Western Economic Diversification Canada
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Airport Improvements Initiative

As previously indicated, most of the key informants were familiar with CEDI and had limited knowledge of AII and therefore most of the key informant information is included in Section 3 although it applies to both CEDI/AII.  The one departmental staff member who was very knowledgeable about the Airport Improvements Initiative completed a key informant interview late in the evaluation process and the information was integrated into the following section.  Additional information contained in the following section was collected from project proponents, the comparative analysis and the outcome assessment.

Relevance

Need for Program

The AII did not duplicate similar programs/initiatives but rather played a complementary role.  Every AII-funded respondent said there was a major need for programming such as the AII. Respondents explained that the scope of the department is more diverse than most funding operations, allowing more diverse types of projects to apply for funding.  Most AII-funded respondents said there was a 25% likelihood their project would have proceeded without departmental funding.  The four comparator airports selected in the outcome assessment component of the evaluation noted that runway expansions are impossible without public funds, which they were currently considering or actively seeking.  Although the comparator airports had made other improvements during the study period, the main reason why none had extended runways or expanded air terminals was lack of funding.

Alignment with Departmental and Federal government priorities

The federal government has a responsibility to ensure all areas of Canada are prosperous and the AII offered the targeted, smaller airports an opportunity to increase traffic flows and thus tourism for their respective regions.  Key informants felt that this initiative was well within the government’s range of priorities (80% for experts, and 100% for stakeholders and department employees).  The objectives of the initiative aligned with the federal priority of Strong Economic Growth and supported the department’s strategic outcome of Community Economic Development.  The department’s economic mandate and past experience in delivering federal infrastructure programs in Western Canada positioned it to deliver the Airport Improvements Initiative. 

Consistency with Federal Roles and Responsibilities

Federal investment in small airports contradicts the National Airports Policy that requires all incremental airport infrastructure be financially self-sustaining.  However, the federal government can, and has, invested in airports when it is in the national interest to do so.  For example, funding of the Moncton Airport (Sommet de la Francophonie in Moncton in 1998) and the Quebec Airport (the 400th anniversary of Quebec City in 2006) was deemed to be in the national interest.  The Airport Improvements Initiative addressed economic issues of public interest by funding airports in areas affected by the mountain pine beetle.  The economic viability of each project was demonstrated in business cases submitted by the proponents and through appropriate due diligence.

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Performance:  Achievement of Expected Outcomes

General Findings

AII was economically driven and projects sought to support long-term structural adjustments to regional economies.  Project proponent respondents reported that the AII-funded projects were very successful in achieving their objectives related to extending runways and expanding airport capacity and ability to operate year-round.  Proponents said that the projects are likely to be very successful in the long run.  Long run success depends on the airports expanding their commercial activities and diversifying their lines of revenue and business, thus enhancing economic stability and replacing lost forest sector activity.  Projects successfully leveraged funding from other sources (4.8/5), increased community capacity and ability to cope with the mountain pine beetle infestation (4.5/5), and created a new economic infrastructure (4.3/5).  The AII projects had less of an impact in terms of diversifying the local economy away from forest dependence (3.3/5) and creating opportunities for diversified value-added forestry (2.9/5) since the nature of these projects did not allow for direct impacts in these areas.  In terms of impacts on local businesses, most respondents said it was too soon to tell.

Project proponents identified community and departmental support as the most important success factors.  Departmental involvement with First Nations bands was also critical, as was the power of large project to unite the community.  Furthermore, a commercially viable and solid business case supported each project and due diligence was appropriate to the project.  With the international appeal that comes with an airport, multiple communities also began to take pride in their increased international profile and made renewed efforts in other local initiatives. 

The AII faced some constraining factors.

Two years is an insufficient amount of time to deliver a program, particularly when there are environmental and native rights issues involved.  Proponents highlighted two major factors constraining the success of the AII-funded projects.  The first was a delay to an aircraft parking area in one of the projects that came about as a result of an environmental impact assessment. Lengthy communications between the department and Environment Canada ended up delaying the construction by several months.  Departmental management disagrees with the proponent’s assessment of the reasons for the delay and claims Environment Canada acted promptly and the delays were caused by the proponent’s alterations to their project. The second challenge was to convince one of the local communities that the project was worthwhile.  They did not originally see the airport expansion as profitable, but were convinced to support it eventually.

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Performance Measurement

The Program Activity Architecture indicator for all three projects was “the number of enhanced community services or facilities”.  The unique indicators focussed primarily on increased flights or passengers through the airport and increased employment.  The Kelowna airport was the only complete project at the time of the file review and the final report indicated that the project could not have been improved, a follow-on project could enhance outcomes, the department could not have engaged the client more effectively and the project was within budget.

