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Aviation Activity and Forecasts

A V I AT I O N A C T I V I T Y A N D FO R E C A S T S

3.1

AV I AT I O N A C T I V I T Y

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Chapter 3

3 . 1 AV I AT IO N AC T IV IT Y O V E RV IEW 3.1.1 Role of Toronto – National and International TABLE 3-1

W ORLD RANKING – TORONTO PEARSON INTERNATIONAL AIRPORT

Total Passengers Aircraft Movements Total Cargo*

1997 25 25 48

1998 25 23 49

1999 25 28 45

2000 27 27 50

2001 26 22 53

2002 29 27 56

2003 29 29 60

2004 29 23 61

2005 29 23 42

2006 29 20 38

Source: Airports Council International Worldwide Airport Traffic Reports *Understated – Toronto Pearson cargo volumes prior to 2005 do not include mail or regional carriers’ cargo volumes

This chapter discusses the future demand for air travel at Toronto Pearson International Airport. The ability of the Airport to accommodate this demand will be discussed in subsequent chapters. Since the first aircraft touched down on its runway over 70 years ago, Toronto Pearson has become Canada’s principal airport, as well as one of the busiest airports in the world. The central geographical location of Toronto within Canada, its large local market, and its proximity to the U.S. market make the Airport important for both mainline and feeder services of major Canadian and international airlines. Toronto Pearson’s status as one of the world’s busiest airports is illustrated in Table 3-1, which shows Toronto’s ranking in the top 30 airports for the last decade in terms of passenger traffic and aircraft movements. Comparative

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airports include Singapore, Philadelphia, Tokyo Narita, Miami and Seattle. A strong travel market has developed that directly links Toronto Pearson to countries in North America, the Caribbean, Central and South America, Europe, the Middle East and Asia. These routes, in turn, provide links to the remaining world markets. Toronto Pearson currently accommodates over 30 million Enplaned and Deplaned (E&D) passengers per year. Demand is expected to rise to 36 million by 2010 (including revenue and nonrevenue E&D passengers), to approximately 50 million by 2020 and to approximately 66 million by 2030. Associated aircraft movement demand is expected to increase from 417,000 in 2006 to 637,000 by 2020 and 801,000 by 2030.

FO R E C A STS

This chapter will initially outline the market profile of Toronto and associated history, explain the current market activity and factors that affect that activity before forecasting the expected future demand levels of passengers and aircraft movements. It will explain the reasons for forecasting and the impacts the levels of demand will have on the facility as a whole, comparing these levels to industry standards before finishing with implications.

3.2

1 2 3 4 5 6 7 8 9 10

TORONTO PEARSON’S TOP ROUTES (2006)

Domestic Montreal Vancouver Ottawa Calgary Halifax Winnipeg Edmonton Thunder Bay London Windsor

Transborder Chicago New York Los Angeles Orlando Miami Las Vegas Atlanta Boston San Francisco Dallas

3.1.2 Market Profile Currently, 79 scheduled and charter airlines serve* Toronto Pearson, providing non-stop service** to 37 domestic, 83 U.S. (transborder) destinations and same-plane service to 100 other international cities (Summer 2006). Domestic travel refers to travel within Canada. Transborder travel refers to travel between a Canadian airport and a U.S. airport, and international travel refers to travel between a Canadian airport and an airport in another part of the world. (See Table 3-2). With nonstop service to so many destinations, Toronto Pearson is an attractive international gateway for Canadian and U.S. connecting passengers (ranked 23rd in the world for connecting passengers in 2006). In fact, the Airport is the fifth largest entry point into the United States after New YorkJFK, Chicago, Miami and Los Angeles international airports. Toronto Pearson also plays a key role in the North American air

International London (All) Frankfurt Paris Amsterdam Hong Kong Cancun Punta Cana Cuba Manchester Rome

route structure and is the central connecting point for Canadians travelling across the country. With Air Canada and WestJet as the major domestic scheduled carriers, passengers are connected with major cities in Canada, the U.S., and the rest of the world. Regional carriers provide access to smaller cities in North America. The six major American carriers (American Airlines, United Airlines, U.S. Airways, Northwest Airlines, Continental Airlines and Delta Airlines) provide additional service to transborder destinations. Scheduled and charter passenger transportation account for the majority of air services at Toronto Pearson (88 per cent of aircraft movements in 2006, See Figure 3-1). Approximately 50 per cent of cargo freight is transported in the bellyholds of passenger aircraft, with the remainder being transported in dedicated cargo aircraft. The remaining activity is comprised of general aviation (GA), which includes business

*to serve means to provide a certain level of service, 6 times a week service between two destinations for both domestic and transborder operations, and 4 times weekly service for international operations ** non-stop service means providing direct point-to-point service without stopping at any intermediate location, even to drop off or collect additional passengers

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aviation (BA), private aircraft and government and military aircraft. At Toronto Pearson, business aviation is the predominant segment. For reasons noted in Chapter 10, activity in the other segments of GA has been decreasing and is now of minor significance compared to BA activity. Over the past three decades, scheduled and charter air carriers have seen their shares of passenger traffic fluctuate between approximately 85-91 per cent for scheduled and 9-15 per cent for charter. A recent decline in the charter carriers’ shares to the 9 per cent level has occurred due to the aftermath of September 11, 2001 (9/11) when a number of smaller charter carriers ceased operations. The scheduled carriers’ have improved their focus on point-topoint travel, and low-cost F I G U R E 3 -1 Distribution of Aircraft Movements (2006) 39% Passenger (Domestic) 11% Passenger (International) 4% Cargo 8% Business Aviation 38% Passenger (Transborder)

FIGURE 3-2 Charter vs. Scheduled Traffic Percentage of Total Passengers

TABLE 3-2

100 90 80 70 60 50 40 30 20 10 0

2000

2001

2002 Charter

2003

2004

2005

Scheduled

2006

3.3 represent the fastest growing segment of the North American airline industry, a feat made possible to a large extent by the RJ, and to some extent by the downturn in traffic in the aftermath of 9/11, when many routes were “rightsized” from mainline carriers to their regional feeders.

