S P R I N G

F O C U S I N G

O N

M E M B E R S

I N

2 0 1 5

I N D U S T R Y

B.C.’s Aviation Industry Employer profile: Kelowna Flightcraft

Revenue recognition standards impact airline revenue transactions

PROS FEED ON BLTs (BUSINESS, LEADERSHIP, AND TECHNOLOGY) HUNGRY FOR THE LATEST ON WHAT’S TRENDING IN BUSINESS THINKING? FEAST YOUR EYES ON CPABC’S BLT CONFERENCE CPABC SPRING LEADERSHIP CONFERENCE/BLT May 7 and 8, 2015 Pan Pacific Hotel, Vancouver, BC Platinum sponsor: Tacit Management Consulting Inc. Gold sponsor: BFL Canada Insurance Services Inc. Optinet Systems Inc. Silver sponsor: Beanworks Solutions Inc. Caron Business Solutions Horizon Recruitment Jazzit Robert Half

bcCPA.ca

Learn from our triple-threat of captivating keynote speakers: • Business. Memory expert Bob Gray on unforgettable ways to improve your recall. • Leadership. Innovation consultant Robert Tucker on how to make yourself an indispensable innovator. • Technology. TrendHunter.com founder and CEO Jeremy Gutsche on big data and the coming trends for business and finance. Plus a trade show aimed at business and finance leaders and more than 12 hours of prime PD seminars. Register Online at bcCPA.ca/BLT Hurry, space is limited!

Taking Flight – The Aviation Industry in British Columbia S P R I N G

2 0 1 5

A growing industry in British Columbia, aviation connects the world to B.C.’s tourism sector, creates educational opportunities for international students, enables a market for our agrifood and aquacultural products, and allows for global investment in our natural resources. Nearly a quarter of all people working in air transportation in Canada are based in B.C., and over 24,000 British Columbians are employed in the air transportation industry. B.C. is also home to Canada’s second-busiest airport, Vancouver International Airport (YVR). YVR is a key contributor to B.C.’s economy as it supports over 61,000 direct and indirect jobs and generates over $11 billion a year in economic activity.

British Columbia’s CA, CGA, and CMA bodies are currently working to unite under the CPA designation. CPABC Industry Update is their online magazine for members, candidates, and students working in industry.

About CPABC Industry Update is published online four times a year and is sent to over 36,000 CA, CGA, and CMA members, candidates, and students in British Columbia. Opinions expressed are not necessarily endorsed by the ICABC, CGA-BC, or CMABC. Copyright CPABC Industry Update 2015.

Contact us Visit us online at bccpa.ca, or email [email protected]. Editorial inquiries can be sent to Tiana Mah at [email protected].

In this Issue 7

The Past and Future of YVR

8

The Sky’s the Limit A Profile of Kelowna Flightcraft

In this issue of CPABC Industry Update, we profile the aviation industry’s contribution to the B.C. economy and take a look back at a CPABC member’s involvement with the federal government’s transfer of YVR to a community-based, not-for-profit organization. We assess the impact of new revenue recognition standards on airline revenue transactions, and we’ve included a Q&A with members working in the aviation industry. This issue also profiles Kelowna Flightcraft, a B.C. aviation success story, and one of Canada’s leading aerospace companies. Also included in the spring issue is a diverse listing of professional development courses being offered by CPABC. We hope you enjoy this edition of Industry Update, and we look forward to your feedback.

Look for this icon throughout Industry Update Click to return to In this Issue (page 3)

in every issue

10

New Revenue Recognition Standard Touches Down

4

13

Fares Too Good to be True?

18

PD Opportunities

15

Poised for Takeoff – Members Share Their Perspectives on B.C.’s Aviation Industry

22

Connect with CPABC Online

20

Industry Snapshot: Aviation

20

Powering Airport Sustainability

8

10

13

$100

AIR TICKETS

15 SPRING 2015

|

page 3

A Look at B.C.’s Aviation Industry Aviation connects the world to B.C.’s: Natural resources for global investment

Tourism opportunities

Educational opportunities for international students

Agrifood and aquacultural products

YVR's Contribution to the B.C. Economy

#1 #2

Welcomed

Handled

people in 2014*

tonnes of cargo*

Supports

Generates

19.36 million

Ranked as the best airport in North America since 2010*

Vancouver International (YVR) is Canada’s secondbusiest airport

>256,000

>61,000

>$11 billion

direct, indirect, and spinoff jobs

a year in economic activity

>310,000

Generates over

aircraft takeoffs and landings*

$600 million a year in revenues to all levels of government:

>$435 million

>$135 million

to the federal government, equal to the annual budget for Western Economic Diversification Canada

to the B.C. government, equal to the annual budget of the B.C. Ministry of Environment

>$6 million

>$27 million

to TransLink, equal to funding the purchase of 10 new conventional buses

to the City of Richmond, equal to the annual funding for the City’s parks and recreation programs

page 4

|

I N D U S T R Y U P D AT E

B.C.’s Airports 38 certified airports in B.C. B.C. aviation sector has airports, heliports, and water aerodromes

B.C. airports handle 20% of Canada’s airport traffic

300+

The federal government owns the four largest airports in B.C. – Vancouver, Victoria, Kelowna, and Prince George

vs.

