Greater Toronto Airports Authority

2005 Annual Report

Toronto Pearson is emerging as a significant

major airport for North America with the

capacity and facilities to accommodate the

anticipated future growth of the industry.

Enhancing access to regional and global

markets, the airport supports the economic

development of the Greater Toronto Area, the

Province of Ontario and Canada.

G T A A

5runways

43taxiways

143gates

1810ha – area of

airport land

GREATER TORONTO AIRPORTS AUTHORITY

Toronto Pearson International AirportP.O. Box 6031, 3111 Convair DriveToronto AMF, Ontario, Canada L5P 1B2

www.gtaa.com

P O S I T I O N E D T O D E L I V E R

The Greater TorontoAirports Authority missionstatement is to developand operate for the publicbenefit, an airport systemwhich supports theeconomic developmentand cultural diversity ofsouth central Ontario andCanada, providingaviation facilities andservices that achieve:The highest standards ofsafety and security;Excellence in customerservice;Environmentalstewardship andsustainability; andCost effectiveness andefficiency.This mission will beachieved through:Developing a skilled anddedicated work force;Maximizing technologyinnovation; andExcellence in corporategovernance.

PASSENGERAC JazzAeroflotAeromexicoAerosvitAir CanadaAir FranceAir IndiaAir JamaicaAir New ZealandAir TransatAlaska AirlinesAlitaliaAll Nippon AirwaysAmerica WestAmerican AirlinesAmerican Eagle Atlantic SoutheastAustrianAviancaBmiBritish AirwaysBWIACanjetCathay PacificChatauqua AirlinesComairCondorContinental CubanaCzech AirlinesDeltaEL ALEtihadFinnairHarmony AirwaysIberiaJapanKelowna FlightcraftKLMKorean Air

LACSALan ChileLOT PolishLTU Int’l AirwaysLufthansaMalevMartinairMesa AirlinesMesaba AirlinesMexicanaMiami AirMidwestMyTravel AirwaysNorthwestOlympicPakistan PiedmontPinnacle AviationPSAQantasRoyal JordanianSAS ScandinavianSata InternationalSingaporeSkyserviceSN BrusselsSunwingSWISS InternationalThai AirwaysThomas CookUnited AirlinesUnited Express/AirWisconsinUS AirwaysVarig BrazilianWestJet Zoom

CARGODHL Airways Federal ExpressKorean CargoMorningstarUPS

DOMESTICCalgaryCharlottetownEdmontonFrederictonHalifaxKelownaKingstonLondonMonctonMontrealNorth BayOttawaQuebecReginaSaint JohnSarniaSaskatoonSault Ste MarieSt. JohnsSudburyThunder BayTimminsVancouverVictoriaWindsorWinnipeg

TRANSBORDERAlbanyAllentownAtlantaBaltimoreBostonCharlotteChicagoClevelandColumbusCovington/CincinnatiDallas-Fort WorthDenverDetroitFt LauderdaleHoustonIndianapolisKansas CityLas VegasLos AngelesManchesterMemphisMiamiMiddletownMilwaukeeMinneapolisNashvilleNewarkNew YorkOrlandoPhiladelphiaPhoenix

PittsburghProvidenceRaleigh/DurhamRochesterSan FranciscoSeattleSt. LouisSt. PetersburgTampaWashingtonWhite PlainsWindsor Locks

INTERNATIONALAmsterdamAthensBirminghamBridgetownBudapestBuenos AiresCancunCayo CocoDelhiDublinFrankfurtGlasgowHamiltonHavanaHolguinHong KongKingstonLisbonLondonManchesterMexico CityMilanMontego BayMoscowMunichNassauParisPort Of SpainPraguePuerto PlataPuerto VallartaPunta CanaRomeSan JoseSantiagoSao PauloSeoulTel AvivTobagoTokyoVaraderoViennaWarsawZurich

76passenger

airlines

26direct Canadian

destinations

44direct international

destinations

44direct US

destinations

➤

➤

➤

➤

➤

➤

➤

AWARDSReflective of the GTAA’scommitment towardsexcellence, thecorporation receivedawards for a broadrange of endeavors in2005, including:

An achievement awardfrom the TransportationHealth & SafetyAssociation of Ontariofor operating with injuryfrequency and cost ratefactors below thecompany’s group ratefor three consecutiveyears

Two awards ofexcellence from theAmerican Council ofEngineering Companiesof New York in thecategories ofBuilding/TechnologySystems andTransportationEngineering

An Award of Excellencefrom the Association ofRegistered InteriorDesigners of Ontario forthe DistinguishedVisitors’ Lounge inTerminal 1

A Silver Screen Awardfrom the InternationalFilm and Video Festivalfor the DVD “FondMemories, NewBeginnings”.

➤

➤

➤

➤

$10,000GTAA donation

to Katrina relief

3interfaith

centres

3medical clinics

with 24 staff

$18,000landing fee waived for

tsunami relief flight

PASSENGERS BY TERMINAL

1

23

1 Terminal 1 47%

2 Terminal 2 20%

3 Terminal 3 33%

PASSENGER TRAFFIC BY SECTOR

1

23

1 Domestic 43%

2 Transborder 30%

3 International 27%

2005

2010

2015

2020

29.93

36.98

44.00

50.00

PASSENGER MOVEMENTS BY FORECASTin millions

ESTIMATED2005 ANNUAL CARGO VOLUMESFor YYZ in tonnes

1

23

1 Domestic 95,000

2 Transborder 126,000

3 International 189,000

ECONOMIC IMPACT

Total economic impact is broken into

three components: Direct, Indirect

and Induced impacts. The airport

and its associated activities were

responsible for output, jobs and

employment income as listed.

AIRCRAFT MOVEMENTS BY AIRCRAFT TYPE

1

23

1 Propeller 15%

2 Small jets 26%

3 Narrow body jets 46%

4 Wide body jets 12%

4

AIRCRAFT MOVEMENTS BY SECTOR

12

3

1 Domestic 42%

2 Transborder 45%

3 International 13%

2005

2010

2015

2020

410.0

477.6

556.4

645.6

AIRCRAFT MOVEMENTS BY FORECAST*in thousands *excluding general aviation

GROUNDSIDE ORIGINS/DESTINATIONSToronto 56.0%

Mississauga 15.0%

Brampton 4.3%

Markham 3.8%

Oakville 3.3%

Other 17.6%

Source 2005 survey

EmploymentOutput IncomeM, $ 2004 Jobs M, $ 2004

Direct $ 9,094.7 69,253 $ 1,684.7

Indirect $ 4,796.2 26,459 $ 978.1

Induced $ 3,056.0 28,714 $ 932.0

Total $ 16,947.0 124,426 $ 3,594.7

50ha dedicated to cargo

154,000sq. m. new apron

71roadway bridges

2005 HIGHLIGHTS

PASSENGERS % Change

2003

(in millions) 2000 2001 2002 2003 2004 2005 to 2005

Sector

Domestic 12.32 12.30 11.27 11.02 12.64 12.91 17%

Transborder 9.81 8.99 8.15 7.32 8.42 8.80 20%

International 6.80 6.75 6.50 6.40 7.56 8.20 28%

Total Passengers 28.93 28.04 25.93 24.74 28.62 29.91 21%

AIRCRAFT MOVEMENTS % Change

2003

(in thousands) 2000 2001 2002 2003 2004 2005 to 2005

Type

Air Carrier 386.4 363.7 336.8 330.9 354.8 356.0 8%

General Aviation 40.1 42.7 46.4 43.3 49.0 53.4 23%

Total

Aircraft Movements 426.5 406.4 383.2 374.2 403.8 409.4 9%

PASSENGERS PER AIR CARRIER MOVEMENT % Change

2003

2000 2001 2002 2003 2004 2005 to 2005

75 77 77 75 81 84 12%

14,748public parking spaces in

three garages and

outdoor lots

85%in GTAA firefighting and

fire prevention staff

100%concrete and steel

recycled from old

Terminal 1

2

YYZLongitude: 79 degrees, 38 minutes west Latitude: 43 degrees, 41 minutes north26 km from Toronto City Centre15 km from Mississauga City Centre19 km from Brampton City Centre

Toronto Pearson International Airport continues to lead the Canadian aviation

industry as the country’s largest and busiest airport, welcoming close to 30 million

passengers in 2005. It was a seminal year, where challenges were met and

expectations were exceeded. Noteworthy highlights include:

DEVELOPMENTIn 2005, ten new gates opened inTerminal 1. This increase ofmodern, efficient facilities forpassengers meant a reductionin the need for busing. Theaggressive Airport DevelopmentProgram, now in its 8th year,continued. Work on Pier F, theinternational pier in Terminal 1,moved ahead with no disruptionsto service excellence. Theguideways for the Airport PeopleMover were completed. The trainswere installed and testing of thesystems and operationalprocedures began.

International Civil AviationOrganization. Both acknowledgedthe excellent security programs atToronto Pearson. The GTAA alsosuccessfully passed an auditof facilities and services fortravellers with disabilities by theCanadian Transportation Agency.

The GTAA launched TorontoPearson Today – a publicationthat enhances communicationswith and about airportstakeholders.

In 2005, the GTAA commencedconstruction of a new fire trainingfacility designed to the Leadershipin Engineering and EnvironmentalDesign (“LEED”) silver standard.This facility should offer a 50%energy reduction. We received anincentive award under the federalgovernment’s Canadian BuildingIncentive Program for this facility.

FINANCE AND ETHICSIn 2005, the GTAA filed a newShelf Prospectus qualifying up to$2.5 billion of debt issuance forcapital expenditures, reservefunds, debt refinancing and otherapproved uses through the25-month period covered bythe Shelf Prospectus.

The Confidential AnonymousReporting for Employees Programwas implemented in the spring of2005 to provide employees withan anonymous mechanism tovoice comments and concernsregarding potential unethicalpractices in the workplace.

2 0 0 5 A C C O M P L I S H M E N T S

OPERATIONSThe response by the airport’sEmergency Services to the AirFrance on-site crash wasexemplary from manyperspectives. The GTAA hasdeveloped comprehensiveemergency plans and proceduresand our established protocolscontributed to a speedy andeffective response, diverting whatmight have been a more tragicincident. To further attest to ourcommendable operations, theGTAA passed security audits byTransport Canada and the

Four new airlines were welcomed:Etihad Airways (the nationalairline of the United ArabEmirates), SN Brussels, Air Indiaand Sunwing Vacations. Fortynew limousine licences wereissued, improving groundsideoperations.

Terminal 1 Terminal

2

Terminal 3

Derry

Roa

d

06L /

24R

05 / 2

3

15R / 33L

Dixie Road

15L / 33R

Hwy 427Hw

y 40

9

06R /

24L

Hwy 401

T2 Satellite

T3 Satellite

APMStation

Vista Cargo

Infield

Terminal

CargoWest

Skyservice/

Esso Avitat

Fedex

Facilities

WestJet Airlines relocated fromTerminal 2 to Terminal 3 and

expanded their operations

Began demolition of Terminal 2 enabling continued constructionof Terminal 1’s Phase 2 –Hammerhead and Pier F

18new bridged gates

in 2004/05

12million litres storage

capacity for spent glycol

450,000tonnes of concrete crushed

and recycled through

Terminal Development project

Opened ten new gates on the eastside of Pier E to accommodateinternational passengers inTerminal 1

Opened eight new gateson Terminal 3’s Pier C in 2004/05

Commissioned “Hold BaggageScreening”, a CATSA initiativewhich ensures 100% screeningof baggage entering the aircraftbaggage hold section

➤

N

Airport propertyCargoPassenger terminals

Opened Cogeneration Planteffectively rendering the airportself-sufficient on power. We canalso generate revenue bycontributing to the Ontario grid

4

O U R S T R A T E G Y :

By 2031, the Greater Toronto Area’s population is expected to increaseto eight million. To support this growth, the GTAA is committed todelivering a premier aviation system for the region.

GTAAMessage from the Chairman

2005 has proven to be another extremely active year for the GTAA with some

noteworthy milestones. It saw the continuation of the long term strategy

implemented in 1996 that called for the rebuilding of Pearson Airport. With the

completion of the second phase of Terminal 1 this past year and the anticipated

opening of Pier F in early 2007, the Airport Development Program will be essentially

completed. While there will always be continuing capital investment in an airport as

large as Toronto Pearson, it is now time to set in place the appropriate strategy to

focus on the management and operation of the new Toronto Pearson.

Recognizing this, the Board of Directors has implemented an expanded strategic

planning process designed to identify risks and opportunities and chart the course

for the Corporation going forward. The corporate strategy will be updated annually

by Management for review and approval by the Board of Directors. The focus will be

to capitalize on the new infrastructure to deliver value to our customers, in ways that

balance a concern for cost control with a desire for maximum service delivery.

Corporate Governance is a matter of increasing interest to all of our stakeholders.

In 2004, the Board adopted a Board Self Assessment process which it expanded in

2005 to include an assessment of the effectiveness of its committees, an

assessment of the Chair of the Board, and the Chairs of each of the committees.

Also in 2005, the Board reviewed and revised the Charters of each of its four

committees to align the responsibilities of those committees with suggested best

governance practices.

The success of any organization is ultimately dependent on the quality of its

people. It is important that the Corporation attract and retain the talented people it

needs to succeed. In 2005, the Board commissioned a review of the Compensation

and Benefit Program in place for its senior management and reviewed the

Today

29.9million passengers

409,401%aircraft movements

5.7%million people

in GTA

5

compensation philosophy generally for the organization as a whole. It will continue

to monitor such arrangements. The Board also continues to monitor the professional

development of the Corporation’s employees and oversee succession planning

activities.

The role and structure of the GTAA as a non share corporation operating as a

commercial entity is sometimes not fully understood by our various stakeholders. It

is important that the GTAA effectively communicate with stakeholders so that they

better understand the organization, its role and the impact of various issues on the

success of the Corporation. With the importance of communication clearly in mind,

the Board has in the past year approved a new communication strategy and will

ensure an appropriate communication policy is in place to govern the Corporation.

The GTAA continues to be involved with the planning for a potential airport on

the Pickering lands. The Board considers it important that this property be

protected for that purpose and that planning be brought to a conclusion as

expeditiously as possible.

It was another successful year for the GTAA for which we can thank the

collective team of management and employees under the leadership of President

and CEO John Kaldeway. As the Corporation moves forward to meet new

challenges, the Board has every confidence this team will deliver the value our

customers and stakeholders deserve and expect.

Warren C. Hurren, Chairman

Future Forecasts

50million passengers

600,000%aircraft movements

8%million people

in GTA

6

O U R M A N D A T E :

The GTAA is dedicated to supporting the economic growth anddevelopment of the region, remaining a good neighbour to surroundingcommunities and being a responsible steward of the environment.

2005Corporate Governance

The GTAA was incorporated in 1993 as a non-share capital corporation pursuant to

Part II of the Canada Corporations Act.

The GTAA is governed by a 15-member Board. Five Directors are appointed

from municipal candidates. Each of the Regional Municipalities of York, Halton, Peel

and Durham and the City of Toronto are entitled to provide, on a rotating basis, the

names of three candidates, and the Board will appoint the most suitable and

qualified candidate for each available position as a Director. In addition, four

Directors are appointed by the Board on a cyclical basis from candidates nominated

by a pool of nominators comprised of the Law Society of Upper Canada, the

Association of Professional Engineers of Ontario, the Institute of Chartered

Accountants of Ontario, the Toronto Board of Trade and the Boards of Trade and

Chambers of Commerce in the Regional Municipality of York, the Regional

Municipality of Halton, the Regional Municipality of Durham and the Regional

Municipality of Peel. Three Directors are appointed by the Board on a cyclical basis

from candidates solicited by the Board itself. Finally, the Government of Canada and

the Province of Ontario are entitled to appoint two Directors and one Director,

respectively. Each Director is an independent Director within the meaning of Multi-

lateral Instrument 52-110.

The GTAA’s By-laws provide that nominees are to be appointed by the Board for

a three-year term. No Director may serve in such a capacity for more than

nine years.

