new arrivals bold departures

new arrivals bold departures

Halifax International Airport Authority

2006 Annual Report

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)

O U R P E O P L E

“Newarrivalsandbolddepartures”reflectsthehistoricchangescompletedin

2006atHalifaxStanfieldInternationalAirportandtheopportunitiescreatedwith

thisnewfoundationinplace.Itcapturesoursenseofprideinallthemilestoneswe

achievedtogether:openingnewfacilities,addingnewflightsandcarriers,unveiling

state-of-the-arttechnology,andsecuringthefinancingforourmulti-yearairport

improvementprogram.

Eachofthosenewarrivalshelpedusbuildonourreputationforsuperbserviceand

safeandsecurefacilitiesfortravellers,visitorsandeverymemberoftheairport

community.Theyalsohelpedlaythegroundworkforourfutureplans.We’resetting

outonaninnovativenewcourseofaction–abolddeparturetowardnew

possibilities,newhorizons.

N EW ARR I VAL S . BOLD DEPARTURES .

MessagefromtheChair|2

C

PMessagefromthePresident&CEO|4

TakingFlight|12

T

MakingConnections|10

M

ImprovingtheBottomLine|14

I

RewardingExperiences|8

R

SettingtheStage|6

S

FinancialStatements|15

BoardofDirectors|22

CorporateGovernance|24

C

2

We’recertainthatactingboldlyinthefutureistheonlyoptionin

today’schallengingenvironment.

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

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 com-munity 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 Mathesonchair of the board of directors

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 hap-pened 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 glo-balization 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.

H A L I F A X I N T E R N A T I O N A L 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 R E P O R T 3

Message from the Chair

HalifaxInternationalAirportAuthority(HIAA)strivestoprovideasafe,

secureandefficientexperienceatHalifaxRobertL.StanfieldInternationalAirport.

4

Message from the President & CEO

In2006,HSIAservedalmost3.4millionpassengers,anewrecord.

Astudyconductedin2006concludedthattheairportcommunity

injected$1.15billionintotheprovincialeconomyin2005.

that the airport community injected $1.15 billion into the provincial economy in 2005. HIAA’s inau-gural 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 improve-ments to make life easier for travellers and help the

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

It was an energetic year: we introduced new tech-nology and services, completed a $90 million infrastructure expansion that opened new growth opportunities, and solidified our long-term financ-ing. 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


P 2006willberememberedasawatershedyearintheevolutionofHIAA.

It’sdifficulttooverstatethemilestonesweachievedduringthose12months.

S

6

Whyembarkona$90million

programtoexpandandenhance

HalifaxStanfieldInternationalAirport

(HSIA)?Becausebigideasneed

plentyofroominwhichtoflourish.

OurnewU.S.preclearancefacility–

thelatestaccomplishmentinourlong-

termairportimprovementprogram

–undeniablydemonstratesthis.

Locatedintheairportterminal’s

northend,thepreclearancefacility

hasperformedbeyondexpectations

sinceopeninginOctober.Passengers

ascendintoasky-litcheck-inarea.

There,theypresenttheirtickets,

checktheirluggage,completetheir

pre-boardsecurityscreening,and

proceedtoU.S.CustomsandBorder

Protection.Oncecleared,theymove

toadedicateddeparturesareawhere

theyboardtheirUnitedStates-bound

aircraft.Whentheirplanelandsin

theU.S.,theydisembarkasdomestic

passengers.

05.2006>HIAAteamsupwithCiscoSystemsandHewlett-Packard(Canada)Co.toannouncethecompleted

installationofanairport-wideintegratedIPvoice,videoanddatanetworkaspartoftheongoingtechnology

upgradeandairportimprovementprogram01.2006>CommonUseTerminalEquipmentisinstalledforusebyairlines

intheticketandgatecounterareas

SETT INGTHE STAGETransforming our facilities and services

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.

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


R

AirportService

Qualitysurvey

resultsfor2006 :

Firstinoverall

passengersatisfaction

forairportsworldwide

withunderfivemillion

passengers,forthe

fourthyearinarow

FirstintheAmericas

inthenewcategoryof

AirportPeopleAwards

Secondinthebest

domesticairport

worldwidecategory

SecondintheAmericas

foroverallsatisfaction

8

REWARDINGEXPERIENCESEnhancing our customer service

11 new full-time staff members. Many of them work for our newly-formed maintenance response teams – multi-disciplin-ary 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 bench-mark against ourselves, customer satisfaction is growing year after year,” says Martin. Paying attention to the details is its own reward.

