Canadian airports are buckling up for a rough ride by freezing salaries, cutting costs and delaying upgrades where possible as airlines cut routes and business travel declines.

While cancelled flights, fewer travellers and tighter margins could spell problems for airport authorities, most officials say they intend to hold the line on costs passed on to air travellers.

"When I talk to my counterparts across the country, generally what you're hearing is that passing on costs at this point is the last resort," says Barry Rempel, president and CEO of Winnipeg Airports and chairman of the Canadian Airports Council.

"But if that's what we have to do, that's what we'll do."

Barry Rempel

An exception is Toronto's Pearson International where the airport improvement fee (AIF) will increase from $20 to $25 per passenger departing as of June 1.

The Greater Toronto Airports Authority (GTAA) has also put in place a hiring freeze, frozen management salaries, closed some air and ground facilities and deferred all but its most critical capital projects as passenger numbers are projected to fall 5.8 percent in 2009. Pearson handled about 32 million passengers last year, according to preliminary numbers.

But the GTAA is also offering incentives to airlines if they bring in new air routes or increase service on existing routes.

"Our goal is for Toronto Pearson to be ready when the traffic comes back, to be in a strong position," says GTAA spokesman Scott Armstrong. "We're responding to the current economy to be ready for an improving economy."

However, airline analyst Jacques Kavafian of Toronto-based Research Capital says now is not the time to increase fees.

"What they're (Toront#o) doing makes no sense," he says. "Because volume is going down, to maintain their revenues they're increasing service fees. I've never heard this in any other business. It makes no sense."

Kavafian says the GTAA should cut, not just freeze, its spending.

"The Montreal, Calgary and Vancouver airport authorities said they will not increase their user fees. They're making the smarter moves," he adds.

He believes that increasing costs to travellers will simply deter passengers from flying or force them to cheaper alternatives from U.S. airports near some of Canada's major cities.

That also concerns Rempel, who notes that U.S. airports have numerous advantages due to different cost structures.

U.S. airports pay virtually no rent, no municipal taxes and are able to issue tax-free bonds, leaving Canadian facilities facing substantially higher operating costs.

"We have decided for some reason we don't need to have airports in Canada competitive with those in the U.S.," says Rempel.

"(U.S. low-cost carrier) Allegiant Air is flying Canadians from North Dakota to Las Vegas and Florida because the U.S. has paid for the runways and infrastructure," he adds. "It's the same thing for Plattsburgh (N.Y.) from Montreal, Buffalo for Toronto, and Bellingham for Vancouver. The Buffalo airport is undertaking a fairly major capital expansion as is Plattsburgh."

Only 18 months after opening its doors, Plattsburgh International Airport is initiating plans for a major expansion of its passenger terminal that's expected to be financed by the U.S. government.

"We optimistically thought it would take five years to prove our ability to effectively tap this unique market," Garry Douglas, president of the Plattsburgh-North Country Chamber of Commerce, which is the airport's marketing and development agency, said in a statement. "We were wrong. And 85 percent of our passengers are coming from Canada, mainly from the Montreal region, but also from Quebec City and even Ottawa."

The Canadian Airports Council believes more could be done to help airports during these difficult times. Besides reducing airport rents, Rempel says Ottawa should help with policing costs and permit duty-free purchases on arrival.

"What we're saying is give us an opportunity to be competitive and make money in other areas," he adds.

In Winnipeg, hiring by the airport authority is frozen as are salaries (except for clauses in existing collective agreements). An overtime ban is in place unless it's absolutely necessary.

But fees are not being raised, even though airlines have already told the airport authority there that capacity will disappear.

Costs are being held at current levels as well in Vancouver. The airport improvement fee remains at $15 while a lower fee, $5, for travel within B.C. and the Yukon is also unchanged.

"Airports and airlines worldwide are facing challenging times due to a slowed global economy and YVR (Vancouver International) is no exception," says Tony Gugliotta, senior vice- president of finance and business development for the Vancouver Airport Authority.

Vancouver handled a record 17.85 million passengers last year but is anticipating a 4.5-percent reduction in passenger volume this year.

The authority says it will continue to look for ways to reduce operating costs and maximize non-aeronautical revenue.

The skies are a little clearer in Alberta, with growing passenger volume propelling Calgary International Airport to the third-busiest airport in the country after Toronto and Vancouver.

Calgary saw its numbers increase two percent last year to reach 12.5 million passengers. It will also welcome new routes from Air Canada and KLM this year, though passenger numbers may fall by as much as five percent.

"Our fees are at a sustainable level at the moment. Our (business) plan already anticipated some reduced economic activity" says Garth Atkinson, president and CEO of the Calgary Airport Authority. "We're not making any changes. Frankly, it's business as usual for us."

Atkinson adds that Calgary has significantly lower operating costs compared to other airports due to the way it is managed. "We're monitoring the situation and if we need to make any changes we will. But, right now, we're well positioned to weather any downturn," he says.

Edmonton, too, finds itself in a reasonably strong position. Edmonton Airports has led the country in passenger increases for the last three years, with more than 50 percent growth in passenger traffic since 2004. This year though, passenger growth is expected to be minimal or remain flat.

The airport is also holding the line on fees, while moving forward with a major terminal expansion.

"We've frozen our aeronautical fees charged to airlines since 2005," says Traci Bednard, vice-president of communications and passenger experience for Edmonton Airports. "We do that because we respect airlines as a key partner for this community and want to ensure we remain as a competitive community and airport."

But Bednard says it would be naïve to think that Edmonton Airports won't be affected by the global downturn.

"It's also why we maintain such an aggressive focus on non-aeronautical revenue," she adds. "It's the reason why we've expanded our restaurant operations and attracted another gas station. Every dollar we raise in non-aeronautical streams is one less dollar we will need to charge to travellers."

(Laura Severs can be reached at laura@businessedge.ca)