transfer tax loan, unsecured, non-interest bearing, repayable in monthly installments of $5,633.

Canadian Imperial Bank of Commerce Construction installment loan, bearing interest at prime rate less 65 basis points.

Transport Canada deferred rent, non-interest bearing, repayable in monthly installments of $6,�00 commencing in 2006. (See note (d) below)

Current portion of long-term debt (See note (b) below)

(a) Credit Facilities The Authority has authorized credit facilities with the Canadian Imperial Bank of Commerce for $�8 million, which, in the event of default, will be secured by an Agreement containing a fixed mortgage by way of sublease of the Authority’s interest in the lease with Transport Canada, and a security interest in all of the other assets of the Authority. This security is not registered, recorded or filed in any public registry until an event of default has occurred. The credit facilities consist of an operating line of credit to a maximum of $3.0 million bearing interest at prime rate less �0 basis points. A demand installment loan to finance construction costs is available to a maximum of $�5.0 million and bears interest at prime rate less 65 basis points.

(b) Current Portion of Long-Term Debt The terms of the construction installment loan only require repayment as agreed by the Bank and the Authority. The loan amount is shown as current, as repayment terms have not been agreed upon and although not expected, the loan could be demanded. This amount will form part of a long-term financing arrangement which the Authority is currently in the process of negotiating.

3. Capital Assets


Accumulated Depreciation

$

1,5875,542

1,5143,165

--

11,808

Net BookValue

$

88566,558

2,5114,444

43,537

117,935

Computer hardware and software Leasehold improvementsMachinery, equipment, furniture and fixturesVehicles Construction in progress

Cost $

2,47272,100

4,0257,609

43,537

129,743

2005 $


Accumulated Depreciation

$

1,2�3 3,528

1,1102,54�

--

8,458

Net BookValue

$

66245,552

2,253 3,633

11,228

63,328

Computer hardware and software Leasehold improvementsMachinery, equipment, furniture and fixturesVehicles Construction in progress

Cost $

1,935 49,080

3,3636,180

11,228

�1,�86

2004 $


Notes To Financial StatementsDecember 31, 2005 continued

4. Long-term Debt (continued)

(c) Capitalized Interest Interest on long-term debt of $260,596 (2004 - $24,060) was capitalized as part of construction in progress during the year.

(d) Forgiveness of Debt During 2005, Transport Canada agreed to forgive $1.2 million (2004 - $nil) of debt. This amount is included in other revenue.

5. Airport Improvement Fees

On January 1, 2001, the Authority implemented an AIF of $10 per local boarded passenger to fund the cost of a major capital program. These fees are collected by the air carriers for a feeof 6% under an agreement between the Authority, the Air Transport Association of Canada,and the air carriers serving Halifax International Airport. Under the agreement, AIF revenuesmay only be used to pay for the capital and related financing costs as jointly agreed with aircarriers operating at the airport.

A summary of the AIF collected and capital and related financing expenditures are as follows:

In thousands of dollars 2005$

12,459(752)

11,707

50,398

38,69121,034

59,725

2004$

12,299(862)

11,43�

14,859

3,4221�,612

21,034

AIF revenue (net):AIF revenueAIF collection costs

Expenditures

Excess of expenditures over AIF revenueExcess of expenditures over AIF revenue, beginning of year

Excess of expenditures over AIF revenue, end of year

From January 1, 2001 to December 31, 2005, the cumulative capital expenditures totaled $110,091,000 (2004 - $59,693,000) and exceeded the cumulative amount of AIF revenue by $59,�25,000 (2004 - $21,034,000).

In thousands of dollars 2005 $

50,366 26,203

76,569

2004 $

38,65924,26�

62,926

Net assets provided by airport improvement feesNet assets provided by other operations

Net assets, end of year

Net assets of the Authority as at December 31 are as follows:

6. Commitments

Transfer agreementOn May 9, 2005, the Government of Canada announced the adoption of a new rent policy that will result in reduced rent for Canadian airport authorities, including Halifax International Airport Authority. This reduced rent will be phased in over four years beginning in 2006, with the new formula achieving its full impact in 2010. The new formula is based on percentage of gross revenues on a progressive scale. The Authority finalized the amendment to its ground lease with Transport Canada in December 2005.