We Love to Fly

41%

of B.C. households buy airline tickets annually, compared to

Victoria International (YYJ) is B.C.’s second, and Canada’s ninth, largest airport

Kelowna International (YLW) is B.C.’s third, and Canada’s tenth, largest airport

YYJ served

YLW served

passengers in 2014**

passengers in 2014***

>1.6 million

B.C.’s 13% share of Canada’s population****

31%

nationally****

>1.6 million

Together, YYJ and YLW support over 2,900 direct jobs and generate

>$1.1 billion

23%

of all aircraft landings and takeoffs in Canada occur in B.C.****

per year in economic activity

The B.C. government’s aviation strategy supports its Pacific Gateway target:

40%

increase in passenger traffic

70%

increase in cargo tonnage through Vancouver by 2020

B.C.’s aviation industry generates $1.2 billion in revenues annually Source: AIAC Pacific

Main data source: B.C. Ministry of Transportation and Infrastructure report: Connecting with the World: An Aviation Strategy for British Columbia, 2012. Additional info: *Vancouver International Airport website - Facts & Stats, yvr.ca; **Victoria International Airport website - Facts & Stats, victoriaairport.com; ***Kelowna International Airport - Facts and Statistics, Kelowna.ca/CM/page68.aspx; ****BC Aviation Council.

SPRING 2015

|

page 5

A Look at B.C.’s Aviation Industry

Jobs >24,000

>2,000

British Columbians work in the air transportation industry

British Columbians work in the aerospace industry

****

Schools

1 daily international passenger service supports:

150-200

300-400

jobs related to servicing the plane, passengers, and cargo

jobs in the tourism sector

Average weekly earnings are $975, which is

20%

higher than the provincial average

24%

Industry Challenge: Competitiveness What:

In 2011, Canada ranked ninth out of 139 countries on competitiveness in The World Economic Forum's Travel and Tourism Competitiveness Report.

Impact:

The same report ranked Canada in the 105th spot in terms of price competitiveness. Canada's poor ranking is mainly due to fee structures imposed directly on travellers, such as the Air Travellers Security Charge, which was introduced following the 9/11 terror attacks.

page 6

|

I N D U S T R Y U P D AT E

B.C. colleges and universities with aviation programs: BCIT, College of New Caledonia, Northern Lights College, Okanagan College, Trinity Western University, and the University of the Fraser Valley

of people working in air transportation in Canada are based in B.C.

Industry Challenge: Leakage What: Impact:

Loss of Canadian air travellers to U.S. airports, which frequently offer lower fares to U.S. and international destinations. A study for the Canadian Airports Council estimated that leakage accounted for a loss of 4.8 million passengers, equal to 20% of the total trans-border Canada–U.S. market.

The Past and Future of YVR CPABC’s part in the Airport Authority’s history

N

early 23 years ago, the Vancouver International Airport (YVR) became one of the first airports in Canada to transfer from federal government control to administration by a local, community-based, not-for-profit organization. During the 1980s, a number of dedicated business leaders spent years working on negotiating the transfer of Vancouver’s airport from Ottawa back to British Columbians. These leaders had a vision for YVR as a premier global gateway, and the late Chester Johnson, CPA, FCA, was among these visionaries as the first chair of the Airport Authority’s board of directors. As board chair, Johnson was tasked with overseeing the transfer of the airport from the federal government to the local Airport Authority. In a 2007 interview in Beyond Numbers magazine published by the Institute of Chartered Accountants of BC, Johnson was quoted as saying, “I wasn’t interested in running an airport, but I sure enjoyed the years of negotiation with the federal government on devolution. It was like the elephant and the mouse, and we were the mouse.” Johnson spent five years in fierce negotiations with the federal government before the airport was transferred to the Airport Authority on July 1, 1992. He was also instrumental in negotiating a $425-million bank syndication loan prior to the transfer.i During his 10-year tenure as chair, Johnson oversaw the construction of a new runway and YVR’s International Terminal Building. A strong advocate for public art within the terminal, Johnson championed the purchase of “The Jade Canoe” sculpture by renowned First Nations artist Bill Reid as crucial to creating a “street scene” within the Terminal Building. In recognition of his work for YVR, the

Chester Johnson Park was created near the International Terminal, a building he had played a large role in creating. Since the formation of the Vancouver Airport Authority, ICABC – one of CPABC’s legacy organizations – has been one of eight nominating entities for the Authority’s board of directors, and has had a member on the board since its establishment. The other nominating entities include the Association of Professional Engineers and Geoscientists of British Columbia, the City of Richmond, the City of Vancouver, the Government of Canada, ICABC, the Law Society of British Columbia, Metro Vancouver, and the Vancouver Board of Trade. As Canada’s second-busiest airport, YVR welcomed 19.36 million visitors in 2014, facilitated more than 310,000 aircraft takeoffs and landings, and handled over 256,000 tonnes of cargo. Sixty-two airlines serve YVR, connecting people and businesses to 99 destinations in Canada, the U.S., and around the world.ii Today, YVR has a 20-Year Master Plan that identifies what air travel needs must be met for 2027 and the Airport Authority’s recommendations to achieve these needs. A $1.8 billion investment by the Airport Authority is part of the master plan to attract new routes and air carriers, improve travellers’ experience at YVR, and make upgrades to the terminals, baggage systems, and safety and security. i

Beyond Numbers magazine, Institute of Chartered Accountants of BC, February 2007

ii

yvr.ca

SPRING 2015

|

page 7

The Sky’s the Limit

L

ike the story of Steve Jobs and Apple, many successful companies have stories of their founders starting their business in a basement or garage. For Kelowna Flightcraft, the company’s humble beginnings trace back to founder Barry Lapointe in 1970. A newly minted aircraft maintenance engineer and pilot, Lapointe moved to the Okanagan Valley to provide mobile aviation services in Vernon and Kelowna. Seeing a niche market opportunity for aircraft maintenance in the Okanagan, Lapointe moved from servicing small aircraft, using tools in the back of his van, to running a fullservice aircraft maintenance, repair, and overhaul depot in Kelowna with his business partner Jim Rogers. Together, Lapointe and R ogers de ve loped a ran g e of avia t ion services, including air cargo, heavy maintenance, aircraft modifications (building air tankers and “stretch” fuselage aircraft), avionics, defence program pilot training, and engine and parts overhauls. The company now has over 1000 employees, a fleet of over 50 aircraft, and three main operational bases in Kelowna, Hamilton, and Southport (Portage la Prairie). Kelowna Flightcraft also has four satellite bases across Canada.

