July 12, 2015: Your meeting tomorrow is in Hong Kong. Thankfully, Cathay Pacific goes the fast transpolar route, which knocks a few hours off the flying time. You walk from your office over to Union Station and take the express rail link-uicker, simpler, more relaxing than a limo. At Pearson, you hop on the airport's Automated People Mover, a monorail-style train that drops you a few minutes later at the International Departures Gate at Pier G in the new Main Terminal.
The terminal is airy and spacious, with glass walls and tall windows which flood it with natural light; the high, vaulted roof is a soaring, wing-shaped arc. You proceed briskly through the central banks of automated check-in desks, and then pass along a glassed-in terrace with a nice view of the airfield, through security and then down onto a moving walkway to your departure gate.
Grab a latte, check e-mail on the wireless and wait for your boarding call. You won't pause to consider the airport's former incarnations: the dreaded Terminal 1 or the airless, windowless Terminal 2. You won't care how Lester B. Pearson International came to be one of the best-run airports, a model of management and corporate structure copied around the world. And as your plane begins to taxi down the new South Runway, the one thing that won't cross your mind is that it was all an incredible accident of partisan wrangling, political expediency and lucky timing. You're just happy to come and go with a minimum of delay and hassle. And Lou Turpen, the president and CEO of the Greater Toronto Airports Authority, wouldn't want it any other way.
For all its evident flaws today, Pearson International Airport is the jewel of Canada's aviation system. It is the country's busiest airport; on average, an aircraft lands or takes off there every 56 seconds. It accounts for 30% of Canada's passenger travel and 40% of air-cargo movement annually. That's 29 million people, and 360,000 metric tonnes of cargo worth about $15 billion every year. It is a "terminus destination," which means that most of the people are coming to or leaving from the Greater Toronto Area. It is also a domestic hub for Air Canada, and a prime entry point into the U.S.: 60% of the population of North America is within a 90-minute flight of Toronto. By passenger volume, Pearson is the 27th-largest airport in the world (Atlanta's Hartsfield is No. 1), and the fourth largest in North America.
Yet in spite of all this, Pearson, formerly Toronto International, and before that Malton Airport, has had a remarkable history of bungled development. The Terminal 1 "Aeroquay" became an instant local landmark when it opened in 1964, but it was designed to handle only 3.5 million passengers per year and proved too small to accommodate larger jets like the 747s, which became common in the late '60s. By 1966, increases in passenger traffic were already straining its capacity. A master plan for Toronto International Airport was released in 1967, which included a second terminal and a new, fourth runway. But the federal government shelved the plan because of local noise concerns. Instead, there was talk of a second international airport for Toronto to alleviate the mounting pressure.
In 1972, the Department of Transport expropriated 18,600 acres of farmland in Pickering, east of Toronto, for a vast, new airport. Meanwhile, it built Terminal 2 at Toronto International as a temporary passenger facility which would convert back to its intended purpose as a cargo terminal once the Pickering Airport was completed. But the Pickering project faced enormous opposition, and was killed when the Conservative Ontario government in 1975 refused to build the necessary roads and sewer infrastructure.
The Transport Ministry's 1975 Malton Contingency Plan then looked for ways to squeeze more capacity out of the two-terminal configuration of Toronto International. The disaster of Mirabel-ontreal's version of Pickering-ad killed off any remaining political will for Pickering, and forced subsequent airport master plans to focus on the Pearson site. New runways and a third terminal were the obvious route. A 1986 plan recommended that the third terminal be built by the private sector.
By this time, Pearson was an overcrowded, delay-plagued traveller's nightmare and, in 1987, the federal government tendered bids to build a third terminal to address the crisis. Toronto developers Huang & Danczkay in partnership with Charles Bronfman's Claridge Group won the contract, and the thoroughly modern Terminal 3 opened in 1991 to a combination of fanfare and relief.
From 1987, the Transport Ministry maintained a policy of devolving its control of major airports to the private sector, while retaining ownership and regulatory control. The privately built terminal at Pearson was a logical extension of the policy, and by 1992, Calgary, Edmonton, Vancouver and both Montreal airports had been spun off to local, non-profit airport authorities. But the big prize was the two highly profitable main terminals at Pearson.
In December, 1992, in the dying days of the Mulroney government, the Transport Ministry handed that prize- 57-year lease-to Paxport Inc. Paxport was a development consortium controlled by Don Matthews, a former president of the Conservative Party and one of Brian Mulroney's top fundraisers. Critics quickly denounced what looked like a nakedly partisan payoff. Jean Chrétien's promise to challenge the deal became a crucial plank in his 1993 election platform.