Rent payable under the old ground lease with Transport Canada included base rent calculatedon a formula reflecting annual passenger volumes, annual revenues, and predetermined baseoperating costs. Base rent was calculated on a capped passenger volume formula subject to adjustments for inflation. The estimated lease obligations over the next five years are approximately as follows: 2006 $4,2�1 200� 4,093 2008 3,825 2009 3,290 2010 3,500

Construction in progressAt December 31, 2005, the Authority had outstanding contractual construction commitmentsamounting to approximately $11.0 million (2004 - $3.0 million).


7. Pension

The Authority sponsors a pension plan (the “Plan”) on behalf of its employees, which has defined benefit and defined contribution components. The defined benefit component is for former Transport Canada continuing full-time employees who were employed by the Authority on February 1, 2000 and previously participated under the Public Service Superannuation Act (“PSSA”) Plan. However, these employees had the option to elect to become members of the defined contribution component in lieu of the defined benefit component. All other employees will become members of the defined contribution component. An actuarial valuation has been prepared as of January 1, 2003, for purposes of funding the Plan.

The existing Government of Canada pension assets and accrued benefits obligation for certain employees have been transferred to the Authority. The pension transfer agreement between Transport Canada and the Authority was finalized during 2004 and the total pension liability has been transferred, fully funded to the Authority. As at December 31, 2005, $11,691,000 (2004 - $6,258,000) in assets had been transferred to the Authority for pensionable service prior to the effective date of February 1, 2000.

The following table provides information concerning the accrued benefit obligation, plan assets, funded status and prepaid (accrued) pension costs of the plan as at December 31, 2005:

In thousands of dollars 2005 $

18,785 (20,147)

(1,362)(1,316)

(46)

2004 $

11,135 (10,992)

143 143

--

Plan assets Accrued benefit obligation

Funded status – plan (deficit) surplus Unamortized net actuarial (loss) gain

Accrued benefit liability

The significant actuarial assumptions adopted in measuring the Authority’s accrued pension benefits are as follows:

2005 %

5.25 6.75 4.00

2004 %

6.25 �.00 4.00

Discount rate Expected long-term rate of return on plan assets Rate of compensation increase

2005 %

57 31 84

100

2004 %

63 33 4--

100

Equity securitiesFixed income securitiesReal estate securitiesOther

Plan Assets

Pension expense for 2005 amounted to $136,000 (2004 - $90,000) for the defined contribution component and $618,000 (2004 - $5�9,000) for the defined benefit component.

Other information related to the Authority’s defined benefit component is as follows:

In thousands of dollars2005

$

573 205 93

Employer contribution Employees’ contribution Benefits paid

2004 $

5�9 204

81

HALIFAX INTERNATIONAL AIRPORT AUTHORITY 2�2005 ANNUAL REPORT

8. Financial Instruments

Fair value The Company’s primary financial instruments consist of cash, accounts receivables and accounts payable and accrued liabilities. The difference between the carrying values and the fair market values of the primary financial instruments are not material due to their short term maturities. At December 31, 2005, the fair value of long-term debt was $641,000 (2004 - $2,900,458) relative to the carrying value of $�24,000 (2004 - $3,188,581).

The fair values of long-term debt were estimated based on the present value of contractual future payments of principal and interest, discounted at the current market rates of interest available to the Authority for similar debt instruments. Credit risk The Authority is subject to credit risk through its accounts receivable. A significant portion of the Authority’s revenues, and resulting receivable balances, are derived from airlines. The Authority performs ongoing credit valuations of receivable balances and maintains reserves for potential credit losses.