Terminal 3 Departures Level

scheduled carriers have gained market share (See Figure 3-2). Traditionally, charter carriers have focused on southern vacation destinations and European leisure markets. It is expected that over time, the charter carriers will continue to focus on vacation traffic maintaining around 10 per cent of the Airport’s passenger market share. Toronto Pearson has a great impact on regional traffic as many flights from other Ontario communities and adjacent U.S. cities are routed to or through the Airport. Traditionally, only turboprop aircraft, such as the Dash-8, served these markets, but the advent of the regional jet in 1992 transformed and expanded this market. Regional jets (RJ) enable carriers to economically operate jet aircraft (the preferred mode of air transportation from the passengers’ perspective) on these routes and consist of models such as the Canadair RJ 100/200 and the Embraer 135/145. These smaller fuel-efficient aircraft are also replacing larger jets on routes with

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lower passenger volumes, allowing carriers to fly these routes with increased frequency without an increase in total capacity. With the increase in innovation of such aircraft, airlines are exploiting the economies of frequency with cost-savings to enable these aircraft to fly further distances than ever before. New aircraft have come from the Embraer family in the form of the EMB 175/195 and from Bombardier in the Canadair RJ 700/900 series. These innovations have led to the concept of producing the “right size” aircraft for each market, which implies that each route requires different-sized aircraft. Matching the correct aircraft in terms of seats and weight (economies of scale) is key to airline operating success in the future. The last 10 years’ traffic presented in Section 3.3 reflects the fastgrowing rate of aircraft movements in and out of Toronto Pearson compared to passenger volumes. Regional airlines currently

FO R E C A STS

Most regional airlines are affiliated with or contracted by mainline airlines and use the Airport as a hub, or with U.S. carriers for which the commuter provides supplemental service to Toronto from U.S. airports.

3.1.3 Network Carriers, Low Cost and Charters Three different types of carriers operate at Toronto Pearson. The traditional network carriers, such as Air Canada, British Airways, American Airlines, are considered to be scheduled airlines with every day service to the majority of destinations with relatively more frequency. Most network carriers operate a hub and spoke network, connecting passengers through hubs and to/from regional affiliates. Following 9/11 and the subsequent downturn in the market, the network carriers have implemented a number of

3.4

initiatives in an attempt to reduce cost and compete on a global scale. These initiatives included downloading “local operations” to regional affiliates, forming stronger alliances as a catalyst for additional connecting traffic and developing more point-to-point flying in the international sector. An alternative type of scheduled carrier is the Low-Cost Carrier (LCC), for example, WestJet, Southwest, RyanAir and EasyJet. These are a newer generation of airlines who compete with the network carriers by avoiding the overhead costs associated with: • operating a variety of aircraft types • offering extra services such as connections and interlines • serving regional and international destinations • providing multi-class configurations, lounges, meals and other amenities.

They tend to operate a more concentrated business with a single or limited number of aircraft types and fewer destinations, but compete on price and frequency of service with the major network airlines. They focus on point-topoint service with limited alliances/relationships leading to less connecting traffic and more Origin and Destination (O&D) traffic. The only connecting traffic carried by an LCC would usually be through traffic (same plane service). LCCs encourage their passengers to “self-connect” through appropriately timed schedules with the passenger responsible for baggage handling. As the LCCs are growing into major players in the industry through expanded routes and some consolidation/mergers, such as Southwest buying Morris Air and EasyJet buying Go (a former British Airways subsidiary), they are pushing network carriers to compete at a lower cost level. As LCCs expand, they may very soon begin to cross paths with other LCCs. So far, LCCs in North America have generally been able to compete only with network airlines, such as Southwest vs. U.S. Airways at Philadelphia and Charlotte, and Southwest vs.

Terminal 1 Departures Level

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American at Dallas Fort Worth. Some LCC competition has existed, such as WestJet vs. JetsGo and CanJet at Toronto and RyanAir vs. EasyJet in the UK, but these are limited. Currently in Canada, WestJet is competing against Air Canada’s no-frills Tango service, which was initially devised by Air Canada as a separate entity. It later became a fare option on many of Air Canada’s domestic and transborder routes. WestJet, which began operating as an LCC, has adopted some higher service features (leather seats, personal entertainment systems) which elevate it from a traditional “LCC”. However, WestJet continues to operate at an LCC cost structure with LCC processes, such as single aircraft type and no interlining – yet. The third airline type is the Charter carrier. Charter airlines operate a more seasonal service, serving the major holiday and visiting friends and relatives traffic segments, rather than competing with network carriers for business travellers. They operate in the peak seasons and tend to reduce operations in the quieter periods. During the winter, most of their service is to sunspot destinations

3.5 airports for people travelling within Canada and beyond. In the 1980s, many new routes were developed linking many smaller Canadian cities directly. In the 1990s, Open Skies permitted increased access for these cities to U.S. destinations.

Air Cargo

in the U.S. and Central America, while in the summer they offer service to Canadian long-haul holiday destinations and to Europe. Air Transat and Skyservice are two of the longest-serving Charter carriers operating at Toronto Pearson. In assessing market shares for the three types of airlines, naturally the historic trend favours network carriers. LCCs, however, are starting to gain market share on growth markets both domestically and to the U.S. The international sector, however, does not suit the low-cost model other than holiday traffic to sunspot destinations at off peak times, such as weekends. The differentiation between network carriers and LCCs has faded in recent years as network carriers have attempted to de-bundle services in order to compete with LCCs. At the same time, LCCs have stretched their definition to maintain growth by adding more services to their offering, such as in-flight entertainment, leather seats and some connectivity. As the gap narrows, it is difficult to depict a clear future for the long-term airline market share in Toronto.

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3.1.4 Origin/Destination and Connecting Passengers Since Toronto Pearson has a strong Origin and Destination (O&D) traffic base, where passengers either begin or end their journey at this airport, the Airport benefits from a large diversity of routes. This base of traffic enables and encourages carriers to flow passengers through Toronto Pearson to other destinations. Several U.S. hubs have a much weaker O&D base where the majority of customers use those airports as hubs to connect on further. For example, Atlanta and Chicago have connecting traffic levels around 50-70 per cent. Heathrow has a connection rate of about 25 per cent. As a hub airport for Star Alliance and WestJet in North America, Toronto Pearson is used as a significant connecting point for passengers on many journeys. Approximately 20 per cent of passengers at the Airport are connecting. Historically, Toronto Pearson and Montreal’s Trudeau International Airport were primary

FO R E C A STS

Due to the evolving structure of air carriers, however, the increase in operations bypassing Toronto Pearson has been offset by the development of hub and spoke operations at Toronto. This allows carriers to provide increased frequencies for travellers as well as an increase in operating efficiencies. International to U.S. connections are being established and developed in conjunction with airline alliance growth. Open Skies between Canada and the UK, as well as other countries in years to come, will facilitate more use of Toronto as a hub to the U.S. and beyond, by enabling multiple carriers to operate more frequently to more destinations.