  • Kelowna Airport:  according to the final report, results in terms of the completed runway extension have exceeded expectations.  The project achieved its performance target of an enhanced community service/facility.  The project has three other performance indicators that it expects to achieve by December 31, 2011:  1) an annual increase of 78 flights into the airport from Europe; 2) an annual increase of 19,000 passengers traveling through the airport from Europe; and 3) an annual increase of 88 person years of direct employment. 
  • Prince George Airport:  the final claim has been approved and the final reporting date is February 28, 2011.  The most recent progress report states that there is now an 11,400 foot runway indicating the achievement of its performance indicator of an enhanced community service/facility.  The project has three other performance targets it has yet to meet:  1) annual increase of 500 international cargo trans-shipment flights at Prince George; 2) an annual increase of 1600 fuel stops at Prince George Airport; and 3) an annual increase of 50 tourism-related international charter flights.  The project was delayed by the slow approval to implement a mitigation plan for an “at risk” species of toad and the weather. 
  • Kamloops Airport:  the first claim has been approved and the expected completion date is December 31, 2012.  The most recent progress report states that the runway is complete and therefore the project has achieved its indicator target of an enhanced community service/facility.  The project has yet to achieve its remaining performance targets of: 1) increasing the annual number of passengers traveling through the airport from 200,611 (pre-initiative) to 467,478; 2) increase direct employment in the region by 744 jobs; and 3) increasing the number of aircraft movements from 13,333 (baseline) to 15,085.  The project was delayed by the late completion of the environmental impact assessment/ archaeological impact assessment.

Expected Outcome:  Incremental Creation of Economic Benefits

Kelowna:  An air service market study conducted by consultants in 2008 found that the runway extension improved operational and safety conditions for current air carriers flying into Kelowna by:  reducing weight penalties associated with runway contamination, increasing safety margins for takeoff and landing, providing greater obstacle clearance on takeoff and reducing aircraft noise impact. 

Prince George:  Case study data indicate the airport increased the community’s:
1) international profile; 2) ability to attract new business; and 3) hope and optimism.

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Ultimate Outcome:  Developing and diversifying the Western Canadian Economy

Literature on diversifying and developing the regional economy

Research supports investment in “asset building”, including improvements to community infrastructure and transportation, as a means of stimulating regional development:  “In Canada and internationally, asset building is increasingly being recognized as an important strategy for social and economic development; in the United Kingdom, for example, it has been described as the ‘third pillar’ of the social welfare system, along with education and income security”.13

Evidence that Airport Improvement Initiative Developed and Diversified the Canadian Economy

The AII-funded projects were very successful in achieving their objectives (average rating of 4.8/5) which included: to extend the runway length to accommodate international flights, to expand the airport to the point where it could accommodate major cargo traffic, and to allow the airports to continue operating year-round instead of only in the summer months.  Project proponent respondents said that the projects are likely to be very successful in the long run as well although that remains to be seen.

What is evident now is that the AII has provided airports with the potential to realize long term goals.  Specifically, the AII-funded airports now have the potential to increase their activity levels whereas the four comparator airports, upgraded during the same time period, still lack the potential to significantly increase activity levels.

Unintended Impacts

AII-funded respondents indicated that several positive impacts were generated as a result of these projects:  less noise traffic because of the longer runway, an increase in community spirit around such a large infrastructure project, and the introduction of Canadian Border Services Agency into the area because of new international flights.  One key informant noted that, in Kelowna and Kamloops, first nations Bands negotiated agreements with the airports that improved their relationship; the Bands publicly credited the Federal government for changing their local relationship with the airports.  No negative impacts were mentioned.

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Performance: Demonstration of Efficiency & Economy

Economy

One key informant acknowledged that AII was delivered at very low cost – AII fit into the department’s existing delivery capacity and the incremental cost to the department was one staff  for 1.5 years and 25%  of a manager’s time for one year; outcomes and outputs likely could not have been generated at lower cost, making AII good value for the money spent.  Every AII-funded respondent said the AII is very cost-effective (100%; average rating of 5/5) and half of the respondents felt the program was well-structured (50%).  Some respondents had cash-flow issues that rendered pre-payment very difficult.  Respondents also said that although the departmental staff were careful to minimize delays, there were red tape issues that ended up resulting in several months of delays.  The first was a delay to an aircraft parking area in one of the projects that came about as a result of an environmental impact assessment.  Lengthy communications between the department and Environment Canada ended up delaying the construction by several months.  The second challenge was to convince one of the local communities that the project was worthwhile.  They did not originally see the airport expansion as profitable, but were convinced to support it eventually.  Respondents said that intended results would have been achieved more effectively if they had been provided more funding to complete the project; as a result the community had to invest much more of their own funding to make up for the gap. The department indicated that the first delay was caused by the proponent’s alterations to their project and the second delay relates to future expansion plans and not to the project funded under AII.