The GTAA’s Board meets on a monthly basis and views its principal responsibility

as overseeing the conduct of the business of the GTAA and supervising

management. The Board ensures that long-term goals and the strategies necessary

to achieve them are established and are consistent with the GTAA’s vision and

The Audit Committee’s mandate is to

fulfill the legal obligations that apply

to audit committees and to assist the

Board in fulfilling its oversight

responsibilities with respect to

financial reporting, accounting,

auditing and internal controls. In so

doing, the Committee reviews all

aspects of the GTAA’s financial and

accounting management procedures,

oversees the integrity of the

Corporation’s financial statements

and financial reporting process, the

work of the Corporation’s external

auditors engaged for the purpose of

preparing or issuing an auditor’s

report, overseeing the qualifications

and independence of the external

auditors and providing an open

avenue of communication between

the Senior Management of the

Corporation, the external auditors, the

internal auditors, and the members of

the Board and committees of the

Board. In addition, the Committee

reviews the risk management and

insurance programs to minimize risk

and exposure and ensure compliance

with the insurance requirements

under the Ground Lease and the

Trust Indenture. Finally, the

Committee monitors and assesses the

performance of pension fund asset

managers.

AUDIT COMMITTEE

7

mission statement. In 2005, the Board and Management revisited the original

strategic vision, first published in May 1996. The revised vision now reflects the nearly

completed development program and the GTAA’s longer term strategic objectives:

“TO BE THE NORTH AMERICAN AIRPORT OF CHOICE.”

To fulfill this mission the GTAA will develop and operate for the public benefit, an

airport system which supports the economic development and cultural diversity of

south central Ontario and Canada, providing aviation facilities and services that

achieve:

➤ the highest standards of safety and security

➤ excellence in customer service

➤ environmental stewardship and sustainability and

➤ cost effectiveness and efficiency.

This mission will be achieved through:

➤ developing a skilled and dedicated work force

➤ maximizing technology innovation and

➤ excellence in corporate governance.

The Board also ensures that the necessary systems are in place to manage the

risks associated with the GTAA’s business and to monitor and measure

management’s performance in carrying out the Corporation’s objectives.

There are four committees of the Board: the Audit Committee, the Corporate

Governance and Compensation Committee, the Environment, Health and Safety

Committee and, the Planning and Development Committee. The mandates of each

committee of the Board are listed below.

The Corporate Governance and

Compensation Committee is charged

with monitoring the relationship

between management and the Board

and defining management’s

responsibilities. The Committee is also

responsible for developing and

reviewing the roles and responsibilities

of the Board, the Chair of the Board

and the President and Chief Executive

Officer, overseeing the nomination

process, recommending candidates for

appointment as Directors, establishing

an orientation program for new

Directors, reviewing the terms of

reference of Board committees,

reviewing management succession

policies, assessing the effectiveness of

the Board and the Committees of the

Board and ensuring compliance with

corporate governance requirements.

In addition, the Committee is

responsible for reviewing executive

compensation arrangements.

Environment, Health and Safety

Committee oversees the GTAA’s

environment, health and safety,

employee occupational health and

safety, public safety, emergency

preparedness and security to ensure

compliance with legislative and

regulatory requirements and industry

standards. The Committee also

ensures that the GTAA maintains

management systems to implement

such policies.

The Planning and Development

Committee generally oversees that

the GTAA has appropriate facility

development plans, including an

accurate, up-to-date and approved

master plan, and that the GTAA has

in place the management systems

necessary to deliver needed facilities

efficiently and economically.

CORPORATE GOVERNANCE ANDCOMPENSATION COMMITTEE

ENVIRONMENT, HEALTH ANDSAFETY COMMITTEE

PLANNING AND DEVELOPMENT COMMITTEE

8

O U R A C T I V I T I E S :

The GTAA is proud of the progress made since 1996 in developing improved facilities and services to our stakeholders, all the while maintaining an efficient ongoing operation.

GTAAMessage from the President

The Greater Toronto Airports Authority is now in its 10th year of operating and

managing Toronto Pearson International Airport, and I am very pleased and

privileged to lead the organization as President and CEO.

In 1996, the GTAA embarked on a 30-year vision for Toronto Pearson. Since that

time, the GTAA’s primary focus has been to replace an aging and obsolete airport

infrastructure to improve facilities and services for our customers. We reached a

major milestone in April 2004 with the opening of the new Terminal 1.

In 2005, ten more gates became operational in Terminal 1, reducing the need to

bus some international passengers to the Infield Terminal. And eight more gates

were commissioned in Terminal 3 in the 2004/05 period. Construction of the Airport

People Mover was largely completed, and is scheduled to begin operations in 2006.

The GTAA continued work to expand Terminal 3, providing more capacity and

enhancing services to our passengers and air carriers. Pier F, Terminal 1’s new

international pier, will open in early 2007, enabling Toronto Pearson to keep pace

with the air travel needs of the Greater Toronto Area and south central Ontario.

The Airport Customer Assistance Program, an initiative introduced in Terminals 1

and 2 in 2004, was expanded in 2005 to include Terminal 3. Now all passengers

with disabilities or special needs can benefit from a seamless program offering

assistance from curb to aircraft seat. Also in Terminal 1, we introduced a Valet

Program for travellers wanting a premier parking service.

In December, we opened the new Cogeneration Plant that will minimize the need

for the GTAA to purchase outside electricity, and will provide the airport with a

clean, efficient and dependable source of power, heating and cooling. This facility

assures self sufficiency and, as an added benefit, can potentially provide another

source of revenue to the Authority, as surplus electricity can be sold by the GTAA.

2,946metres of APM

guideway constructed

200,000litres of used glycol

recycled in

December 2005

652,000requests for ACAP

services

9

All these accomplishments combined provide an improved platform to go out to

the international aviation community and develop new routes and more choices for

travellers. To that end, it is critical that Toronto Pearson is able to effectively

compete in the global market. We therefore continue to encourage the federal

government to liberalize air service agreements and continue to reduce airport

ground rent.

Not only will we make every effort to generate new routes and traffic, we will also

carry on with our work to control fees and charges to the air carrier community.

To this end, the GTAA will maintain the pursuit of new non-aeronautical sources

of revenue, which, in fact, on a per passenger basis, are already better or on par

with other large Canadian airports.

Safety and security remain our highest priority. World events over the last six

years have shown that safety remains uppermost in many travellers’ minds. In

response, the GTAA continues to place significant emphasis in these areas. In fact,

Pearson received recognition from both the International Civil Aviation Organization

and Transport Canada in security audits undertaken last year.

The GTAA’s emergency preparedness was put to the test in August when Air

France flight 358 crashed on airport lands. The immediate response by our

emergency department and coordination of all other responders was exemplary and

we are very proud to have been part of the team that averted a potential disaster.

We had another successful year in 2005 and for this I thank everyone – the

Board of Directors led by Warren Hurren, the senior management team, and all of

the GTAA’s employees. We have worked together consistently and positioned

Toronto Pearson to deliver to all of our stakeholders the facilities they need and

deserve, today and for the future.

John KaldewayPresident and Chief Executive Officer

11.3km of baggage conveyors

in Terminals 1 and 3

5.1%increase in non-

aeronautical revenue

over 2004

83pieces of heavy

equipment for snow

removal

GT

AA

2

00

5

10

T O B E T H E N O R T H A M E R I C A N A I R P O R T O F C H O I C E

V I S I O N

The GTAA’s vision is framed by the

development of premier airport facil-

ities and services to meet future air

travel demands; a strategic location

on the North American continent;

and a growing role in global trade,

finance and commerce. Our vision is:

“To be the North American Airport

of Choice”.

PO

SI

TI

ON

ED

T

OD

EL

IV

ER

D E L I V E R I N G V A L U E T O O U R C U S T O M E R S

11

The GTAA’s customer base can broadly

be defined as individuals or organizations

who use and depend on the airport, are

affected by the airport’s operations and

activities or who can influence the airport.

This year we are reporting on the ways

the GTAA has delivered:

1to the community

(Greater Toronto Area and

south central Ontario)

5through airport safety

and security

2to travellers

6through environmental

performance

3to airlines

7through employees

4to the general

business community

8to government

12

GT

AA

2

00

5

D E L I V E R I N G V A L U E T O T H E C O M M U N I T Y

C O M M U N I T Y

Air transportation is essential to the

well-being of a viable community.

The GTAA’s Airport Development

Program now provides the Greater

Toronto Area and other communities

in south central Ontario with much

needed facilities for business and

pleasure travel and for the shipment

of goods.

12public meetings and

workshops held in 2005

7.8 millionpopulation of south central

Ontario – 2001

276,453visits to arrival/departure

web page in Dec. 2005

10noise monitoring terminals

installed since 2001

124,400jobs attributable to the

airport in 2005

11.5 millionpopulation of south central

Ontario – forecast 2031

13

D E L I V E R I N G VA L U E T O T H E C O M M U N I T Y

THE ESSENTIAL AIRPORT SYSTEM

The GTAA must ensure that Toronto Pearson’s facilities and air services match

the needs of the growing population in the GTA and south central Ontario. In

2005, the airport system’s utility was achieved through the continuation of the

Airport Development Program, the addition of airlines and air routes and a focus

on customer service. As requested by the federal government, the GTAA is

continuing to plan for an airport on the Pickering lands to serve the growing

population in the eastern portion of the GTA.

GENERATING JOBS AND OPPORTUNITIES

In satisfying the area’s need for air transportation, thousands of jobs are gener-

ated by the airport. Employment in many sectors of the economy, including the

airline, aircraft maintenance, general aviation, hospitality and accommodation,

and ground transportation industries originate at the airport. Through all of these

the airport generated more than 124,400 jobs in 2005, contributing to a viable

and prosperous community.

OPEN COMMUNICATIONS AND CONSULTATION

The diverse airport community incorporates employees, local residents,

businesses and many others. To tell the collective stories of all the members of

this community, in November 2005, the GTAA introduced an exciting and

expanded Toronto Pearson Today newsletter.

The GTAA fosters community consultation. The Noise Management

Committee reviews matters related to noise and environment, and Workshops

and Public Forums offer an opportunity to educate and consult with local resi-

dents. Workshop topics in 2005 included, “Managing the Skies at Toronto

Pearson” and “How your Airport is Working to Protect the Environment”. At

Public Forums, local residents learn about aircraft noise issues and dialogue

with representatives of the GTAA, NAV CANADA, Transport Canada and the

airline industry.

The Consultative Committee addresses interests and initiatives where Toronto

Pearson and airport stakeholders can collaborate in support of the region’s

economic development. This committee launched an Economic Development

Study in 2005.

The GTAA also established a new Consultative Committee on Taxicabs and

Limousines. At this forum members of the taxi/limo community can share

information, discuss issues of concern and act in an advisory capacity to the GTAA.

14

D E L I V E R I N G VA L U E T O T R AV E L L E R S

AIRPORT DEVELOPMENT PROGRAM (ADP)

The redeveloped Toronto Pearson provides travellers with a modern and

efficient facility for today and for the future. On November 1, 2005, ten

gates on the east side of Pier E, and along the liner between Piers E

and F were brought into operation. This subsequently reduced the need

for busing to the Infield Terminal. The expansion of the international pier

in Terminal 3 provided eight new gates, bringing the airport total to 141

gates. Pier F remains on schedule for an operational start-up in the first

quarter of 2007.

INCREASED AIR SERVICES

To provide passengers with more choices of airlines and destinations, the

GTAA reached out to the international aviation market and successfully

attracted four new carriers. Etihad Airways, SN Brussels, Air India, and

Sunwing Vacations all began operations in 2005. Toronto Pearson’s

global reach has now attained 114 destinations without passengers

having to change a plane.

ON THE ROADWAYS AND CURBS

On the groundside, the GTAA introduced a new Curbside Valet parking

service at Terminal 1 – a fast and convenient option, with just a $20

premium over regular rates. In 2005, we issued 40 new limousine

licences, increasing the GTAA’s licenced fleet to 360 taxicabs, 270

limousines as well as six accessible limousines.

CUSTOMER SERVICE

In 2005, the GTAA continued its mandate of providing excellence in

customer service. The Airport Customer Assistance Program (ACAP)

was expanded to include Terminal 3. ACAP fulfilled more than

652,000 requests for passengers in need of assistance while travelling

through Toronto Pearson, including over 116,000 requests for

wheelchair assistance.

PO

SI

TI

ON

ED

T

OD

EL

IV

ER

D E L I V E R I N G V A L U E T O T R A V E L L E R S

15

The GTAA strives to provide travellers

with an appealing, efficient and effective

travel environment. This is accomplished

through first-class facilities, customer

service programs and amenities, and a

wide choice of airlines and destinations.

636taxicab and limousine

licences

133retail and food/beverage

outlets

60languages spoken by

ACAP agents

1,714,090taxicab and limousine

trips from the airport

100terminal specialists and

information representatives

●

533,915passengers transported

in terminals by surrey

16

GT

AA

2

00

5

D E L I V E R I N G V A L U E T O T H E A I R L I N E S

A I R L I N E S

Flexibility, reliability and efficiency

are valued by the airlines. The GTAA

delivered at Toronto Pearson by pro-

viding common use facilities and

services which provides flexibility

and cost effective options for airlines.

85bridged gates

116,875wheelchair requests

48self serve check-in kiosks

13,137aircraft deiced

in 2004/05 season

880common use counters

6deicing pads capable

of processing 500 aircraft

per day

17

D E L I V E R I N G VA L U E T O T H E A I R L I N E S

CREATING FLEXIBILITY, RELIABILITY AND REDUCING COSTS

The GTAA assumed the responsibility for providing a number of services

and facilities that have historically been provided by individual airlines.

They include passenger transport services, traditional check-in counters

and self serve kiosks, aircraft deicing, gate assignment and IT&T

infrastructure. Airlines no longer need to invest resources in these areas

at Toronto Pearson allowing them to easily balance their requirements

according to operational needs. This infrastructure enabled a seamless

move of WestJet operations from Terminal 2 to Terminal 3.

In the early stages of the Airport Development Program, the GTAA

anticipated future industry IT&T requirements. The GTAA’s Campus Area

Network connects all main areas of the airport permitting “anywhere to

anywhere”, “any application to anywhere” and “anyone to anyone with

security” voice, data and video communications. Through this airport-

wide carrier class network, airlines are now able to quickly and reliably

meet operational needs. In Summer 2005, the GTAA signed a

Memorandum Of Understanding with the International Air Transport

Association (IATA) confirming our desire to work with the industry to

reduce costs by simplifying processes and making the most effective use

of technology.

The GTAA’s IT&T Business Services offers airlines a single source for

a broad range of standard voice and data services and airport specific

products. Reliability is assured through engineering, quality products,

24/7 support and ongoing technology refresh.

A reliable power supply is another prerequisite for airline success. In

December, the GTAA opened its new Cogeneration Plant. Power

produced from its generators is able to meet the needs of the entire

airport reducing the likelihood of a blackout similar to the one

experienced in 2003.

18

D E L I V E R I N G P E R F O R M A N C E T O T H E B U S I N E S S C O M M U N I T Y

INFRASTRUCTURE AND AIR SERVICES

In 2005, the GTAA renewed its focus on attracting new airlines and air

routes. To develop additional routes, we are following two approaches to

air service development, collaborating with the federal government to

create a regulatory environment that permits the types and frequencies

of air service needed by the business community, and identifying service

opportunities to the airlines. Services provided by four new airlines in

2005 enable increased access to new markets abroad for local

businesses, and in turn, opened up access to Canadian markets.

ECONOMIC VIABILITY FOR THE REGION

One aspect of the GTAA mandate is to utilize the airport as a tool for

regional economic development. Significant economic activity – business

revenue, employment, wages and taxes – is generated through the

maintenance and operation of the airport and by providing for the needs

of the people who travel through it. The economic benefits extend

beyond the airport to the supply chain and to firms providing goods and

services to employees for personal consumption.

In 2005, the GTAA supported the business community by purchasing

goods and services valued at over $262 million. Also, by hosting the

annual Airports Council International – North American conference in

September, the GTAA was responsible for providing the tourist industry

with over 2,200 guests from airports around the world.

A CATALYST FOR GROWTH

The airport is also a catalyst for commerce, facilitating the movement of

goods and people and offering numerous benefits. These include: access

to markets, tourism, participation in the global economy, supply chain

management through just-in-time delivery, meeting customers, fast and

reliable delivery of high value products, increased competition and

enabling e-commerce through air freight and courier services.

PO

SI

TI

ON

ED

T

OD

EL

IV

ER

D E L I V E R I N G V A L U E T O T H E B U S I N E S S C O M M U N I T Y

B U S I N E S S

Excellence in air service and a first-

class infrastructure to support it are

critical to the economic future of the

Greater Toronto Area. Commercial

and corporate aviation which provide

air transportation services for people

and cargo are vital to the growth and

success of the business community.

