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new arrivals bold departures

Halifax International Airport Authority 2006 Annual Report


OUR PEOPLE

Mark Bowser, Randall Clooney, Keith Conner, Lee Nolter, Steven Nelson, Michael MacEwan, Catherine Huddleston, James Moulton, Tom Murray, Esther MacDonald, Robert Ettinger, Delbert Geddry, Richard Gooding, Drake Clarke, Todd Ball, Eleanor Humphries, Clifford Gillie, James McKee, William D. Turple, Paul Tuttle, Melissa Foley, Robert Clarke, Larry Naugle, John MacLean, Paul Dalrymple, Kevin Gaudet, Judy Berglund, Derek Forrest, Terry Hilchey, Janet Menzies, Ron Moakler, Howard Rose, Alan O’Leary, Don Lajoie, Cecillia Anderson, Peter Snair, Ivan Frame, Frank Leavitt, Kellie Hannam, Ron Conway, Allan Pace, Jane Scott, Leonard Brown, Christopher Ball, Donald Myers, Dave Snow, Joyce Hoskin, Donna Anderson, Reg Beeler, Sean Dempsey, Gary Christian, Mike Hartlen, John Melbourne, Bill Crosman, Brian Cutler, Burton Wright, Joyce Carter, Paul Hood, Thomas Morris, William A. Turple, Stephen Bezanson, Deborah MacLeod, Alastair Cox, William Wellwood, Kenneth Bayers, Ronda Brassard, Tim Fisher, Timothy Bull, Vernon Myers, Gord Duke, Nancy Fong, Malcolm Phippen, Kelly Martin, Janet Ingraham, Barry Carroll, Art Nowen, Charles Clow, Robert Gallant, Thomas Maguire, Joey MacPherson, Cathy Walker, Roxanne Hilchie, Larry Butler, Stephen Whalen, Mike Maxwell, Mike Sweet, Richard Boutilier, Shawn Hicks, Kim Keeling, Brian Gillette, Gary Porter, David Dawe, Bruce Loveridge, Charles Robson, Jamie Wilkins, Angela Hartt, Sherrie Clow, Gilbert Chandler, Peter Sworin, Chris Collier, Lydia Bowie, Theresa Conway, Karen Harrie, Wayne DeCoste, Reg Verge, Peter Clarke, Stephanie Gorman, Shawn Delong, Aaron Whynder, Rachael Robinson, Catherine Towers, Jerry Staples, William Cowan, Alex Skinner, Andy Lyall, Marcel Laforest, John Young, Kelly Zwicker, Art Ives, Douglas Kinsman, Rick Garson, Mel Dinney, Milly Hardwick, Tim Zinck, Edward Dempsey, Troy Appleby, Dan Tanner, Arnold Wood, Garry Parsons, Greg Shackleton, Kim Oakley, Doug Eisan, Michael Healy, Leigh Robinson, Twila Grosse, Dan Pride, Ken Champion, Barry Woynar, Robert Silver, Tony McMillen, Kevin Mosher, Stephen Fudge, Norman Ross, David Brown, Joseph MacLean, Blair Christian, Steven Hilchie, Jack Weir, Kevin Boutilier, Bruce Gaudet, Rick Wyatt, Dean Letto, Laine Peters, Harry McMullen, Carol Mackie, Kim Porter, Peter Spurway, Karen Sinclair (AS OF DECEMBER 31, 2006)


N E W A R R I VA L S . B O L D D E P A R T U R E S . “ New arrivals and bold departures ” reflects the historic changes completed in 2006 at Halifax Stanfield International Airport and the opportunities created with this new foundation in place. It captures our sense of pride in all the milestones we achieved together: opening new facilities, adding new flights and carriers, unveiling state-of-the-art technology, and securing the financing for our multi-year airport improvement program. Each of those new arrivals helped us build on our reputation for superb service and safe and secure facilities for travellers, visitors and every member of the airport community. They also helped lay the groundwork for our future plans. We’re setting out on an innovative new course of action – a bold departure toward new possibilities, new horizons.

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Message from the Chair | 2

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Message from the President & CEO | 4

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Setting the Stage |6

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Rewarding Experiences |8

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Making Connections | 10

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Taking Flight | 12 Improving the Bottom Line | 14

Financial Statements | 15 Board of Directors | 22 Corporate Governance | 24


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We’re certain that acting boldly in the future is the only option in today’s challenging environment. 2


Message from the Chair Halifax International Airport Authority (HIAA) strives to provide a safe, secure and efficient experience at Halifax Robert L. Stanfield International Airport. We do this by measuring ourselves against the best airports around the globe. We recognize that the world is changing rapidly and to achieve our goals, we must build today what we will need tomorrow. We achieved that in 2006, creating a platform from which to soar. This is why we believe “New Arrivals and Bold Departures” is the ideal theme for this year’s annual report. Sure, we want to celebrate everything that happened in 2006, a year in which our terminal building expanded from end to end, becoming a sleek, modern, cutting-edge facility that’s the envy of any in the country. We’re also certain that acting boldly in the future – whether adopting a more entrepreneurial spirit or becoming even more service-oriented – is the only option in today’s challenging environment. So HIAA’s vision is clear: continue working to build the best airport in the world. Excellence, after all, has nothing to do with scale. Our ambition is born of an understanding that globalization has shrunk the world. Today, the business customer on the other side of the continent may mean as much as the customer across the harbour. Without air connectivity, a city and region is out of the game.

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In her message, Eleanor Humphries, our President & CEO, explains how we’re transforming the airport into the greatest air transportation hub this region has ever seen: by unveiling new technologies, services and facilities; by enhancing the visitor experience; by working with our partners. I would like to thank her and the HIAA team for their efforts in 2006 – a year in which HIAA received awards for communications and community involvement, and Eleanor herself was honoured twice, first by Atlantic Business Magazine as one of Atlantic Canada’s Top 50 CEO’s, marking the fourth time she has been named to this distinguished list, and then with a Women of Excellence Award from the Canadian Progress Club. I’d like to express our sincere appreciation to Norbert Comeau who, in December, completed his three-year term on our Board. I’d also like to extend the entire HIAA’s heartfelt gratitude to Bernie Miller whose dedication to the Board has never wavered since becoming one of the original members at its inception in 1995. Bernie, of course, spent the next decade as Chair – a period during which he also served as the airport’s chief negotiator during the transfer negotiations with

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Transport Canada and twice acted as HIAA’s CEO. In his usual selfless style, Bernie agreed to serve on the Board after his official term ended in December until his replacement was chosen. We welcomed two new valued members of the Halifax business community to the Board in 2006 – Wadih Fares, President of W.M. Fares Group, and Jamie Baillie, President & CEO of Credit Union Atlantic. Fred Smithers, one of our existing Board members, became Vice Chair. 2006 was clearly a significant year for HIAA, as you will see by the accomplishments and milestones noted throughout this report. As we look ahead, we expect more of the same in 2007, starting with the celebration in February to honour a great Nova Scotian, when Prime Minister Stephen Harper renamed Halifax International Airport in honour of Robert L. Stanfield.