3.1.5 Air Cargo Profile In terms of air cargo, Toronto Pearson serves not only as a gateway for shipments originating in or destined for the GTA, but also as a major trans-shipment centre

3.6 freighter service compared with passenger service.

3.1.6 Business Aviation Profile

Business Aviation Aircraft

for cargo travelling between other Canadian and international points. With the continued trend toward global trade, the importance of the far-reaching network of routes from the Airport can only be expected to better serve Ontario’s shippers and manufacturers. The importance of Toronto Pearson as the dominant Canadian airport for air cargo is expected to continue, in both regional and national contexts; however, the increased use of RJs in right-sizing markets instead of larger aircraft is negatively impacting belly cargo capacity on some North American routes. Freighters are now filling this role and are expected to do so into the future. Consolidation and reorganization have been affecting the air cargo industry since the late 1990s with the trend accelerating in more recent times as many of the larger companies look to strengthen their market position. This has comprised acquisitions, restructuring and consolidation of some operations. The effect is that logistics companies are now concentrating

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their search for airport sites on those that can accommodate their long-term expansion plans, with some airports benefiting at the expense of others. The last several years have been somewhat volatile with regard to total cargo handled at Toronto Pearson. Total cargo activity worldwide reached its highest ever level in 1999 and with the economic slowdown and subsequent impacts of 9/11 and SARS respectively, the total cargo volumes have declined a total of nearly five per cent per annum since that period. Some clear distinctions of cargo compared to passenger traffic include the fact that cargo is predominantly one-direction traffic, and therefore unbalanced activity often benefits one company more than others, for example an importer of goods compared with an exporter of goods. In the more recent decline in air cargo traffic, freighter demand suffered far less than passenger hold demand. This indicates that there has still been strong demand for

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Business Aviation (BA) exists at Toronto Pearson because a number of corporate aircraft are housed in the Infield and north Business Aviation Areas. BA has a broad variety of uses from flying corporate executives between businesses to intersecting with commercial charter operations. These types of operations are considered to aid a business, government, or military operation, and, in general, not to be available to the public for hire nor involve cargo operations. Corporate aircraft are piloted by individuals who have, at a minimum, a valid commercial pilot’s licence with an instrument rating. Traditionally, operators of BA aircraft use aircraft with between five and 14 seats. Since 1991, BA traffic has fluctuated, reaching a peak in the mid- to late 1990s. More recently, BA aircraft movements have been lower due to the downturn in the industry. At Toronto Pearson, there is a tendency to use larger BA aircraft based on demand. Over the last five years, total BA movements have grown at an average rate of two per cent per annum, primarily due to charter carrier traffic and some government traffic, although the latter comprises a small proportion of total BA traffic. See Chapter 10 on Business Aviation.

3.7 declined again (-4.6 per cent) and was 15 per cent lower than in 2000.

Enplaned and Deplaned Passengers, Historical Trend – 1965-2006 E/D Passengers (000,000s)

35

2000: AC/CP Merger

30

2001: 9/11

1992-1994: Recession

25 20

1995: Open Skies

15

2003: SARS and Iraq War

1990-1993: Gulf War/Recession/GST

10

1983: Iran/Iraq War

5 0 1965

1970

1975

1980

1985 Total Pax

3 . 2 HI S TO RICAL G RO W T H Demand for aviation services is ultimately contingent on the general health of the economy. As illustrated in Figure 3-3, growth rates in passenger volumes coincide with growth rates in the economy (recessions in 1981-84, 1991-93 and 2001-03). However, the 9/11 terrorist attacks were a shock to this relationship, as was the advent of SARS (2003) and the Iraq and Afghan wars, which have depressed aviation travel in recent years. By 2006-07, traffic levels were back to normal and returning to the trend line, except on U.S. routes, due to the war in Iraq and heightened and restrictive security measures in this market. Along the way, changes to the regulation of the air carrier industry can also have a significant effect on demand. These changes may arise from regulatory reform usually due to domestic and international events. In the early 1980s, the increased freedom of access to the air travel market in Canada (economic regulatory reform) led to a brief period of increased competition from new entrants. This

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1990

1995

2000

2005

Trend Line

increased competition and the wide availability of discount fares contributed significantly to exceptional passenger traffic growth of 5.3 per cent per annum until 1988. Similar growth occurred in the mid-1990s when the Open Skies accord between Canada and the U.S. was implemented. After the boom in the late 1990s, the economy began to slow in 2001 and traffic began to show signs of weakening. When the 9/11 terrorist attacks occurred, the Airport experienced a major traffic shock with a reduction in traffic of 20 per cent in the fourth quarter of 2001. Traffic declines continued through the first three quarters of 2002 with security issues, travel fears, and economic woes crippling the industry. With Toronto Pearson’s close proximity to the U.S. and its high proportion of U.S. traffic (nearly 25 per cent of total airport traffic), the impacts of 9/11 were higher than most non-U.S. airports.

However, by 2004, the economy had recovered and most of the aviation shocks had diminished. Air traffic at Toronto Pearson had increased by 15 per cent and both the domestic and international sectors had recovered to beyond their 2000 peaks. In 2005 and 2006, oil price increases limited capacity growth in the industry and brought fuel surcharges to passengers. Traffic levels, however, continued to increase and reached 30.97 million passengers in 2006 (compared to 28.8 million in 2000). However, transborder traffic had not yet fully recovered to year 2000 levels (-9.5 per cent vs. 2000). Overall, this limited capacity growth and continued passenger traffic increases brought load factors, the measure of passengers to available seats, to record levels. Figure 3-4 shows comparative annual traffic levels from 20002006 for each sector. FIGURE 3-4 Passengers by Sector 2000-2006 35,000 30,000 Passengers (000s)

FIGURE 3-3

25,000 20,000 15,000 10,000 5,000

By 2003, another war in Iraq and the SARS outbreak affected traffic at Toronto Pearson. By the end of 2003, although the city was deemed SARS free, traffic had

FO R E C A STS

0

2000

2001 Domestic

2002

2003

2004

International

2005

2006

Transborder

3.8 3 . 3 AV I AT I O N F O RE CA ST S 3.3.1 Forecasting Process The forecasts presented in this Master Plan are based on the national system forecasts prepared by Transport Canada in 2006. This forecast reflects the latest outlook for world economies and the structure of the airline industry. The method for producing forecasts has been refined to adequately account for changes in regional growth rates and airline market shares for both existing and potential new carriers at Toronto Pearson.