Expansion As the business grew in its early days, Kelowna Flightcraft expanded from page 8

|

maintenance into charter flying. The story of how the company became the exclusive air cargo carrier for Purolator Courier is one of going the extra mile for a customer. Company history recalls the late night call Lapointe received requesting a rush cargo flight for a courier company whose pilots had gone on strike. That first flight in 1978 was the beginning of a successful 35-year relationship between Kelowna Flightcraft and Purolator, during which the company flew over one million pounds of Purolator and Canada Post cargo daily, on a fleet of narrow- and wide-body aircraft, to 12 airbases across Canada. The company continued to diversify its revenue sources by offering a continuum of services. It purchased larger aircraft and offered aircraft leasing arrangements, allowing Purolator to grow its business while maintaining steady cash flows.

Kelowna Flightcra “KF Aerospace” t

defence programs. These government contracts represented huge growth potential with the bonus of lowrisk receivables. In 2005, Kelowna Flightcraft successfully won a $1.8 billion contract to train Canadian Air Force pilots for the next 22 years at the Portage la Prairie base in Manitoba. Since winning this contract, the company has expanded the number of services it offers to the military and now has a dedicated business development team that regularly reviews and bids on national defence programs and other major contracts.

Looking to the Future

Kelowna Flightcraft’s initial business model of “fly, maintain, lease” was also applied to other customers. Cargo clients were offered maintenance and/ or leasing options, and maintenance clients were offered aircraft modifications and leasing options. The company’s goal was to provide seamless service to meet its clients’ wide-ranging aviation needs.

Kelowna Flightcraft recently re positioned its entire business model. In 2013, Purolator and the Canada Post Group of Companies issued a request for proposal that changed their air cargo pricing structure from dollars per flight hour to a unit toll of dollars per kilogram. This change, along with other requirements, forced Kelowna Flightcraft to review its overall air cargo business, strategy, and pricing. In the end, the cargo contract was awarded to another company and Kelowna Flightcraft transitioned out of Purolator and Canada Post’s air cargo program as of March 2015.

Examining their business once again in the early 2000s, Lapointe and Rogers strategized to expand into military

During the 12-month transition period, Kelowna Flightcraft’s business development team explored

I N D U S T R Y U P D AT E

aft celebrates 45-year milestone by launching a new brand, to reflect expanding business model of “fly, maintain, lease, teach”.

opportunities to establish new air cargo routes and markets, while management worked on redeploying t h e c o m p a ny ’s Pu ro l a to r “ h u b” airbase into a maintenance, repair, and overhaul facility. To support the transition, the company developed a marketing plan to renew and rebrand all the company’s aviation services. In April 2015, Kelowna Flightcraft

launched a new website, logo, and trademark – “KF Aerospace” – to depict its significant presence in the Canadian and international aviation industry. The new brand is the next step the company has taken as it prepares for global growth.

a “fly, maintain, lease, teach” business

Longer term, the company’s strategy is to continue expanding and improving its integrated aviation services under

the aircraft leasing business as airlines

model. The new vision provides a renewed focus on international opportunities, establishing an Eastern Canada maintenance, repair, and overhaul presence, adding defence program contracts, and expanding look to replace their aging fleets postrecession.

Connecting with CPABC: A Q&A with KF Aerospace’s director of finance and CFO, Meryle Corbett, CPA, FCMA

I

ndustry Update spoke to Meryle Corbett, CPA, FCMA, director of finance and CFO of KF Aerospace, formerly Kelowna Flightcraft Group of Companies, to find out what it’s like to work at the company and learn about its involvement with CPABC’s Career Connect program. At KF Aerospace, Corbett oversees the finance department, and acts as a facilitator between other functional areas of the company such as human resources, maintenance operations, and risk management.

What makes KF Aerospace a unique place to work? The company has an incredible ability to thrive and find solutions in crisis situations. For example, our Canadian Forces Flight Training School was created from ground zero to a “steady state” flight school in 15 months, and a national wide-body air network for Canada Post cargo was established in less than six months.

What qualities are common among your most successful employees? They all have an excellent work ethic, a passion for aviation, enthusiasm for troubleshooting all kinds of problems, and they operate as a team in a “work family” environment.

KF Aerospace has a number of CPAs in the organization. What sets CPAs and CPA candidates apart from other hires? We have a succession planning process and find that CPA candidates are well positioned to develop a career path within our family of companies. CPAs have an ability to think on their feet, ask the right questions, and are able to adapt to the issues and needs of our business.