Frank Matheson chair of the board of directors

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Message from the President & CEO

In 2006, HSIA served almost 3.4 million passengers, a new record. A study conducted in 2006 concluded that the airport community injected $1.15 billion into the provincial economy in 2005. 4


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2006 will be remembered as a watershed year in the evolution of HIAA. It’s difficult to overstate the milestones we achieved during those 12 months.

It was an energetic year: we introduced new technology and services, completed a $90 million infrastructure expansion that opened new growth opportunities, and solidified our long-term financing. The upshot: six years after taking over operation of Halifax Stanfield International Airport (HSIA), HIAA has truly arrived. Now we’re ready to move in a bold new direction and show the world what the airport of the 21st century can be. In so many ways, 2006 was an historic one for HIAA. On October 4, our new U.S. preclearance facility – the first such facility launched in North America since 9/11 – opened after years of intensive work and negotiations. Halifax has now joined an elite group of major airports: non-stop U.S.-bound passengers can check in, be cleared by U.S. Customs and Border Protection, then board a plane and arrive at their U.S. destination as domestic passengers. That makes for easier connections and gives passengers access to more U.S. airports. Our connections with the world improved in other ways too: our established carriers added flights and new carriers came on board. Clearly CanJet Airlines’ decision to end scheduled air service was unforeseen, but we quickly regained our balance. In 2006, HSIA served almost 3.4 million passengers, a new record. A study conducted in 2006 concluded

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that the airport community injected $1.15 billion into the provincial economy in 2005. HIAA’s inaugural bond issue – which gave us $150 million to pursue our capital plans over the next several years – is another sign of our fiscal strength. Having a solid financial foundation is a critical building block for any corporate entity. So, I’m happy to say that in 2006 HIAA reported an excess of revenues over expenses of $10.5 million. U.S. Secretary of State Condoleezza Rice chose to visit Halifax and made a special stop at the airport to personally thank our people and our partners for their remarkable outpouring of help and hope, on the fifth anniversary of 9/11. We strengthened the core of our corporate culture: we’re in the service business; our ultimate goal is to make every moment passengers spend within our building fresh and engaging. We already do a good job in this regard, receiving two first-place awards in the 2006 Airport Service Quality survey, a global customer service ranking program that rates 90 of the world’s airports. Awards like these confirm we’re on the right track. Yet, we’re determined to do even more to provide passengers with exceptional service. That’s why we introduced a broad range of technological improvements to make life easier for travellers and help the

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airport run even more smoothly. In 2006, we started designing a proposed 2300-space parking facility and moved forward in the planning for a potential 175-room hotel. We also commissioned a study to ask passengers, employees, our tenants, and local residents what new services they’d like to see. That process demonstrates something else about HIAA: our commitment to listen to and work with our partners – whether tenants, airlines, stakeholders, different levels of government, or the neighbouring community. I encourage you to have a look at the names on the inside front cover of this report; they’re the people of HIAA – vibrant and committed. I want to thank every one of them for their efforts in 2006. It takes a lot of people working together to chart the bold new course we have set for ourselves. As far as we’re concerned, the question is no longer: what is an airport? We believe it is: what can an airport be? We’re confident we have created a solid foundation for the future, as we work to build the best airport in the world.

Eleanor Humphries president & ceo

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S Why embark on a $90 million program to expand and enhance Halifax Stanfield International Airport (HSIA)? Because big ideas need plenty of room in which to flourish. Our new U.S. preclearance facility – the latest accomplishment in our longterm airport improvement program – undeniably demonstrates this. Located in the airport terminal’s north end, the preclearance facility has performed beyond expectations since opening in October. Passengers ascend into a sky-lit check-in area. There, they present their tickets, check their luggage, complete their pre-board security screening, and proceed to U.S. Customs and Border Protection. Once cleared, they move to a dedicated departures area where they board their United States-bound aircraft. When their plane lands in the U.S., they disembark as domestic passengers. 6


S E T T I N G T H E S TA G E Transforming our facilities and services

We think of this facility as the crown jewel in our expansion. Yet it’s only one way we’re improving service at HSIA. “Everything we do,” explains Michael Healy, HIAA’s Vice President Infrastructure & Technology, “is designed to positively shape the experience of our partners, tenants and passengers.” Consider, for example, the $12 million spent completing Phase II of our Runway Restoration Program – repaving Runway 14/32 and reconstructing Taxiway H – ahead of schedule and with minimal disruption. This serves as a testament to our well-developed construction and communication processes. At the terminal’s south end we also opened our new commuter facility, which means regional air passengers now enjoy an expanded waiting area and more retail and food and beverage options, along with 12 additional gates and covered walkways providing improved ground access to aircraft. The list of infrastructure improvements doesn’t stop there. HIAA has also installed a new common use departures baggage system with the latest in security technology. And we’re proud of our newly expanded arrivals area, featuring a majestic glass wall that enhances the natural light and allows arriving passengers to see waiting greeters and the baggage carousels as they descend. In 2006, HIAA also took over operation of seven loading bridges at HSIA that were previously owned by Air Canada – making a total of 13 HIAA-owned bridges now available for common use by all airlines. The only way to create the airport of tomorrow – HIAA’s ultimate goal – is with the technology of the future. By introducing a series of technological changes and upgrades in 2006, we made huge strides in transforming the

airport experience. Along the way we also provided yet another reason why 2006 marked a stellar year at HSIA. Passengers notice the transformation the moment they step inside the terminal. Common use self-service kiosks make checking in easier than ever, and a new digital public address system keeps travellers well informed. Starting in January, the convenience level went up another notch. The reason: new common use terminal equipment (CUTE) installed in the ticket counter and gate areas, which has further streamlined the check-in process. CUTE represents a smart solution to capacity constraints. Instead of depending on equipment owned by each individual air carrier, passengers now use a common platform for the check-in process. The benefits: greater accessibility, efficiency and flexibility for carriers and travellers – and a better use of terminal space – helping to reduce the need for major capital investment on the part of the airlines. In 2006, we also focused on increasing communications accessibility within our walls. We fully understand that, in today’s global marketplace, success means being reachable 24/7 no matter where you happen to be. Which is why, with the help of Cisco Systems, Inc. and alliance partner HP Canada, we introduced Atlantic Canada’s first unified voice, video, data, and wireless communications system. As of January, telephone calls in the terminal building use state-of-the-art Voice over Internet Protocol (VoIP) technology rather than traditional analog telephone communications. Just one more way we’re working to build the best airport in the world.