The Paxport consortium had a number of high-level Tories connected to it besides Matthews. An existing non-profit local airports authority (the Toronto Regional Airports Authority) was not allowed to be part of the bid process. Senior Transport officials were pressured to complete the deal before the election, and their concerns about Paxport's finances were ignored. Indeed, three weeks after winning the bid, financial pressure forced Paxport to enter a partnership with its only rival, Bronfman's Terminal 3 group, forming the Pearson Development Corporation.
Immediately after the '93 federal election, the new government killed the deal. The Liberals also introduced legislation limiting the developers' right to sue for compensation. The Tory-controlled Senate refused to pass it, claiming the bill violated the Charter of Rights. In 1996 the Pearson Development Corporation (PDC) sued the federal government for damages amounting to more than $600 million in lost profits; on the eve of the 1997 federal election, PDC and the government settled out of court for $60 million. Then, PDC sold Terminal 3 to the newly minted Greater Toronto Airports Authority (GTAA) for $719 million.
Improvements at Pearson were on hold throughout. But the entire mess had one positive outcome: the 1994 National Airports Policy, which spawned the GTAA, a private, not-for-profit capital corporation which would run Pearson with board representation from all three levels of government, local business, the airline industry and labour.
All of which brings us to Lou Turpen.
With more than 20 years in the business, Lou Turpen is probably the most senior airport executive in North America today. Before he took the CEO's job at the GTAA in 1995, he had served for 14 years as director of the San Francisco International Airport. "I'm coming from the outside-I don't have any political affiliation, but the Paxport concept would have been a disaster for Toronto," he says. "We would have been out of gas today." The numbers back him up: Paxport's plan would have created a 52-gate facility with the capacity for 26 million passengers a year, and nowhere else to go. By 1998, Pearson was already handling more than that, with projections pointing to 35 million passengers by 2005, and 40 million by 2010. "As bad as the delay was," says Turpen, "it actually was good. The airport has not been taken down the wrong road."
Anyone who has been through Pearson in the last six months can see the beginnings of what Turpen believes is the right road. The steel of the new terminal is rising up around Terminal 1, and the outline of a dramatic, curved roof is clearly visible. This is the first step in a 20-year, $4.4-billion master plan that will see Terminal 1, and then Terminal 2, demolished as the new building gradually opens out like a fan. Ultimately, even Terminal 3 will be torn down and replaced with a single structure uniting the entire terminal complex in a semicircular form with six piers radiating out from it. With 135 gates and six runways, the completed facility will be capable of handling 55 million passengers on 665,000 arrivals and departures every year. "It's not 'If you build it, they will come,'" Turpen says. "They're coming. So you better build it."
Turpen is a trim, dapper 56-year-old from Hammond, Ind., with a neat, wing-shaped moustache, and a crisp bearing that betrays his military background. He began his career in the U.S. Air Force as an engineer, where he spent six years running airfield operations, maintenance and construction. In 1979, the chief engineer for Strategic Air Command recommended him for the job of deputy for operations, maintenance and engineering at San Francisco International. Two years later, at the age of 37, he took the top job of director, which he held until 1995.
His record as an airport redeveloper made him a logical candidate for the GTAA post. He led two major works projects at San Francisco International: a $700-million (U.S.) program in the early 1980s (which came in on time and under budget) and a $2.5-billion program begun in 1992, which includes the recently completed international terminal.
"Lou has vision," says John Martin, the current director of the San Francisco airport. "Some people would call him a maverick, but that's what kept the airport successful. He has always been willing to go against the conventional industry thinking to lead it to new and higher standards."
For Turpen, Toronto presented an irresistible challenge. In his opinion, the GTAA's non-profit corporate structure was "the best form of airport governance in the world"-one that gives it freedom from short-term political pressures, but with a strong element of public accountability and no shareholder pressure to maximize profits (its charter requires that all surpluses be plowed back into airport development). Airport developments go wrong, he explains, because they can take 10 years or more. In that time, you can have two or three governments, and a number of different ministers, all with different ideas of how to make things happen. One bad decision and you're stuck with a terminal in the wrong place for 30 years.
"People blame government for things, but government is going to respond to the pressures it has," says Turpin. As a result, Pearson was a "parochial, tactically responding organization where, frankly, we just kept things going." But Turpen saw huge potential in Toronto as a great terminus airport. It was not a single-airline hub, as Denver is for United, or Atlanta for Delta, where most people are just switching planes. Because of Toronto's strong "destination magnetics," 75% of Pearson's passengers arrive at, or depart from, the Greater Toronto Area. But at the same time, it is ideally located to be a collection and redistribution point for North America, especially as it allows overseas travellers to clear American customs before connecting. It has enough land. And though the terminal program was suspect, he felt that the government had built an excellent airfield operation.
It fell to Turpen to give Pearson a long-term strategic plan that anticipated demand. He moved quickly. In the 15 months between October of 1995 and January of 1997, he and his staff "stress-tested" a variety of development scenarios, before settling on the current one; made six land acquisitions required by the plan; purchased Terminal 3; and floated a highly successful revenue bond worth $950 million. After that it became a matter of execution, which would flow from the strategic plan.