What attracted you to become a member of the CPA Career Connect employer program? Our goal is to find and retain the best candidates possible; CPABC Career Connect is a win/win for us as we gain preferred access to the skills and strengths of CPA candidates and we’re able to offer them great career opportunities. CPABC Career Connect recognizes leading companies that provide an effective working and training environment for designated members, students, and candidates and affirm the value of CPA-trained accountants and finance professionals within their organization. To learn more about the program, visit www.bccpa.ca/careers/career-connect. SPRING 2015

|

page 9

New Revenue Recognition Standard By Peter Rogan and Zhe Xuan Choo, CPA, CA

It is expected that a new revenue recognition standard will have a significant impact on all airline revenue transactions, and will likely require some airlines to change certain revenue recognition practices. page 10

|

I N D U S T R Y U P D AT E

Touches Down

I

n M ay 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly issued a new revenue recognition standard that will supersede vir tually all revenue recognition guidance in International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (US GAAP), including the industry-specific guidance that airline entities use today. The new standard, IFRS 15, provides guidance for those accounting for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers. In five steps, the new guidance outlines the principles an entity must apply in order to measure and recognize revenue and the related cash flows:

1 2

Identify the contract(s) with the customer;

3 4 5

Identify the separate performance obligations in the contract; Determine the transaction price; Allocate the transaction price to the separate performance obligations; and Recognize revenue when each performance obligation is satisfied.

Key Accounting Consideration for Airlines Frequent Flyer and Loyalty Program Accounting Airlines often offer loyalty programs that allow customers to earn reward points for flying with them or through partner arrangements, such as cobranded credit cards, flights on other airlines, and activities with other travel partners, such as rental car companies and hotels. Under the new standard, goods and services an entity might currently consider to be marketing incentives – including reward miles or points issued in frequent flyer or loyalty programs – are now classified as goods or services for which the customer pays and to which the entity should allocate consideration (i.e., identify as performance obligations) for purposes of revenue recognition. This change arises because the reward miles or points have value to the customer and obligate the airline to provide a future good or service. The new standard will require airlines to defer revenue for their loyalty programs until the related performance obligations are satisfied. This could have a material effect on an airline’s financial results for entities

currently accounting for loyalty transactions in accordance with the incremental-cost method. Although reward points sold through partner arrangements are accounted for as revenue transactions in accordance with today’s revenue recognition guidance in US GAAP, reward points that are issued to program participants for using the entity’s products and services can be accounted for as an accrued expense under US GAAP using the incremental-cost method. However, the incremental-cost method is not currently permitted by IFRS, which requires entities to account for reward points as a separately identifiable component of the sales transaction(s) in which they are granted. Airlines moving from an incrementalcost method to treating reward points as a revenue element will have to allocate some portion of the transaction price to the reward element based on the estimated stand-alone selling price of each performance obligation. Airlines that have treated reward points sold to partners, such as co-branded credit card providers, as revenue elements should be able to use that model as a starting point to estimate the value of used reward points. However, the valuation of the reward points may change under the new standard.

SPRING 2015

|

page 11

New Revenue Recognition... (cont’d)

Implementing Accounting Change A common five-phase model for implementing accounting change in an organization includes:

1. Assessment: Identify accounting, reporting, and tax differences, and assess the consequences in business processes and systems.

2. Design and planning: Set up program and project infrastructure, including a roadmap and change management strategy.

3. Solution development: Identify solutions, prepare an implementation plan, and develop solutions across the work streams.

4. Implementation: Approve and roll out solutions across the work streams.

5. Postimplementation: Address deferred items and transition to operational model.

Accounting Standards for Private Enterprises (ASPE) The Private Enterprise Advisor y Committee has discussed the impact of the new standard on the application of Section 3400 Revenue, given that Section 3400 is based on US GAAP. The committee observed that IFRS 15 has yet to be incorporated into Part I of the CPA Canada Handbook – Accounting. As a result, IFRS 15 is not yet part of Canadian GAAP. The committee noted that, as with any IFRS issued or amended by the IASB, any potential changes to the accounting standards for private enterprises as a result of the issuance of IFRS 15 would be considered by the committee once the standard has become effective and some experience has been gained in applying it.

Effective Date and Transition For IFRS financial statements, the standard is mandatorily effective for annual periods beginning on or after January 1, 2017. Early adoption is permitted. IFRS 15 requires a full retrospective approach, in which the standard is applied to all of the periods presented, or a modified retrospective adoption. Under the modified retrospective adoption, entities will apply the standard retrospectively to only the most current period presented in the financial statements (i.e., the initial period of application).

Implementation Considerations The new standard will affect the recognition, measurement, and disclosure of revenue for many airlines. Since revenue is often the most important financial performance indicator, this accounting change could have impacts on an organization beyond its financial statements. Airlines should perform a preliminary assessment on how they will be affected as soon as possible so they can determine how to prepare to implement the new standard. Due to the potential wide-ranging impact of IFRS 15, the implementation process should be comprehensive and include the IT, tax, legal, sales, marketing, and human resources depar tments, and the executive management team. Public entities should also consider how they will communicate the changes to investors and other stakeholders, including their plans for disclosing the effects of the new accounting standards and the transition method the organization has selected. Zhe Choo is a senior manager, financial accounting advisory services at EY. Peter Rogan is a senior manager, Financial Accounting Advisory Services at EY and a member of EY Canada’s Expert Network for the new revenue recognition standard.

Disclaimer: The views expressed in this article are preliminary. The authors may identify additional issues as they analyze the standard and entities begin to interpret it. During that process, the authors’ views may evolve.

page 12

|

I N D U S T R Y U P D AT E

$100

AIR TICKETS

Fares Too Good to be True? Canadian Transportation Agency rules that passengers cannot take advantage of mistake fares By Kathryn McGoldrick

I

n this electronic age, more air travellers are purchasing flights online, on the basis of posted fare prices. But what happens when the wrong fare price is posted? Is the airline

still required to transport the passenger at the posted price, even if that price is significantly lower than the fare it intended to charge?