05. 2006 > HIAA teams up with Cisco Systems and Hewlett-Packard (Canada) Co. to announce the completed installation of an airport-wide integrated IP voice, video and data network as part of the ongoing technology upgrade and airport improvement program 01.2006 > Common Use Terminal Equipment is installed for use by airlines in the ticket and gate counter areas H A L I F A X

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R Airport Service Quality survey results for 2006 : First in overall passenger satisfaction for airports worldwide with under five million passengers, for the fourth year in a row First in the Americas in the new category of Airport People Awards Second in the best domestic airport worldwide category Second in the Americas for overall satisfaction

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R E WA R D I N G E X P E R I E N C E S Enhancing our customer service At HIAA, we strive to improve the customer experience. That means spending millions of dollars upgrading infrastructure, providing the latest technology and adding services. Taking the airport in a bold new direction also means paying attention to the smallest detail. Need proof? Just consider the piles of blankets, diapers, baby food, decks of cards, cribbage boards, and bottled water standing ready in a storage room – emergency provisions to ease traveller discomfort when unexpected delays occur. “Passengers are our focus,” says Kelly Martin, HIAA’s Customer Relations Manager. “While they are here with us, we do whatever we can to make them comfortable.” Our service-oriented philosophy comes to life in the first and last faces many visitors see in the airport terminal – the tartan-vested volunteers who provide everything from directions and information, to help for special needs travellers. In 2006, 120 dedicated and enthusiastic Volunteer Hosts, who come from all walks of life, logged more than 17,500 hours serving passengers and visitors. We also spread the service word via special training to our tenants who are on the front-line throughout the terminal. Over 60 per cent of the terminal’s retail and service outlets have received this training, and we remain a Super Host designated airport – the only one in the country. Everything we’re doing to respond to the needs of travellers and tenants isn’t obvious to the eye. In 2006, we recruited

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11 new full-time staff members. Many of them work for our newly-formed maintenance response teams – multi-disciplinary teams of tradespeople who provide rotating on-site shift coverage over 16 hours a day, seven days a week. Our attention to customer service seems to be working. In 2006, once again we received awards from the Airport Service Quality survey, which ranked customer service in 90 participating airports worldwide. HSIA took first place for overall passenger satisfaction for airports worldwide with under five million passengers, for the fourth consecutive year. And we were named best in the Americas in a new category – Airport People Awards – that recognizes airports that have cultivated a strong customer service culture among their staff and partners. We also placed second in the best domestic airport worldwide category and second in the Americas for overall satisfaction. Global recognition, of course, is wonderful. HIAA, however, puts just as much stock in our own ongoing internal traveller surveys. “The really important thing is that when we benchmark against ourselves, customer satisfaction is growing year after year,” says Martin. Paying attention to the details is its own reward.

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MAKING CONNECTIONS Doing our part in the community

M At HIAA, being connected matters. We mean that in the widest possible sense of the word: connected to the world’s airports, connected to our tenants and staff, connected to the 5,400 people who work in and around Halifax Stanfield International Airport. We also mean being connected to the broader Nova Scotia community – a link we value on so many levels. HIAA employees, for starters, are active community participants and fundraisers. In 2006, they raised over $13,000 for the United Way, entered a team in the annual Manulife Dragon Boat Festival raising almost $4,200 for amateur sport in Nova Scotia, and donated over $1,000 worth of school supplies and food to the Parker Street Food & Furniture Bank.

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What’s more, HIAA supported over 200 organizations with almost $100,000 in corporate donations, as well as promotional items and public display space. Our Humanities Fund is another way we provide community support. Developed through the collective agreement process between HIAA and the Union of Canadian Transportation Employees Local 80829, this fund was created to help meet basic needs in the community. Union members contribute $.01 for each hour worked, and HIAA doubles that contribution. In 2006, taking its lead from employee suggestions, the fund distributed $7,000 to six organizations: the Emily Fund, for the purchase of insulin pumps; Alcare Place, to help people with addictions; Habitat for Humanity, to purchase building supplies; the Canadian Mental Health Association’s Building Bridges Program, to help those suffering from mental illness; Ark, to help feed the homeless; and the Pictou County Early Intervention Program, to assist children with special needs. We also get out into the community with our parade float. In 2006, many of our volunteers and employees and their families walked and waved in the Apple Blossom Festival parade, the Halifax-Dartmouth Natal Day parade, the Halifax Holiday Parade of Lights, and the Truro Santa Claus Parade.

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Like the rest of the world, we’re going green – and giving support to environmental initiatives. HIAA provided the Nature Conservancy of Canada with a contribution to help with the acquisition and stewardship of a parcel of land in the Musquodoboit Harbour area. As an important place for migratory birds to fuel up between flights, that’s a cause close to our heart. We’re also pleased that the Southern Twayblade (Listera australis), an exceedingly rare Nova Scotia orchid, continues to thrive at HSIA. In 2006, more of those plants grew on our lands than ever before in recorded history. We are always striving to make the airport a safer, healthier place to work. A 21 per cent decline in time lost because of workplace accidents in 2006 indicates that all the hard work is paying off. We’re determined to enhance that record, placing a strong emphasis on improving existing programs and developing new ones to reduce the accident rate even further. We commissioned an audit in 2006 to see how our occupational health and safety programs stack up against OHS standards elsewhere. Based on early results, we’ve started working on improvements in many areas, including hazard reporting and health and safety training. Our aim, after all, is unwavering: to make travellers, visitors and workers as safe as possible.

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In March we launched iWatch – our unique and award-winning program designed to increase awareness of security threats and to encourage members of the airport community to report suspicious activity. Results for the first year showed a four-fold increase in reports to security from employees throughout the airport community – everyone from cleaners to contractors, retailers to ramp workers. The program was recognized with two honours – an award of merit from the Canadian Public Relations Society (Nova Scotia) Inc. and first place in the Public Relations category of the Airports Council International - North America’s 2006 Excellence in Marketing and Communications Contest. We shored up security in other ways too: increased policing within the new preclearance facility and greater scrutiny of HIAA buildings and grounds outside the terminal. One big change: a new system that uses biometric scans (retina and figerprint) to gain access to secure areas throughout the airport. Futuristic stuff, even if the goal – doing everything in our power to be a good community partner – is a decidedly old-fashioned one.

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TA K I N G F L I G H T Increasing our air services

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4.6 %

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rise in passengers from 2005

increase in cargo traffic over 2005

3,378,601 passengers through Halifax Stanfield International in 2006

06.2006 > United Airlines launches service to Washington Dulles

12.2006 > American Eagle begins service to New York LaGuardia

09.2006 > Air Canada offers non-stop daily flights to London Heathrow 10.2006 > Icelandair announces return of service beginning in May 2007

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U.S. preclearance means many new destinations and markets for all of Atlantic Canada, cementing Halifax as the region’s air gateway.