3.3.2 Factors Affecting Aviation Demand Economic and demographic factors relevant to forecasting aviation activity can be divided into those affecting the demand side and those affecting the supply side. Additionally, several strategic factors come into play. As was discussed in Chapter 2, demand for aviation services is driven by the general health of the economy, both domestically and abroad, and individual purchasing power. The significant factors are Gross Domestic Product (GDP), Personal Disposable Income (PDI), adult and immigrant population (especially adult population) and air fares. The supply of aviation services provided by the carriers depends upon competition from other air carriers and other modes of travel, fuel cost and efficiency,

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labour costs, and other industry specific factors including government regulation, policy issues, airport and air navigation costs, congestion and environmental initiatives. All of these factors influence the airline fleets (number of aircraft and size of planes), passenger loads, and route structures. Fluctuations in currency exchange rates (including the recent increases in the Canadian dollar relative to the U.S. dollar) appear to have had a negligible effect on total passenger traffic at Toronto Pearson. Rather, the proportion of passenger traffic from the highercurrency country tends to increase compared to the lower-currency country as their buying power increases. Socio-political unrest in recent years has been a more significant factor than in previous years as many people have chosen to avoid the U.S. while it is occupying Iraq. Strategic factors are those that may cause structural shifts from historical patterns of supply and demand for aviation services. These factors include the growth

Terminal 1 Check-In Counters

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of teleconferencing and other forms of electronic communication, the presence of LCCs and charter air carriers, other sources of low-fare travel, and since 9/11, the “hassle factor” of travel by air such as security uncertainty and inconsistency. The impact of teleconferencing may be negligible due to its propensity to offset negative factors. Results suggest that 5-10 per cent of business travel growth may be lost in the future. However, the increase in global trade associated with electronic communication may offset some or all of this and could have a positive impact on international air travel as it promotes growth in the global economy. Indications on the effect of the “hassle factor” are already reflected in the loss of five per cent in shorthaul markets where the uncertainty of processing times is a relatively significant factor. However, as these systems mature and technological advances streamline the process, it is expected that this impact will reduce.

3.9 FIGURE 3-5 Accuracy of Transport Canada Forecasts E/D Revenue Passengers

35 30 25 20 15 10 1978 1979 1980 1981 1982 1983 1984 1985 1986 1087 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Actual

In 1986

3.3.3 Passenger Forecasting Process The process of forecasting passengers starts with the Transport Canada Forecasting Group’s system-wide forecast of passenger demand and aircraft movements. An econometric passenger origin/ destination model (PODM) and a passenger traffic allocation model (PTAM) are used to prepare a forecast for the top 77 airports in Canada. Inputs to these models include those listed in Section 3.3.2. Economic forecasts based on the outlooks of several external agencies, such as the Conference Board of Canada and Informetrica, are used in conjunction with historical traffic data in these models to forecast the demand for travel. The base model (PODM) projects the number of origin and destination (O&D) passengers for each area of the country for the domestic, transborder and other international markets. Enplaned/ deplaned passenger volumes are forecast by incorporating connecting passenger traffic derived from the passenger allocation model to yield an integrated forecast for

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In 1992

each of the major airports in the country, as well as an aircraft movement forecast. The forecasts are then reviewed and finalized by the GTAA. The following adjustments are made to the forecasts: • To account for non-revenue passengers (airline employees or others travelling at deeply discounted fares) • To adjust to facility-based sector definitions to provide the microlevel detail required for facility planning purposes. The forecasting process is undertaken annually by Transport Canada and is tracked by the GTAA on a monthly basis. Figure 3-5 demonstrates the accuracy of the forecasts done using this method for two previous iterations. Redeveloped facilities at Toronto Pearson should appeal to passengers arriving from European and other international cities and bound for U.S. cities for which little or no direct routes exist to meet demand. To facilitate this role, in-transit pre-clearance facilities, which preclude the need for international to transborder connecting passengers to pass through

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Canadian Customs, are already available in Terminal 1 and will be available in Terminal 3 as demand warrants. As a result, connecting passenger volumes between international and transborder sectors are expected to increase in the Transport Canada numbers. The forecasts used reflect additional connections between sectors, both at the aggregate level and on a daily profile basis where connecting volumes are incorporated into future facility requirements.

3.3.4 Passenger Demand In 2006, the enplaned and deplaned (E&D) traffic reached 30.97 million passengers at Toronto Pearson with approximately 80 per cent representing O&D traffic and the remainder accounted for by connecting traffic. O&D traffic represents passengers originating or terminating their trips at Toronto Pearson whereas connecting passengers use Toronto Pearson as a connecting point to travel between two other points. Regional is defined as the passengers whose origin/destination is in the Greater Toronto catchment area, which is described in Chapter 2 of this Master Plan as the Airport’s Total Service Area. Regional O&D passenger volumes are projected to grow from about 23 million in 2006 to almost 50 million by 2030. Regional O&D passenger forecasts are presented in Table 3-3 and Figure 3-6.

3.10 previously discussed, it should be noted that this is a demand forecast for the Toronto region and does not take into account any capacity limitations.