19

410,000tonne cargo (est.)

in 2005

$31.7 billiongoods processed through

Port of Entry

318cargo loading docks

$16.9 millionbusiness revenue

attributable to the airport

111,181sq. m. cargo

building space

$262 milliongoods and services

purchased by GTAA

20

D E L I V E R I N G P U B L I C A N D AV I AT I O N S A F E T Y

OUR PEOPLE

The safety and security of the travelling public and airport workers is

of paramount importance to the GTAA and we have adopted a multi-

agency approach to this program. Elements include the Public Safety

Division (GTAA Security, Emergency Services, Canine Services, Airside

Safety and Compliance) supported by Peel Regional Police, and the

Airport Operations Division (Airport Operations Control Centre, Security

Operations, Emergency Planning, Medical Clinic and Terminal Nurses,

and Duty Managers).

The GTAA Emergency Services personnel are amongst the highest

trained in Canada. Every firefighter is qualified as an Aircraft Rescue

Firefighter, Structural Firefighter, Emergency Medical Responder and

Rescue/Special Operations Specialist.

PREPAREDNESS

Qualified and equipped staff, continuous training, detailed emergency

procedures and regular exercises create a thorough and specific security

program. While the GTAA focuses on prevention, it is fully prepared to

respond. This was evidenced by the GTAA response to the crash,

evacuation and subsequent fire of the Air France Airbus A340 in 2005.

The response to the incident was cited by many sources as

being exemplary.

THE “PEARSON MODEL” – PUT TO THE TEST

Our standard operating procedures have become known as the “Pearson

Model” and are being emulated by other Canadian airports. The GTAA’s

fire training facilities are used to train emergency services staff from

other airports around the world. In 2006, the GTAA will expand and

solidify this training model with the opening of the Fire and Emergency

Services Training Institute.

In a security audit by the International Civil Aviation Organization

(ICAO) in 2005, the GTAA’s Disaster Plans and Emergency Procedures,

training programs, Hold Bag Screening, policing and canine services

were noted as being exemplary. Also in 2005, we implemented an

enhanced Safety Management System in advance of Transport

Canada requirements.

PO

SI

TI

ON

ED

T

OD

EL

IV

ER

D E L I V E R I N G P U B L I C A N D A V I A T I O N S A F E T Y

S A F E T Y

How we respond to emergencies is a

result of continual testing of our

safety and security program, our pro-

tocols, our preparedness and our

practice. In 2005, we were put to the

test when Air France flight 358

crashed on-site. We succeeded on

all levels.

21

125defibrillators in terminals

50emergency exercises

conducted in 2005

320firefighting staff from other

airports trained at Pearson

180 secondsICAO standard for

response

50emergency response

vehicles

52 secondstime to respond to Air France

incident

22

GT

AA

2

00

5

E N V I R O N M E N T A L P E R F O R M A N C E

The alignment of a pedestrian/cycle trail on airport grounds hasbeen completed. The GTAA isdeveloping the preliminarydesign and is working with theCity of Mississauga and otherstakeholders to plan the detailsof the trail.

The first phase of the newGlycol Processing Facility wascompleted in late 2005.200,000 litres of highconcentrated glycol wereprocessed to commission thefirst two concentrators.

As part of a Riparian habitatimprovement program alongEtobicoke and Spring Creek,work is underway on EtobicokeCreek to realign a portionof the creek and rebuild anunstable slope.

➤ ➤ ➤

Minimizing our environmental footprint

and protecting the environment whenever

possible is our commitment. Our ISO

certification ensures that we not only stay

the course, but deliver continual

improvement.

PEDESTRIAN TRAIL GLYCOL RECYCLING CREEK REHABILITATION

23

E N V I R O N M E N TA L P E R F O R M A N C E

LEADERSHIP THROUGH ISO 14001

In 1999, the GTAA was the first North American airport to receive

ISO 14001 certification by establishing an Environmental Management

System for all aspects of airport operations to monitor and improve

environmental performance. To maintain certification standing, the GTAA

is committed to continual improvement, prevention of pollution and

compliance with legislation. Obtaining and maintaining ISO 14001

certification is an objective set out by the corporation. In 2005, we were

recertified to the new standard, one year earlier than required.

SUSTAINABILITY IN ACTION

As reported in the 2004 Environmental Sustainability Report, the GTAA

remains focused on delivering environmental protection and minimizing

our environmental footprint. A major push towards energy conservation

occurred in 2005. The commissioning of the on-site Cogeneration Plant

signified our commitment to long-term sustainability.

Under the Ground Support Equipment Vehicles electrification

program, battery chargers for ground support equipment have been

installed in Terminal 1 and the new areas of Terminal 3 allowing ground

handlers to electrify their equipment. The GTAA continues to work with

airlines and ground handlers to encourage changes to their equipment.

To date one of the airlines at Pearson has committed that all new

equipment will be electric, eliminating the use of diesel on-site. Terminal

Services Inc. has added emissions controls to their vehicles or retrofitted

their equipment to electric.

OUR SURROUNDINGS

The GTAA concentrates on several environmental areas including air

quality, waste management, water quality, noise, minimizing consumption

and improving the land. Initiatives in 2005 included establishing

a salt reduction baseline, as well as baselines for energy and

water consumption.

The GTAA continues to set targets in all areas to ensure continual

improvement in its environmental management.

24

D E L I V E R I N G VA L U E T H R O U G H E M P L O Y E E S

ESSENTIAL AND APPRECIATED

Pearson is a like a small city. Many skills and trades are required to

manage and operate the airport. It could not function without the

dedication, expertise and loyalty of the GTAA work force. In addition to

regular duties GTAA employees worked tirelessly in the days following the

Air France crash restoring normal operations and assisting various agencies

during the investigation that followed.

The GTAA also benefits from the GO-Team – a volunteer management

team that enables a large group of GTAA staff to be mobilized quickly to

assist in crucial situations. Without our dedicated employees, we would not

be where we are today.

CREATING A RECIPROCAL RELATIONSHIP

The GTAA recognizes the need to attract and retain an exceptional

work force. We offer our employees good benefits and competitive pay, in a

modern and safe environment. An emphasis on training and development

ensures that our knowledge base is current and that employees are

equipped to do their jobs to the best of their abilities. The International

Association of Airport Executives Program is an accredited program which

develops airport expertise and specialization in numerous fields. Our

commitment to the IAAE Program will ensure a continuing stream of airport

management specialists. Co-op programs between the GTAA and a number

of area colleges and universities introduce potential employees to the

unique industry.

EMPLOYEES CONTRIBUTING TO THE COMMUNITY

Although dedicated to the airport, GTAA employees also make a personal

commitment to society and their own communities. Youth and seniors

groups, camps for children with disabilities and diseases, sports

organizations and correctional institutions are among the organizations

supported by the employees. The GTAA lauds the thousands of volunteer

hours employees offer to their local communities.

PO

SI

TI

ON

ED

T

OD

EL

IV

ER

D E L I V E R I N G V A L U E T H R O U G H E M P L O Y E E S

25

Employees are the foundation of every

successful organization. The quality

of an organization’s employees directly

influences its ability to gain and sustain

competitive advantage and deliver

performance to all stakeholders.

962total GTAA employees

58employees in International

Association of Airport

Executives Program

sponsored by GTAA

24%of GTAA employees

with more than

15 years service at

the airport

13.8 hours lost per 200,000

hours worked

41on-site training courses

facilitated by Human

Resources

$38,248raised by GTAA employees

for disaster relief and

charities

26

GT

AA

2

00

5

D E L I V E R I N G T O G O V E R N M E N T S

Toronto – Pearson is a testimony to the

success of the National Airports Policy. In

fully meeting the expectations envisioned

by the federal government, it has also

delivered financial, economic and social

benefits to other levels of government.

1The federal governmentreceived airport ground rentfrom the GTAA in excess of$144.4 million in 2005. Since1996 the GTAA has paidthe federal government $1.1 billion.

2Additional federal revenue isrealized through the AirTravellers Security Charge,Federal Excise Tax on AviationGas and Jet Fuel, and GST paidby passengers on tickets andgoods and services purchasedat the airports.

3Payments-in-lieu of taxes to municipal governments by the GTAA in 2005 – $22.6 million. Since December 2,1996, the GTAA has paid a totalof $219 million in Payments-in-lieu of taxes.

27

D E L I V E R I N G T O G O V E R N M E N T S

EXCELLING IN OUR ROLE

The federal government created the National Airports Policy to permit

airports to be more responsive to local interests and needs; support local

economic development and promote Canada’s competitiveness; and shift

the cost of developing and operating airports from the taxpayers to those

who use the facilities.

The GTAA has delivered on this policy. The outdated and inefficient

facilities at Toronto Pearson have been replaced by modern and

upgraded infrastructure. Specific local needs of the community have

guided our objectives and there is now a long-term vision for the airport.

With redevelopment nearing completion, the GTAA has now positioned

the airport as a vehicle to promote regional economic development.

IMPROVED LEVELS OF SAFETY AND SECURITY

Under the GTAA stewardship, the levels of safety and security have

increased. Expanded crews and a second fire hall at the north end of the

airport afford improved response times to aviation incidents. The

introduction of Airside Safety Officers provides a higher level of airside

compliance than previously possible. The GTAA performed an important

project management function enabling CATSA to achieve its timelines for

implementing the Hold Bag Screening Program at Toronto Pearson.

DELIVERING ON ALL LEVELS

Provincial and municipal governments also benefit from the airport.

Payments-in-lieu of Taxes paid by the GTAA, property taxes paid by

airport tenants and personal and property taxes paid by individuals resulting

from their employment accrue to governments. The GTAA has delivered

infrastructure improvements that otherwise would have been shouldered

by the municipalities or the province of Ontario and the addition of

structural fire fighting to the GTAA emergency service group has relieved

Mississauga from having to provide first response on airport property.

The GTAA has delivered a new Toronto Pearson that provides value

and benefits to this community.

28

GT

AA

2

00

5

F I N A N C I A L P E R F O R M A N C E ➤

G T A A

It is the GTAA’s objective to exercise

prudent fiscal management and

maintain investor confidence by

ensuring effective cost control and

an aggressive non-aeronautical

revenue program.

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis (“MD&A”) contains certain forward-looking statements. By their nature, forward-looking statements

require us to make assumptions and are subject to inherent risks and uncertainties. Please refer to the section titled “Caution Regarding

Forward-Looking Statements” contained at the end of this MD&A for a discussion of such risks and uncertainties and the material factors and

assumptions related to the forward-looking statements.

This report discusses the financial and operating results for the Greater Toronto Airports Authority (“GTAA”) for the

year ended December 31, 2005 and should be read in conjunction with the Consolidated Financial Statements of

the GTAA for the years ended December 31, 2005 and 2004. Additional information relating to the GTAA, including

the Annual Information Form and the Consolidated Financial Statements referred to above, is available on SEDAR at

www.sedar.com. The GTAA’s Consolidated Financial Statements are also available on its website at www.gtaa.com.

CORPORATE PROFILE

The GTAA was incorporated in March 1993 as a corporation without share capital, and recognized as a Canadian

Airport Authority by the federal government in November 1994. The GTAA is authorized to operate airports within

the Greater Toronto Area (“GTA”) on a commercial basis, to set fees for their use and to develop and improve the

facilities. In accordance with this mandate, the GTAA is currently managing and operating Toronto Pearson

International Airport (the “Airport” or “Toronto Pearson”).

The responsibilities of the GTAA for the operation, management and development of Toronto Pearson are set

out in the ground lease with the federal government which was executed in December 1996 (the “Ground Lease”).

The Ground Lease has a term of 60 years, with one renewal term of 20 years. The GTAA’s priorities are to operate a

safe, secure and efficient Airport and to ensure that the facilities provide the necessary services, amenities and

capacity for current and future requirements for air travel for the GTA.

BUSINESS STRATEGY AND MISSION

The GTAA remains focused on providing quality aviation facilities at Toronto Pearson, recognizing that the region’s

current and future demand for air travel is expected to continue to grow. To meet this anticipated demand the GTAA

has undertaken the Airport Development Program (“ADP”), as well as the redevelopment of Terminal 3. The GTAA is

also pursuing methods to improve operational efficiencies. The GTAA has developed the following mission statement:

“To develop and operate for the public benefit, an airport system which supports the economic development and

cultural diversity of south central Ontario and Canada, providing aviation facilities and services that achieve:

• The highest standards of safety and security;

• Excellence in customer service;

• Environmental stewardship and sustainability; and

• Cost effectiveness and efficiency.

This mission will be achieved through:

• Developing a skilled and dedicated work force;

• Maximizing technology innovation; and

• Excellence in corporate governance.”

29

MD

&A

GT

AA

20

05

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S

For the Year Ended December 31, 2005

Dated March 23, 2006

The mission of the GTAA establishes its operational priorities and guides its capital decision making. Cost effec-

tiveness, includes not only ensuring that the GTAA receives value for monies spent, but also an increasing focus

on the generation of non-aeronautical revenue from various sources. The capital investment priorities of the GTAA

are to replace aging infrastructure where required, design and construct facilities based on current and future

travel demands, optimize the utility of the Airport’s infrastructure through common use strategies, and ensure

effective life cycle management and management of capital projects.

The ADP, a major capital program which includes the construction of passenger facilities, runways, taxiways,

utilities, roadways and other facilities, and the redevelopment of Terminal 3 and other capital projects have

required ongoing capital funding. The GTAA is a non-share capital corporation and therefore has established a

program to access the debt capital markets on an ongoing basis to fund its various capital programs. The criteria,

covenants and restrictions for financing by the GTAA are set out in the master trust indenture (the “Trust

Indenture”) and are described in the section on Liquidity and Capital Resources. With the ADP and redevelop-

ment of Terminal 3 nearing completion, the GTAA’s annual debt capital requirements for these projects are

expected to reduce over time.

OPERATING ACTIVITY

The GTAA monitors passenger activity levels and aircraft movements, including the type and size of aircraft, as

both passenger and aircraft activity have a direct impact on financial results. In 2004 and 2005, the Airport expe-

rienced a recovery from the significant negative impacts on activity levels caused by the terrorist attacks of

September 11, 2001 and the outbreak of Severe Acute Respiratory Syndrome (“SARS”) in Toronto in 2003.

Total passenger traffic at the Airport in 2005 was 29.9 million passengers, an increase of 4.5% from the 2004

level of 28.6 million passengers. Each of the three traffic sectors at the Airport demonstrated different rates of pas-

senger growth during 2005. The domestic sector, or passengers traveling within Canada, showed slight year-over-

year growth of 2.1% in 2005. The transborder sector, or passengers traveling between Canada and the United

States, showed stronger growth at 4.5% year-over-year. The greatest growth was in the international sector, or

passengers traveling between Canada and destinations outside of Canada and the United States, which in 2005

was up 7.9% over 2004. Total passengers in each sector for 2004 and 2005 respectively, were: domestic,

12.6 million and 12.9 million; transborder, 8.4 million and 8.8 million; and international, 7.6 million and 8.2 million.

In addition to the annual change, there are some seasonal fluctuations in travel patterns such as increased

activity during holiday periods. The following graph illustrates the passenger levels (in thousands), by each sector,

for the past three years, by quarter:

30

MD

&A

GT

AA

2

00

5

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

PASSENGER LEVELS, YEARS 2002 – 2005

Number of Passengers (in thousands)

Total Passengers Domestic PassengersTransborder Passengers International Passengers

Q1 Q1Q3Q2 Q4Q3Q2Q1Q4Q3Q2Q1Q4 Q4Q3Q22002 20052003 2004

Flight activity is measured by aircraft movements, including the type and size of aircraft, which determines the

Maximum Takeoff Weight (“MTOW”) and the number of seats. These are used to calculate airline charges for

each flight. Load factors, or the number of passengers on a plane, continued to be higher in 2005 than experienced

in prior years as air carriers did not add flights at the same rate as passenger activity increased. Consequently,

MTOW did not increase as much as passenger traffic. MTOW for 2005 was 12.8 million tonnes, as compared to

12.6 million tonnes in 2004, an increase of 1.6%. The combination of high load factors and changes in the type

of aircraft operated resulted in a minimal 0.3% decrease in total arrived seats in 2005 compared to 2004. Total

movements increased 0.3% in 2005 over 2004. The following graph illustrates the arrived seats, MTOW and

movements (in thousands) for the past three years, by quarter:

31

MD

&A

6,000

5,000

4,000

3,000

2,000

1,000

0

AIRCRAFT MOVEMENT AND SEATS, YEAR 2002 – 2005

Arrived seats and MTOW

(in thousands)

Total Arrived Seats MTOWTotal Movements

Q1 Q1Q3Q2 Q4Q3Q2Q1Q4Q3Q2Q1Q4 Q4Q3Q22002 20052003 2004

140

120

100

80

60

40

20

0

Aircraft movement

(in thousands)

OPERATING EVENTS

There were several events during 2005 which impacted operational or financial results at the Airport. On March 11,

2005, Jetsgo Corporation (“Jetsgo”) ceased operations and was granted protection from its creditors under the

Companies’ Creditors Arrangement Act (“CCAA”). Jetsgo has subsequently filed for bankruptcy. The GTAA has filed

a claim for approximately $5.7 million for all amounts due from Jetsgo, including GST. The GTAA believes that

Jetsgo ceasing operations had a slight negative impact on passenger levels during the year, particularly in the

domestic sector. Portions of Jetsgo traffic was picked up by other domestic air carriers, although the full impact of

Jetsgo ceasing operations on domestic activity is difficult to quantify.