In 2006, a record 3,378,601 passengers travelled through Halifax Stanfield International Airport, a 4.6 per cent increase from 2005. The opening of our U.S. preclearance facility represented the single most important development since the airport opened in 1960. And the benefits were immediate. Four months before the first passenger checked in, United Airlines began flying from Halifax to Washington Dulles International Airport in anticipation of the new era. As well, in December, American Eagle began daily roundtrip flights from Halifax to New York’s LaGuardia Airport, which serves only domestic and precleared passengers. U.S. preclearance means many new destinations and markets for all of Atlantic Canada, cementing Halifax as the region’s air gateway. “The opening of preclearance has already delivered the kinds of gains we anticipated when we considered the business case,” says Jerry Staples, HIAA’s Vice President Marketing & Business Development. That was only the start of more good news. Air Canada began non-stop daily flights to London Heathrow, and increased seasonal service to Toronto, Montreal, Ottawa, and Sydney. WestJet Airlines introduced new seasonal daily non-stop service to Edmonton. Condor enhanced its summer schedule by extending service to Frankfurt into November, and Sunwing Airlines operated summer seasonal service to Toronto and London, Ontario. H A L I F A X

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Throughout the year, several airlines gave notice that they would launch new services in 2007. After a six-year absence from the Halifax market, Icelandair announced that it would resume service to Keflavik International Airport, near Reykjavik, starting in May, with three flights per week. Other announcement highlights for 2007 include Air Canada beginning daily service to LaGuardia in April; American Eagle adding a weekend summer season service to Chicago in May; United Airlines launching daily service to Chicago in June; Northwest Airlines flying twice daily to Detroit in May; and Delta Air Lines beginning weekly service to Atlanta in June. As well, WestJet announced a weekly seasonal flight to Tampa Bay (March through May 2007) and Transat Holidays, in partnerhip with CanJet Airlines, announced winter seasonal charter service to Orlando and St. Petersburg in Florida. Internationally, Condor announced it would return with two weekly flights to Frankfurt, Germany, in the summer of 2007. Zoom Airlines announced it would resume weekly summer service to London (Gatwick) and Glasgow, Scotland in 2007, and launch weekly seasonal service to two new destinations in Europe – Belfast and Paris – in June. Air Transat, partnering with Canadian Affair, announced plans to offer a twice-weekly seasonal service to London (Gatwick), and to resume weekly service to Frankfurt, Germany. These new services were tempered by some service reductions. In February 2006, Provincial

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Airlines ceased scheduled service, and CanJet Airlines ended scheduled service in September, announcing plans to enter the charter market. On the cargo side, ABX Air, Inc. began a new dedicated weekly DC-9 service to New York and Miami via Wilmington, Ohio in October. That addition helped cargo traffic rise to 27,700 metric tonnes, a five per cent increase over 2005. The federal governement’s Blue Sky air transportation policy, announced in November 2006, set the stage for new opportunities for marketing our city, province and region. This policy represents a welcome approach to increasing choices and options for travellers and shippers alike. We improved service in other ways too. For instance, both our U.S. preclearance and commuter facilities include new food, beverage and retail outlets. Outside the terminal there were also enhancements: I.M.P. Group International Inc. finished its new aerospace hangar on airport lands; a pair of car rental giants – Avis Budget Group, Inc. and Dollar Thrifty Automotive Group, Inc. – completed construction of new operational headquarters. All of these new facilities, air services and amenities demonstrate our collective commitment to build the best airport in the world.

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I M P R OV I N G T H E B OT TO M L I N E Reinforcing our financial stability

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There’s a precise logic to the choice of theme for this annual report: in 2006, HIAA put in place key building blocks to help us reach our ambitious goals. Consider the financial front. The big news: in 2006, we completed our first bond issue – a $150 million private placement offering. The 35-year, non-amortizing bonds pay a 5.503 per cent annual interest rate. “We’re still as prudent as we’ve ever been,” says Joyce Carter, HIAA’s Vice President Finance & CFO. “HIAA maintains one of the lowest debt-per-enplaned-passenger ratios in the country. In fact, Standard & Poor’s assigned us an A+ credit rating – one of the best ratings among major airports across Canada.” We now have the financing in place to pursue our capital plans over the next several years. That’s good news for HIAA – and the community. In 2005, HIAA and its aviation partners located at the airport generated $1.15 billion in gross output. That translates into 11,625 jobs and $385 million in wages and salaries for the province. We’re pleased to report that landing and terminal fees have not risen in the six years since management of the airport was transferred from the federal government to HIAA. CanJet’s announcement that it was ending scheduled service in September 2006 was unexpected. In 2005, the airline had accounted for 18 per cent of all passengers passing through our airport and 11

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per cent of HIAA’s total revenue. Passenger volumes were absorbed by increased capacity added by other carriers, namely Air Canada and WestJet, thereby reducing HIAA’s revenue loss. As a result, by year-end, our bottom line was not significantly affected by CanJet’s decision. Our total revenues – including the Airport Improvement Fee – reached $51.8 million in 2006, compared to $46.0 million in 2005. A combination of factors was behind the increase. Offering common use services to airlines meant higher aeronautical revenues. At the same time, our enhanced parking options – including our expanded Park’N Fly facility – led to a hike in parking revenue. We also had an increase in interest revenue due to surplus funds from our bond issue. Our expenses totalled $41.3 million in 2006, compared to $32.4 million the previous year. That rise was mainly due to providing common use services to our airline partners, along with the higher cost of maintaining the expanded air terminal building, and paying the interest on our bonds. Overall, revenues exceeded expenses by $10.5 million in 2006, compared to $13.6 million in 2005, which means we’re in great shape to forge ahead with our future plans.

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In 2007, for example, HIAA will concentrate on implementing its multi-million dollar Groundside Redevelopment Plan, which includes reconstruction of the north tunnel to provide passengers with ground access to the parking lot at the north end of the terminal building and reconfiguring the terminal front roadway to improve the flow of passengers and vehicles by creating separate roads for passenger pick up and drop off. We’ll also consider a 2300-space parking facility adjacent to the north end of the terminal building, with an over-road pedway, and installation of underground drainage and electrical services, including services for a future hotel. We will continue to grow the U.S. preclearance program. We have the strength and flexibility to maintain and operate our new south end commuter facility along with the other facilities introduced in 2006. The new arrivals have set the stage for bold departures. We are well on our way.

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BALANCE SHEET

Financial Statements

As at December 31

2006 (in thousands of dollars) $

2005 $

assets Current Cash Accounts receivable Inventories Prepaid expenses

AU D I TO R S ’ R E P O R T

To the Directors of Halifax International Airport Authority We have audited the balance sheet of Halifax International Airport Authority as at December 31, 2006 and the statements of operations and changes in net assets and cash flows for the year then ended. These financial statements are the responsibility of the Authority’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Authority as at December 31, 2006 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. As required by the Canada Corporations Act, we report that, in our opinion, these principles have been applied on a basis consistent with that of the preceding year.