In the United States, Department of Transportation (DoT ) regulations prohibit airlines from increasing the price of a fare after the ticket has been purchased. While the precise impact of SPRING 2015

|

page 13

Fares too good... (cont’d) this regulation in relation to “mistake fares” has been the subject of some debate in the U.S., the DoT has taken the position that it applies to such fares.

action to remove the fares. Swiss then notified its passengers that the tickets were cancelled, and provided refunds.

total cost of approximately US$1,000

The CTA rejected the passengers’ position that a valid and binding Canada has no similar legislation. The contract of carriage had been created Canadian Transportation Agency (CTA) when the tickets were purchased, and recently addressed the issue of mistake that Swiss was therefore obligated to fares in the context of complaints by honour the posted fare price. In 83 passengers who purchased doing so, it relied on case tickets for travel on Swiss A law that provides that a International Air Lines AG. general party may be entitled (“Swiss”) but later had rule is that if it to have a contract these tickets cancelled seems too good revoked if there has by Swiss on the basis to be true, it been a fundamental that the posted fares probably is! mistake, and if a party were erroneous. These who knows or ought to passengers had purchased know of this mistake “remains tickets for multi-segment first silent and snaps at the offer, seeking to class or business class travel between take advantage of the other’s mistake.” Yangon, Myanmar and Montreal,

was lower than the equivalent posted

Toronto, or Ottawa for a base fare price that ranged between US$113 and US$150, with a total fare price of approximately US$1,000 including taxes and surcharges. The correct base fare prices for these flights ranged between US$10,000 and US$15,000. The majority of the tickets were purchased after notice of the fares was posted on a popular flying blog, which referred to the fares as “mistake fares.”

mistake. If the ticket was purchased less

The fares were never posted on the Swiss website, but were distributed to other online selling agents by the Airline Tariff Publishing Company (ATPCO). Swiss claimed that these fares had been mistakenly included by ATPCO, and that Swiss was unaware of the error. Upon discovering the error on September 28, 2012, it took immediate

page 14

|

The CTA concluded that the fares were a mistake, as they were approximately one percent of the correct fare, and that those purchasing tickets either knew or ought to have known of the mistake. The CTA noted that it did not appear to be coincidental that many of the tickets had been purchased after the blog had been posted, although it did not rely on the post in coming to the conclusion that the purchasers knew or ought to have known of the mistake. The CTA observed that it could not be determined from the post that the author was in fact aware that the fares were a mistake, and that, in any event, some tickets were purchased prior to the post. It did find, however, that a reasonable person ought to have known that a

I N D U S T R Y U P D AT E

for first class/business class travel from Myanmar to Eastern Canada, which economy fare, was not a low ticket price, but a mistake. As fare price was a fundamental term of a contract of carriage, the required mutual agreement for a valid contract to be formed was not present, and Swiss was therefore entitled to cancel the tickets. T h e C TA a l s o s e t o u t g e n e r a l expectations for carriers in addressing mistake fares. When all or any portion of a ticketed itinerary is cancelled due to a mistake fare, the carrier should, at a minimum, notify the passenger of the cancellation no later than 72 hours after the carrier becomes aware of the than 72 hours before the scheduled departure, the passenger should be notified at least 24 hours before departure. In either case, the carrier should refund the amount paid. This decision suggests that passengers will not be able to take advantage of mistake fares when these fares are so low that a reasonable person ought to have realized they were a mistake. While cases will be fact-specific, a general rule is that if it seems too good to be true, it probably is! Kathryn McGoldrick is an associate with Alexander Holburn Beaudin + Lang LLP, and practices civil litigation in the areas of aviation, insurance, and appeals.

Poised for Takeoff Members share their perspectives on B.C.’s aviation industry

I

ndustry Update spoke with members working in aviation to gain their insights into the industry, its future outlook, and areas of growth. Recently, we spoke with Glenn McCoy, CPA, CGA, senior vice president, finance and chief financial officer of the Vancouver Airport Authority in Richmond; Pat Kennedy, CPA, FCMA, chief financial officer of Pacific Flying Club in Delta; and Mike Delves, CPA, CGA, accountant and business advisor with MNP LLP in Nanaimo and treasurer of the BC Aviation Council.

fleet of 27 aircraft at the Boundary

Club. This includes strategic planning,

Bay Airport. The Club was founded in

risk management, human resources,

1965 as the Canadian Pacific Airlines

budgeting, marketing, and business

Employees Flying Club. We train both

development. I also liaise with various

Industry Update: Can you give a brief overview of your organization and your role within it?

recreational and commercial pilots and

levels of government and national and

we’re accredited by the Private Career

provincial organizations.

Training Institutions Agency of BC and

McCoy: As the senior vice president,

hold the Education Quality Assurance

finance and chief financial officer of the

Kennedy: I’m the chief financial officer

designation issued by the Province

Vancouver Airport Authority (YVR), I am

of Pacific Flying Club, Western Canada’s largest flight training centre with a

of B.C. As CFO, I’m responsible for all

part of the executive team responsible

of the non-flying operations of the

for the overall management of YVR and SPRING 2015

|

page 15

Poised for Takeoff... (cont’d)

its subsidiaries. I am directly responsible for the Airport Authority’s corporate finance, accounting, and commercial services, including retail and parking operations. I am also on the board of two of the Airport Authority ’s subsidiaries, including Vantage Airport Group and the McArthurGlen Designer Outlet Vancouver Airport joint venture.

Industry Update: Aviation is a growth industry for B.C., but many British Columbians don’t know it is one of our key industries. What needs to change for us to realize the importance of aviation to our economy?

