Profits Up 77% For Airport Developer

Print
The company charged with overseeing Lynden Pindling International Airport's (LPIA) $409.5 million transformation saw its fiscal 2009 net income increase by 76.8 per cent to $10.308 million, with the costs for the redevelopment's final two stages pegged at $127.9 million and $83.5 million respectively.

The Nassau Airport Development Company's (NAD) 2009 annual report showed that the profit jump from the previous year's $5.831 million had been generated from a combination of operating revenue increases and expense declines, with both key areas heading in the right direction. Total operating revenue rose by 7.14 per cent, from $34.496 million in 2008 to $36.96 million this year.

Despite the recession's impact on tourist travel to the Bahamas, NAD's audited financial statements for the year to June 30, 2009, showed that revenues from the passenger user facility (PFC) charge rose by 7 per cent year-over-year, from $21.554 million in 2008 to $23.08 million this time around.

That is likely to provide some encouragement to both NAD and its financial backers, especially the investors who financed its the $265 million fund raising for LPIA's Phase I redevelopment. This is because the PFC is the revenue stream that will enable NAD to meet its interest and, ultimately, principal repayments on the bank debt and bond notes.

Overall, the Ernst & Young-audited financial statements showed that NAD's total revenues from aeronautical operations increased by 7.4 per cent to $28.115 million, compared to $26.184 million for the 12 months to June 30, 2008.

Apart from the PFC, most other aeronautical revenue streams at LPIA were heading in the right direction with modest year-over-year increases posted for 2009. Aircraft landing fees rose from $3.382 million to $3.662 million; terminal fees were ahead from $952,285 to $1.032 million; aircraft parking fees increases from $64,405 to $85,980; and loading bridge fees increase from $231,425 to $254,930.

It is likely that NAD's aeronautical revenue streams will see even greater increases in coming financial statements from 2010 onwards, given the planned fee increases at LPIA.

On the commercial side, NAD's revenues increased by a lesser amount, rising by 6.4 per cent to $8.845 million compared to $8.311 in 2008. The main increases here came from terminal leases and the retail concessions, which rose from $3.541 million to $4.197 million, more than compensating for an almost $400,000 drop in refuelling royalties.

On the other side, NAD's total operating expenses fell by 7.9 per cent from $20.191 million to $18.604 million in 2009. This was largely due to drops in material, supplies and services costs, plus a 73.2 per cent reduction in the company's provision for doubtful accounts, which dropped from $1.062 million to $391,036.

This, combined with the 13.5 per cent reduction in materials, supplies and services costs from $12.063 million to $10.437 million - an almost $1.6 million fall - helped to offset a 9.3 per cent increase in salaries and benefits costs to $6.239 million.

The 7.14 per cent operating revenue rise, and 7.9 per cent operating expenses decline, combined to ensure NAD enjoyed a 28.34 per cent operating income increase to $18.356 million for 2009, compared to $14.304 million the year before.

And, with non-operating expenses falling by more than $400,000 - largely thanks to the disappearance of $1.857 million in finance costs incurred in 2008 - NAD saw its retained earnings rise from $1.422 million at the 2009 year-start to $11.73 million some 12 months later. No dividends have been taken out of NAD by its parent, the Airport Authority, or their ultimate owner, the Government.

The fact that NAD, and by extension LPIA, have enjoyed two consecutive years of profitability means that their Canadian managing partner, Vancouver Airport Services (YVRAS), has achieved one of its contractual goals, namely to ensure the Bahamas' main airport makes a profit within five years of their 2007 takeover.

It also means that the airport is no longer dependent on government subsidies for its financial survival, an important consideration given the current burden being faced by Bahamian taxpayers. It is now making money.

Apart from the financials, NAD's 2009 annual report contained relatively few earthshattering surprises for those who have monitored developments at LPIA since it and YVRAS took over operations there in early 2007.

Showcasing the $409.5 million redevelopment project, NAD said that once the project was completed by its scheduled finish date of late 2013, LPIA would have 585,000 square feet of terminal space.

Increase

It described this as "a 21 per cent increase, with the ability to accommodate 50 per cent more passengers. The addition of 34 gates, including one capable of handling the world's largest aircraft, the Airbus A380, will provide the airport with capacity to welcome more than five million passengers".

The annual report went on to describe the LPIA facilities that NAD inherited as "crowded, outdated and [not] accurately reflecting today's Bahamas - a country rich with history and natural beauty, with a thriving tourism and financial industry".

Some $10.6 million was invested in those legacy facilities by NAD via capital works projects, in a bid to bring them up to an acceptable standard. Now, with that phase almost completed, attention is focused on the $198.1 million construction of the new 247,000 square foot US departures terminal, which is underway.

The second phase, NAD's annual report said, would involve the "selective demolition and construction of a new 226,000 square foot International Arrivals Terminal and International Departures Pier", part of which will encompass the existing US departures terminal.

The final phase three will involve the construction of the new 112,000 square foot Domestic/International Departures and Domestic Arrivals Terminal. Phase two is scheduled for completion in late 2012, with the final stage earmarked for a finish in late 2013.

NAD's annual report, describing the second phase construction as "a complete renovation, modernisation and reconfiguring of the existing US terminal", said this would cost $127.9 million.

The Domestic/International Departures and Domestic Arrivals Terminal, which will be built on the site of the existing International Arrivals Hall, is set to cost $83.5 million.

With the construction phase anticipated to generate 400 building sector jobs, NAD added: "Providing increased capacity for passengers and aircraft to facilitate growth in tourism and other related industries, and new modern terminals, can help attract additional airlines and services."

Currently, LPIA has two runways, more than 30 gates and over 482,000 square feet of combined terminal capacity. "With more than three million passengers, and more than 92,000 take-offs and landings in 2008, the airport has reached its capacity, and its facilities are outdated and insufficient for a country as modern and successful as the Bahamas," NAD said.

To create a Bahamian 'sense of place' at the remodelled LPIA, NAD's annual report committed the company to spending $2.2 million in purchasing permanent and temporary artwork from Bahamian artists.

The new terminals, the company said, would feature deep wells for geothermal cooling, an exterior design made up of 50 per cent glass, 50 per cent solid walls to reduce heat gain, solar power and the use of storm water for toilets and irrigation.

Elsewhere, NAD said its overall customer satisfaction ratings had increased from 3.9 out of a maximum 5 in January 2007 to 4 in November 2008, then 4.1 in May 2009.

Source: The Tribune