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

AtHIAA,westrivetoimprovethecustomerexperience.Thatmeans

spendingmillionsofdollarsupgradinginfrastructure,providingthelatest

technologyandaddingservices.Takingtheairportinaboldnewdirection

alsomeanspayingattentiontothesmallestdetail.


AtHIAA,beingconnectedmatters.

Wemeanthatinthewidestpossible

senseoftheword:connectedtothe

world’sairports,connectedtoour

tenantsandstaff,connectedtothe

5,400peoplewhoworkinandaround

HalifaxStanfieldInternationalAirport.

Wealsomeanbeingconnectedto

thebroaderNovaScotiacommunity

–alinkwevalueonsomanylevels.

HIAAemployees,forstarters,are

activecommunityparticipantsand

fundraisers.In2006,theyraisedover

$13,000fortheUnitedWay,entered

ateamintheannualManulifeDragon

BoatFestivalraisingalmost$4,200

foramateursportinNovaScotia,and

donatedover$1,000worthofschool

suppliesandfoodtotheParkerStreet

Food&FurnitureBank.

MAK ING CONNECT IONSDoing our part in the community M

10

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 Mus-quodoboit 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.

In March we launched iWatch – our unique and award-winning program designed to increase aware-ness 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.

What’s more, HIAA supported over 200 organiza-tions 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.


06.2006>UnitedAirlineslaunchesservicetoWashingtonDulles

10.2006>IcelandairannouncesreturnofservicebeginninginMay2007

T

3,378,601 passengers through Halifax

Stanfield International in 2006

4.6 % rise in passengers from 2005

5.0 % increase in cargo traffic over 2005

12.2006>AmericanEaglebeginsservicetoNewYorkLaGuardia

TAK INGFL IGHTIncreasing our air services

09.2006>AirCanadaoffersnon-stopdailyflightstoLondonHeathrow

12

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; North-west 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, partner-ing 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

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 dedi-cated 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 transporta-tion 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 Automo-tive 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.

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 pas-senger 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.

U.S.preclearancemeansmanynewdestinations

andmarketsforallofAtlanticCanada,cementing

Halifaxastheregion’sairgateway.


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 – includ-ing 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, com-pared 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.

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.

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 manage-ment of the airport was transferred from the federal government to HIAA.

CanJet’s announcement that it was ending sched-uled 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

There’sapreciselogictothechoiceofthemeforthisannualreport:

in2006,HIAAputinplacekeybuildingblockstohelpusreachourambitiousgoals.

Considerthefinancialfront.

IMPROVINGTHEBOTTOMLINE

Reinforcing our financial stability I


Financial Statements

AUDITORS’ REPORT

To the Directors ofHalifax 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, CanadaFebruary 9, 2007 Chartered Accountants

BALANCESHEET As at December 31

2006 2005(in thousands of dollars) $ $ assetsCurrentCash 77,354 6,065Accounts receivable 3,943 5,380Inventories 380 320Prepaid expenses 695 570 82,372 12,335

Capital assets (note 3) 170,223 117,935Deferred financing costs (note 4) 3,862 –Debt service reserve fund (note 4) 4,127 –Accrued benefit asset (note 7) 426 – 261,010 130,270

liabilities and net assetsCurrentAccounts payable and accrued liabilities 20,569 24,227Deferred revenue 938 736Current portion of long-term debt (note 4) 80 26,081 21,587 51,044 Long-term debt (note 4) 150,644 724Accrued benefit liability (note 7) – 46Security deposits 1,764 1,887 173,995 53,701Net assetsEquity in capital assets (note 5) 87,015 76,569

261,010 130,270

Commitments (note 6) Contingencies (note 9)See accompanying notes

On behalf of the Board:

Director Director

15

STATEMENT OF OPERAT IONS

ANDCHANGESINNETASSETS Year ended December 31

2006 2005(in thousands of dollars) $ $ revenuesTerminal and passenger security fees 11,875 8,833Landing fees 9,148 8,703Concessions 8,301 7,789Parking 6,260 5,314Rentals 1,825 2,018Interest income 1,756 63Other (note 4) 312 1,640 39,477 34,360Airport improvement fees (note 5) 12,316 11,707 51,793 46,067

operating expensesSalaries, wages and benefits 11,655 11,042Materials, services and supplies 11,276 9,061Amortization 6,530 3,361Ground lease rent 4,271 4,361General and administrative 3,588 3,376Interest expense on long-term debt (note 4) 2,762 36Property taxes 1,265 1,187 41,347 32,424