Delves: As a business advisor at MNP,

McCoy: The Airport Authority’s entire

I work with a variety of aviation clients – particularly those with interests in airports. Since 2012, I’ve been involved with the BC Aviation Council: I was elected treasurer in 2014 and named chair of the audit and investment committee in 2015.

mandate is to generate economic value, create jobs, and connect our province and region to the world. I believe that increased reporting of the industry’s economic impact and its role as an essential connecting agent for other industries would help people realize the importance of aviation to B.C.’s economy. For example, cargo, a key area of the industry, contributes greatly to the economy and needs increased awareness. Approximately 25 percent of YVR’s cargo trade is with the Asia-Pacific region – the top destination for B.C. exports by air – accounting for more than $600 million in 2013.

Industry Update: Pat, you’re also involved with BCIT’s school of transportation’s aerospace program. Can you tell us a bit more about your involvement? Kennedy: The Club, in partnership

with BCIT, offers the flying component of BCIT’s airline and flight operations program. Personally, I work with the associate dean and chief instructor of the aerospace programs to ensure the program meets the high standards required by employers to guarantee the success of our program graduates. Our alumni are employed by Canada’s major airlines and fly for other major carriers around the world.

page 16

|

Kennedy: We need to make more

noise in presenting aviation and the aerospace industry as a large component of B.C.’s economic fabric. Major employers include Cascade Aerospace, KF Aerospace, Canadian Helicopters, WestJet, Air Canada, and of course, the Vancouver Airport Authority. Government is aware of the importance aviation plays in the province’s growth, but the travelling public isn’t always aware of how many jobs are generated by the aviation sector in B.C.

I N D U S T R Y U P D AT E

Delves: Similar to other modes

of logistics and transpor tation, many consider aviation as part of our infrastructure rather than as an industry unto itself. With greater access and usage, people are more likely to realize the importance of aviation to our economy. Wider access results from expanded infrastructure, as well as reduced restrictions on competition and air space access.

Industry Update: For any business to grow, certain key success factors must be present. What factors are crucial for the B.C. aviation industry to succeed? Safet y, a good relationship with the various levels of government, and good strategic planning. It is always critical for any business, not just those in aviation, to be ahead of the competition and work collaboratively to ensure the company and indeed the whole sector is strong. Strong competition ensures a healthy industry. The province has a responsibility for ensuring that the B.C. aerospace and aviation sectors are not at a competitive disadvantage because of government policies, be they tax policies or other regulations.

Kennedy:

McCoy: Increased partnerships with

the government are crucial to growing Canadian airports. We are currently working with the federal government on implementing Transit Without Visa. This is a program whereby international travellers can transit through YVR without obtaining a Canadian visa.

This would be a game changer for YVR and other major airports in Canada, as it would attract more passengers and carriers that currently can’t serve this market using only Vancouver-based originating and departing passengers. This is key for our continued growth as a global hub. Delves: Four key things need to be

in place. One, it’s essential we have available and trained personnel ranging from operational resources (such as pilots and support crews) to technicians and engineers for aircraft maintenance and development. Two, we need to invest in our infrastructure, and our airports especially need capacity to meet future demand. Three, we need to be competitive: our services must be competitively priced and we must ensure taxation isn’t impeding that. Finally, in terms of access to markets, we need to expand our Air Transport Agreements to ensure greater access from B.C. to more areas internationally.

Industry Update: In which areas do you see the greatest growth for the B.C. aviation industry? McCoy: Our greatest opportunity for

growth lies in connecting the emerging economies and middle classes of China with South America. 2014 was a year of exceptional passenger growth for YVR. We had record passenger volumes to Asia-Pacific, with traffic to the region up 9.8 percent over 2013 and traffic to Mainland China up 6.6 percent. Cargo service has also seen significant growth. A recent agreement

with Shanghai Pudong International Airport will allow YVR to collaborate on improving the perishable goods supply chain between Vancouver and Shanghai. Kennedy: Airports present strong

growth opportunities as the airlines expand routes and add new equipment. The weakening Canadian dollar presents challenges to the cost structure of many aviation companies, as many have their purchases billed in U.S. dollars, but this can also be an opportunity for companies to export their goods and services to other markets.

Industry Update: What trends are you seeing within the industry? Kennedy: Training can be a challenge. The aviation flight training sector has consolidated recently and increasing demand from international markets for Canadian-trained pilots affects the availability of training and airspace requirements. We have also seen pilot shortages for senior management and senior pilot positions due to changing demographics. It can be a challenge to attract a younger demographic to an industry that is very expensive to train for and where entry-level positions often do not offer as much compensation as other professions. McCoy: Increased competition within

the airport business. Edmonton is adding a 210,000-square-foot facility with the goal of becoming a cargo hub. Calgary opens its new $1.4-billion, 22-gate international terminal later this year. And many U.S. airports are

expanding to compete for the growing Asian market. Competition is good, as it forces us to keep innovating. In the last year, YVR has made huge progress with initiatives that will increase its non-aeronautical revenue, such as our BorderXpress kiosks – YVR’s industry-leading automated passport control solution – or the Authority’s partnership with McArthurGlen to build a luxury shopping centre within minutes of the terminal. Delves: On a positive note, our

passenger numbers continue to grow. Of concern is the availability of skilled people and access to training. Recent enrolment in BCIT’s Aerospace Technology Campus peaked in 201011, declined through 2012-13, but began to increase again in 2013-14.

SPRING 2015

|

page 17

Professional Development Opportunities for COMMUNICATION | NEGOTIATION Clear Thinking/Clear Speaking Learn to speak clearly and succinctly when you have little or no time to prepare. You will discover how to respond to questions, speak up at meetings, and even feel more comfortable in social situations. While speaking is the primary focus, you will also gain tips to improve your phone messages, e-mails, and written reports.