FIGURE 3-6 Origin and Destination Passengers

Passengers (000,000s)

60

Actual

Forecast

50 40 30 20 10 0 1990 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Domestic

Transborder

International

F I G U R E 3 -7 Enplaned and Deplaned Passengers

Passengers (000,000s)

70

Actual

60

Forecast

50 40 30 20 10 0 1990 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Domestic

TABLE 3-3 Actual

Forecast

Transborder

International

ORIGIN AND DESTINAT ION PA SSENGERS Year 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010 2015 2020 2025 2030

Domestic 6,610,000 5,853,000 6,240,000 6,699,000 6,732,000 6,859,000 6,727,000 6,719,000 6,585,000 6,437,000 7,541,000 7,783,000 7,978,000 8,982,000 10,315,000 11,582,000 12,856,000 14,105,000

Total regional E&D passenger traffic over the longer term is expected to grow from about 31 million passengers in 2006 to

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Transborder 5,610,000 5,594,000 6,236,000 6,355,000 6,669,000 6,910,000 7,257,000 6,649,000 6,104,000 5,475,000 6,320,000 6,643,000 6,711,000 7,777,000 9,450,000 11,211,000 13,078,000 14,963,000

International 4,318,000 5,236,000 5,129,000 5,685,000 5,973,000 6,272,000 6,846,000 6,796,000 6,314,000 6,214,000 7,366,000 7,998,000 8,358,000 10,159,000 12,457,000 15,017,000 17,773,000 20,594,000

Total 16,538,000 16,764,000 17,605,000 18,739,000 19,374,000 20,041,000 20,830,000 20,164,000 19,003,000 18,126,000 21,227,000 22,424,000 23,047,000 26,918,000 32,222,000 37,810,000 43,707,000 49,662,000

about 66 million by 2030, for an average annual growth rate of approximately three per cent. In addition to the assumptions

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Forecasts of E&D passengers are detailed in Table 3-4 and Figure 3-7. Currently, traffic at the Airport consists of 43 per cent domestic, 29 per cent transborder, and 28 per cent international passengers. Over the long term, these figures are expected to become more balanced with international, followed by transborder volumes, growing at a faster rate than domestic volumes. The shift in traffic is due to maturation of the domestic market, the impact of Open Skies and international connections on transborder activity, and the increase in global trade and the international travel activity it generates. Open Skies have enabled Toronto Pearson to become a North American gateway as well as a primary airport for Eastern/Central Canada for both transborder and international activity. With further international Open Skies agreements anticipated, the expectation for even higher international activity at Toronto Pearson will be realized. Throughout the forecast horizon, Toronto Pearson is expected to continue to grow as a gateway between Europe and North America, and to a lesser extent between Asia and North America with longer-range aircraft and expanded U.S. opportunities with

3.11

TABLE 3-4 Actual

Forecast

TABLE 3-5

ENPL ANED AND DEPL ANED PA SSENGERS Year 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010 2015 2020 2025 2030

Domestic 10,390,000 10,057,000 10,772,000 11,629,000 11,939,000 12,376,000 12,318,000 12,304,000 11,272,000 11,022,000 12,637,000 12,906,000 13,466,000 15,121,000 17,139,000 19,184,000 21,233,000 23,233,000

Transborder 6,748,000 6,929,000 7,903,000 8,431,000 8,650,000 9,080,000 9,813,000 8,989,000 8,153,000 7,316,000 8,422,000 8,803,000 8,923,000 10,375,000 12,703,000 15,206,000 17,883,000 20,609,000

International 4,915,000 5,460,000 5,584,000 6,035,000 6,143,000 6,329,000 6,799,000 6,750,000 6,505,000 6,401,000 7,557,000 8,205,000 8,583,000 10,520,000 13,049,000 15,896,000 18,992,000 22,188,000

Total 22,053,000 22,446,000 24,259,000 26,095,000 26,732,000 27,785,000 28,930,000 28,043,000 25,930,000 24,739,000 28,616,000 29,914,000 30,972,000 36,016,000 42,891,000 50,286,000 58,108,000 66,030,000

ALLIANCE AIRLINES

Star Air Canada Air New Zealand All Nippon Asiana Austrian British Midland LOT Polish Lufthansa SAS – Scandinavian Singapore South African Spanair Swiss Air TAP – Portugal Thai United U.S. Airways

One World American British Airways Finnair Cathay Pacific Iberia Qantas LAN – Chile Malev – Hungarian Royal Jordanian Japan

RJ additions to the Air Canada and Star Alliance fleets. The opportunity for this growth requires unconstrained runway and terminal facilities, and further

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Skyteam Aeroflot Aeromexico Air France KLM Royal Dutch Airlines Alitalia Continental Czech Delta Korean Northwest

development/integration of airline alliances. The members of the three main global airline alliances are listed in Table 3-5. Currently, only the Star Alliance has a Canadian airline member.

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Alliances with a Canadian carrier are more likely to route operations through Toronto Pearson for connections between North American and international destinations as well as the usual domestic connections. The percentage of international passengers who arrive at the Airport to board connecting flights is expected to increase from approximately 12 per cent in 2006 to approximately 21 per cent by the end of the forecast horizon mainly due to Open Skies and stronger airline alliances.

3.3.5 Aircraft Movement Forecasting Process The forecast of aircraft movements is derived from the passenger demand forecast, and from an econometric model for the nonpassenger operations (Business Aviation and Cargo). Using current airline statistics and accepted forecasts of load factors and aircraft sizes from the PTAM model (see Section 3.3.3), passenger air carrier movements are projected for the airport system as a whole. By adding the results of the nonpassenger operations model, the total itinerant movement forecasts are generated for the system and for individual airports. The GTAA reviews and modifies the forecasts to account for sector definition differences and local load factors, which results in a set of forecasts for use in facility and financial planning analyses.

3.12

TABLE 3-6

ITINERANT AIRCRAFT MOVEMENTS Air Carrier – Passenger Aircraft

Actual

Forecast

Year 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010 2015 2020 2025 2030

Domestic 172,000 156,000 170,000 168,000 177,000 195,000 168,000 148,000 135,000 136,000 151,000 152,000 163,000 181,000 204,000 229,000 253,000 278,000

For facility planning analysis, the annual forecasts are converted to future planning day schedules. These schedules enable the planners to assess the facilities required to accommodate the busy traffic periods in the future. The forecasts are used in airside, apron and terminal gating simulations to determine future needs and timing. All of this is described in more detail in both the Airside System and Passenger Terminals chapters, Chapters 5 and 6 respectively.