As a result of the space formerly used by Jetsgo becoming available in Terminal 3, the GTAA and WestJet

Airlines Ltd. (“WestJet”) agreed to move WestJet’s operations from Terminal 2 to Terminal 3 in June 2005. In addi-

tion to more efficient use of Airport facilities, this move enabled the acceleration of demolition of certain areas at the

west end of Terminal 2.

On August 2, 2005, Air France Flight 358 overshot Runway 24L/06R and flight activity at the Airport was very

limited for approximately 5.5 hours while emergency crews responded to the situation. All 309 passengers and crew

on the flight survived, although some injuries were reported. The incident was investigated by the Transportation

Safety Board and their report has not yet been filed. The investigation and subsequent repairs to the area, including

runway lighting, resulted in Runway 24L/06R being closed for operations until August 12, 2005.

The Toronto area also experienced several days of severe weather in August, which combined with the impact

of the Air France incident resulted in traffic for the month being approximately 1.0% below that experienced in

August 2004.

During 2005 several air carriers expanded their operations at Toronto Pearson and several new air carriers

commenced operations at the Airport.

On November 1, 2005, ten additional bridged gates on Pier E were opened for domestic and international

arrivals and departures. The use of these new gates for some international departures has reduced the reliance on

the Infield Terminal and consequently some of the bussing requirements. The remaining international operations

will be moved from the Infield Terminal to Pier F in early 2007, when it becomes operational.

During the fall of 2005, the GTAA was commissioning and testing its new co-generation plant which was con-

structed to ensure a reliable source of electricity for the GTAA. The facility was substantially complete on December

31, 2005. The co-generation plant has the capacity to provide the required electricity and steam for the Airport and

any excess electricity may be sold to the Provincial power grid. Nonetheless, the GTAA will continue to be able to

purchase electricity from the Ontario power market thus ensuring redundant supply and a choice between purchas-

ing and generating power depending on which source provides the lowest cost.

RESULTS OF OPERATIONS

The following section discusses the GTAA’s approach in setting its rates and charges, together with its financial

results. In reviewing the financial results, it is important to note that the GTAA is a non-share corporation.

Accordingly, the GTAA’s financial model is based on the premise that all funds, whether generated through revenue

or debt, will be used for Airport operations, ancillary aviation related activities, construction, repairs and mainte-

nance, debt payments, reserve funds and other activities within the GTAA’s mandate.

Rate Setting Approach

The objective of the GTAA’s rate setting approach is to break-even on a modified cash basis after including the

reserve and debt requirements as set out in the Trust Indenture. Aeronautical rates and charges are set by the

GTAA annually to cover the projected operating costs on a break-even cash basis for each year. To calculate the

rates and charges for the subsequent year, projections are developed for passenger activity, air traffic (number of

movements and MTOW), non-aeronautical revenue, operating costs and capital costs, including debt service (inter-

est and principal). In calculating these rates in a given year, certain capital expenses, such as debt service, reserve

funds and reinvestment requirements for facilities that are operating or will be operating for a portion or all of the

year, are included. The amortization of these operating assets is not included in the rate calculations. In addition,

capital costs, including interest, for projects under construction are funded through debt. The debt payments are

not included in the annual rates and charges until the assets become operational.

The two components of the aeronautical rates and charges are the landing fee and the general terminal charge.

Landing fees are set as a rate per tonne of MTOW to cover the projected operating costs associated with the airfield,

plus ground rent, payments-in-lieu of property taxes (“PILT”) and specific debt service costs, offset by the projected

non-aeronautical revenue and a specified amount of Airport Improvement Fee (“AIF”). General terminal charges are

set to cover the operating costs for the common areas in the three primary passenger terminals and the Infield

Terminal as a rate per landed seat, regardless of whether the seat is occupied by a passenger. There is a premium

on the general terminal charge for non-domestic flights to cover the costs of the facilities for various government

agencies. The common areas include holdrooms, check-in counters, passenger processing areas and arrival halls,

but exclude space that is exclusively leased to airline or other tenants.

32

MD

&A

GT

AA

2

00

5

NET OPERATING RESULTS

The GTAA’s net operating results for the three years ended December 31, 2005, 2004 and 2003, are summarized

in the following table:

(in thousands) 2005 2004 2003

Revenues $ 953,674 $ 832,014 $ 646,863

Operating expenses 527,992 487,988 460,068

Revenues over expenses1 425,682 344,026 186,795

Interest and financing costs 334,400 267,973 157,086

Amortization 209,638 188,389 96,479

Revenues under expenses $ (118,356) $ (112,336) $ (66,770)

Note 1: Revenues over expenses before interest and financing costs and amortization of capital assets

Revenues over expenses before interest and financing costs and amortization increased from $344.0 million for the

year ended December 31, 2004 to $425.7 million for the year ended December 31, 2005. This increase of 23.7%

was primarily the result of increased landing fee revenues to cover the increased debt service costs associated with

Terminal 1 and other new assets becoming operational, and increased passenger traffic generating more AIF rev-

enue, offset by some additional expenses. Interest and financing costs were $268.0 million for 2004 as compared

to $334.4 million for 2005 reflecting a full year of interest expense in respect of Terminal 1 and its ancillary facili-

ties. The above table demonstrates that for each year, the revenues generated by the GTAA were more than suffi-

cient to cover operating expenses and interest and financing costs. In accordance with its rate setting approach, the

GTAA expects that revenues and reserve funds applied will continue to be sufficient to cover operating expenses

and interest and financing costs, including the principal included in the rate setting calculation.

The financial results reported by the GTAA include certain non-cash items, such as amortization and the deferral

of some ground rent payments. As noted in the description of the rate setting approach, these non-cash items are

not included in the calculation of aeronautical rates and charges. The amount of deferred ground rent included as

an expense, but not included as a cash payment, was $21.0 million in 2004 and $10.5 million in 2005. After amor-

tization, the net revenue under expenses for 2004 was $112.3 million as compared to $118.4 million for 2005. The

increase in amortization reflects the new Terminal 1 becoming operational in April 2004, and the additional gates

on Pier E of Terminal 1 becoming operational in November 2005. In 2005 amortization exceeded the principal

component included in the landing fee by $128.5 million. Consistent with many infrastructure developments, the

GTAA’s net revenues may not be sufficient to cover amortization for a period of several years, resulting in the GTAA

reporting revenues under total expenses.

33

MD

&A

Revenues

Revenues are received from aeronautical charges (landing fees and general terminal charges), AIF, and non-

aeronautical sources such as car parking and ground transportation, concessions and rentals, and other sources.

Landing fees are based on MTOW; general terminal charges are based on the number of seats in an aircraft using a

passenger terminal; AIF is charged per passenger; and parking and other activities are dependent on passenger

levels. Consequently, the primary drivers for revenue are aircraft movements and passenger activity. The relation-

ship between these revenue sources and expenses was discussed in the section on Rate Setting Approach. The fol-

lowing chart summarizes the GTAA’s revenues for the years ended December 31, 2005, 2004 and 2003:

(in thousands) 2005 2004 2003

Landing fees $ 405,874 $ 338,008 $ 246,771

General terminal charges 157,206 145,455 113,663

Airport improvement fees, net 175,425 142,235 105,857

Car parking and ground transportation 96,115 89,074 76,556

Concessions and rentals 110,775 107,738 98,812

Other 8,279 9,504 5,204

$ 953,674 $ 832,014 $ 646,863

Total aeronautical revenue for the year ended December 31, 2004 was $483.5 million, as compared to

$563.1 million for the year ended December 31, 2005. The increase reflects increased landing fees as a result of

additional debt service costs, based on a full year of operations at Terminal 1 and associated facilities and other

costs. Accordingly, the increase in the landing fee component was greater than the increase in general terminal

charges. However, the load factor, or ratio of passengers to seats, was higher than expected in 2005 and therefore

the revenues received from aeronautical sources were slightly below the projections of the GTAA. The GTAA

believes that the increased load factors reflect Jetsgo passengers shifting to other air carriers and efforts by carriers

to operate at higher load factors to improve their efficiencies. This trend is expected to continue, at least in the short

term, and has been incorporated in the passenger and flight activity projections used for setting the aeronautical

rates and charges for 2006.

AIF revenue, which is net of the commission paid to the air carriers for the collection of the AIF, increased from

$142.2 million in 2004 to $175.4 million in 2005. During 2004 the rates for the AIF were $12 for an originating

passenger and $8 for a connecting passenger. These rates remained in effect until November 1, 2004 when the

GTAA implemented an increase in the AIF to $15 for an originating passenger and the rate for connecting passen-

gers remained at $8. The increase in AIF revenue in 2005 reflects the rate change and the increase in passenger

volumes for 2005 as compared to 2004.

Under the terms of the AIF agreements with the air carriers, the GTAA has committed that AIF revenue will be

used primarily for capital programs at Toronto Pearson, including associated debt service (interest and principal)

and reserve funds. Historically the GTAA has used AIF revenue to fund debt service, but it retains the option of

funding capital projects directly with AIF revenue. Recognizing that capital expenditures and the receipt of AIF rev-

enue may not occur in the same period, AIF revenue earned and collected, but not utilized in any given period, is

invested in the AIF Reserve Fund for future capital or debt service payments. In 2004, $142.2 million of AIF rev-

enue was earned and $140.6 million was used for capital projects or debt service. This compares to $175.4 million

earned and $162.0 million used during 2005, with the difference from each year held in the AIF Reserve Fund.

The GTAA also receives fees or rental payments from car parking, ground transportation, concessions, space

rental and other rental properties. In total, these categories generated $196.8 million in 2004 as compared to

$206.9 million in revenue in 2005. This increase of 5.1% is largely attributable to the higher passenger volumes

34

MD

&A

GT

AA

2

00

5

resulting in increased sales and some agreements tied to passenger volumes. The GTAA continues to focus on new

initiatives to increase these non-aeronautical revenues beyond passenger growth, including additional advertising as

well as reviewing leasing and development opportunities. One negative impact which was recognized in the last

quarter of 2005, and is expected to continue in 2006, is the loss of cash-and-carry duty free for those international

flights being gated on Terminal 1. Due to domestic and international departing passengers having access to these

gates in Terminal 1, the duty free operator is required to deliver purchases to the gate of the aircraft. It is antici-

pated that the opening of Pier F in 2007 will provide greater opportunities to generate non-aeronautical revenue,

especially with the increased retail and food and beverage facilities.

Other revenue, which includes interest on reserve funds and investments, decreased slightly from $9.5 million in

2004 to $8.3 million in 2005. This revenue will fluctuate depending on the timing of debt issues, interest rates and

the use of capital funds throughout the year.

Operating Expenses

The GTAA’s operating expenses include the cost to operate and maintain the Airport, together with interest and

financing costs and the amortization of capital assets. As noted previously, the operating expenses that are reported

in the financial statements are on an accrual basis and are not entirely consistent with the expenses used in the

calculation of aeronautical rates and charges. Specifically, amortization is not included in the landing fee, while the

principal component of debt service, which is not an operating expense on the financial statements, is included in

the landing fee calculation. The following chart summarizes the GTAA’s operating expenses for the years ended

December 31, 2005, 2004 and 2003:

(in thousands) 2005 2004 2003

Ground rent $ 144,423 $ 130,394 $ 125,211

Goods and services 262,281 237,943 223,426

Salaries, wages and benefits 98,701 95,553 85,504

Real property taxes and PILT 22,587 24,098 25,927

527,992 487,988 460,068

Interest and financing costs 334,400 267,973 157,086

Amortization of capital costs 209,638 188,389 96,479

$ 1,072,030 $ 944,350 $ 713,633

The Ground Lease sets out the calculation of the annual ground rent payable by the GTAA to the federal govern-

ment based on a fixed amount per revenue passenger, adjusted for inflation. In July 2003, the Minister of Transport

announced a 24-month ground rent deferral program which had the effect of reducing the ground rent paid by

$10.0 million in 2003, $21.0 million in 2004 and $10.5 million in 2005. However, the GTAA has the obligation to

repay the deferred amount over 10 years, commencing on January 1, 2006, and therefore the full ground rent

expense has been recorded for each period, with an offsetting liability recorded on the balance sheet. The deferred

rent did reduce the cash requirement for ground rent each year, and the amount used for the calculation of landing

fees in each year.

In 2004, the passenger numbers for 2002 and 2003 were reconciled with the results released by Statistics

Canada, as set out in the Ground Lease, and it was recognized that the actual activity was lower than originally

estimated. An adjustment of $12.4 million was made in 2004, reducing the 2004 ground rent reported from

$142.8 million to $130.4 million. Total ground rent for 2005 was $144.4 million.

In May 2005, the federal government announced a proposed new regime for calculating ground rent payable by

Canadian airports, based on current year revenue rather than on passengers, commencing in 2011. The proposed

35

MD

&A

new rent regime is to be phased in over five years with ground rent being calculated based on current rent and pro-

jected 2010 rent payments during this period. The GTAA questions the appropriateness of having ground rent

based on revenue in a passenger based environment and believes that the proposed rent structure is not financially

beneficial for the GTAA, particularly in the short term. This regime would have ground rent apply to revenue gener-

ated to pay debt service. The federal government provided a copy of the amending agreement for the Ground Lease

in December 2005. The GTAA has not executed the amending agreement, and continues to lobby the new federal

government for a more appropriate and favourable agreement for Toronto Pearson.

Goods and services comprise the general operating expenses for the Airport and were $237.9 million and

$262.3 million for 2004 and 2005, respectively. The increase in expenses is primarily attributed to the increased

facilities and services associated with the opening of Terminal 1, higher utility costs due to an unusually hot sum-

mer, extended snow removal operations and a provision for the bad debt expense of $4.3 million relating to Jetsgo

when it ceased operations.

The GTAA has both union and non-union employees and both groups are compensated with salaries and bene-

fits, including pension plan options, medical and life insurance benefits and certain other benefits. Salaries, wages

and benefits increased from $95.6 million in 2004 to $98.7 million for 2005, an increase of 3.2%. The increase

reflects salary increases and solvency payments that have been required for one of the pension plans.

The GTAA has an exemption from the payment of real property taxes under the Assessment Act (Ontario), and

instead pays to each of the cities of Toronto and Mississauga an amount prescribed by an Ontario provincial govern-

ment regulation as PILT. The amounts due are based on passenger activity for a specified prior year. PILT paid in

2004 was $24.1 million, based on passengers for 2001, and PILT for 2005 was $22.6 million, based on passenger

activity for 2002. The recent recovery in passenger activity will be reflected in higher PILT payments in future years.

The year-over-year increase in interest and financing costs and amortization reflect the impact of new Terminal 1

and ancillary facilities becoming operational on April 6, 2004. The GTAA capitalizes interest for projects under con-

struction and interest is expensed for projects that are complete and operational. Consequently, interest and financ-

ing costs were $268.0 million and $334.4 million for 2004 and 2005 respectively. Offsetting the interest expense in

each year is interest earned on investments and reserve funds, and also in 2004, the gain on the sale of certain

interest rate swaps and the gain on the sale of ACE Aviation shares that were received in partial settlement of the

GTAA’s unsecured CCAA claim against Air Canada.

A similar trend is noted for amortization of capital assets which increased from $188.4 million in 2004 to

$209.6 million in 2005.