June 3, 2015 | 9 am – 5 pm | Vancouver

Effective Negotiations for Finance Professionals The basis for successful business relationships is negotiation rather than power. The aim of this interactive program is to enable finance professionals to reach mutually agreeable internal business solutions by thinking and acting for the long-term success of negotiated outcomes.

June 10, 2015 | 9 am – 5 pm | Vancouver

CONTROLLERSHIP | MANAGEMENT ACCOUNTING | HUMAN RESOURCES Documenting Your Organization’s Financial Processes This seminar teaches participants how to document their financial work processes and prepare detailed taskbased procedure manuals. It focuses on documenting an organization’s financial processes, including AP, AR, asset management, treasury, accounting, cash management, accruals, journal entries, and payroll.

May 21, 2015 | 9 am – 5 pm | Vancouver

Employment Standards Overview This seminar provides an introduction to key provisions of the B.C. Employment Standards Act (ESA), with emphasis on commonly misunderstood requirements. At the end of this seminar, the participant should be able to identify ESA compliance requirements, identify current HR compliance issues, and formulate solutions.

June 11, 2015 | 9 am – 12:30 pm | Vancouver

page 18

|

I N D U S T R Y U P D AT E

Understanding the Financial Risks of Employee Benefits Costs related to employee benefit programs are significant and growing. Through a combination of lecture and interactive discussions, this seminar will help participants better understand the area of employee benefits, the key cost drivers and future trends impacting benefits, and strategies to better manage them.

June 12, 2015 | 9 am – 12:30 pm | Vancouver

LEADERSHIP | PERSONAL DEVELOPMENT | ETHICS Becoming … what you really want to be What kind of life do you seek for yourself? If, despite your many talents, you haven’t arrived where you want to be, are at a crossroads, between jobs, or just want to get off the treadmill, this life-altering course was designed with you in mind. It will provide you with the framework, tools, and guidance for becoming extraordinary, regardless of your destination.

June 3, 2015 | 9 am – 5 pm | Vancouver

Conflict: Changing Viewpoints & Influencing Behaviours Too often our well-intentioned efforts to change the views and behaviours of others lead to escalating emotions and debilitating conflict. And this mismanaged conflict impairs performance and destroys relationships. To enhance the quality of your relationships with people who count, you need to acquire the insights and skills for turning disagreement and disputes into opportunities for co-operation.

June 4, 2015 | 9 am – 5 pm | Vancouver

Ethics 24/7 for CPAs This seminar focuses on ethical leadership and decisionmaking in the current business environment to avoid and minimize ethical issues in serving employers, clients, and the public. This workshop will primarily address ethics in the environment of all professional accountants, regardless

Members in Industry

Highlights from the CPABC PD Program for May-June, 2015

of legacy designation, and whether in public practice or industry. This seminar qualifies towards the four-hour ethics requirement.

May 4, 2015 | 8  :30 am – 12:30 pm 1 pm – 5 pm | Vancouver June 4, 2015 | 8  :30 am – 12:30 pm 1 pm – 5pm | Vancouver June 17, 2015 | 8:30 am – 12:30 pm | Richmond

Stop the Insanity! Radical Ideas for Unpredictable Times There are two types of enterprises in the world today – those that get better and those that go out of business. This cutting-edge, counterintuitive course will enable you to start important conversations about how to fix failing or broken practices by embracing ideas that run contrary to everything you’ve ever been taught about managing people and surviving in a volatile, unpredictable world.

June 2, 2015 | 9 am – 5 pm | Vancouver

STRATEGIC MANAGEMENT CERTIFICATE PROGRAM Strategic Planning This interactive workshop will use several case examples to examine the link between stated organizational goals, the business environment, and visible strategies, with focus on the functional strategy level. You will gain an appreciation of the tools used to develop and execute successful strategies.

May 27, 2015 | 9 am – 5 pm | Vancouver

Risk Management & Governance The first part of this interactive workshop will examine different types of risks that can undermine the achievement of an organization’s objectives, and the management approaches and tools used to manage them. Part two will overview director and board responsibilities and take an in-depth look at the governance practices of top Canadian companies.

INFORMATION & BUSINESS TECHNOLOGY Building a Financial Model of a Company (Hands-on) This hands-on course focuses on the skills required to design and create an interactive financial model of a company that adheres to the highest industry standards. The course includes model design, logic, construction, financial concepts, and accounting treatment. Participants will build a model that includes a forecast of a company’s income statement, cash flow statement, and balance sheet.

June 9, 2015 | 9 am – 5 pm | Vancouver

Financial Modelling – DCF Valuation Analysis (Hands-on) This seminar will focus on the steps required to properly value a company using the discounted cash flow (DCF) methodology. Participants will learn to recognize and avoid the five most common errors finance professionals make when creating DCF analyses.

June 10, 2015 | 9 am – 5 pm | Vancouver

Financial Modelling – Merger Modelling (Hands-on) This hands-on course will focus on the skills required to design and create a powerful model to analyze the impact of a merger or acquisition. Issues related to combining two companies will be reviewed and discussed. The seminar will be taught from the perspective of finance professionals who need to quickly assess the impact of a merger between publicly traded companies.

June 11, 2015 | 9 am – 5 pm | Vancouver For a full listing of spring/summer seminars and programs, please visit the CPABC PD website at pd.bccpa.ca.