Transborder 97,000 113,000 132,000 147,000 162,000 170,000 181,000 178,000 167,000 155,000 161,000 160,000 159,000 186,000 220,000 257,000 297,000 331,000

International 27,000 25,000 25,000 27,000 28,000 30,000 37,000 38,000 35,000 36,000 43,000 44,000 45,000 54,000 66,000 78,000 91,000 103,000

Cargo, Business Aviation, Ferry, Technical 56,000 49,000 45,000 53,000 54,000 30,000 41,000 42,000 46,000 44,000 49,000 53,000 51,000 60,000 65,000 73,000 81,000 89,000

Total 296,000 294,000 327,000 342,000 367,000 395,000 386,000 364,000 337,000 327,000 355,000 356,000 367,000 421,000 490,000 564,000 641,000 712,000

and Figure 3-8). Overall movements, including Business Aviation and Cargo, are also expected to grow by almost two per cent annually for the same period. While the international sector is expected to be the higher growth market, domestic and transborder markets are more susceptible to changes in aircraft mix by the carriers operating at Toronto Pearson. Both of these markets are fairly mature in terms

Total Itinerant 352,000 343,000 372,000 395,000 421,000 425,000 427,000 406,000 383,000 371,000 404,000 409,000 417,000 481,000 555,000 637,000 722,000 801,000

of passenger demand, however the type of aircraft being used to transport the passengers continues to cycle from mainline larger aircraft to smaller regional aircraft during downturns, and now to new larger RJs in the 75-100 seat range. As the Airport approaches capacity and becomes more congested in the long term and as new more efficient, narrow-body aircraft are developed, the cycle will continue to progress.

FIGURE 3-8 Itinerant Aircraft Movements

3.3.6 Aircraft Operations

900

Actual

Forecast

Toronto Pearson’s passenger air carrier movement demand is expected to grow from 367,000 in 2006 to approximately 564,000 in 2020, and continue to grow to 712,000 by 2030 (see Table 3-6

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Movements (000s)

750 600 450 300 150 0 1990

FO R E C A STS

1998

2002

2006 Domestic

2010 Transborder

2014 International

2018

2022

Business Aviation

2026

2030

3.13 routes such as Toronto-Narita, Toronto-Beijing and TorontoDelhi. Should these aircraft increase in popularity, Toronto Pearson is already equipped with the necessary facilities to accommodate them through the forecast horizon.

Passenger Terminal Demand

In the international sector, the development of more economical and long-range aircraft have facilitated the ability for airlines to ensure they have the correct aircraft in their fleet to serve specific routes by “right-sizing”. This has led to many airlines down-gauging aircraft and the development of more robust aircraft, such as Boeing’s new 787 family of aircraft and the Airbus A350 XWB. These aircraft will be able travel farther due to wider wingspan which, in turn, will make them more cost-efficient. This is similar to the continuing RJ revolution. Aircraft manufacturers are also looking to replace long-range and high-capacity aircraft with developments such as the new Airbus A380 and the prospective Boeing B747-8 Intercontinental, and their cargo derivatives. These aircraft are being considered by airlines to provide premium service on the super long-range routes like Sydney-London and SydneyToronto non-stop and on highcapacity markets to/from Asia primarily to Europe and the U.S. Opportunities for these aircraft at Toronto Pearson are in the highdensity Toronto-London and Toronto-Frankfurt markets as well as in high-growth Toronto-Asia

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3.3.7 Air Cargo Demand Toronto Pearson is the largest cargo airport in Canada. Moving a total of 517,000 metric tonnes of air cargo in 2006, Toronto Pearson is significantly ahead of its competitors, and currently ranks 38th in the world for air cargo volumes. The shipment of parcels, packages and larger items by air has historically been a secondary business for air carriers, but has grown in importance with globalization. TABLE 3-7 Actual

Forecast

FO R E C A STS

Approximately one half of cargo shipped at Toronto Pearson is in the bellyholds of passenger aircraft. Pure cargo air carriers, however, are capturing marketshare, including FedEx, UPS, DHL, Martinair and Volga-Dnepr. The GTAA obtains the cargo forecast from Transport Canada who use regression analysis to forecast air cargo volumes. Gross Domestic Product (GDP) is used as the key explanatory variable in the forecast. Historically, a one per cent change in GDP has resulted in approximately a one per cent change in total air cargo volumes. The resulting cargo forecast, displayed in Table 3-7, reveals overall average growth of three per cent per annum to 2030. It should be noted that the data in years prior to 2005 were Transport

ENPL ANED AND DEPL ANED CARGO (000 kg) Year 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010 2015 2020 2025 2030

Domestic 152,000 122,000 116,000 127,000 111,000 109,000 101,000 82,000 80,000 64,000 55,000 114,000 109,000 130,000 150,000 171,000 193,000 219,000

Transborder 67,000 76,000 91,000 99,000 83,000 94,000 93,000 83,000 73,000 76,000 86,000 199,000 209,000 254,000 311,000 376,000 451,000 541,000

International 108,000 122,000 129,000 142,000 174,000 176,000 173,000 153,000 156,000 148,000 156,000 162,000 199,000 216,000 273,000 341,000 419,000 514,000

Total 327,000 320,000 336,000 368,000 368,000 379,000 367,000 318,000 309,000 288,000 297,000 475,000 517,000 600,000 734,000 888,000 1,063,000 1,274,000

3.14

Airside Demand

Canada estimates that included cargo carried only on scheduled and charter airlines. Since 2005, the GTAA has developed methods to capture regional/local cargo volumes for both air freight and truck freight, which were previously unaccounted for, and these extra volumes have significantly bolstered the reported cargo figures. It is anticipated that the proportion of long-haul cargo will increase due to factors such as rising fuel costs, leading firms to truck large volumes of short-haul cargo. Considering the trend toward increased global trade, the air cargo growth rate could exceed the GDP growth rate; though this trend was noted, it was not incorporated into the cargo forecast. In the domestic and transborder sectors, there is a potential for carriers to transfer the transportation of cargo from bellyholds to small freighter aircraft due to the increased use of RJs on many routes, which do not have the capacity to transit this cargo. Toronto Pearson’s cargo market is much stronger than data would indicate. The region is comprised of some of the world’s leading aireligible, producing companies that require expedited transportation

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to meet their regular shipping requirements. Since the service from Toronto Pearson to a number of transborder gateways is frequent, it has more recently attracted international freighter operations and is expected to continue to do so in the future. This can only be seen as a positive step in the increasingly fluid market. Since cargo can be trucked hundreds, sometimes thousands, of miles to reach its gateway or destination, the location of Toronto Pearson is proving to be a key consideration when carriers decide where to fly, and the excellent operating efficiencies and cargo facilities at Toronto Pearson are capable of responding to nearand mid-term cargo market opportunities. A profile of a future planning day for cargo movement numbers is important in understanding the potential for the Airport to expand. Sample days from historical data are taken and specific growth rates are applied out over the horizon of this Master Plan. More detail can be found in the Airside System and Air Cargo chapters, Chapters 5 and 8 respectively.