SUMMARY OF QUARTERLY RESULTS

Selected unaudited quarterly financial information for the period from January 1, 2004 through December 31, 2005

is set out in the following table:

(in millions) 2005 2004

Quarter ended Dec Sept June Mar Dec Sept June Mar

Revenues $ 230 $ 260 $ 233 $ 231 $ 208 $ 230 $ 201 $ 193

Operating expenses 143 124 126 135 120 133 118 117

Revenues over expenses1 87 136 107 96 88 97 83 76

Interest and financing 84 82 84 84 79 80 66 43

Amortization 55 52 52 51 62 46 53 27

Revenues2 $ (52) $ 2 $ (29) $ (39) $ (53) $ (29) $ (36) $ 6

Notes: 1. Revenues over expenses before interest and financing costs and amortization

2. Revenues over/(under) expenses

36

MD

&A

GT

AA

2

00

5

The GTAA’s quarterly results are influenced by passenger activity and aircraft movements which vary with travel

demand associated with holiday periods and other factors such as weather and economic conditions. Due to these

external factors the historic quarterly results cannot be relied upon for future trends. The opening of additional

areas in Terminal 1 and other facilities during 2005 will impact operating costs in many ways including higher utility

and operating costs and reduced busing costs. There were no exceptional events during the fourth quarter of 2005

which had a significant impact on traffic, revenues or operating expenses.

AIRPORT DEVELOPMENT PROGRAM AND CAPITAL PROJECTS

After the GTAA assumed responsibility for the Airport, it initiated an extensive redevelopment program to improve

and redevelop the facilities to meet current and future demand. The Airport Development Program (“ADP”)

includes the construction of terminal facilities, roadways, cargo facilities, airside improvement such as runways and

taxiways, ancillary services and utilities infrastructure. The ADP was designed as a demand driven program that

would be undertaken while the Airport continued to operate and would provide the GTAA with some flexibility on the

timing of certain future stages. The GTAA has regularly reviewed the components of the ADP to respond to changes

in the aviation industry, with the current total budget being $4.5 billion. To the end of 2005, $4.0 billion, excluding

capitalized interest, had been spent on the program which was approximately 90.0% complete.

During 2005, the apron reconstruction between Piers E and F of Terminal 1 was completed, as were the exterior

walls and roof of Pier F. Work continues on the mechanical and electrical components and the installation of the

baggage system, elevator and escalator systems in the non-operational portions of Terminal 1, including Pier F. On

November 1, 2005, ten gates on the east side of Pier E and on the liner between Piers E and F were brought into

operation. Pier F remains on schedule to commence operations in the first quarter of 2007.

The automated people mover (“APM”), which connects the GTAA operated off-airport parking area to Terminals 3

and 1, is now scheduled to commence operation in the summer of 2006. During 2005, the guideway and the sta-

tions’ exterior finishes and interior architectural finishes and mechanical and electrical systems were completed.

Pier F marks the conclusion of the ADP terminal project. The GTAA has indicated that after the completion of

Pier F, it would examine the options to determine the timing of Terminal 2 demolition and the construction of Pier G

or any other terminal facilities. Based on the analysis completed during 2005, it has been determined that upon the

completion of Pier F and the relocation of all remaining activity in Terminal 2 to Terminal 1, Terminal 2 will be

demolished. The GTAA has authorized a budget of $330.0 million for the demolition of Terminal 2 and its parking

garage, expansion of the T1 parking garage, construction of a parking garage in Area 6B on the east side of Airport

Road, some ancillary work and the design of Pier G. The final design and construction timing of Pier G is still under

review, and will be dependent on demand.

In addition to the ADP, the GTAA has undertaken plans to expand and upgrade certain areas and components of

Terminal 3. During 2005, $70.3 million, excluding capitalized interest, was spent on the capital project known as

the Terminal 3 Redevelopment Project, including the expansion of the central processing area and the expansion

and improvement of the baggage systems. Certain redeveloped areas in Terminal 3 became operational during the

past year, and it is expected that the significant expansion of the check-in areas and baggage systems will be oper-

ational in late 2006.

The GTAA has also completed the construction of a new natural gas-powered co-generation facility at an approx-

imate cost of $146.3 million, excluding capitalized interest. This facility was substantially completed at the end of

2005 after commissioning and testing during the fall of 2005. The co-generation plant has the capacity to provide

the required electricity and steam for the Airport. The GTAA may also purchase electricity from the Ontario power

market, or sell any excess electricity generated to the Provincial power grid. The GTAA has entered into manage-

ment contracts for the day-to-day operation of the facility and the management of natural gas and electricity pur-

chases and sales to optimize the economic benefit of the plant.

37

MD

&A

In September 2004, the Ontario Ministry of Energy issued a Request for Proposals for 2,500 megawatts (“MW”)

of new clean electricity generation, demand response and demand-side management projects (the “2,500 MW

RFP”). The GTAA submitted a proposal and has been awarded a contract pursuant to the 2,500 MW RFP program.

As a result of being selected under the 2,500 MW RFP, the financial risk of operating the co-generation facility has

been reduced.

The GTAA has other ongoing capital projects for Toronto Pearson, and in 2005, $56.7 million, excluding capitalized

interest, was spent on projects such as runway and taxiway upgrades and the replacement of certain fleet vehicles.

PICKERING

In 2001, the federal government asked the GTAA to undertake studies to determine the requirements for a future

regional reliever airport on the Pickering lands located to the east of Toronto. Between 2001 and 2004, the GTAA

undertook certain feasibility studies, held various public workshops and meetings, and was preparing for the environ-

mental assessment process in accordance with the federal government’s request. During 2005, the federal govern-

ment determined that it would undertake a due diligence evaluation of the need for an airport before the environmen-

tal assessment is commenced. The GTAA views this as an important initiative and will continue to cooperate with the

federal government to advance the planning for the future reliever airport on the Pickering Lands. The final decision

on whether the construction of the airport should commence will be up to the federal government.

ASSETS AND LIABILITIES

Total assets and liabilities for the three years ended December 31, 2005, 2004 and 2003 are set out below:

(in millions) 2005 2004 2003

Total Assets $ 7,007.4 $ 6,467.8 $ 5,872.4

Total Liabilities $ 7,236.9 $ 6,579.0 $ 5,871.3

The increase in total assets reflects the ongoing investment in Airport infrastructure as set out in the description of

the ADP and other capital projects. Between 2004 and 2005, the primary increase in assets was $133.3 million in

reserves and other funds, $103.5 million in capital assets and $293.1 million in work in progress. The increases

between 2003 and 2004 show a similar pattern, but also reflect the transfer of Terminal 1 from work in progress in

2003 to capital assets in 2004.

Total reserves as at December 31, 2004 were $783.4 million as compared to $916.7 million at December 31,

2005. These reserves represent funds for regular payments of interest and principal, amounts set aside with the

Trustee as security for specific debt issues, funds set aside in accordance with the terms of the Trust Indenture for

operating and capital expenses and funds set aside by the GTAA as described in the section entitled Rate Setting

Approach for future principal payments and other commitments such as the AIF Reserve Fund. All of the reserves

are fully funded and invested.

Changes in the total reserve funds include an increase in the Debt Service Reserve Fund, primarily as a result of

the new Medium Term Notes (“MTN”) issues, application of the Debt Service Fund for ongoing interest payments

for all debt and principal payments on the Series 1999-1 MTN amortizing issue, an increase in the Notional

Principal Fund with the ongoing collection of Notional Principal in the landing fee, and the collection of AIF during

the year, offset by the application of the AIF Reserve Fund to debt payments.

As noted in the section entitled Rate Setting Approach, the GTAA includes in its landing fee principal amortiza-

tion for each debt issue based on a 30-year amortization period for the debt, regardless of the actual term of the

respective issue. Consistent with the treatment of interest expense, principal is only included for the debt associated

with operational assets. On a quarterly basis, the GTAA funds the Notional Principal Fund with the estimated princi-

pal collected in the previous quarter. The Notional Principal Fund will be applied to the ongoing amortizing pay-

38

MD

&A

GT

AA

2

00

5

ments for Series 1999-1, as it was in 2004 and 2005, or to repay any issue on maturity in whole or in part. At

December 31, 2004, there was $88.1 million in the Notional Principal Fund, as compared to $152.6 million at

December 31, 2005.

For the AIF Reserve Fund, the GTAA sets the AIF revenues aside when collected and uses the funds primarily

for ongoing debt service payments. For 2005, the GTAA used $162.0 million of AIF which is the amount anticipated

when setting the rates and charges for 2005. The result is that the AIF Reserve Fund increased from $99.5 million

at the end of 2004 to $111.8 million at the end of 2005.

The primary component of the total liabilities is the debt program, which at December 31, 2005 totalled

$6.9 billion of current and long term debt obligations, as compared to $6.3 billion as at December 31, 2004. Under

the ground rent deferral program, deferred ground rent was $41.5 million at December 31, 2005, as compared to

$31.1 million at December 31, 2004. This liability will decrease with the repayment of the ground rent deferral over

the next 10 years commencing in 2006.

During 2005, the GTAA issued $1.2 billion of new debt and $600 million matured in May. The various new

issues and maturities in 2005 are set out in the following table:

(in millions)

MTN Series Original Issue Date Maturity Date Principal

2005-1 February 8, 2005 n/a $ 350

2003-2 n/a May 20, 2005 (600)

2005-2 May 20, 2005 n/a 510

2005-3 October 26, 2005 n/a 350

The net deficiency reported on the balance sheet is a combination of the reserve funds which have been funded

through operating revenue and cumulative revenues over or under expenses. Since revenues after operating

expenses and interest and financing costs have not been sufficient to cover amortization for several operating

periods, the GTAA has recorded revenues under expenses. This has resulted in a cumulative negative net asset

position of $111.2 million as at December 31, 2004 as compared to a negative net asset position of $229.5 million

as at December 31, 2005. The principal component included in the aeronautical charges is based on a 30-year

amortization and will therefore be lower in early years and increase over time, similar to the principal payments of a

mortgage. The amortization of the GTAA’s most significant assets is reported on a declining balance basis, which is

higher in the early years of the asset life and decreases over time. This differential contributes to the GTAA’s current

negative net asset position. It is anticipated that when the principal component in the landing fee increases to a

level where it is equal to or exceeds the reducing amount of amortization of assets, revenue will exceed all

expenses, including amortization, providing a potential improvement to the net asset position.

LIQUIDITY AND CAPITAL RESOURCES

The GTAA is a non-share corporation and accordingly is funded through operating revenues, AIF revenue, reserve

funds, the debt capital markets and its syndicated bank credit facility. As noted previously, aeronautical charges are

set each year to cover the projected operating costs, including debt service and reserve requirements, after consid-

eration for the projected air traffic and passenger activity and non-aeronautical revenue sources. Consistent with its

residual approach, any funds generated by the GTAA are used to cover costs within its mandate.

An overall Capital Markets Program was established by the GTAA with the Trust Indenture setting out the terms

of all debt, including bank facilities, revenue bonds and MTNs. The program has been used to fund all ongoing

capital programs and the GTAA will continue to access the debt markets to fund the capital programs and to refi-

nance some or all of its maturing debt. At December 31, 2005, there was a total of $6.9 billion of debt outstanding,

39

MD

&A

excluding the bank facility. Any proceeds received and not immediately required are invested in short-term invest-

ment grade debt instruments until they are required to fund the capital programs.

On October 13, 2005, the GTAA filed a new shelf prospectus qualifying up to $2.5 billion of debt issuance for

capital expenditures, reserve funds, debt refinancing and other approved uses through the 25-month period cov-

ered by the shelf prospectus. The first issue under this new shelf prospectus was completed on October 26, 2005

for $350 million, for 10 years at 4.7%. On February 28, 2006, the GTAA completed a further issue of $250 million

for 5 years at 4.4% which was designed for retail investors.

Until November 2005, the GTAA had two bank credit facilities with a syndicate of banks totaling $550 million

which included a 364-day revolving facility and a 3-year revolving term facility. Both of these facilities matured in

November 2005 and were replaced with a new credit facility with the same banking syndicate. The new facility

includes a $500 million credit facility and a $50 million facility for interest rate and foreign exchange hedging activi-

ties. The new facility has a term of three years, which can be extended annually for an additional year with the

lenders’ consent. The new facility will be used to fund capital or operating expenses as required and provides flexi-

bility on the timing for accessing the capital markets in the future. This facility ranks pari passu with all other debt

of the GTAA.

At December 31, 2005, the GTAA had reserve funds totaling $916.7 million, which include reserve funds held by

the Trustee in accordance with the Trust Indenture and certain funds held by the GTAA for specific or future require-

ments. AIF revenue collected and not utilized in any given year is retained in the AIF Reserve Fund for future years.

The Notional Principal Reserve Fund will increase with the principal component collected in the landing fee until it is

used for the repayment of debt. The other reserve funds provide additional security for the debt program.

Principal payments for the next five years include the amortizing payments for MTN Series 1999-1, the maturity

of MTN Series 1997-2, Series 2000-2, Series 2003-1, Series 2004-2 and Series 2005-2. The GTAA has also

entered into certain capital leases for equipment, but the annual payments are not significant. The total principal

and capital lease payments for the next five years are:

(in millions)

2006 $ 9.3

2007 894.6

2008 385.2

2009 260.8

2010 611.5

Thereafter 4,706.7

$ 6,868.1

The objective of the GTAA’s investment and cash management strategy is to ensure that the cash requirements for

operations, capital programs and other demands are met and to maximize the flexibility in accessing the capital

markets as may be required. The GTAA monitors its cash flow requirements accordingly. Given recent MTN issues,

the new credit facility, reserves and the projected operating revenues and costs, the GTAA does not anticipate any

funding shortfalls in the near term. However, there may be events outside of the control of the GTAA that could

negatively impact its liquidity.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The accounting policies adopted by the GTAA are set out in Note 4 of the Consolidated Financial Statements as at

December 31, 2005 and 2004. In preparing the financial statements, management is required to make certain esti-

mates or assumptions, including estimates for amortization of capital assets, revenue recognition and the fair value

of financial instruments.

40

MD

&A

GT

AA

2

00

5

Capital assets for the Airport include items such as improvements to leased land, runways, terminal and other

buildings, and roadways. These assets are recorded at cost and each asset type is amortized over the lesser of the

remaining term of the Ground Lease or their estimated useful lives. Amortization of assets commences when the

asset is brought into operation and for certain assets, such as the terminal buildings, the asset may be brought into

or removed from operations in stages. Starting on January 1, 2004, Terminal facilities are amortized at a rate of

2.5% on a declining balance.

The timing for revenue recognition depends on the nature of the revenue and the specific agreements in place.

Landing fees, general terminal charges and car parking are recognized as the Airport facilities are utilized. AIF, net

of the airline administration fee, is recorded upon the enplanement of passengers, however it is not transferred to

the AIF Reserve Fund until payment is received. Revenues from concessions, ground transportation and space or

property rental are recognized in accordance with the respective agreements. For each month end there are certain

estimates for the number of passengers, movements, sales and other criteria to determine the revenue earned for

each of the respective categories.

RISKS AND UNCERTAINTIES

Continuing the trend which began in 2004, the GTAA experienced a much more stable financial and economic

environment with continued growth in passenger volumes in 2005. However, the risk of sudden and possibly signifi-

cant impacts or volatility in demand due to external sources such as economic conditions, geopolitical unrest,

government regulation, world health epidemics and the financial uncertainty in the aviation industry continue to

exist. Any of these could impact the GTAA’s financial results.

In recent months there has been extensive commentary on the potential of a pandemic or severe outbreak of the

avian flu. Depending on the location, timing, and extent of such an event, it could have significant impacts on

regional or world travel. The GTAA has been working with Health Canada to understand the risks of such an event,

and has developed operational contingency plans based on various scenarios.

Subsequent to the Air France incident on August 2, 2005, the GTAA, together with other parties, was named as

a defendant in a class action lawsuit commenced by certain passengers. The GTAA’s insurers are defending this

action and it is the opinion of the GTAA that this is an insurable event. Consequently, it is expected that the GTAA’s

financial exposure, if any, will be limited to its insurance deductibles. This event also demonstrates that there are

always operational risks associated with an airport. The GTAA mitigates these risks through strict compliance with

safety requirements and regulations and emergency response procedures.