Halifax, Canada February 9, 2007

Capital assets (note 3) Deferred financing costs (note 4) Debt service reserve fund (note 4) Accrued benefit asset (note 7)

77,354 3,943 380 695 82,372

6,065 5,380 320 570 12,335

170,223 3,862 4,127 426

117,935 – – –

261,010

130,270

20,569 938 80 21,587

24,227 736 26,081 51,044

150,644 – 1,764 173,995

724 46 1,887 53,701

87,015

76,569

261,010

130,270

liabilities and net assets Current Accounts payable and accrued liabilities Deferred revenue Current portion of long-term debt (note 4) Long-term debt (note 4) Accrued benefit liability (note 7) Security deposits Net assets Equity in capital assets (note 5) Commitments (note 6) Contingencies (note 9) See accompanying notes

Chartered Accountants

On behalf of the Board:

Director

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F I N A N C I A L S TAT E M E N T S

S TAT E M E N T O F O P E R AT I O N S AND CHANGES IN NET ASSETS

Year ended December 31

2006 (in thousands of dollars) $

2005 $

revenues

S TAT E M E N T O F C A S H F LOWS

Year ended December 31

2006 (in thousands of dollars) $

2005 $

operating activities

Terminal and passenger security fees Landing fees Concessions Parking Rentals Interest income Other (note 4) Airport improvement fees (note 5)

11,875 9,148 8,301 6,260 1,825 1,756 312 39,477 12,316 51,793

8,833 8,703 7,789 5,314 2,018 63 1,640 34,360 11,707 46,067

Salaries, wages and benefits Materials, services and supplies Amortization Ground lease rent General and administrative Interest expense on long-term debt (note 4) Property taxes

11,655 11,276 6,530 4,271 3,588 2,762 1,265 41,347

11,042 9,061 3,361 4,361 3,376 36 1,187 32,424

Excess of revenues over expenses Net assets, beginning of year

10,446 76,569

13,643 62,926

Net assets, end of year (note 5)

87,015

76,569

operating expenses

Excess of revenues over expenses Items not involving cash: Amortization Net change in non-cash working capital balances related to operations Cash provided by operating activities

10,446

13,643

6,530

3,361

(7,559) 9,417

3,949 20,953

(54,008) (54,008)

(48,581) (48,581)

150,000 24,000 (50,081) (4,127) (3,912) 115,880

– 26,000 (1,086) – – 24,914

Increase (decrease) in cash Cash, beginning of year

71,289 6,065

(2,714) 8,779

Cash, end of year

77,354

6,065

35

investing activities Expenditures on capital assets Cash used in investing activities

financing activities

See accompanying notes

Proceeds of bond issue Proceeds of long-term debt construction loan Repayments of long-term debt Debt service reserve fund Deferred financing costs Cash provided by financing activities

Supplementary Information Cash interest paid – long-term debt See accompanying notes

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16


December 31, 2006

N OT E S TO F I N A N C I A L S TAT E M E N T S

1. general

2. significant accounting policies (continued)

The Halifax International Airport Authority (the “Authority”) was incorporated on November 23, 1995 as a corporation without share capital under Part II of the Canada Corporations Act. On February 1, 2000, the Authority signed a 60-year ground lease with Transport Canada and assumed responsibility for the management, operation and development of the Halifax Robert L. Stanfield International Airport. Excess revenues over expenses are retained and reinvested in airport operations and development. The Authority is a dynamic and multi-faceted aviation enterprise that provides air access to the world, facilitates personal and business connections and promotes regional economic growth. The Authority is governed by a Board of Directors whose members are nominated by the Halifax Regional Municipality, the Province of Nova Scotia and the Federal Government, as well as the Halifax Chamber of Commerce. The nominated members can also appoint additional members who represent the interests of the community. The Authority is exempt from federal and provincial income tax, federal large corporation tax, and Nova Scotia capital tax.

Assets Computer hardware and software Leasehold improvements Machinery, equipment, furniture and fixtures Vehicles

2. significant accounting policies The Authority’s financial statements have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities at the date of the financial statements and the reported amounts of certain revenues and expenses during the year. Actual results could differ from those estimates. Inventories Inventories consist of materials, parts and supplies and are stated at the lower of cost, determined on an average cost basis, and estimated replacement cost. Ground lease The ground lease with Transport Canada is accounted for as an operating lease. Capital assets Capital assets are recorded at cost including interest on funds borrowed for capital purposes, net of contributions and government assistance and are amortized over their estimated useful lives on a straight-line basis as follows:

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A U T H O R I T Y

2 0 0 6

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Rate 20% - 33% 2.5% - 10% 5% - 20% 5% - 17%

Construction in progress is recorded at cost and is transferred to leasehold improvements when the projects are complete and the assets are placed into service. Revenue recognition Landing fees, terminal fees, parking revenues and passenger security fees are recognized as the airport facilities are utilized. Concession revenues are recognized on the accrual basis and calculated using agreed percentages of reported concessionaire sales, with specified minimum guarantees where applicable. Rental revenues are recognized over the lives of respective leases, licenses and permits. Airport improvement fees (“AIF”) are recognized when originating departing passengers board their aircraft as reported by the airlines. Deferred revenue consists primarily of a portion of the common-use terminal equipment (“CUTE”) fee required for future capital acquisitions and the unamortized portion of a grant received from the government to undertake specific marketing activities to increase the air connections and routes between the United Kingdom, Germany, Iceland, the Netherlands and Nova Scotia that use Halifax Robert L. Stanfield International Airport. Employee benefit plans The Authority sponsors a pension plan on behalf of its employees which has defined benefit and defined contribution components. In valuing pension obligations for its defined benefit component, the Authority uses the accrued benefit actuarial method prorated on services and best estimate assumptions. Pension plan assets are valued at current market values. The excess of the accumulated net actuarial gain or loss over 10% of the greater of the accrued benefit obligation and the fair value of the plan assets is amortized over the average remaining service life of employees. Defined contribution component amounts are expensed as incurred. Deferred financing costs Costs relating to the issue of Series A Revenue Bonds, including agent fees, professional fees and termination of interest-rate swap agreements, are deferred and amortized on a straight-line basis over the term of the related debt.

R E P O R T

17


December 31, 2006

N OT E S TO F I N A N C I A L S TAT E M E N T S

3. capital assets

4. long-term debt

2006 (in thousands of dollars) $ Accumulated Net Book Cost Depreciation Value $ $ $

(in thousands of dollars)

Computer hardware and software Leasehold improvements Machinery, equipment, furniture and fixtures Vehicles Construction in progress

6,136 161,436

2,876 9,525

3,260 151,911

6,230 8,031 6,236

2,057 3,388 –

4,173 4,643 6,236

188,069

17,846

170,223

2005 (in thousands of dollars) $ Accumulated Net Book Cost Depreciation Value $ $ $ Computer hardware and software Leasehold improvements Machinery, equipment, furniture and fixtures Vehicles Construction in progress

2,472 72,100

1,587 5,542

885 66,558

4,025 7,609 43,537

1,514 3,165 –

2,511 4,444 43,537

129,743

11,808

117,935

2006 $

2005 $

150,000

Canadian Imperial Bank of Commerce Construction installment loan, bearing interest at prime rate less 65 basis points.

26,000

Transport Canada deferred rent, non-interest bearing, repayable in monthly installments of $6,700 which commenced in 2006. Current portion of long-term debt

724 150,724 80

805 26,805 26,081

150,644

724

5.503%, non-amortizing Series A Revenue Bonds due July 19, 2041. Interest payable semi-annually in arrears on January 19 and July 19 of each year until maturity, commencing on January 19, 2007.

