October 1, 2009
For most of us, the airport is a way station—emplacements of Native art and doughnut franchises flank tearful reunions and, sometimes, endless carousel queues. Larry Berg, president and CEO of the Vancouver International Airport Authority, sees it differently. Berg, a 63-year-old Edmontonian with a master’s in business, worked in energy and mining for 18 years before joining Canada’s second-busiest airport. To him, YVR is a nexus for issues of security, politics, competition, and shopping, with revenue from non-aviation sources like duty-free, car rentals, and parking buttressing bread-and-butter landing and terminal fees. All this becomes exponentially more complicated with the just-opened Canada Line and the looming five-ring circus that is the Olympics.
What impact will the 2010 Games have on the airport? Aside from enhanced security, we’ll have a lot of processes in place to expedite the Olympic family, especially making sure we handle their luggage, which I think will be one of the larger challenges: they’ll have no shortage of skis, toboggans, luge equipment—not your average suitcase. Arrivals will be spread out over a couple of weeks, but departures will be more challenging, because people will tend to depart over a couple of days. We’ll be doing check-in and luggage-handling for many departing Olympians and spectators at the venues, at the athletes’ villages, and at some of the hotels. In this, we’ve been able to learn from our experience with cruise ships: we do onboard check-in at cruise ships when they dock and we handle their luggage and take it out to the airport in advance, so cruisers pretty well go through the airport in an expedited fashion. Overall, we expect to see between 300,000 and 350,000 more passengers through here during the Games than we would otherwise see.
When the world comes, they’ll find the high-speed RAV in place. What else? For arriving passengers coming in who are international, they are very familiar, from European and Asian cities, with taking rapid transit. It’s kind of what they expect: if you go to Hong Kong or Heathrow or Amsterdam, you expect you’ll have a rapid-transit ride downtown. One of the features that’s coming to the airport is enhanced shopping. Retail now accounts for roughly a third of our revenues. You’re going to see some nice new retail offerings. And for the thousands of people who work in the terminals, there’s a built-in market there as well.
Revenue at YVR has been growing over the last decade, peaking at $368 million in 2007. How is it faring in the current recession? As with a lot of businesses, our sales aren’t what they were. We’re budgeting for a reduction of passengers for 2009. We had about 18 million passengers in 2008 and expect those numbers to decrease this year. In that, we’re no different from many airports, better off than some: the B.C. economy is enjoying a more robust environment than the rest of Canada and other countries, thanks partly to the many preparations that are ongoing for 2010 and to some of the big infrastructure spending that we still see going on around us.
Where do tomorrow’s passengers come from? Our entire business strategy revolves around being the gateway of choice into North America for Asian Pacific travel. Fortunately, we are the closest major North American airport to Asia. We have a very deliberate strategy to be a low-cost airport through low landing fees, so that we can offer costs that are competitive, or better-than-competitive, with our competitors for international traffic, principally in L.A. and San Francisco. What hinders us around that competition is that we’re a small business market relative to, say, Toronto, Chicago, or L.A. Now, with new long-range aircraft and polar routes—in fact, Hong Kong-New York flights are already a reality—they can bypass the gateway entirely. We calculate that a daily air service from Asia into Vancouver, annualized every day over a year, creates 220 jobs in the airport and about $17 million in wages.
How do we retain that Asian traffic? After 10 years as a pilot program at YVR, the existing Transit Without Visa program will become permanent. A trial TWOV program for Chinese nationals will begin. This means that a resident of a TWOV country will only need one visa when travelling to the U.S. through YVR. This puts us on a level playing field with Pacific gateway airports like Los Angeles and San Francisco. We’re hoping this adjustment will encourage the airlines to add incremental service to cities in China not served today. Take southern China. We’re hoping that we could put on a Vancouver-Guangxi service, not only serving the Vancouver market but being able to go through Vancouver into Chicago, Boston, Houston, New York…
Is there a ceiling to this new growth? In these difficult economic times, we need to position ourselves to take advantage of opportunities, for when the market returns, which it surely will. That’s why we need to use this time to get all our trading agreements as liberal as possible: when people and airplanes do start to move around again more than they are today, we need to be positioned to compete and take advantage of opportunities. We get to build infrastructure now for 20 years in the future here. And we’re in good shape: we have the gate capacity and we could handle more traffic. We just need the air policy to be aligned in harmony with us. Our current capacity today would take us up toward 25 million passengers. That would make us a big airport.
How much time do you spend lobbying the feds on matters like international treaties? I thought my job would be more to do with construction and operations, but creating the type of playing field where we can really go out and compete for business has proved to be a bigger part of this job than I envisioned—possibly the biggest.
Your airport authority runs facilities around the world. Chicago’s Midway Airport and London’s Gatwick are bids you’re still in discussions over. How is the existing portfolio? We’re involved in about 17 other airports through YVR Airport Services Ltd. Smaller ones in Canada: Kamloops, Cranbrook, Fort St. John, Hamilton, and Moncton, New Brunswick. In the Caribbean, we’re in Jamaica, Montego Bay, Nassau, Turks and Caicos. Six airports in the Dominican Republic. Santiago, Chile. And we’re involved in two airports in Cypress. We manage those airports. Our role is first, to ensure they are safe and secure, then we want to build traffic in them to assist in the economic development of those countries. We’ve won all those operating concessions through competitive bids; we’re good at it, and we’re attractive as an operator. People come to us and look at the Vancouver airport and they say, “We wish our country or our city had one of these.” They like the way we’ve done a number of things here. We’re seen as a highly efficient operator with low costs, high productivity for the airlines, and efficient and attractive facilities for passengers. Passengers like us because it’s not just another airport. There’s a sense of place: you’re not just in Cincinnati, you’re in Vancouver and it feels like Vancouver. The artwork, the waterfall—those sorts of things have a little bit of a wow factor.