US embassy cable - 03MONTREAL1076

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, Transportation 
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. 
 
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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. 
 
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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