Bond Issue In July 2006, the Authority completed a $150 million Revenue Bond issue. The $150 million 5.503% Series A Revenue Bonds, are due on July 19, 2041. The net proceeds from this offering are being used to finance the 10 year Capital Plan, and for general corporate purposes. These include repayment of existing bank indebtedness incurred by the Authority in connection with the 10 year Capital Plan and the funding of a $4.1 million Debt Service Reserve Fund and a $5.9 million Operating and Maintenance Reserve Fund required by the Master Trust Indenture entered into by the Authority in connection with the offering. The bonds are direct obligations of the Authority ranking pari passu with all other indebtedness issued under the Master Trust Indenture. Reserve Funds Pursuant to the terms of the Master Trust Indenture, the Authority is required to establish and maintain with a trustee a Debt Service Reserve Fund with a balance at least equal to 50% of annual debt service costs. As at December 31, 2006, the Debt Service Reserve Fund included $4.1 million in interest bearing deposits held in trust. These trust funds are held for the benefit of bondholders for use in accordance with the terms of the Master Trust Indenture.

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18


December 31, 2006

N OT E S TO F I N A N C I A L S TAT E M E N T S

4. long-term debt

5. airport improvement fees

(continued)

The Authority is required to maintain an Operating and Maintenance Reserve Fund of approximately $5.9 million. The Operating and Maintenance Reserve Fund must be established and funded as required by the Master Trust Indenture, for the benefit of bondholders. The balance in the Fund is equal to at least 25% of certain defined operating and maintenance expenses for the previous fiscal period. For 2007, approximately $6.6 million will be required to fund the Operating and Maintenance Reserve Fund. The Operating and Maintenance Reserve Fund may be satisfied by cash, letters of credit, or the undrawn availability under a committed credit facility. Deferred Financing Costs (in thousands of dollars)

2006 $

Deferred financing costs Less: Accumulated amortization

3,912 (50) 3,862

2005 $ – – –

Capitalized Interest Interest on long-term debt of $1,966,365 (2005 - $260,596) was capitalized as part of construction in progress during the year. Debt Forgiveness During 2005, Transport Canada agreed to forgive $1.2 million of debt, which is included in other revenue.

5. airport improvement fees On January 1, 2001, the Authority implemented an AIF of $10 per local boarded passenger to fund the cost of a major capital program. These fees are collected by the air carriers for a fee of 6% under an agreement between the Authority, the Air Transport Association of Canada, and the air carriers serving Halifax Robert L. Stanfield International Airport. Under the agreement, AIF revenues may only be used to pay for the capital and related financing costs as jointly agreed with air carriers operating at the airport.

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A I R P O R T

A U T H O R I T Y

2 0 0 6

A N N U A L

(continued)

A summary of the AIF collected and capital and related financing expenditures are as follows: 2006 (in thousands of dollars) $

2005 $

AIF revenue (net): AIF revenue AIF collection costs Interest on surplus funds Net funds received

13,122 (806) 12,316 1,756 14,072

12,459 (752) 11,707 — 11,707

Capital expenditures funded by AIF Interest expense funded by AIF

44,388 2,762 47,150

50,398 — 50,398

Excess of expenditures over AIF revenue Excess of expenditures over AIF revenue, beginning of year

33,078

38,691

59,725

21,034

Excess of expenditures over AIF revenue, end of year

92,803

59,725

From January 1, 2001 to December 31, 2006, the cumulative capital expenditures totaled $157,241,000 (2005 - $110,091,000) and exceeded the cumulative amount of AIF revenue by $92,803,000 (2005 - $59,725,000). Net assets of the Authority as at December 31 are as follows: (in thousands of dollars)

2006 $

2005 $

Net assets provided by airport improvement fees Net assets provided by other operations

55,147 31,868

50,366 26,203

Net assets, end of year

87,015

76,569

R E P O R T

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December 31, 2006

N OT E S TO F I N A N C I A L S TAT E M E N T S

6. commitments

7. pension

Transfer Agreement Effective February 1, 2000, the Authority signed a 60-year ground lease with Transport Canada (the “Landlord”) which provides for the Authority to lease the Halifax Robert L. Stanfield International Airport (the “Airport”). A 20-year renewal option may be exercised, but at the end of the term, unless otherwise extended, the Authority is obligated to return control of the Airport to the Landlord. On May 9, 2005, the Government of Canada announced the adoption of a new rent policy that will result in reduced rent for Canadian airport authorities, including the Halifax International Airport Authority. This reduced rent will be phased in over four years beginning in 2006, with the new formula achieving its full impact in 2010. The new formula is based on percentage of gross revenues on a progressive scale. The Authority finalized the amendment to its ground lease with Transport Canada in December 2005. Rent payable under the old ground lease with Transport Canada included base rent calculated on a formula reflecting annual passenger volumes, annual revenues, and predetermined base operating costs. Base rent was calculated on a capped passenger volume formula subject to adjustments for inflation. The estimated lease obligations under the amended ground lease over the next five years are approximately as follows (in thousands of dollars):

The Authority sponsors a pension plan (the “Plan”) on behalf of its employees, which has defined benefit and defined contribution components. The defined benefit component is for former Transport Canada continuing full-time employees who were employed by the Authority on February 1, 2000 and previously participated under the Public Service Superannuation Act (“PSSA”) Plan. However, these employees had the option to elect to become members of the defined contribution component in lieu of the defined benefit component. All other employees will become members of the defined contribution component. An actuarial valuation has been prepared as of January 1, 2006, for purposes of funding the Plan. The existing Government of Canada pension assets and accrued benefits obligation for certain employees have been transferred to the Authority. The pension transfer agreement between Transport Canada and the Authority was finalized during 2004 and the total pension liability has been transferred, fully funded to the Authority. The following table provides information concerning the accrued benefit obligation, plan assets, funded status and prepaid (accrued) pension costs of the plan as at December 31, 2006: 2006 2005 (in thousands of dollars) $ $

2007 2008 2009 2010 2011

$ 4,093 3,825 3,290 3,454 3,587

Plan assets Accrued benefit obligation

Long-Term Debt – Bond Issue The $150 million Series A Revenue Bonds yield interest of 5.503% per annum, payable on January 19 and July 19 of each year until maturity. The interest due over the next five years is as follows (in thousands of dollars):

2007 2008 2009 2010 2011

$ 8,255 8,255 8,255 8,255 8,255

Construction in Progress At December 31, 2006, the Authority had outstanding contractual construction commitments amounting to approximately $1.5 million (2005 - $11.0 million).