3.3.8 Business/General Aviation Forecasts Business aviation activity is expected to continue to maintain its presence at Toronto Pearson with higher growth in corporate operations offsetting declines in government and private operators. Transport Canada’s forecast

FO R E C A STS

growth is fuelled by GDP and Personal Disposable Income rates of growth. Business Aviation traffic is expected to grow by one or two per cent per year throughout the forecast horizon. While the use of very small aircraft (Very Light Jets, or VLJ’s) as air taxis by the corporate community is not being considered at Toronto Pearson, as the Airport is expected to remain focused on air carrier activity, some VLJ’s may operate in the Toronto area to provide direct non-stop service to smaller markets. VLJ’s and other small aircraft operating at Toronto Pearson would limit airside capacity due to aircraft separation rules requiring these aircraft to maintain increased horizontal separation when arriving or departing after a larger aircraft. The GTAA would, therefore, not encourage such activity.

3.4 F O RECA STS F O R FACILIT Y PL ANNING Producing forecasts to understand both the level of activity through the Airport and the future strain on facilities enables the GTAA to assess when additional facilities need to become available. Since it takes time to plan, design, fund and build these facilities, it is important to develop detailed daily forecast flight schedules that can be used in facility planning simulation models well in advance of the facility requirement.

3.15 In order to ensure that the forecasts are as useful as possible, it is necessary to assess traffic levels on each day of the week and independently for each sector. Generally, most domestic and transborder traffic will be far more consistent in terms of frequency throughout the week than international, where increases are seen on weekends as people choose to travel for holiday purposes more widely during that time.

This section of the Plan provides an overview of the development of these forecasts. The requirements resulting from the analyses of these schedules can be seen in more detail in the Airside System and Passenger Terminals chapters, Chapters 5 and 6.

3.4.1 Development of Schedules of Activity When future schedules of traffic are produced, a number of input factors are considered that break the aggregate passenger forecast down to the necessary level of detail. Beginning with the sector forecasts, the traffic is subdivided into five domestic, seven transborder

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and seven international zones, to identify both the varying growth rates and to account for the appropriate timing of flights at Toronto Pearson. The zones are shown in Figures 3-9, 3-10 and 3-11. These factors are considered on a regional basis by sector: the number of passengers per flight on historic routes, the mix of aircraft, the market share for each airline, the load factor and number of seats per flight. The schedules of activity are developed for a representative summer and winter week and are disaggregated by flight over the course of each day. Using the annual forecasts provided by Transport Canada, the same independent factors are derived for forecast years.

FO R E C A STS

Therefore, historical traffic is analyzed and forecasted on a daily basis for each sector with the number of arriving and departing passengers broken into short 15minute segments throughout the day. Based on this history, future activity schedules are developed that incorporate traffic growth patterns and regional differences, as well as airline fleet plan assumptions. Following this analysis, schedules were generated for passengers, movements and seats for each year and season throughout the forecast horizon. These schedules are then used in simulations to determine future facility congestion levels and thus future facility requirements.

3.4.2 Industry Planning Standards Daily and hourly passenger and movement volumes drive the main requirements for facility planning. Therefore, the forecasting of these parameters is paramount in the

3.16

development of passenger and aircraft-related facilities at the Airport. A number of standards relating to levels of activity exist throughout the industry and these are often used as a form of benchmark for planning. Planning day standards are used to estimate traffic levels through a period of time, perhaps a week or an hour, with an understanding that the Airport can operate at that level of activity.

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Moreover, peak standards are set to reflect the variability of activity levels across a planning day and help to determine when passenger and aircraft peaks will occur. It also sets a level of expectation that the Airport can accommodate such levels of activity with acceptable delays during absolute peaks (100th percentile periods). There are five main peak standards that are used as benchmarks around the world at airports:

FO R E C A STS

• The absolute peak • The average day of the busiest month • The average of the seven busiest days of the three busiest months • The 90th percentile of daily traffic • The 95th percentile of days. These metrics are used by different organizations when planning for future levels of activity. Transport Canada, for example, adopts the 90th percentile of daily

3.17

traffic for aircraft activity whereas the International Civil Aviation Organization (ICAO) adopts the average of the seven busiest days of the three busiest months. These standards have been expanded to peak hour planning. In this case, instead of days, hours are used for comparison, over a given period of time. When calculating planning days, it is important to understand which industry standards are being met, which are realistic as a benchmark,

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and which should be viewed as a future target for the Airport.

3.4.3 Seasonal Variations and Peaks

An independent study was undertaken by Moncrieff Management Ltd. to validate the suggested standards for Toronto Pearson. The assessment of Toronto Pearson’s traffic by sector and season for passenger planning standards, aircraft planning standards and peak hour traffic analysis concluded that GTAA methods for developing a summer and winter week forecast for each year represented a reasonable planning standard – not the absolute peak, but sufficiently high levels of activity.

In addition to forecasting the annual traffic levels, the planning of facilities requires that seasonal and daily variations in traffic levels are considered. The summer months of July and August have traditionally been the busiest months at Toronto Pearson, as passenger traffic is buoyed by vacationers to and within Canada and to Europe. During the winter, the peak months of February and March are affected by vacationers travelling to sunspot destinations

FO R E C A STS

3.18 (see Figure 3-12). Since 9/11, some of the U.S.-bound holiday traffic has shifted to other southern destinations. The degree to which that traffic returns to the U.S. depends on U.S.-World relations and relative costs of holidays.