Excess of revenues over expenses 10,446 13,643Net assets, beginning of year 76,569 62,926

Net assets, end of year (note 5) 87,015 76,569

See accompanying notes

STATEMENTOFCASHFLOWS Year ended December 31

2006 2005(in thousands of dollars) $ $ operating activitiesExcess of revenues over expenses 10,446 13,643Items not involving cash: Amortization 6,530 3,361 Net change in non-cash working capital balances related to operations (7,559) 3,949Cash provided by operating activities 9,417 20,953

investing activitiesExpenditures on capital assets (54,008) (48,581)Cash used in investing activities (54,008) (48,581)

financing activitiesProceeds of bond issue 150,000 –Proceeds of long-term debt construction loan 24,000 26,000Repayments of long-term debt (50,081) (1,086)Debt service reserve fund (4,127) –Deferred financing costs (3,912) –Cash provided by financing activities 115,880 24,914

Increase (decrease) in cash 71,289 (2,714)Cash, beginning of year 6,065 8,779

Cash, end of year 77,354 6,065

Supplementary InformationCash interest paid – long-term debt – 35

See accompanying notes


FINANCIALSTATEMENTS

NOTESTOFINANCIALSTATEMENTS December 31, 2006

1. general

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.

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.

InventoriesInventories 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 leaseThe ground lease with Transport Canada is accounted for as an operating lease.

Capital assetsCapital 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:

2. significant accounting policies (continued)

Assets RateComputer hardware and software 20% - 33%Leasehold improvements 2.5% - 10%Machinery, equipment, furniture and fixtures 5% - 20%Vehicles 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 recognitionLanding 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 plansThe 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 costsCosts 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.


3. capital assets

2006(in thousands of dollars) $ Accumulated Net Book Cost Depreciation Value $ $ $ Computer hardware and software 6,136 2,876 3,260Leasehold improvements 161,436 9,525 151,911Machinery, equipment, furniture and fixtures 6,230 2,057 4,173Vehicles 8,031 3,388 4,643Construction in progress 6,236 – 6,236

188,069 17,846 170,223

2005(in thousands of dollars) $ Accumulated Net Book Cost Depreciation Value $ $ $

Computer hardware and software 2,472 1,587 885Leasehold improvements 72,100 5,542 66,558Machinery, equipment, furniture and fixtures 4,025 1,514 2,511Vehicles 7,609 3,165 4,444Construction in progress 43,537 – 43,537

129,743 11,808 117,935

4. long-term debt

2006 2005(in thousands of dollars) $ $

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. 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. 724 805

150,724 26,805Current portion of long-term debt 80 26,081

150,644 724

Bond IssueIn 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 FundsPursuant 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.




4. long-term debt (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 2006 2005(in thousands of dollars) $ $

Deferred financing costs 3,912 – Less: Accumulated amortization (50) – 3,862 –

Capitalized InterestInterest on long-term debt of $1,966,365 (2005 - $260,596) was capitalized as part of construction in progress during the year.

Debt ForgivenessDuring 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.

A summary of the AIF collected and capital and related financing expenditures are as follows:


AIF revenue (net): AIF revenue 13,122 12,459 AIF collection costs (806) (752) 12,316 11,707Interest on surplus funds 1,756 —Net funds received 14,072 11,707

Capital expenditures funded by AIF 44,388 50,398Interest expense funded by AIF 2,762 — 47,150 50,398

Excess of expenditures over AIF revenue 33,078 38,691Excess of expenditures over AIF revenue, beginning of year 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:


Net assets provided by airport improvement fees 55,147 50,366Net assets provided by other operations 31,868 26,203 Net assets, end of year 87,015 76,569


5. airport improvement fees (continued)

6. commitments

Transfer AgreementEffective 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):

2007 $ 4,093 2008 3,825 2009 3,290 2010 3,454 2011 3,587

Long-Term Debt – Bond IssueThe $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 $ 8,255 2008 8,255 2009 8,255 2010 8,255 2011 8,255

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

7. pension

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) $ $

Plan assets 22,290 18,785Accrued benefit obligation (23,093) (20,147)

Funded status – plan (deficit) (803) (1,362)Unamortized net actuarial gain (loss) 1,229 (1,316)

Accrued benefit asset (liability) 426 (46)

The significant actuarial assumptions adopted in measuring the Authority’s accrued pension benefits are as follows: 2006 2005 % %

Discount rate 5.25 5.25Expected long-term rate of return on plan assets 6.75 6.75Rate of compensation increase 4.00 4.00



7. pension (continued)

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

Employer contribution 1,032 573Employees’ contribution 203 205Benefits paid 138 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 60 57Fixed income securities 32 32Real estate securities 8 8Other – 3 100 100

8. financial instruments

Fair valueThe 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.