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A I R P O R T

A U T H O R I T Y

2 0 0 6

A N N U A L

Funded status – plan (deficit) Unamortized net actuarial gain (loss) Accrued benefit asset (liability)

22,290 (23,093)

18,785 (20,147)

(803) 1,229

(1,362) (1,316)

426

(46)

The significant actuarial assumptions adopted in measuring the Authority’s accrued pension benefits are as follows: 2006 2005 % % Discount rate Expected long-term rate of return on plan assets Rate of compensation increase

R E P O R T

5.25 6.75 4.00

5.25 6.75 4.00

20


December 31, 2006

N OT E S TO F I N A N C I A L S TAT E M E N T S

7. pension

8. financial instruments

(continued)

Other information related to the Authority’s defined benefit component is as follows: 2006 2005 (in thousands of dollars) $ $ Employer contribution Employees’ contribution Benefits paid

1,032 203 138

573 205 93

Pension expense for 2006 amounted to $165,000 (2005 - $136,000) for the defined contribution component and $556,000 (2005 - $618,000) for the defined benefit component. Plan Assets 2006 2005 % % Equity securities Fixed income securities Real estate securities Other

60 32 8 – 100

57 32 8 3 100

(continued)

Credit risk The Authority is subject to credit risk through its accounts receivable. A significant portion of the Authority’s revenues, and resulting receivable balances, are derived from airlines. The Authority performs ongoing credit valuations of receivable balances and maintains reserves for potential credit losses.

9. contingencies The Authority may, from time to time, be involved in legal proceedings, claims and litigation that arise in the ordinary course of business which the Authority believes would not reasonably be expected to have a material adverse effect on the financial condition of the Authority.

10. comparative figures The comparative financial information has been reclassified to conform to the presentation adopted for 2006.

8. financial instruments Fair value The Authority’s primary financial instruments consist of cash and cash equivalents, accounts receivable, long-term debt and accounts payable and accrued liabilities. The difference between the carrying values and the fair market values of the primary financial instruments, excluding long-term debt, are not material due to their short-term maturities. At December 31, 2006, the fair value of Transport Canada deferred rent was $547,285 (2005 - $641,000) relative to the carrying value of $724,167 (2005 - $724,000). The fair value of the Revenue Bonds was $139,698,000 (2005 - nil) relative to the carrying value of $150,000,000 (2005 - nil). The fair values of long-term debt were estimated based on the present value of contractual future payments of principal and interest, discounted at the current market rates of interest available to the Authority for similar debt instruments.

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21


Fred Smithers Vice Chair

Jamie Baillie Director

Norbert Comeau Director

James S. Cowan, QC Secretary to the Board

Wadih M. Fares Director

Paul Gurr Director

BOARD OF DI RECTORS

Frank Matheson Chair

Frank Matheson – Chair Frank is President and CEO of Homburg Canada Inc., an international real estate company with holdings in residential, commercial, industrial, and retail properties. Frank is a past Chair of the Halifax School Board and the Halifax Forum Commission. Frank became Chair of the Board on January 1, 2006. He currently is a Governor of Canada’s Sports Hall of Fame and sits on the Board of Governors for Saint Mary’s University and the Advisory Board of the Sobey’s School of Business. Fred Smithers – Vice Chair Fred is the President and CEO of the Secunda Group of Companies, and the Honorary British Consul for the Maritime Provinces. He is a Director of ProGear, a golf club manufacturing company, and President and Owner of Granite Springs Golf and Country Club. He sits on the Board of Directors of Barrington Wind Energy, the Saint John Ambulance Society, and the World Wildlife Fund of Canada, and is on the Board of Governors for Saint Mary’s University. Jamie Baillie – Director Jamie is President & CEO of Credit Union Atlantic. Prior to joining the Credit Union, he held various leadership roles in Nova Scotia business and government, spending three years as Chief of Staff for Premier John Hamm, and was previously a Partner with Robertson Surrette. Jamie’s community efforts also include the Boards of Neptune Theatre Foundation and Dalhousie University. Norbert Comeau – Director Norbert had a lengthy career as a school administrator with the Provincial Acadian School Board. He has served as a member of the Nova Scotia Human Rights Commission and chaired the organizing committee for FANE (Acadian Federation of Nova Scotia). He has always been active as an entrepreneur and provided leadership to numerous organizations in the community of Clare.

James S. Cowan, QC – Secretary to the Board Jim is a member of the Senate of Canada and partner of the law firm Stewart McKelvey. He is the Chair of the Board of Governors of Dalhousie University and past Chair of the Atlantic Provinces Transportation Commission. Upon his appointment to the Senate in March of 2005, Jim resigned from the Board but continues as Secretary, a position that he has held since 1995. Wadih M. Fares – Director Wadih currently serves as the President of W.M. Fares Group, a building design, project management and development firm, and has served as the Honourary Consul of Lebanon for the Maritime Provinces for the past 10 years. He is the Capital Campaign Chair for the Halifax Theatre Project, Vice-Chair on the Board of Directors for Pier 21, and member on the Board of Directors for the Halifax Chamber of Commerce, The Urban Development Institute of Nova Scotia, and the Multicultural Association of Nova Scotia. Recently Wadih was elected as Councillor for the Association of Professional Engineers of Nova Scotia and is a recipient of Her Majesty the Queen Golden Jubilee Medal, and the 2005 APENS Citizenship Award. Paul Gurr – Director Paul is principal of Gurr & Associates, a Halifaxbased management consulting firm specializing in strategic development and core process redesign across a broad range of functions including commercial, performance management, human resources, logistics, and public affairs. Paul participated on the Halifax Chamber of Commerce, and currently serves on the Advisory Board of the Frank H. Sobey Faculty of Commerce at Saint Mary’s University, the Canadian Centre for Ethics in Public Affairs and the Trade Centre Limited.

22


Bernard F. Miller Director

Cheryl Newcombe Director

Roy Rideout Director

Robert J. Scott Director

Ken Streatch Director

BOARD OF DI RECTORS

Peter McDonough, QC Director

Peter McDonough, QC – Director Peter is a senior partner at McInnes Cooper, and has been in practice for over 30 years in the areas of property development and real property (commercial and residential). He has served on the Board of Governors of Dalhousie University, Nova Scotia College of Art and Design, Special Olympics and the YMCA. He was the co-Chair of the Halifax Industrial Commission, President of the Dalhousie Alumni Association, and is the founding President of the Dalhousie Black and Gold Club. Bernard F. Miller – Director Bernie served as the Chair of the Airport Authority Board for 10 years. He was the Authority’s chief negotiator during the transfer negotiations with Transport Canada which brought the airport under local control and also served as the airport’s CEO for much of the first year after transfer. He assumed the CEO role again in 2005 from February until August. He retired as Chair at the end of 2005 and continued to serve on the Board as Past Chair in 2006. Bernie previously enjoyed a 35-year career with Air Canada, where he held a number of senior executive positions. He retired from the airline in 1991 as Vice President, In-Flight Service for Air Canada’s worldwide operations. Cheryl Newcombe – Director Cheryl joined the HIAA Board in July 2005. She is the Comptroller of Lighthouse Lumber Wholesalers Limited in Dartmouth, a position she has held since 2002. Cheryl is also on the Board of Beacon House and is the immediate past Chair of the Halifax Regional Water Commission.