June 2, 2015 | 9 am – 5 pm | Victoria June 9, 2015 | 9 am – 5pm | Vancouver SPRING 2015

|

page 19

Powering Airport Sustainability By Majidah Hashim

T

he ‘green revolution’ in the aviation industry has evolved to take on the more holistic (and far more economically favourable) approach of sustainability. What started as presumably the flavour of the day has now become the order of days to come. In April 2008, the aviation industry came together in Geneva in a monumental show of solidarity to sign what has come to be known as the ‘Aviation Industry Commitment to Action on Climate Change.’ Signatories included international and regional industry organizations, aircraft manufacturers, engine manufacturers, airlines, airports, and air traffic control providers. Within this commitment, the industry made a pact to gear towards a pathway to carbon-neutral growth and a carbon-free future, but also called out to governments and other friends within the industry to do the same. A series of events could be said to have triggered this pact,

page 20

|

I N D U S T R Y U P D AT E

most notable of which was the increasingly aggressive protests held against London Heathrow Airport and its expansion plans. With an established precedence, similar sentiments from environmental groups threatened to obstruct growth not just for UK airports, but for airports worldwide. In Europe, the extension of the European Union Emissions Trading Scheme onto airlines threatened to reshape the already delicate balance of air traffic movements globally. And so the aviation industry came together to take a stand in support of sustainability. At the Copenhagen Conference of the Parties (COP 15) in 2009, aviation became the only industry to announce ambitious environmental targets, and it laid out its plan on how it was going to do so for the world to see. This move effectively, albeit momentarily, improved the image of airports and their prospects for growth – but now airports, in living up to their end of the pact, need to make good on their promises.

It was not that airports were not already doing a lot of good, but the biggest challenge stood in finding a suitable method to communicate these efforts to the world. It was not until 2011, when the Global Reporting Initiative launched the Airpor t Operators Sector Supplement (AOSS), that airports found a framework that not only gave them a set of indicators to measure their environmental performance with, but also gave them a basis of comparison to see where they stood. The AOSS, however, is not an environmental reporting framework. It is a sustainability reporting framework. This means that besides environmental performance, it gives equal attention to measuring economic and social impact performance, and presents a global picture of an airport’s worth. Fuelled by stakeholder pressure, or simply the desire to inform the world of the great contribution of airports, the number of airport sustainability reports in circulation increased exponentially and continues to do so today. In 2012, the Air Transport Action Group (ATAG), responsible for bringing the aviation industry together to sign the 2008 climate change commitment in Geneva, brought the industry together once again. This time, they signed

a declaration ‘Towards Sustainable Aviation,’ and once again called out to governments and others to join in this endeavour. This constant trail-blazing has been a conscious and careful move on the part of industry. ATAG calculates the global economic impact of aviation in 2010 alone to have been in excess of $2.2 trillion. According to current statistics from ATAG and Airbus, air traffic is set to double in the next 15 to 20 years. In fact, according to a study from IHS Global Insight, OAG and Airbus, since 2008 the increase in passenger traffic has constantly outperformed world GDP and continues to do so today. Clearly, there is a lot at stake. What started out as the ‘fashion statement’ of the decade (green was the new black, wasn’t it?) has interestingly transformed to reveal one of the most powerful business approaches for the next century. Majidah Hashim was a project manager, and aviation sustainability specialist with NACO, Netherlands Airport Consultants.

This article is an excerpt from InterVISTAS’s Aviation Intelligence Report, March 2014.

Sustainability Initiatives at YVR and YYJ Solar Power

Reducing Energy Consumption

Solar hot water heating systems at YVR help heat more than 800 gallons of hot water every hour, resulting in energy savings of $110,000 each year. YYJ’s solar hot water pre-heating system on the roof of the airport terminal heats an estimated 20 percent of the airport’s hot water in the winter and nearly 100 percent during the summer.

YVR has saved more than 24 gigawatt hours of electricity and $5.5 million since establishing a cross-department energy reduction team in 1999. Energy-saving initiatives include econo-mode settings on baggage conveyor belts and installing carbon dioxide sensors to control heating, ventilation, and air conditioning according to the number of people within an area.

Going Geothermal YYJ’s new $9.7 million Airside Operations Centre is powered by a geothermal system and includes occupancy sensors and energy-efficient lights.

Alternative Fuelled Fleets YVR’s rebate program for alternative-fuelled taxis has improved air quality at the airport by taking the equivalent of 1,651 cars off the road and reducing carbon dioxide emissions by 8,422 tonnes a year. YYJ’s Electric Vehicle Program provides electricity at no additional cost to airlines that use electrical vehicles.

Green Walls One of the largest living walls in North America can be found at YVR at the Canada Line YVR-Airport station. The green wall, which is 18 metres high and 12 metres wide, includes 28,249 individual plants on 2,173 panels and houses a built-in irrigation and feeding system. Source: Vancouver International Airport website - Community & Environment, Sustainability, yvr.ca, and Victoria International Airport’s 2011 Environmental Management Plan.

Stay up to date with CPABC Connect with CPABC online

Read our blog, at blog.bccpa.ca, or visit our website, at bccpa.ca.

CPABC Publications

In Focus

BC Check-Up

is CPABC’s flagship magazine that is published six times a year.

is an annual benchmark study of the BC economy.

eNews

is CPABC’s monthly e-newsletter that covers provincial and national news from the accounting profession, events, professional development opportunities, public practice news, and member benefits.

Feedback on Industry Update? In upcoming issues we’ll be examining the public sector, tourism industry, construction industry, healthcare and more. Send your feedback and suggestions for future issues to [email protected]; we look forward to hearing from you.

page 22

|

I N D U S T R Y U P D AT E

Industry Update

is CPABC’s industryfocused online magazine that is published four times a year.

Interested in contributing to Industry Update? Members, candidates, and students interested in contributing to Industry Update can send articles to [email protected].