Notes To Financial StatementsDecember 31, 2005 continued

9. One-Time Marketing Grant

In 2005, the Authority received a one-time marketing grant from the Government of Nova Scotia in the amount of $600,000. The grant can be used to undertake specific marketing activities to increase the air connections and routes between the United Kingdom, Germany, the Netherlands and Nova Scotia, that use Halifax International Airport. The grant is being amortized to income as expenses are incurred. As at December 31, 2005, $102,000 has been credited to income, with the remaining $498,000 credited to deferred revenue.

10. Comparative Figures

The comparative financial information has been reclassified to conform to the presentation adopted for 2005.


2005 Board of Directors

Director: Ken Streatch

Director: Stephen L. Wallace

Director: Robert J. Scott

Director: Fred Smithers

Director: J. Robert Winters

Director: Roy Rideout

Director: Cheryl Newcombe

Chair: Bernard F. Miller

Secretary: James S. Cowan

Director: Paul Gurr

Director: Carole Cushing

Director: Norbert Comeau

Director: Peter McDonough

Vice Chair: Frank Matheson

Vice President Infrastructure & Technology: Michael Healy Vice President Marketing & Business Development: Jerry Staples

President & CEO: Eleanor Humphries Vice President Finance: Joyce Carter Vice President Operations: Peter Clarke

Director Human Resources: Lydia Bowie Corporate Counsel: John MacLeanDirector Communications & Public Affairs: Gina Connell

Executive Management


Board of Directorscontinued

Norbert Comeau – DirectorNorbert had a lengthy career as a school administrator with the Provincial Acadian School Board. He has served as a member of the Nova Scotia Human Rights Commission and chaired the organizing committee for FANE (Acadian Federation of Nova Scotia). He has always been active as an entrepreneur and provided leadership to numerous organizations in the community of Clare.

Carole Cushing – DirectorCarole is the former Senior Vice President and Managing Director and Atlantic Division Manager for BMO Nesbitt Burns Inc., where she was responsible for the Private Client Division in the four Atlantic Provinces, and provided leadership to ten branch managers throughout the region. Carole has served as Chair of the Board of Governors of Mount Saint Vincent University, Trustee of the IWK Grace Health Centre Foundation, and Chair of the IWK’s Investment Committee.

Paul Gurr – Director Paul is the former President for Labatt Breweries Atlantic, and serves on a number of professional and community boards, including the Halifax Chamber of Commerce, the advisory board of the Frank H. Sobey Faculty of Commerce at Saint Mary’s University, and the Canadian Centre for Ethics in Public Affairs. He also participates on the Board of Governors for Junior Achievement, and the Executive Forum of Nova Scotia. Paul is currently a full-time business graduate student at Saint Mary’s University.

Bernard F. Miller – ChairBernie has been Chair of the Airport Authority Board for the past 10 years. He was the Authority’s chief negotiator during the transfer negotiations with Transport Canada which brought the airport under local control, and also served as the Airport’s CEO for much of the first year after transfer. He assumed the CEO role again in 2005 from February until August. He retired as Chair at the end of 2005 and will continue to serve on the Board as past Chair in 2006. Bernie previously enjoyed a 35-year career with Air Canada, where he held a number of senior executive positions. He retired from the airline in 1991 as Vice President, In-Flight Service for Air Canada’s worldwide operations.

Frank Matheson – Vice ChairFrank is President and CEO of Homburg Canada Inc., an international real estate company with holdings in residential, commercial, industrial, and retail properties. Frank is a past Chair of the Halifax School Board and the Halifax Forum Commission, and has served on many community and industry-related boards and commissions. Frank became Chair of the HIAA Board on January 1, 2006.

James S. Cowan, QC – Secretary to the BoardJim is a member of the Senate of Canada and partner of the law firm Stewart McKelvey. He is the Chair of the Board of Governors of Dalhousie University and past Chair of the Atlantic Provinces Transportation Commission. Upon his appointment to the Senate in March of 2005, Jim resigned from the HIAA Board, but continues as Secretary, a position he has held since 1995.