The financial stability of the aviation industry remains a risk for the GTAA, particularly with respect to domestic

air carriers. To date there have been no losses due to foreign air carriers filing for bankruptcy protection. In 2005,

the GTAA incurred losses from an airline, Jetsgo, ceasing operations and declaring bankruptcy. Although there is

some risk from industry changes or exposure to a dominant air carrier, this is mitigated by the fact that over 75% of

the passenger activity at the Airport originates or terminates at Toronto Pearson. During the past year, the GTAA has

also received several requests for additional routes or landing slots.

Another potential impact from changes in the aviation industry is the trend to allocating smaller aircraft to some

shorter routes. Such changes in the fleet mix can impact the GTAA’s planning of facilities and on determining the

traffic for projecting future landing fees. The GTAA uses projected revenues, expenses, MTOW and arrived seats to

calculate the landing fee per tonne and the general terminal charge per seat. The risks inherent to this approach

are that expenses may be underestimated or non-aeronautical revenues overestimated resulting in inadequate aero-

nautical revenue. Aeronautical revenue may also be lower than expected if passenger or aircraft activity volumes are

not realized. In 2005, passenger activity was essentially as projected, but MTOW and seats were approximately

1.5% below projections. The GTAA believes that this is a result of higher load factors and smaller aircraft on certain

routes. These revised patterns have been taken into account for planning in subsequent years.

41

MD

&A

Any large construction project is subject to risks relating to costs, schedule and other events. Given the current

stage of the ADP and other capital projects, and the limited amount of construction remaining, the risk for the total

project is reduced. It is anticipated that the GTAA will continue to meet the specific goals of its capital programs

within or close to the construction budget and schedule.

There is always risk when raising funds in the capital markets, including interest rates and the availability of

funds at any point in time. External factors such as economic conditions, government policies, catastrophic events

and the state of the financial markets can impact the GTAA’s ability to access the capital markets. The GTAA debt

program has been well received by the capital markets in Canada. The GTAA monitors the overall debt markets and

works with its financial advisors to select the timing, size and term of any debt issue to ensure continued access to

the markets and to maximize opportunities. The GTAA also monitors its debt maturity profile to minimize refinancing

risk in the future.

As part of the debt program, the Trust Indenture sets out certain covenants that the GTAA must meet, including

two specific coverage tests for operating expenses and debt payments. If revenue or expenses are substantially dif-

ferent than projected, there is a risk of not meeting the coverage tests. The operating covenants state that the total

revenue must at least cover all operating expenses, including interest and financing costs. The debt service

covenant states that the net revenues, which may include available credit, must be at least 1.25 times the total

interest and financing costs, including notional principal. In meeting these tests, the AIF revenue included is the

amount transferred from the AIF Reserve Fund, and may not be the same as the AIF earned. If the debt service

covenant test is not met in any year, the GTAA is not in default of its obligations under the Trust Indenture so long

as the test is met in the subsequent year.

The availability of adequate insurance coverage is subject to the conditions of the overall insurance markets

and the GTAA’s claims and performance record. The GTAA has continued to be successful in placing all of its

insurance needs.

CONCLUSION

The past year has been another successful year with stable passenger activity growth, continued progress on the

ADP and other capital projects, and no significant events to unsettle the aviation industry. The ceasing of operations

of Jetsgo did have a slight negative impact on the activity levels and on the financial results, however, the overall

performance for the year was positive.

The GTAA continues its approach of a long-term vision for the Airport, which includes ensuring that the facilities

provide capacity, flexibility and high standards for the future. This must be done with an awareness and responsive-

ness to the short term and unexpected events and challenges. The strategy of constructing common use facilities,

high standards for safety and security and financial efficiency, together with the recent continued recovery in pas-

senger volumes, all set a positive framework for a successful future at Toronto Pearson.

DISCLOSURE CONTROLS AND PROCEDURES

The GTAA’s management is responsible for establishing and maintaining disclosure controls and procedures to pro-

vide reasonable assurance that material information relating to the GTAA is made known to management, particu-

larly during the period in which annual filings are being prepared. Management has evaluated the effectiveness, as

at December 31, 2005, of the GTAA’s disclosure controls and procedures and has concluded that such disclosure

controls and procedures are effective.

42

MD

&A

GT

AA

2

00

5

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis (“MD&A”) contains certain statements about the GTAA and its future

expectations. By their nature, forward-looking statements require the GTAA to make assumptions and are subject to

inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions and projections will

not prove to be accurate, that the GTAA’s assumptions may not be correct and that actual results may differ materi-

ally from such predictions, forecasts, conclusions or projections. The GTAA cautions readers of this MD&A not to

place undue reliance on the forward-looking statements as a number of factors could cause actual results, condi-

tions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the

forward-looking statements.

Words such as “believe”, “expect”, “plan”, “intend”, “estimate”, “anticipate” and similar expressions, as well as

future or conditional verbs such as “will”, “should”, “would” and “could” often identify forward-looking statements.

Specific forward-looking statements in this MD&A include, among others, statements regarding: future demand for

air travel in the Greater Toronto Area; the GTAA’s annual debt capital requirements; the relationship between the

GTAA’s revenues and reserve funds, and its operating expenses and interest and financing costs; non-aeronautical

revenues; airline load factors; budgets and expenditures relating to capital projects; the commencement of opera-

tions of the APM; Pier F and other facilities at the Airport currently under construction; the design and construction

of Pier G; the federal government’s initiatives with respect to ground rent and the Pickering lands; insurance recov-

ery; the impact of the new co-generation facility on revenues and expenses; and the GTAA’s liquidity.

These forward-looking statements are based on a variety of factors and assumptions including, but not limited

to: long-term growth in population, employment and personal income will provide the basis for increased aviation

demand in the Greater Toronto Area; the Canadian and U.S. economics will grow at expected levels in the near

term; the growth and sustainability of low fare and other air carriers will contribute to aviation demand in the Greater

Toronto Area; transborder and international travel will continue to grow; the commercial aviation industry will not be

directly affected by terrorism; the cost of enhancing aviation security will not overly burden air carriers or the GTAA;

no significant event occurring which impacts the ordinary course of business such as a natural disaster or other

calamity; and no significant cost overruns or delays relating to capital programs. These assumptions are based on

information currently available to the GTAA, including information obtained by the GTAA from third party experts

and analysts.

Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by

forward-looking statements include, among other things: levels of aviation activity; air carrier instability; aviation

liability insurance; construction risk; geographical unrest; terrorist attacks; war; health epidemics, labour negotia-

tions; capital market and economic conditions; changes in laws; adverse regulatory developments or proceedings;

lawsuits; and other risks detailed from time to time in the GTAA’s publicly filed disclosure documents.

The forward-looking statements contained in this MD&A represent the GTAA’s expectations as of the date of this

report and are subject to change. Except as required by applicable law, the GTAA disclaims any intention or

obligation to update or revise any forward-looking statements included in this MD&A whether as a result of new

information, future events or for any other reason.

43

MD

&A

44

GT

AA

2

00

5 M A N A G E M E N T ’ S R E S P O N S I B I L I T Y F O R

F I N A N C I A L R E P O R T I N G

To the Board of Directors of the Greater Toronto Airports Authority

We have audited the consolidated balance sheets of the Greater Toronto Airports Authority as at December 31,

2005 and 2004 and the consolidated statements of operations, changes in net assets and cash flows for the years

then ended. These consolidated financial statements are the responsibility of the Greater Toronto Airports

Authority’s management. Our responsibility is to express an opinion on these financial statements based on

our audits.

We conducted our audits 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 consolidated financial statements present fairly, in all material respects, the financial

position of the Greater Toronto Airports Authority as at December 31, 2005 and 2004 and the results of its

operations, changes in its net assets and its cash flows for the years then ended in accordance with Canadian

generally accepted accounting principles.

Chartered Accountants

Mississauga, OntarioFebruary 17, 2006

The consolidated financial statements of the Greater Toronto Airports Authority have been prepared by

management and approved by the Board of Directors and the Members of the Greater Toronto Airports Authority.

Management is responsible for the preparation and presentation of the information contained in these

consolidated financial statements and other sections of this Annual Report. The Greater Toronto Airports Authority

maintains appropriate systems of internal control, policies and procedures which provide management with

reasonable assurance that assets are safeguarded and that financial records are reliable and form a proper basis

for the preparation of financial statements.

The Greater Toronto Airports Authority’s independent auditors, Deloitte & Touche LLP, have been appointed by

the Members of the Corporation to express their professional opinion on the fairness of these consolidated

financial statements.

The Board of Directors ensures that management fulfills their responsibilities for financial reporting and

internal controls through an Audit Committee which is composed of four directors. This Committee reviews the

consolidated financial statements and reports to the Board of Directors. The auditors have full and direct access

to the Audit Committee.

John Kaldeway Judy A. FountainPresident and Chief Executive Officer Vice President and Chief Financial OfficerMarch 10, 2006

A U D I T O R S ’ R E P O R T

45

ST

AT

EM

EN

TS

As at December 31 (in thousands) 2005 2004

ASSETS

Current

Cash and cash equivalents $ — $ 16,859

Accounts receivable 84,848 70,539

Prepaid expenses 3,292 2,738

Inventory 9,192 4,720

97,332 94,856

Reserve and other funds (Note 5) 916,727 783,376

Deferred charges (Note 7) 60,280 53,422

Capital assets (Note 8) 4,922,179 4,818,721

Work in progress (Note 9) 1,003,479 710,392

Accrued benefit asset (Note 13) 7,402 7,030

$ 7,007,399 $ 6,467,797

LIABILITIES

Current

Bank indebtedness $ 57,710 $ —

Accounts payable and accrued liabilities 237,486 247,461

Security deposits and deferred credits 18,610 18,425

Deferred gain on interest rate swaps (Note 18) 1,069 1,069

Deferred ground rent (Note 3) 4,156 —

Current portion of long-term debt (Note 10) 9,250 609,473

328,281 876,428

Deferred gain on interest rate swaps (Note 18) 12,437 13,506

Deferred ground rent (Note 3) 37,407 31,050

Long-term debt (Note 10) 6,858,792 5,657,975

7,236,917 6,578,959

NET ASSETS (DEFICIENCY) (Note 11)

Externally restricted 64,704 69,607

Internally restricted 319,419 209,955

Unrestricted (613,641) (390,724)

(229,518) (111,162)

$ 7,007,399 $ 6,467,797

SIGNED ON BEHALF OF THE BOARD

Warren C. Hurren B. Mac CosburnDirector Director

C O N S O L I D A T E D B A L A N C E S H E E T S

46

ST

AT

EM

EN

TS

GT

AA

2

00

5

Years Ended December 31 (in thousands) 2005 2004

REVENUES

Landing fees $ 405,874 $ 338,008

General terminal charges 157,206 145,455

Airport improvement fees, net (Note 6) 175,425 142,235

Car parking and ground transportation 96,115 89,074

Concessions 58,790 57,208

Rentals 51,985 50,530

Other 8,279 9,504

953,674 832,014

OPERATING EXPENSES

Ground rent (Note 3) 144,423 130,394

Goods and services 262,281 237,943

Salaries, wages and benefits 98,701 95,553

Real property taxes and payments-in-lieu of real property taxes (Note 14) 22,587 24,098

527,992 487,988

Revenues over expenses before interest and financing costs and amortization 425,682 344,026

Interest and financing costs (Note 12) 334,400 267,973

Amortization of capital assets 209,638 188,389

Revenues under expenses $ (118,356) $ (112,336)

C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S

47

ST

AT

EM

EN

TS

2005

Balance, RevenuesYear Ended December 31 Beginning Under Transfers/ Use of Balance,(in thousands) of Year Expenses Allocations Funds End of Year

EXTERNALLY RESTRICTED

Operating and maintenance reserve $ 50,806 $ — $ 7,165 $ — $ 57,971

Renewal and replacement reserve 3,000 — — — 3,000

Debt service fund – principal 15,801 — 17,448 (29,516) 3,733

69,607 — 24,613 (29,516) 64,704

INTERNALLY RESTRICTED

Airport improvement fees collected, net 99,452 — 174,344 (162,000) 111,796

Notional principal of long-term debt 88,100 — 81,948 (17,448) 152,600

Debt service coverage requirement 22,403 — 32,620 — 55,023

209,955 — 288,912 (179,448) 319,419

RESTRICTED NET ASSETS 279,562 — 313,525 (208,964) 384,123

UNRESTRICTED NET DEFICIENCY (390,724) (118,356) (104,561) — (613,641)

TOTAL NET DEFICIENCY $ (111,162) $ (118,356) $ 208,964 $ (208,964) $ (229,518)

2004

Balance, RevenuesYear Ended December 31 Beginning Under Transfers/ Use of Balance,(in thousands) of Year Expenses Allocations Funds End of Year

EXTERNALLY RESTRICTED

Operating and maintenance reserve $ 50,806 $ — $ — $ — $ 50,806

Renewal and replacement reserve 3,000 — — — 3,000

Debt service fund – principal 3,294 — 20,413 (7,906) 15,801

57,100 — 20,413 (7,906) 69,607

INTERNALLY RESTRICTED

Airport improvement fees collected, net 104,475 — 135,602 (140,625) 99,452

Notional principal of long-term debt 22,350 — 86,163 (20,413) 88,100

Debt service coverage requirement 16,553 — 5,850 — 22,403

143,378 — 227,615 (161,038) 209,955

RESTRICTED NET ASSETS 200,478 — 248,028 (168,944) 279,562

UNRESTRICTED NET DEFICIENCY (199,304) (112,336) (79,084) — (390,724)

TOTAL NET ASSETS (DEFICIENCY) $ 1,174 $ (112,336) $ 168,944 $ (168,944) $ (111,162)

C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S

I N N E T A S S E T S ( D E F I C I E N C Y )

48

ST

AT

EM

EN

TS

GT

AA

2

00

5

Years Ended December 31 (in thousands) 2005 2004

CASH FLOWS FROM OPERATING ACTIVITIES

Revenues under expenses $ (118,356) $ (112,336)

Items not affecting cash

Amortization of capital assets 209,638 188,389

Amortization of deferred gain on interest rate swaps (1,069) (1,069)

Loss on disposal of capital assets 756 1,461

Increase in prepaid pension asset (372) (3,322)

Realized gain on interest rate swaps — (2,437)

Amortization of deferred charges (Note 7) 6,082 5,094

Increase in deferred ground rent 10,513 21,026

Changes in non-cash working capital

(Increase) Decrease in accounts receivable (14,309) 4,817

(Increase) Decrease in prepaid expenses (554) 753

Increase in inventory (4,472) (1,699)

Decrease in accounts payable and accrued liabilities (9,975) (17,802)

Increase (Decrease) in security deposits and deferred credits 185 (5,921)

78,067 76,954

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of capital assets (3,705) (3,211)

Proceeds on disposal of capital assets 38 6,648

Work in progress (Note 9) (603,272) (653,070)

(606,939) (649,633)

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of medium term notes (Note 10) 1,210,000 850,000

Repayment of long-term debt (609,406) (9,175)

Draw on credit facility (Note 10) 294,000 —

Repayment of credit facility (251,000) (145,000)

Termination of interest rate swaps — 18,082

Bank indebtedness 14,710 —

Increase in reserve and other funds (133,351) (150,985)

Increase in deferred charges (Note 7) (12,940) (11,509)

512,013 551,413

NET CASH OUTFLOW (16,859) (21,266)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 16,859 38,125

CASH AND CASH EQUIVALENTS, END OF YEAR $ — $ 16,859

At December 31, 2005, cash and cash equivalents were nil as a result of the Company’s bank indebtedness

position. At December 31, 2004, cash and cash equivalents consisted of short-term investments of $50.8 million

less cash and outstanding cheques of $17.2 million and allocations to the Airport Improvement Fee Reserve Fund

of $16.7 million.

C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S

49

NO

TE

S

1. NATIONAL AIRPORTS POLICY

In July 1994, the federal government announced its National Airports Policy whereby the management, operation

and maintenance of 26 airports within the National Airport System was to be transferred through various ground

lease arrangements to locally controlled Canadian Airport Authorities (“CAAs”). The National Airports Policy also

prescribed the Fundamental Principles for the Creation and Operation of CAAs including the Public Accountability

Principles to be adopted by each CAA.

CAAs are free to operate airports on a commercial basis and have the authority to set all fees and charges. The

federal government retains regulatory control over aeronautics and as such will set safety and security standards for

airports, licence airports and regulate the aviation industry as a whole.

