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### Viewing cable 03MONTREAL1076, Phased Expansion Plans for Montreal's Dorval Airport

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
03MONTREAL1076 | 2003-08-11 21:28 | 2011-04-28 00:00 | UNCLASSIFIED | Consulate Montreal

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 03 MONTREAL 001076

    SIPDIS

    State for WHA/CAN (Wheeler) and EB/TRA

    FAA for Krista Berquist

    TSA for Susan Williams

    SIPDIS

    BCBP for Joe O'Gorman

    E.O. 12958: N/A
    TAGS: EAIR ECON EFIN PREL CA
    SUBJECT: Phased Expansion Plans for Montreal's Dorval Airport

    REF: A) MONTREAL 0412 (2002)

    ¶1. This cable contains input from Embassy Ottawa.

    ¶2. SUMMARY: Montreal's Dorval International Airport recently
    opened Phase 1 of a planned three-stage, C$700 million
    expansion that will include new and improved facilities as well
    as integration of the airport into the local and regional
    transportation network.  The renovation is part of an overall
    effort to have Dorval reestablish itself as a major
    international hub.  Plans for Phase 3, which may not begin
    until 2006 or 2007, include new pre-clearance facilities for
    Department of Homeland Security inspectors; however, it is
    unclear whether these new facilities will address long-standing
    DHS pre-clearance security concerns. END SUMMARY

    ¶3. Aeroports de Montreal(ADM), a non-profit agency, manages
    both Dorval and Mirabel Airports under a 60-year lease signed
    in 1992 with Transport Canada, the federal transportation
    agency.  Mirabel is located approximately 30 miles from
    downtown Montreal in a relatively unpopulated area; it was
    developed in the 1970s with the intention of replacing Dorval,
    which was considered to have low growth potential because it is
    surrounded by residential neighborhoods.  However, Mirabel's
    distance from the city made its viability dependent on train
    and highway connections from downtown Montreal that were never
    developed.  Consequently, Mirabel never gained sufficient
    support either from the airlines or the traveling public and
    many international carriers abandoned Montreal for Toronto.

    ¶4. In 1996, ADM determined that, with expansion, Dorval would
    be able to accommodate all passenger traffic for the
    foreseeable future.  It allowed international carriers to move
    back to Dorval in 1997.  Some charter carrers continue to
    operate at Mirabel but all will have moved to Dorval by 2004.
    In an interview with post, CEO James Cherry said ADM is
    obligated under its lease to maintain an airport at Mirabel,
    and will devote it to cargo transport for now.  Cherry said ADM
    plans this fall to issue a formal Request for Proposals to
    determine a future use for Mirabel's underused terminal
    facilities.  Mirabel has understandably been dubbed a "White
    Elephant" by many, but the 75,000 acre site will remain
    available should need for a second major passenger airport
    ultimately arise.

    ¶5. Rating agency Standard and Poor's recently downgraded ADM
    from an A plus to an A, citing difficulties in the airline
    industry, and in Dorval's case, the long wait for a new lease
    with Transport Canada.  According to Cherry, "they [S and P]
    were just looking for excuses; they are downgrading all
    Canadian airports."  Cherry says that over eighty percent of
    all travelers who fly through Dorval either start or finish
    their trip at Dorval.  This high percentage of
    origin/destination traffic insulates Dorval from the
    instability found at many hub airports; the steady passenger
    stream from area residents provides ADM with a consistent
    income flow.  "Even during slow periods, Montrealers will still
    have the need to fly," he explained.

    -------------------------
    Three Phases of Expansion
    -------------------------

    ¶6. The Dorval renovation and expansion are projected to cost
    approximately C$700 million and will occur in three phases.
    Phase I, the Trans-border Jetty, which handles flights between
    the U.S. and Canada, opened on April 1, 2003.  Although several
    gates can accommodate planes as large as a Boeing 767, the new
    jetty is designed with adjustable bridges to accommodate even
    the smallest aircraft, such as regional jets.  Cherry said that
    Dorval's expansion was designed with current airline
    restructuring trends in mind; he predicted that low-cost
    airlines may ultimately claim up to 40 percent of the Canadian
    domestic air travel market.

    ¶7. The Trans-border jetty offers some significant improvements
    over the previous 1950s era terminal: more gates, more shopping
    and eating areas as well as greatly enhanced security with the
    complete segregation of arriving and departing passengers.
    Cherry noted that while the new facility is spacious and
    modern, it is not the "architectural monument" that some recent
    airports have become.  Originally the Dorval expansion was set
    to cost C$1.3 billion, but the plans were scaled back after
    Cherry was hired in 2001.

    ¶8. Phase 2 of Dorval's expansion plan is a new International
    Jetty, scheduled to open in 2005 and currently about 25 percent
    completed.  It will include a new arrivals hall, a new Canadian
    immigration/customs inspection facility and a baggage claim
    area that will handle both international and U.S. arrivals.
    The International Jetty will have at least one gate able to
    accommodate the new super-jumbo Airbus A380 and will also
    feature several "swing" gates allowing a plane to arrive as a
    trans-border or international flight and depart either to the
    U.S. or another international destination.