Fred Smithers – DirectorFred is the President and CEO of the Secunda Group of Companies, and the Honorary British Consul for the Maritime Provinces. He is a Director of ProGear, a golf club manufacturing company, and President and Owner of Granite Springs Golf and Country Club. He sits on the Board of Directors of Barrington Wind Energy, the IWK Hospital for Children, and the World Wildlife Fund of Canada, and is on the Board of Governors for Saint Mary’s University.

Ken Streatch – Director Ken has over 30 years of senior management experience in both business and government. He is the President and CEO of Sunberry Cranberry Producers Inc., and Chairman of the Board of Atlantic Canada Cranberries Inc. Ken has held a number of portfolios with the government of Nova Scotia, including Minister of Transportation and Communications and Minister of Economic Development.

Stephen L. Wallace – DirectorStephen is President of the Bedford-based consulting firm Terrain Group Inc. He is a former Director of the Nova Scotia chapter of the Urban Development Institute and past President of the Consulting Engineers of Nova Scotia.

J. Robert Winters, QC – DirectorRobert is counsel to Burchell MacDougall, Barristers & Solicitors of Truro, Nova Scotia, and Chairman of Napwick Holdings Limited, a private holding company, past Chairman of the Board of Regents of Mount Allison University, and a member of the advisory boards of the Bragg Group of Companies and Inland Technologies Inc.

Peter McDonough, QC – DirectorPeter is a senior partner at McInnes Cooper, and has been in practice for over 30 years in the areas of property development and real property (commercial and residential). He has served on the Board of Governors of Dalhousie University, Nova Scotia College of Art and Design, Special Olympics, and the YMCA. He was the Co-Chair of the Halifax Industrial Commission and is the founding President of the Dalhousie Black and Gold Club.

Cheryl Newcombe – DirectorCheryl joined the HIAA Board in June 2005. She is the Comptroller of Lighthouse Lumber Wholesalers Limited in Dartmouth, a position she has held since 2002. Cheryl is also on the Board of Beacon House and is the immediate past Chair of the Halifax Regional Water Commission. Cheryl is a nominee of Halifax Regional Municipality.

Roy Rideout – DirectorRoy is past Chairman and CEO of Clarke Inc., a publicly traded company in the transportation industry. He is also a Director of Oceanex Income Fund, Fortis Inc. and NAVCANADA. Prior to 1988, Roy held senior executive positions with both Eastern Provincial Airways and Canadian Airlines International for 15 years. Roy is a chartered accountant.

Robert J. Scott – Director Bob is Executive Vice President of Glenora Distillers International Ltd. and is a former Director of the Small Business Development Corporation for the province of Nova Scotia.


Corporate Governance

Executive Officer; assesses the performance of the Board and the Chief Executive

Officer; ensures effective communication with the nominators and the community; and

ensures the effectiveness of the Airport Authority’s internal controls and systems in

preserving and enhancing the Airport Authority’s assets and pursuing its mission. The

Board meets as often as is required to carry out its responsibilities and maintains three

standing committees that make recommendations to the Board with respect to matters

within their jurisdiction: the Governance Committee, chaired by Robert Winters; the

Audit Committee, chaired by Roy Rideout; and, the Capital Projects Committee, chaired

by Peter McDonough. The Airport Authority has adopted conflict of interest guidelines

to govern the conduct of, and the disclosure and avoidance of conflicts of interest for, all

officers and directors. These disclosures are updated as required.

During 2005, the Governance Committee of the Board reported that there were no

breaches of the conflict of interest guidelines by any officer or director of the Airport

Authority.

Compensation of the senior officers and directors of the Airport Authority is reviewed

annually. Amounts paid to the Airport Authority’s officers and directors during

2005 follow.

Halifax International Airport Authority is a dynamic and multi-faceted aviation enterprise

that provides air access to the world, facilitates personal and business connections,

and promotes regional economic growth.