2. CORPORATE PROFILE OF THE GREATER TORONTO AIRPORTS AUTHORITY

Greater Toronto Airports Authority (“GTAA”) was incorporated on March 3, 1993 under Part II of the Canada

Corporations Act, as a corporation without share capital. This corporate structure ensures that the excess of

revenues over expenses is retained and reinvested in airports and airport operations under control of the GTAA.

The By-Laws of the GTAA were amended in 1994 to conform with the requirements of the National Airports Policy.

The GTAA has all the powers, obligations and duties of any private Canadian corporation. The GTAA is governed by

a 15-member Board of Directors (the “Board”). In 2003, the GTAA changed the manner in which Directors are

appointed to the Board. As a result of these changes, Directors serve a term of three years and are eligible to be

re-appointed subject to a maximum limit of nine years. Five Directors are appointed from municipal candidates.

Each of the Regional Municipalities of York, Halton, Peel and Durham and the City of Toronto are entitled to pro-

vide, on a rotating basis, the names of three candidates and the Board appoints one of the three candidates for

each available position as a Director. In addition, four Directors are appointed by the Board on a cyclical basis on

the basis of candidates nominated by a pool of nominators comprised of the Law Society of Upper Canada, the

Association of Professional Engineers of Ontario, the Institute of Chartered Accountants of Ontario, the Toronto

Board of Trade and the Boards of Trade and Chambers of Commerce in the Regional Municipality of York, the

Regional Municipality of Halton, the Regional Municipality of Durham and the Regional Municipality of Peel. Finally,

the Government of Canada and the Province of Ontario are entitled to appoint two Directors and one Director

respectively, while the Board of Directors is entitled to appoint three Directors.

The mandate of the GTAA is to operate and develop a regional network of airports in the Greater Toronto Area

(“GTA”). Under the terms of a ground lease (see Note 3, Airport Subject To Ground Lease), the first airport in this

network, Toronto Pearson International Airport (the “Airport”), was transferred to the GTAA in 1996. The Airport’s

operations on 4,400 acres of land include the new Terminal 1, Terminal 2 and Terminal 3, airside assets including

five runways, taxiways and aprons, groundside assets including bridges and parking lots, infield assets including an

aircraft deicing facility and cargo buildings, and ancillary structures. Excluded are any assets owned by NAV

CANADA, the operator of Canada’s civil air navigation system.

The GTAA is committed to the continuing development of the Airport. This includes the staged replacement of

old Terminal 1, which has occurred, and Terminal 2 with a single unified terminal, increasing airside capacity to five

runways, increasing cargo and aircraft facilities, and reconstructing the roadway system.

3. AIRPORT SUBJECT TO GROUND LEASE

On December 2, 1996, the GTAA assumed the operation, management and control of the Airport for a period of

60 years, together with one renewal term of 20 years, by virtue of a ground lease (the “Ground Lease”) between the

GTAA, as tenant, and Her Majesty the Queen in Right of Canada, represented by the Minister of Transport

(“Transport Canada”), as landlord. The GTAA assumed the obligations of Transport Canada under all existing

agreements at the Airport.

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

December 31, 2005 and 2004

50

NO

TE

SG

TA

A

20

05

The Ground Lease is the principal document governing the relationship between the GTAA and Transport

Canada at the Airport. It determines the rent to be paid and generally allocates risk and responsibilities between the

GTAA and the federal government for all matters related to the operation of the Airport. Under the Ground Lease, all

revenue and expenditure contracts in effect on December 1, 1996 were assigned to the GTAA. The GTAA did not

assume any liability with respect to claims against the federal government incurred prior to December 2, 1996.

By virtue of its status as the tenant under the Ground Lease, the GTAA has the authority to set and collect airline

rates and charges, negotiate and issue leases, licences and permits and construct and develop the infrastructure of

the Airport. The Ground Lease permits the GTAA to pledge its leasehold interest in the Airport as security.

Rent under the Ground Lease is comprised of Base Rent, Participation Rent and Deficiency Rent. Base Rent is

calculated on a capped passenger volume formula subject to adjustments for inflation. Participation Rent is based

on a measure of incremental revenues and is not applicable until year 2012. Deficiency Rent is payable in the

event the GTAA does not meet capital expenditure targets delineated in the Ground Lease (see Note 16,

Commitments and Contingent Liabilities). The Ground Lease with amendments made in April 1997 provided a total

of $199.6 million in rent credits consisting of $113.4 million for specified development projects, $72.3 million for

Airside Development Projects, $10.0 million for security costs, $3.5 million for the acquisition of two pieces of land

which were subsequently transferred to the landlord and $0.4 million for a restoration project. The rent credits for

development projects and land acquisitions have been fully allocated to capital assets (see Note 8, Capital Assets).

Under the Ground Lease, Transport Canada is required to assume all costs associated with environmental

remediation in the event an order is issued by an appropriate government agency requiring the clean-up of any

noxious or hazardous substance where such substance was present prior to December 2, 1996 (See Note 16,

Commitments and Contingent Liabilities).

In July 2003, the Government of Canada announced a program to allow for a reduction in the ground rent,

for a two-year period commencing July 1, 2003. For each of the 10 years following January 1, 2006, the GTAA’s

annual ground rent payments will be increased by approximately $4.2 million per year (see Note 19, Ground

Rent Agreement).

4. SIGNIFICANT ACCOUNTING POLICIES

Presentation and Basis of Accounting

The GTAA’s financial statements are prepared in accordance with Canadian generally accepted accounting princi-

ples. The preparation of financial statements requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and the disclosure of commitments and contingencies at the date of

the financial statements and the reported amounts of revenue and expenses during the reporting period. These

estimations and assumptions include the useful lives of capital assets, provisions for projected costs and valuation

allowances. Actual results could differ from estimates.

Principles of Consolidation

The financial statements consolidate the accounts of GTAA and its wholly-owned subsidiary, Greater Toronto

Airports Authority Associate Inc. (the “GTAAA”).

Ground Lease

The Ground Lease is accounted for as an operating lease. Rent credits under the Ground Lease have been applied

to reduce the cost of completed capital assets (see Note 3, Airport Subject To Ground Lease).

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term, highly liquid investments with an original term of 90 days

or less.

51

NO

TE

S

Inventory

Inventory consists of natural gas and parts and supplies held for use at the Airport. Natural gas inventory is stated

at cost, while all other inventory is stated at the lower of cost and replacement value.

Deferred Charges

Costs relating to long-term financing including underwriter fees, professional fees, derivative instruments and bond

discounts are deferred and amortized straight-line over the terms of the respective debt instruments. The amortiza-

tion of these charges is included in interest and financing costs. Leasehold inducements are deferred and amor-

tized straight-line over the terms of the tenant leases.

Acquisitions

Assets acquired related to the development of the Airport are capitalized to Work in progress or Capital assets. Net

revenues and costs related to projects under construction are capitalized until the construction project or replace-

ment facilities become operational.

Capital Assets

Capital assets are recorded at cost. Capital assets include items such as improvements to leased land, runways,

buildings and roadways. These assets will revert to Transport Canada upon the expiration or termination of the

Ground Lease.

The GTAA reviews long-lived assets for impairment on an ongoing basis and recognizes impairment losses when

the carrying value of an asset exceeds the undiscounted cash flows from its future use.

The costs of Capital assets (less estimated residual values) are amortized over the lesser of the remaining term

of the Ground Lease or their estimated useful lives. Capital assets are amortized at the following annual rates:

Terminal assets

Buildings and support facilities, parking 2.5% declining balance for Terminal facilities

structures, pedestrian bridges and approach Straight-line over remaining useful life for Terminal 2 improvements

systems, and apron works 2.5% to 20% declining balance for non-terminal facilities

Baggage handling systems Straight-line over 25 years

Airside assets

Improvements to leased land Straight-line over remaining term of the Ground Lease

Runways and taxiways 2.5% declining balance

15 years straight-line for runway and taxiway surfaces

Deicing facilities 2.5% declining balance

Other assets

Utilities and stormwater management facilities 2.5% declining balance

Operating assets 10% to 30% declining balance

Capital leases 10% to 30% declining balance

All leases entered into by the GTAA for the use or operation of equipment are classified as capital, to the extent they

meet the criteria for capitalization in accordance with generally acceptable accounting principles.

Work in Progress

Work in progress is transferred to Capital assets when the asset is placed in service. Interest associated with

borrowing funds for Work in progress is capitalized until the work is substantially complete and assets are operational.

52

NO

TE

SG

TA

A

20

05

Revenue Recognition

Landing fees, general terminal charges and car parking revenues are recognized as the airport facilities are utilized.

Airport improvement fees, net of airline administration fees, are recorded upon the enplanement of the passenger

(see Note 6, Airport Improvement Fees). Concession revenues are charged on a monthly basis and are recognized

based on a percentage of sales or specified minimum rent guarantees. Ground transportation revenue is recognized

based on a combination of the duration of the term of the licences and permits and utilization fees. Rental revenues

are recognized straight-line over the duration of the respective agreements.

Salaries, Wages and Benefits

Reimbursements to service organizations for their salaries, wages and benefits have been included in this operating

expense category. Employee benefits are accrued as earned by employees.

Employee Future Benefit Plans

The GTAA maintains both defined benefit pension plans and a defined contribution pension plan for its employees.

The pension costs of the defined benefit plans are actuarially determined using the projected benefits method pro-

rated on service and best estimate assumptions. Pension plan assets are valued at fair value. The unamortized net

actuarial gain or loss exceeding 10% of the greater of the accrued benefit obligation at the beginning of the year

and the fair value of plan assets at the beginning of the year is deferred and amortized over the average remaining

service life of active employees. The costs of the defined benefit plans are recognized as the benefits are earned

through employee service. The costs of the defined contribution pension plan are expensed as paid.

Derivative Financial Instruments

Derivative financial instruments, including interest rate swaps and foreign exchange hedges, may be used from time

to time to reduce exposure to fluctuations in interest rates and foreign exchange rates. These financial instruments

will be accounted for under the accrual method if the GTAA meets the requirements set out in existing accounting

pronouncements and the GTAA chooses to designate these financial instruments as hedges. Accordingly, the book

value will not be adjusted to reflect the current market values. Payments and receipts under interest rate swap

agreements will be recognized as adjustments to interest and financing costs where the underlying instrument is a

GTAA debt issue and as adjustments to interest income where the underlying instrument is an investment.

Derivative financial instruments that are not designated by the GTAA to be in an effective hedging relationship will

be carried at fair value with the changes in fair value, including any payments and receipts made or received, being

recorded in interest and financing costs.

Commodity swap agreements are used from time to time to reduce exposure to fluctuations in commodity

prices. Commodity swaps in an effective hedging relationship as defined in existing accounting pronouncements

may be accounted for under the deferral method where the unrealized gains and losses are deferred and recog-

nized in goods and services expense in the period in which the underlying commodity purchases are recognized.

Commodity swaps that are not designated in an effective hedging relationship as defined in existing accounting

pronouncements will be carried at fair value with the changes in fair value, including any payments and receipts

made or received, being recorded in goods and services expense.

Realized and unrealized gains or losses associated with derivative financial instruments, which have been

terminated, dedesignated from a hedging relationship or cease to be effective prior to maturity, will be deferred and

recognized in the period in which the underlying hedged item is realized. In the event a designated hedged item is

sold, extinguished or matures prior to the termination of the related derivative financial instrument, any realized or

unrealized gain or loss on such derivative financial instrument will be recognized in the Consolidated Statement

of Operations.

53

NO

TE

S

5. RESERVE AND OTHER FUNDS

The Debt Service Fund and Debt Service Reserve Fund (the “Trust Funds”) and Operations, Capital and

Financing Funds invested in cash and qualified short-term investments are as follows:

(in thousands) 2005 2004

Debt Service Fund

Interest $ 78,812 $ 79,527

Principal 3,733 15,801

82,545 95,328

Debt Service Reserve Fund

Revenue Bonds

Series 1997-2 due December 3, 2007 35,391 35,170

Series 1997-3 due December 3, 2027 37,216 37,004

Series 1999-1 due July 30, 2029 40,525 40,320

Medium Term Notes

Series 2000-1 due June 12, 2030 39,029 38,828

Series 2000-2 due July 19, 2010 39,986 39,817

Series 2001-1 due June 4, 2031 35,473 35,248

Series 2002-1 due January 30, 2012 31,455 31,260

Series 2002-2 due December 13, 2012 29,933 29,748

Series 2002-3 due October 15, 2032 38,730 38,474

Series 2003-1 due June 2, 2008 19,585 19,469

Series 2003-2 due May 20, 2005 — 22,461

Series 2004-1 due February 2, 2034 38,984 38,782

Series 2004-2 due February 4, 2009 11,413 11,335

Series 2005-1 due June 15, 2015 17,746 —

Series 2005-2 due May 18, 2007 14,497 —

Series 2005-3 due February 15, 2016 16,507 —

446,470 417,916

Bank indebtedness secured by Series 1997 – A Bond 7,322 6,371

453,792 424,287

Operations, Capital and Financing Funds

Operating and Maintenance Reserve Fund 57,971 50,806

Renewal and Replacement Reserve Fund 3,000 3,000

Airport Improvement Fee Reserve Fund 111,796 99,452

Notional Principal Fund 152,600 88,100

Debt Service Coverage Fund 55,023 22,403

380,390 263,761

$ 916,727 $ 783,376

54

NO

TE

SG

TA

A

20

05

Trust Funds

The GTAA is required to establish and maintain with the Trustee the Trust Funds in accordance with the terms of

the Trust Indenture (see Note 10, Long-Term Debt). The Trust Funds are held for the benefit of the bondholders

and noteholders for use and application by the Trustee in accordance with the terms of the Trust Indenture.

Amounts in the Debt Service Fund are allocated to either an Interest Account or a Principal Account. On a

monthly basis, the GTAA is required to deposit into the Interest Account an amount equal to one-sixth of the semi-

annual aggregate interest requirement due on all outstanding bonds and medium term notes. Also on a monthly

basis, the GTAA is required to deposit into the Principal Account an amount equal to one-twelfth of the total princi-

pal amount included in annual debt service, during the term, for any bonds or notes due in such year. The principal

requirements of the Debt Service Fund were funded from the Notional Principal Fund during 2005 and had a

balance of $3.7 million at December 31, 2005 (2004 – $15.8 million). Amounts in the Debt Service Fund are held

by the Trustee for the benefit of the bond or noteholders and are disbursed by the Trustee to pay interest and

principal as it becomes due.

Principal of $29.5 million was paid from the Debt Service Fund in 2005 (2004 – $7.9 million). During 2005,

$17.4 million was deposited to the Principal Account of the Debt Service Fund by the GTAA for the principal of the

Series 1999-1 revenue bond (2004 – $20.4 million for Series 1999-1 and 2003-2). The deposit to the Principal

Account of the Debt Service Fund to fulfill principal requirements was funded from the Notional Principal Fund (see

Operations, Capital and Financing Funds below) during the year.

To the extent provided in any Supplemental Indenture, the GTAA is required to set aside funds in the Debt

Service Reserve Fund for each series of bonds or medium term notes. The required amount is established at the

time of issue of each series of bonds or medium term notes and funded from the proceeds of each issue. Amounts

held in the Debt Service Reserve Fund are held by the Trustee for the benefit of the bond or noteholders for use

and application in accordance with the terms of the Trust Indenture. At the maturity of each series of bonds or

medium term notes, funds not applied by the Trustee will be returned to the GTAA.

Operations, Capital and Financing Funds

The GTAA has established an Operating and Maintenance Reserve Fund and a Renewal and Replacement Reserve

Fund pursuant to the Trust Indenture (see Note 10, Long-Term Debt). The Operating and Maintenance Reserve

Fund is equal to one-sixth of the projected operating and maintenance expenses for the following fiscal year. As at

December 31, 2005 this fund had a balance of $58.0 million (2004 – $50.8 million). This amount is to be used

only for operating and maintenance expenses, or other purposes as required for the safe, ongoing operation and

maintenance of the Airport as set out in the Trust Indenture. The Renewal and Replacement Reserve Fund of

$3.0 million (2004 – $3.0 million) is to be used for unanticipated repairs to, or the replacement of property and

equipment as set out in the Trust Indenture.

In conjunction with the airport improvement fee agreements with participating airlines the GTAA has established

an Airport Improvement Fee Reserve Fund for the deposit of fees collected and not yet utilized. As at December 31,

2005, this fund had an accumulated balance of $111.8 million (2004 – $99.5 million). During 2005, $162.0 million

(2004 – $140.6 million) of accumulated Airport Improvement Fee Funds were utilized for some debt service payments.