    ¶9. Phase 3 will include check-in areas for US-bound flights, a
    new US Customs/Immigration pre-clearance area, an enlarged
    domestic jetty for small aircraft, and a rail station that will
    connect to VIA Rail's intercity service, as well as to the
    Central Station downtown.  Since a train station already exists
    one mile from the airport terminal, linking the airport to the
    Ottawa-downtown Montreal corridor should be relatively
    inexpensive, according to CEO Cherry.  He estimated the cost at
    approximately C$90 million.  Construction work would also
    improve highway access to Dorval.  Phase 3 is expected to begin
    in 2006 or 2007, and should take about two years to complete,
    although financing has not yet been arranged and the ADM board
    has not given its final approval.  CEO Cherry told post "we
    [ADM] are considering moving up the start date [of phase 3] by
    one year, maybe in 2005."

    ¶10. Notwithstanding the fact that the Transborder Jetty was
    built and is operational, renovations at Dorval and Mirabel are
    currently hindered by what Cherry describes as "perverse
    economic consequences" of the lease signed with the federal
    government in 1992.  Under that lease, while ADM is responsible
    for financing all improvements, the federal government receives
    up to 80 percent of any income resulting from investments in
    new facilities.  According to Cherry, ADM went ahead with the
    renovations based on personal assurances from the Federal
    Minister of Transportation that a new lease formula for most of
    Canada's major airports will remove such disincentives and make
    it possible to undertake new business partnerships.

    ---------------------------
    Increasing Passenger Levels
    ---------------------------

    ¶11. The Dorval expansion is expected to increase the airport's
    capacity from its present level of 9 million passengers each
    year to 15 million; ADM bases its expansion plans on projected
    average annual growth of 3-4 percent.  According to Christiane
    Beaulieu, ADM Vice President for Public Affairs, Dorval's
    current three runways handle 55-60 movements (takeoffs or
    landings) per hour, and could handle up to 100 per hour, so
    expansion will be limited to terminal facilities.  Beaulieu
    said ADM's marketing department is working to bring in new
    airlines and get others to expand their operations.  Lufthansa
    and Austrian Airlines recently re-established service at
    Dorval, and Canadian discount carriers Westjet and Jetsgo have
    been increasing their level of service.  Air Canada, despite
    its bankruptcy problems, is also planning to expand at Dorval,
    in part because of the airport's lower operating costs.
    Because Dorval is not a major hub, it experiences much less
    peak-period congestion than hub airports like Toronto and
    consequently, offers airlines considerable potential for fuel
    and labor savings through reduced delays.

    -----------------------
    Immigration and Customs
    -----------------------

    ¶12. According to Normand Boivin, VP of Dorval operations, ADM
    is working with US and Canadian immigration on a new clearance
    system that, once the International Jetty is completed, will
    allow passengers to disembark from an international flight and
    move directly to the U.S. inspection area.  This should
    increase Dorval's viability as a hub for international flights
    terminating in the U.S.

    ¶13. A longstanding concern of Department of Homeland Security
    personnel at Dorval has been the security of the pre-clearance
    inspection area: customs and immigration inspectors currently
    are interviewing and pre-clearing passengers who have had
    neither their persons nor their luggage screened.  After the
    9/11 attacks, the security screening stations (x-ray and metal
    detectors) were temporarily moved in front of the
    immigration/customs area, but have since been moved back.  A
    long-term solution will require more expensive renovations that
    are unlikely before the new facility is built in Phase 3.
    ADM's plans to address the security concerns are not clear,
    however.  Henri-Paul Martel, ADM's Vice President for
    Engineering and Construction, showed post preliminary designs
    for the new inspection area featuring the same configuration as
    the current facility.  However, in his interview with post,
    ADM's CEO Cherry himself raised the DHS pre-inspection security
    concerns, saying that these concerns will factor into the
    design of the new inspection facility planned for Phase 3.
    According to him, the inspection areas will be located behind,
    rather than in front of, security screening stations.  However,
    Phase 3 construction wouldn't be completed until 2007, if
    construction began in 2005.

    ¶14. COMMENT: The ill-fated effort to develop Mirabel into
    Montreal's airport of the future resulted in a serious decline
    in the city's status as an air transportation center.  The
    current effort to expand Dorval and bring it up to modern
    standards -- despite airline industry doldrums -- confirms its
    status as Montreal's principal passenger airport for at least
    the next 30 years.  However, competition might arise from an
    unexpected quarter.  Not far across the border in Plattsburgh,
    New York, a former U.S. military air base is being converted
    into a commercial airport that Plattsburgh city leaders plan to
    market as a gateway to Montreal in a few years.  END COMMENT
    ALLEN

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