The Airport Authority is governed by a Board consisting of a maximum of 14 Directors

nominated by the following entities:

Federal Government 2

Provincial Government 1

Halifax Regional Municipality 4

Halifax Chamber of Commerce 3

HIAA Board of Directors 4

Generally, a director may serve no more than a total of nine years from the date of

transfer, February 1, 2000. Collectively, directors are expected to possess knowledge

relating to the aviation industry, air transportation, business, finance, administration, law,

government, engineering, labour organizations, and the interests of consumers.

The Board oversees the conduct and operation of the Airport Authority; reviews and

approves corporate strategies, plans and financial objectives; appoints the Chief


Executive CompensationThe salary range for the President & CEO and for each of the Vice Presidents of the Airport Authority during 2005 was $98,800 to $250,000.

In addition to base salaries, annual bonus payments totaling $1�0,000 were paid during the year. Bonus payments are contingent on individual and corporate achievements.

Contracts in excess of $92,600Halifax International Airport Authority, in accordance with its ground lease with Transport Canada, is required to report all contracts in excess of $92,600 ($�5,000 in 1994 dollars adjusted for Consumer Price Index) which were entered into during the year and that were not awarded on the basis of a public competitive tendering process. The following contracts were in excess of $92,600 and were awarded without public tender:

Terminal Systems International, Inc. for a gate management system in the amount of $119,250.Miller Waste Systems for international waste management services for five years with $118,220 paid in year one.

For the above two contracts, systems or services are of a proprietary nature with one qualified supplier.

Royal Canadian Mounted Police for policing services for five years for $3,5�9,52�.

For the above contract, the supplier previously and satisfactorily performed service which represented a cost saving.

•

•

•

Board of Directors Total Compensation

Chair: B. F. Miller * $�1,800

Vice Chair: F. Matheson $31,500

Secretary: J. S. Cowan $3�,4�9

Directors: N. Comeau $20,000

C. Cushing $19,200

P. Gurr $11,305

P. McDonough $22,400

C. Newcombe $3,�28

R. Rideout $22,200

R. J. Scott $19,200

F. Smithers $12,800

K. Streatch $19,200

S. L. Wallace $22,531

J. R. Winters $1�,600

*During the period February 1, 2005 to July 31, 2005, Mr. Miller, as Chair of the Board, assumed the additional responsibilities of the CEO of the Airport Authority.


L A U T C A F I V E - Y E A R F O R E C A S T

5002 4002 3002 raeY 2006 2007 2008 2009 2010

Passenger Volume 2,973,187 3,242,389 3,229,111 3,347,330 3,510,633 3,677,451 3,788,473 3,899,079

Per cent Change 4.2 % 9.1 % -0.4 % 3.8 % 4.9 % 4.8 % 3.0 % 2.9 %

Total Aircraft Movements 88,228 89,845 86,393 89,935 93,533 96,151 98,363 100,625

Per cent Change 3.8 % 1.8 % -3.8 % 4.1 % 4.0 % 2.8 % 2.3 % 2.3 %

Planned Capital Expenditures ($ 000’s)

$ 8,598 $ 15,268 $ 57,881 $ 72,793 $ 57,511 $ 15,715 $ 18,483 $ 21,013

Rent Payable to Transport

Canada ($ 000’s) $ 3,191 $ 4,240 $ 4,361 $ 4,271 $ 4,093 $ 3,825 $ 3,290 $ 3,500

Five-Year Forecast


The following table outlines the passenger traffic and aircraft movements forecasted

over the next five years. These are the key drivers to our financial success, which will

enable us to provide the best airport facilities and services to the public and our

customers as we move onward and upward.

1 Bell Boulevard, Tel: 902.8�3.4422 Enfield, Nova Scotia Fax: 902.8�3.4�50B2T 1K2 www.halifaxairport.com

onward - halifax stanfield international airport

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