Efficiency

The following is a discussion of the AII program in relation to the programs and best practices that have been reviewed.

The experience of one community with AII was complicated by a perceived funding shortfall.

One community was initially reluctant to support their AII project.  When they became convinced of its efficacy, AII did not provide all necessary funding and the community had to invest their own resources to make up the funding gap.  Some infrastructure programs do require joint funding.  However, the difference in the expectation and the reality of funding levels can reduce local support for the initiative and for a program in general.

The lack of advance funding can create issues for proponents.

Some participants in the program did not have sufficient cash flow to cover the up-front project costs and were forced to obtain bridge funding.  The Canadian Federal government airport infrastructure programs (and many other jurisdictions) focus on smaller remote airports and often provide 100% of program costs.  The previous BC Air Transport Assistance Program offered 100% funding for small airport projects while larger ones are expected to cost share. 

Coordination between stakeholder agencies is essential to success.

Most often there are two or more levels of government (and potentially more than one department of one level) involved in the project.  Coordination is crucial not only for cost sharing issues but for areas of administrative and regulatory issues. Consultation and coordination with the involved communities is important for ensuring a smooth project process. 

While there is some variation across airports, overall the department funded 29% of total project costs; every departmental dollar was matched by $2.45 from other contributors.  A leveraging ratio of 2.45 is respectable in comparison to the $1.65 leveraged by the Western Economic Partnership Agreements which funded the Cranbrook runway expansion.14 Internationally, the leveraging ratio of 2.45 compares favourably with the $2.88 leveraged from a large transportation infrastructure project funded in Dundee Scotland.15  

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Table 4.1 Collaborative Funding
Project Partner Funding Contribution ($, % of total cost)
  Other Federal Provincial Municipal Client Total Partner Funding
AII Total  $ 0.00
-
 $16.35
26.0%
 $ 5.10
8.0%
 $ 23.47
37.0%
71.0%
Note: All numbers in millions CAD$

Table 4.2 Funds Leveraged in AII Projects, July 2010
Project Total WD contribution (% of total cost Total Cost Of Projects Dollars Leveraged  Per WD Dollar
Kamloops Airport $6.00  (32%) $18.50 $2.08
Kelowna Airport $1.35 (17%) $7.80 $ 4.78
Price George Airport $11.00 (30%) $36.97 $2.36
Total $18.35 (29%) $ 63.27 $2.45
Note: All numbers in millions CAD$

Infrastructure projects like airports require sophisticated management systems.
These projects need to incorporate best practices in strategic planning, information management, asset management systems, consultation, priority setting and business case approaches.  They also include cost and benefit analysis of the project and account for social and environmental impacts.

Like CEDI, AII applicants had concerns regarding short time frames.

The program had at least the appearance being rushed into implementation.  Applicants said they would have liked to have more time for implementation.  Most infrastructure programs are of longer duration, usually multiple years. 

Possible Improvements and Lessons Learned

  • Project proponents learned they should know more about all the requirements before undertaking the project in order to plan more effectively.
  • AII-funded respondents recommended that funding should be available in advance, explaining that project managers had to seek out bridge funding to fill in until the government repaid their costs.  Departmental management explained that all three airports were consulted and declined advances as outlined in the Due Diligence Report;  however, the Due Diligence Report for one of the airports lacked this information and bridge funding was very costly for this particular airport.
  • One key informant listed a number of lessons learned/best practices including:  utilization of experienced departmental staff; availability of appropriate processes and systems to support delivery; sufficient project implementation time; timely due diligence and funding processes; collaboration with other funding partners; leadership with respect to environmental and first nations consultations; legal support; and strict stacking requirements and requirement of provincial government matching funding to ensure cooperation of all partners. 

[13] Source: “A Review of Rural and Regional Development Policies and Programs”, Canadian Policy Research Networks, 2008, page 7.

[14] Source:  “Evaluation of the Western Diversification Program-Western Economic Partnership Agreements”, 2008, page 6.

[15] The project was a large waterfront redevelopment funded under the “Cities Growth Fund”: a program aimed at “supporting growth in Scotland’s 6 cities that resulted in clear, measurable improvements in each City-Region”.  The leveraging ratio was 1.44 pounds, which is approximately  2.88 Canadian dollars assuming an exchange rate of 2 pounds per Canadian dollar in 2007 (when the report was written).  Source:  http://www.scotland.gov.uk/Publications/2007/03/27153210/4, accessed November 26, 2010.