8. financial instruments (continued)

Credit riskThe 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.



FrankMathesonChair

FredSmithersViceChair

JamieBaillieDirector

NorbertComeauDirector

JamesS.Cowan,QCSecretarytotheBoard

WadihM.FaresDirector

PaulGurrDirector

Frank Matheson – ChairFrank 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 ChairFred 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 – DirectorJamie is President & CEO of Credit Union Atlantic. Prior to joining the Credit Union, he held various leadership roles in Nova Scotia business and gov-ernment, 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 Foun-dation and Dalhousie University.

Norbert Comeau – DirectorNorbert had a lengthy career as a school adminis-trator with the Provincial Acadian School Board. He has served as a member of the Nova Scotia Human Rights Commission and chaired the orga-nizing 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 BoardJim 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 manage-ment 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 Profes-sional 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 Halifax- based management consulting firm specializing in strategic development and core process redesign across a broad range of functions including commer-cial, 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 Cana-dian Centre for Ethics in Public Affairs and the Trade Centre Limited.

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PeterMcDonough,QCDirector

BernardF.MillerDirector

CherylNewcombeDirector

RoyRideoutDirector

RobertJ.ScottDirector

KenStreatchDirector

J.RobertWinters,QCDirector

Peter McDonough, QC – DirectorPeter 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 – DirectorBernie 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 – DirectorCheryl 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 – DirectorRoy 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 – DirectorRobert 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.

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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 disclo-sures 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 CompensationChair: F. Matheson $52,175

Vice Chair: F. Smithers $15,775

Secretary: J. S. Cowan $30,400

Directors:J. Baillie $ 1,834

N. Comeau $15,600

C. Cushing $ 3,622

W. Fares $ 6,800

P. Gurr $15,200

P. McDonough $20,950

B. Miller $27,050

HIAA is governed by a board consisting of a maximum of 14 directors nominated by the following entities:

Federal Government 2

Provincial Government 1

Halifax Regional Municipality 4

Halifax Chamber of Commerce 3

HIAA Board of Directors 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 preserv-ing 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

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 CompensationThe 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 $94,887HIAA, 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.


Corporate GovernanceHalifaxInternationalAirportAuthority(HIAA)isadynamicandmulti-faceted

aviationenterprisethatprovidesairaccesstotheworld,facilitatespersonal

andbusinessconnections,andpromotesregionaleconomicgrowth.

Five-Year Forecast

Scheduled and Charter Passenger Services

16 DOMEST IC

DEST INAT IONS

Calgary, AB Charlottetown, PEDeer Lake, NLEdmonton, ABFredericton, NB Goose Bay, NL Hamilton, ON London, ON Moncton, NB Montreal, QCOttawa, ON Saint John, NBSt. John’s, NLStephenville, NLSydney, NS

Toronto, ON

17 INTERNATIONAL

DEST INAT IONS

Bermuda – Hamilton

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)

9 TRANSBORDER

(USA) DESTINATIONS

Boston, Massachusetts Detroit, Michigan Newark, New Jersey New York (JFK), New YorkNew York (LGA), New York Orlando, FloridaSt. Petersburg, FloridaSarasota, Florida

Washington (IAD), DC

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

Prince Edward Air

9 C A R G O

C A R R I E R S

Air Canada Air Canada Jazz Air GeorgianAir St. Pierre Air TransatAmerican Airlines CanJet AirlinesCondor Flugdienst Continental Airlines Delta Air Lines My Travel (Air Tours)Northwest Airlines Provincial Airlines SkyService Airlines Sunwing AirlinesThomas Cook (UK)United AirlinesWestJet Airlines

Zoom Airlines

1 9 P A S S E N G E R

A I R C A R R I E R S

Scheduled and Charter Passenger Air Carriers

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A C T U A L F I V E - Y E A R F O R 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

1 Bell Boulevard

Enfield, Nova Scotia

B2T 1K2

Tel : 902.873.4422

Fax: 902.873.4750

www.halifaxairport.com

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