Holiday Season Demand

F I G U R E 3 -12 Traffic by Month, 2006 3,500 3,000 2,500 2,000 1,500 1,000 500 0

Feb

Mar

Apr

May

Jun

Domestic

Jul

Aug

Transborder

Sep

Oct

Nov

Dec

International

F I G U R E 3 -13 Daily Variations, Summer 2006

Passenger volumes also vary by day of the week. While business travellers typically travel on weekdays, leisure travel itineraries usually include weekends. As shown in Figures 3-13 and 3-14, the traffic peaks on Fridays when both groups overlap. During the summer, the vacationing passengers boost traffic levels throughout the week. In the winter months, vacationing travellers increase weekend distribution, with international and transborder sunspot travel raising the Saturday and Sunday traffic levels to the equivalent of the Friday level, but with significantly different sector splits. The analysis of these traffic patterns is important, as airport facilities must be designed to handle busy traffic periods.

120,000 100,000 80,000 60,000 40,000 20,000

3.4.4 Passenger Planning Levels

0 Mon

Tue

Wed Domestic

Thu Transborder

Fri

Sat

Sun

All Sectors

International

F I G U R E 3 -14 Daily Variations, Winter 2006 100,000 80,000 60,000 40,000 20,000 0 Mon

Tue

Wed Domestic

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AND

Fri International

FO R E C A STS

Sat All Sectors

Sun

The standards mentioned above allow the Airport to set goals and target levels of activity across a season, by sector and direction. Linking directly with the planning day schedules produced, total passengers and movements are calculated for each day of the week. Tables 3-8 and 3-9 summarize the peak day levels of activity for passengers for summer and winter

3.19 respectively for 2005, 2015, 2020, 2025 and 2030. Also shown in Table 3-10 are the peak hour traffic levels for selected sector and season combinations.

3.4.5 Aircraft Movement Planning Levels Peak day and hour traffic analysis is performed in much the same way for aircraft movements. The totals for the planning day and peak hour activity are presented in Tables 3-11 and 3-12 for summer and winter respectively for 2005, 2015, 2020, 2025 and 2030.

TABLE 3-8

2005 2015 2020 2025 2030

Transborder A D 14,000 14,000 22,000 22,000 26,500 26,500 30,500 30,500 34,000 34,500

International A D 16,000 17,000 26,000 25,500 31,500 32,000 36,500 37,500 43,500 45,000

WINTER PEAK DAY PA SSENGER TRAFFIC

Domestic A D 16,500 16,500 21,000 20,500 23,500 23,000 26,000 25,500 28,500 27,500

Transborder A D 13,500 13,500 21,500 21,000 26,000 25,500 29,500 29,000 33,500 32,500

International A D 13,000 13,500 21,000 20,000 24,000 24,500 29,000 29,000 33,500 33,000

TABLE 3-10 PEAK HOUR PA SSENGER TRAFFIC LEVELS

Also shown in Table 3-13 are selected peak hour traffic levels.

Season Summer

For a complete picture, in Table 3-14 is the Business Aviation peak hour traffic levels. Winter

3 . 5 F O R E CA ST I M P L I CAT IO NS

Sector Domestic

Direction A D International A D Transborder A D

2005 2,300 2,000 2,600 2,600 1,900 1,600

2015 2,300 2,900 3,700 3,600 2,500 2,300

2020 2,800 3,100 3,800 3,900 2,800 2,700

2025 3,600 3,400 5,200 4,100 3,300 3,200

2030 3,700 3,700 5,900 5,100 3,600 3,400

TABLE 3-11 SUMMER PEAK DAY AIRCRAFT MOVEMENTS

With over 50 million E&D passengers and 637,000 aircraft movements projected by the year 2020, evaluation of Toronto Pearson’s airside, terminal and supporting infrastructure will be required to assess whether the Airport has sufficient capacity to meet the future aviation demands of the region at reasonable levels of service. Once Toronto Pearson reaches capacity, other regional airports must have capacity in place to handle any spillover from Toronto Pearson; otherwise significant delays will occur and the

Chapter 3 > A V I AT I O N A C T I V I T Y

Domestic A D 21,500 22,000 27,000 27,500 30,500 31,000 33,500 34,500 37,000 37,500

TABLE 3-9

2005 2015 2020 2025 2030

SUMMER PEAK DAY PA SSENGER TRAFFIC

AND

2005 2015 2020 2025 2030

Domestic A D 240 240 310 315 345 350 385 390 415 415

Transborder A D 255 260 365 365 420 430 475 485 530 530

International A D 85 90 145 145 175 175 205 210 245 250

TABLE 3-12 WINTER PEAK DAY AIRCRAFT MOVEMENTS

2005 2015 2020 2025 2030

FO R E C A STS

Domestic A D 205 200 255 250 250 240 315 310 340 330

Transborder A D 255 255 340 340 390 390 445 445 475 480

International A D 80 85 110 110 130 130 155 160 195 190

3.20

TABLE 3-13 PEAK HOUR AIRCRAFT MOVEMENT TRAFFIC LEVELS Season Summer

Winter

Sector Domestic

Direction A D International A D Transborder A D

2005 23 21 13 14 34 29

2015 29 33 21 19 37 32

2020 33 35 24 20 44 39

2025 40 38 29 22 51 45

2030 43 50 32 25 55 45

TABLE 3-14 PEAK HOUR BUSINESS AVIATION TRAFFIC LEVELS Season Summer

Sector Domestic

Direction A D A D A D

International Winter

Transborder

airport system will not be able to effectively support the GTA.

3.5.1 Utilization of Facilities Once schedules are produced, it is necessary to assess the efficiencies of the airport operation. Such efficiencies could occur from a number of different sources:

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• The time taken for a passenger to navigate check-in • Pre-Board Screening (PBS) • U.S. Customs and Border Protection • Canadian Border Services • Other facilities to reach the gate • Length of time an aircraft spends on a gate • Size of gate or whether there are adjacency rules.

FO R E C A STS

Some of these facilities are discussed in Chapter 6 – Passenger Terminals. As Toronto Pearson looks to become the most efficient facility and a gateway of choice to the North American market and beyond, such evaluation is pertinent to attracting airlines to use Toronto Pearson in their long-term objectives. Reference: Transport Canada, General Forecast Update, 2006/07. Transport Canada makes no warranties, guarantees or representations, expressed or implied.