Airport traffic sluggish

Canadian airports face a slow recovery after the recession caused a significant erosion of passenger traffic, says a debt rating agency.

MONTREAL — Canadian airports face a slow recovery after the recession caused a significant erosion of passenger traffic, says a debt rating agency.

DBRS said it expects sluggish traffic conditions well into 2010.

The country’s airports have seen their business drop over the last 12 months, although the losses have been less severe than in past recessions. Declines have also eased in the latest traffic results.

However, traffic was down five to seven per cent as of the summer at most airports, with the exception of Vancouver, where conditions were much worse.

Canada’s second-busiest airport saw its volumes drop by 11.6 per cent as of August because of sharp declines in its international and transborder business from peaks in 2008.

Airport authorities are forecasting that traffic will decrease by four to nine per cent in 2009, with a modest rebound in 2010.

Vancouver is expected to drop 8.9 per cent overall, Toronto 6.4 per cent, Montreal 5.6 per cent, Edmonton five per cent and Ottawa four per cent.

Five years of solid growth has given the airport operators “a sizable cushion to weather traffic declines,” the DBRS report said.

Airport operators have also mitigated the effects of the downturn by deferring capital projects, hiring freezes and advancing planned fee increases. The exception is Edmonton, whose capital upgrades are ramping up.

The recession has also produced challenges for air carriers, especially Air Canada (TSX:AC.B) which accounts for more than half of traffic at Canada’s largest airports.

DBRS said the airline remains in a precarious financial position due to its heavy debt, although it obtained temporary relief from a 21-month extension of collective agreements and more than $1-billion in new funding.

“This should provide some breathing room in the near term, although medium-term prospects remain uncertain,” it said.

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