Roy Rideout – Director Roy is past Chairman and CEO of Clarke Inc., a publicly traded company in the transportation industry. He is also a Director of Oceanex Income Fund, Fortis Inc. and NAVCANADA. Prior to 1988, Roy held senior executive positions with both Eastern Provincial Airways and Canadian Airlines International for 15 years. Roy is a chartered accountant. Robert J. Scott – Director Bob is Executive Vice President of Glenora Distillers International Ltd. and is a former Director of the Small Business Development Corporation for the province of Nova Scotia. Ken Streatch – Director Ken has over thirty years of senior management experience in both business and government. He is the President and CEO of Sunberry Cranberry Producers Inc., and Chairman of the Board of Atlantic Canada Cranberries Inc. Ken has held a number of portfolios with the government of Nova Scotia, including Minister of Transportation and Communications and Minister of Economic Development. J. Robert Winters, QC – Director Robert is counsel to Burchell MacDougall, Barristers & Solicitors of Truro, Nova Scotia, and Chairman of Napwick Holdings Limited, a private holding company. He is past Chairman of the Board of Regents of Mount Allison University, a member of the advisory board of the Bragg Group of Companies, and a Director of High Liner Foods Inc.

J. Robert Winters, QC Director

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23


Corporate Governance Halifax International Airport Authority (HIAA) is a dynamic and multi-faceted aviation enterprise that provides air access to the world, facilitates personal and business connections, and promotes regional economic growth.

HIAA is governed by a board consisting of a maximum of 14 directors nominated by the following entities: Federal Government Provincial Government Halifax Regional Municipality Halifax Chamber of Commerce HIAA Board of Directors

2 1 4 3 4

Generally, a director may serve no more than a total of nine years from the date of transfer, February 1, 2000. Collectively, directors are expected to possess knowledge relating to the aviation industry, air transportation, business, finance, administration, law, government, engineering, labour organizations, and the interests of consumers. The Board oversees the conduct and operation of HIAA; reviews and approves corporate strategies, plans and financial objectives; appoints the Chief Executive Officer; assesses the performance of the Board and the Chief Executive Officer; ensures effective communication with the nominators and the community; and ensures the effectiveness of HIAA’s internal controls and systems in preserving and enhancing HIAA’s assets and pursuing its mission. The Board meets as often as is required to carry out its responsibilities and maintains three standing committees that make recommendations to the Board with respect to matters within their

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I N T E R N A T I O N A L

A I R P O R T

jurisdiction: the Governance Committee, chaired by Robert Winters; the Audit Committee, chaired by Roy Rideout; and the Capital Projects Committee, chaired by Peter McDonough. HIAA has adopted conflict of interest guidelines to govern the conduct of, and the disclosure and avoidance of conflicts of interest for, all officers and directors. These disclosures are updated as required. During 2006, the Governance Committee of the Board reported that there were no breaches of the conflict of interest guidelines by any officer or director of HIAA. Compensation of the senior officers and directors of HIAA is reviewed annually. Amounts paid to HIAA’s officers and directors during 2006 follow. Board of Directors Total Compensation Chair: F. Matheson Vice Chair: F. Smithers Secretary: J. S. Cowan

$52,175 $15,775 $30,400

Directors: J. Baillie N. Comeau C. Cushing W. Fares P. Gurr P. McDonough B. Miller

$ 1,834 $15,600 $ 3,622 $ 6,800 $15,200 $20,950 $27,050

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Board of Directors Total Compensation (continued) Directors: C. Newcombe $15,200 R. Rideout $20,600 R. J. Scott $16,400 K. Streatch $14,000 S. L. Wallace $ 6,917 J. R. Winters $22,950 Executive Compensation The salary range for the President & CEO and for each of the Vice Presidents of HIAA during 2006 was $98,800 to $250,000. In addition to base salaries, annual bonus payments totalling $75,500 were paid during the year. Bonus payments are contingent on individual and corporate achievements. Contracts in excess of $94,887 HIAA, in accordance with its ground lease with Transport Canada, is required to report all contracts in excess of $94,887 ($75,000 in 1994 dollars adjusted for Consumer Price Index) that were entered into during the year and that were not awarded on the basis of a competitive tendering process. During 2006, no contracts in excess of $94,887 were awarded without a competitive tendering process.

24


Five-Year Forecast

A C T U A L

F IVE -Y E A R F OR E C A S T

YEAR

2004

2005

2006

2007

2008

2009

2010

2011

Passenger Volume

3,242,389

3,229,111

3,378,601

3,527,591

3,673,668

3,811,453

3,920,326

4,027,889

Per cent Change

9.1 %

-0.4 %

4.6 %

4.6 %

4.1 %

3.8 %

2.9 %

2.7 %

Total Aircraft Movements

89,845

86,393

86,110

90,157

94,485

98,453

100,816

103,135

Per cent Change

1.8 %

-3.8 %

-0.3 %

4.7 %

4.8 %

4.2 %

2.4 %

2.3 %

Planned Capital Expenditures ($ 000’s)

$15,268

$57,881

$58,807

$53,058

$40,052

$18,483

$19,513

$8,243

Rent Payable to Transport Canada ($ 000’s)

$4,240

$4,361

$4,271

$4,093

$3,825

$3,290

$3,454

$3,587

Scheduled and Charter Passenger Services

Scheduled and Charter Passenger Air Carriers

16 DOMESTIC

1 7 I N T E R N AT I O N A L

9 CARGO

D E S T I N AT I O N S

9 TRANSBORDER (U SA ) D E ST I N AT I O N S

1 9 PA S S E N G E R

D E S T I N AT I O N S

AIR CARRIERS

CARRIERS

Calgary, AB Charlottetown, PE Deer Lake, NL Edmonton, AB Fredericton, NB Goose Bay, NL Hamilton, ON London, ON Moncton, NB Montreal, QC Ottawa, ON Saint John, NB St. John’s, NL Stephenville, NL Sydney, NS Toronto, ON

Bermuda – Hamilton

Boston, Massachusetts Detroit, Michigan Newark, New Jersey New York (JFK), New York New York (LGA), New York Orlando, Florida St. Petersburg, Florida Sarasota, Florida Washington (IAD), DC

Air Canada Air Canada Jazz Air Georgian Air St. Pierre Air Transat American Airlines CanJet Airlines Condor Flugdienst Continental Airlines Delta Air Lines My Travel (Air Tours) Northwest Airlines Provincial Airlines SkyService Airlines Sunwing Airlines Thomas Cook (UK) United Airlines WestJet Airlines Zoom Airlines

Air Canada Airborne Express CargoJet Icelandair Kelowna Flightcraft (Purolator) Korean Air Lines Morningstar Express (FedEx) Provincial Airlines Prince Edward Air

Netherlands Antilles – St. Maarten Cuba – Camaguey, Cayo Coco, Holguin, Varadero Dominican Republic – La Romana, Puerto Plata, Punta Cana Jamaica – Montego Bay Germany – Frankfurt, Munich Mexico – Cancun St. Pierre et Miquelon United Kingdom – Glasgow, London (Gatwick), London (Heathrow)

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