"We've spent 20% of the money, we've committed 40% of the money, and we're 3% under budget, so I'm happy. If we get to 60% and I'm 3% under, I'll be high-fiving in the parking lot."
It hasn't all been smooth sailing though. At San Francisco International, Turpen wasn't afraid to throw his weight around politically to protect the airport's interests-and he generally got what he wanted. Toronto has not changed his style. "With the new form of governance, the airport is establishing new boundaries," he says.
This led to early scuffles with Air Canada, Pearson's largest carrier, over the airline's lease arrangements (since resolved), and clashes with leaders of local municipalities-in particular, Mississauga's steely-eyed mayor-for-life, Hazel McCallion. (She's held the job since 1978.) The GTAA went to the Ontario Municipal Board to overturn a Mississauga plan that would have put a residential development in the path of one of its runways. Mississauga in turn took the GTAA to court to collect permit and development fees worth about $55 million, which the Ontario Supreme Court rejected. Turpen has also challenged the provincial government to explain the increase in payments in lieu of taxes paid to Mississauga, which went from $6 million in 1995 to $28 million in 1999, for which he claims the airport gets very little in services. This is in addition to the $120 million the airport pays the federal government annually.
If Turpen is not interested in making friends in local political circles, it's because he sees the airport as serving not only the Greater Toronto Area, but the country and the international aviation infrastructure as well. His mission may not be simple, but it is straightforward: "If I leave here and people say 'Lou who?' that's okay, so long as they go 'Wow!' when they walk into the terminal building, or 'I can't believe how fast I got my bag,' or 'I can't believe how easy it was to park.' That's what motivates us."
Evolution of an Airport
First arrival, an American Airlines DC-3, touches down at Toronto's Malton Airport
New terminal building completed, with a capacity of 400,000 passengers per year
First of the long (1,800 metres), jet-capable runways is built
Malton renamed Toronto International Airport
Another new runway (north) completed
Air traffic control tower constructed
Terminal 1 opens; originally intended as the first of four "aeroquays"
Terminal 2 opens as a "temporary" passenger facility. North runway extended to 3,200 metres to accommodate larger jets
Toronto International renamed Lester B. Pearson International Airport
Terminal 3 opens, the world's first privately built and operated terminal
GTAA, incorporated three years earlier, acquires Pearson under a 60-year ground lease with the federal government
GTAA purchases Terminal 3 for $719 million; fourth runway (west) opens
Nav Canada opens its new $17.2-million air-traffic control tower. In December, groundbreaking begins for "Terminal New"
Central de-icing facility, south firehall and infield tunnel under the east and west runways completed
Terminal 1 demolished. Phase 1 of Terminal New program complete
Phase 2 of Terminal New and parking garage complete
Terminal 3 demolished; completion of the last phase of Terminal New Pearson's Master Plan
How the GTAA is building a new airport rght on top of the old one -- while maintaining full service
2000 to 2005
Terminal 1 is demolished. The New Terminal's Piers D, E and F are complete. Parking garage Phase 1 (8,500 spaces) complete. Automated People Mover shuttle train complete. Domestic pier of Terminal 2 demolished. Airport capacity: 36 to 39 million passengers
2005 to 2015
Rest of Terminal 2 demolished. Pier G of Terminal New and parking garage (12,600 spaces) complete. New north runway complete. Capacity: 39 to 45 million passengers
New Pier H and parking-garage expansion complete. Capacity: 47 to 50 million passengers
Terminal 3 replaced by an extension of the new terminal to create a single, unified terminal complex; with six runways and 135 gates, Pearson reaches maximum capacity: 55 million passengers Top Airports
Ranked by total passengers
Airport Passengers 1 Atlanta 80,171,036 2 Chicago, O'Hare 72,135,887 3 Los Angeles 68,477,689 4 London, Heathrow 64,607,185 5 Dallas/Fort Worth 60,687,122 27 Toronto 28,820,326
Wonder how an airport makes money? In Pearson's case, approximately 30% of revenues come from food concessions, parking and ground transportation
2000 Revenues: $449,657 (in 000s) Landing fees 171,279 General terminal charges 106,837 Car parking and ground transportation 82,060 Concession 54,460 Rental 27,352 Other 7,669 2000 Expenses: $378,198 (in 000s) Ground rent 122,332 Goods and services 114,339 Salaries, wages and benefits 64,023
Real property taxes and payments in
lieu of real property taxes 25,536 Interest and financing costs 67,873 Amortization 35,076
Pearson International's Financing
1997 $950 millon (5- and 10-year revenue bonds) 1999 $500 millon (30-year revenue bonds) 2000 $300 million (30-year medium-term notes) 2001 $275 million (10-year medium-term notes)