Capital and financing funds include Notional Principal and Debt Service Coverage Funds, which are amounts

that have been collected through airline rates and charges. The Notional Principal Fund may be used to reduce

future debt obligations, when principal is due for any series of bonds or medium term notes. For non-amortizing

debt, principal is deemed to be included in annual debt service, based on a 30-year amortization, commencing on

the same date as interest is expensed. The Debt Service Coverage Fund is established to meet the coverage

requirements set out in the Trust Indenture, and as at December 31, 2005 had a balance of $55.0 million (2004 –

$22.4 million).

55

NO

TE

S

6. AIRPORT IMPROVEMENT FEES

Airport improvement fees, net of airline administration charges, reported in the Statement of Operations, totaled

$175.4 million during 2005 (2004 – $142.2 million). Gross revenues and administration charges for 2005 were

$182.6 million and $7.2 million respectively (2004 – $148.1 million and $5.9 million).

7. DEFERRED CHARGES

(in thousands) December 31, 2005

Accumulated Net Book Cost Amortization Value

Bond issue costs $ 49,519 $ 17,850 $ 31,669

Deferred loss on commodity swap 196 196 —

Deferred leasehold inducements 4,600 101 4,499

Deferred hedge loss on bond 18,060 7,450 10,610

Bond discount costs 17,294 3,792 13,502

$ 89,669 $ 29,389 $ 60,280

(in thousands) December 31, 2004

Accumulated Net Book Cost Amortization Value

Bond issue costs $ 44,131 $ 13,963 $ 30,168

Deferred loss on commodity swap 196 — 196

Deferred hedge loss on bond 17,953 6,528 11,425

Bond discount costs 14,449 2,816 11,633

$ 76,729 $ 23,307 $ 53,422

The aggregate amortization expense in respect of deferred charges for the year ended December 31, 2005 was

$6.1 million (2004 – $5.1 million) and is included in interest and financing costs. Additions to deferred charges

during the year totaled $12.9 million (2004 – $11.5 million).

56

NO

TE

SG

TA

A

20

05

8. CAPITAL ASSETS

Capital assets are comprised of:

(in thousands) December 31, 2005

Accumulated Net Book Cost Amortization Value

TERMINAL ASSETS

Buildings and support facilities, parking structures,

pedestrian bridges and approach systems

and apron works $ 4,126,682 $ (340,317) $ 3,786,365

Baggage handling systems 169,726 (23,958) 145,768

4,296,408 (364,275) 3,932,133

AIRSIDE ASSETS

Improvements to leased land 24,000 (3,633) 20,367

Runways and taxiways 319,632 (26,940) 292,692

Deicing facilities 29,906 (4,562) 25,344

373,538 (35,135) 338,403

OTHER ASSETS

Utilities and stormwater management facilities 383,489 (21,943) 361,546

Operating assets 562,063 (273,893) 288,170

Capital leases 10,057 (8,130) 1,927

955,609 (303,966) 651,643

$ 5,625,555 $ (703,376) $ 4,922,179

57

NO

TE

S

(in thousands) December 31, 2004

Accumulated Net Book Cost Amortization Value

TERMINAL ASSETS

Buildings and support facilities, parking structures,

pedestrian bridges and approach systems and

apron works $ 4,016,151 $ (227,738) $ 3,788,413

Baggage handling systems 165,588 (17,244) 148,344

4,181,739 (244,982) 3,936,757

AIRSIDE ASSETS

Improvements to leased land 24,000 (3,233) 20,767

Runways and taxiways 311,958 (19,624) 292,334

Deicing facilities 29,902 (3,915) 25,987

365,860 (26,772) 339,088

OTHER ASSETS

Utilities and stormwater management facilities 219,800 (16,635) 203,165

Operating assets 536,154 (199,737) 336,417

Capital leases 9,967 (6,673) 3,294

765,921 (223,045) 542,876

$ 5,313,520 $ (494,799) $ 4,818,721

Rent credits of $189.2 million, received prior to December 31, 2000, have been applied to the cost of airside assets.

On December 31, 2005, the GTAA completed commissioning on a Cogeneration Facility, constructed in order to

provide new clean generating capacity to both the GTAA and the Ontario Power grid (see Note 20, Subsequent

Events). Costs of $154.0 million, including capitalized interest of $7.7 million, incurred for the development,

construction and commissioning of the Cogeneration Facility were transferred from work in progress to capital

assets on December 31, 2005, and have been included in Utilities and stormwater management facilities.

9. WORK IN PROGRESS

TransfersBeginning Additions / to Capital End of

(in thousands) of Year Adjustments Assets Year

Airside Development Project $ 67 $ 370 $ (437) $ —

Terminal Development Project 525,519 411,042 (107,148) 829,413

Infield Development Project 242 (330) 375 287

Utilities and Area Support Facilities 815 3,135 (188) 3,762

526,643 414,217 (107,398) 833,462

Restoration Projects 55,692 48,679 (18,126) 86,245

Cogeneration Plant 88,518 65,448 (153,966) —

T3 Redevelopment 39,539 74,928 (30,695) 83,772

$ 710,392 $ 603,272 $ (310,185) $ 1,003,479

As at December 31, 2005, Work in progress included capitalized interest and financing costs in the amount of

$115.2 million (2004 – $89.7 million).

58

NO

TE

SG

TA

A

20

05

10. LONG-TERM DEBT

As at December 31, 2005 the long-term debt outstanding is comprised of:

(in thousands) Coupon MaturitySeries Rate Date 2005 2004

(Note 18)

Revenue Bonds, See below

1997-2 5.95% December 3, 2007 $ 375,000 $ 375,000

1997-3 6.45% December 3, 2027 375,000 375,000

1999-1 6.45% July 30, 2029 483,678 492,094

Medium Term Notes

2000-1 7.05% June 12, 2030 550,000 550,000

2000-2 6.70% July 19, 2010 600,000 600,000

2001-1 7.10% June 4, 2031 500,000 500,000

2002-1 6.25% January 30, 2012 500,000 500,000

2002-2 6.25% December 13, 2012 475,000 475,000

2002-3 6.98% October 15, 2032 550,000 550,000

2003-1 5.17% June 2, 2008 375,000 375,000

2003-2, See below floating May 20, 2005 — 600,000

2004-1 6.47% February 2, 2034 600,000 600,000

2004-2 4.45% February 4, 2009 250,000 250,000

2005-1 5.00% June 1, 2015 350,000 —

2005-2, See below floating May 18, 2007 510,000 —

2005-3 4.70% February 15, 2016 350,000 —

6,843,678 6,242,094

Capital leases, See below 364 1,354

Province of Ontario

Interest-free, payable in five equal annual

installments commencing 2011 24,000 24,000

6,868,042 6,267,448

Less current portion 9,250 609,473

$ 6,858,792 $ 5,657,975

Interest arising from these debt instruments amounted to $396.9 million (2004 – $365.0 million).

For Series 2003-2 and 2005-2 the interest rates are based on the 3-month Bankers’ Acceptance rate plus

55 basis points and 18 basis points respectively, adjusted quarterly. For series 2003-2 interest rates during the

period January 1, 2005 to May 20, 2005 ranged from 3.16% to 3.30% (2004 – 2.86% to 3.36%). For Series

2005-2 interest rates ranged from 2.80% to 3.52% (2004 – n/a) during the period from May 18, 2005 to

December 31, 2005.

With the exception of Series 1999-1 revenue bonds, principal on each series of revenue bonds and medium

term notes is payable on the maturity date. Series 1999-1 are amortizing revenue bonds repayable in scheduled

annual installments of principal, payable on July 30 of each year. These payments commenced July 30, 2004 and

continue until maturity.

59

NO

TE

S

Capital Markets Platform

As a corporation without share capital, the GTAA’s ongoing capital requirements are financed with debt. The GTAA

developed a financing plan referred to as the Capital Markets Platform, capable of accommodating a variety of

corporate debt instruments. All indebtedness incurred under the Capital Markets Platform is secured under a

Master Trust Indenture (the “Trust Indenture”) dated December 2, 1997, and supplemented from time to time,

which establishes common security and a set of common covenants by the GTAA for the benefit of its lenders. The

security comprises an assignment of the revenues of the GTAA, a specific charge on certain funds, reserve funds

and accounts, an unregistered first leasehold mortgage of the GTAA’s leasehold interest in the Airport and a

guarantee and related collateral security of subsidiaries as designated from time to time.

Revenue Bonds and Medium Term Notes

The GTAA has the following Revenue Bonds and Medium Term Notes outstanding:

Principal Amount Interest Payable Series Settlement Date (in thousands) Commencement Date

Revenue Bonds

1997-2 December 2, 1997 $ 375,000 June 3, 1998

1997-3 December 2, 1997 375,000 June 3, 1998

1999-1 July 20, 1999 483,678 January 30, 2000

Medium Term Notes

2000-1 June 12, 2000 250,000 December 12, 2000

2000-2 July 17, 2000 325,000 January 19, 2001

2000-2 reopen January 09, 2001 275,000 January 19, 2001

2000-1 reopen January 16, 2001 300,000 December 12, 2000

2001-1 June 4, 2001 500,000 December 4, 2001

2002-1 January 28, 2002 500,000 July 30, 2002

2002-2 June 13, 2002 475,000 December 13, 2002

2002-3 October 15, 2002 285,000 April 15, 2003

2002-3 reopen November 22, 2002 265,000 April 15, 2003

2003-1 May 13, 2003 375,000 December 2, 2003

2004-1 February 2, 2004 350,000 August 2, 2004

2004-2 February 4, 2004 250,000 August 4, 2004

2004-1 reopen September 2, 2004 250,000 August 2, 2004

2005-1 February 8, 2005 350,000 June 1, 2005

2005-2 May 20, 2005 510,000 August 18, 2005

2005-3 October 26, 2005 350,000 February 15, 2006

With the exception of Series 2005-2, interest is payable semi-annually from the Interest Payable Commencement

Date, based on fixed rates. Series 2005-2, interest is payable quarterly from the Interest Payable Commencement

Date, based on floating rates. With the exception of Series 2003-1 and Series 2005-2 medium term notes, which

are not redeemable, the notes are redeemable in whole or in part at the option of the GTAA at any time at a

redemption price based on yields over Government of Canada bonds with similar terms to maturity.

60

NO

TE

SG

TA

A

20

05

Credit Facility

The GTAA maintains a Credit Facility with a syndicate of six Canadian banks. The Credit Facility is secured by a

$550 million pledge bond issued pursuant to the Trust Indenture. Indebtedness under the Credit Facility ranks pari

passu with other indebtedness issued under the Trust Indenture. Under this Credit Facility, the GTAA is provided

with a $500 million facility for general corporate purposes and capital expenditures, and a $50 million facility for

interest rate and foreign exchange hedging activities. The facility, due November 22, 2008, will have a term of three

years, and can be extended annually for an additional year with the lenders’ consent.

At December 31, 2005, $43 million was drawn on the facility (2004 – nil) and is included in bank indebtedness.

As at December 31, 2005, a letter of credit for $9.0 million was outstanding against the facility (see Note 16,

Commitments and Contingent Liabilities). Indebtedness under the Credit Facility bears interest at rates that vary

with the lenders’ prime rate, bankers’ acceptance rates and LIBOR, as appropriate. Interest rates incurred during

the year ranged from 2.95% to 5.00% (2004 – 2.25% to 5.00%).

Capital Leases

The GTAA has undertaken to lease certain operating equipment. Effective interest rates of the capital leases range

from 0.59% to 4.71% (2004 – 0.59% to 3.19%).

Principal Repayments

Principal payments scheduled for each of the next five years are as follows:

(in thousands)

2006 $ 9,250

2007 894,604

2008 385,158

2009 260,807

2010 611,504

Thereafter 4,706,719

$ 6,868,042

During the year, the GTAA incurred interest costs, on a cash basis, of $395.1 million (2004 – $345.8 million).

11. NET ASSETS (DEFICIENCY)

The GTAA has established within its net assets, funds for operational requirements and debt-related obligations.

The net assets consists of three components: externally restricted, internally restricted and unrestricted.

Externally Restricted

A portion of the net assets has been allocated for operational purposes pursuant to the Operating and Maintenance

Reserve Fund and Renewal and Replacement Reserve Fund (see Note 5, Reserve and Other Funds) set out in the

Trust Indenture (see Note 10, Long-Term Debt).

Internally Restricted

A portion of the net assets that has been collected in revenue has been allocated for capital projects and financing

purposes through the debt-related obligations of notional principal and debt service coverage requirements (see

Note 5, Reserve and Other Funds). In conjunction with the airport improvement fee agreement with the airlines, a

portion of the fee that has been collected has been allocated to a reserve fund. The internally restricted net assets

are held in separate investment accounts by the GTAA and will be disbursed in accordance with its policies or com-

mitments for these funds.

61

NO

TE

S

Unrestricted

An unrestricted net assets represents cumulative revenue under expenses, including amortization, which remains

after reserve fund cash commitments have been made.

12. INTEREST AND FINANCING COSTS

Interest and financing costs for long-term debt and bank facilities, net of interest earned on the Debt Service

Reserve Fund and capitalized interest:

(in thousands) 2005 2004

Interest and financing costs incurred $ 403,027 $ 362,601

Less:

Interest earned on the Debt Service Reserve Fund (14,434) (11,657)

Capitalized Interest (54,193) (82,971)

$ 334,400 $ 267,973

13. EMPLOYEE BENEFITS

Defined Benefit Pension Plans

The GTAA maintains two defined benefit pension plans. One of these plans is for former Transport Canada

employees who were eligible to elect to transfer their pension credits to the GTAA plan. As at September 30, 2000,

the final election date, 151 of these employees elected to transfer their credits. As at December 31, 2004, all

employee pension credits were transferred to the GTAA from the Public Service Superannuation Account (“PSSA”).

No unfunded pension liability in respect of employees who transfer these pension credits was to be assumed by the

GTAA plan.

The GTAA measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as

at December 31 of each year. The most recent actuarial valuation of the pension plans for funding purposes was as

of January 1, 2004 and the next required valuation will be as of January 1, 2007.

62

NO

TE

SG

TA

A

20

05

Aggregate information about the GTAA’s defined benefit pension plans as at December 31 is as follows:

(in thousands) 2005 2004

ACCRUED BENEFIT OBLIGATION

Balance at beginning of year $ 74,321 $ 54,515

Transfer of PSSA liabilities — 4,351

Actuarial loss 8,119 6,769

Current service cost 3,407 2,958

Interest cost 4,561 3,894

Benefits paid (996) (743)

Employee contributions 978 942

Past service costs — 1,635

Balance at end of year 90,390 74,321

PLAN ASSETS

Fair value at beginning of year 71,694 55,510

Transfer of PSSA assets — 4,351

Employee contributions 978 942

Employer contributions 4,316 6,558

Actuarial gain 2,048 1,209

Expected return on plan assets 4,359 3,867

Benefits paid (996) (743)

Fair value at end of year 82,399 71,694

Funded status – plan deficit (7,991) (2,627)

Unamortized net actuarial loss 14,155 8,131

Unamortized past service costs 1,089 1,362

Unamortized transitional obligation 149 164

ACCRUED BENEFIT ASSET $ 7,402 $ 7,030

As at December 31, 2005, one of the GTAA’s two defined benefit pension plans is in a deficit position of

$10.9 million (2004 – $7.4 million deficit), with an accrued obligation of $79.5 million (2004 – $65.3 million) and a

fair value of plan assets of $68.6 million (2004 – $57.9 million). The other is in a surplus position of $2.9 million

(2004 – $4.8 million surplus), with an accrued obligation of $10.9 million (2004 – $9.0 million) and a fair value of

plan assets of $13.8 million (2004 – $13.8 million).

The GTAA’s net defined benefit pension plan expense is as follows:

(in thousands) 2005 2004

Current service cost $ 3,407 $ 2,958

Interest cost 4,561 3,894

Amortization of transitional amount 15 15

Amortization of past service cost 273 273

Net actuarial loss 47 —

Expected return on plan assets (4,359) (3,867)

Net defined benefit pension plan expense $ 3,944 $ 3,273

63

NO

TE

S

Total cash payments for employee future benefits for 2005, consisting of cash contributed by the GTAA to its funded

pension plans and cash contributed to the defined contribution plans was $8.5 million (2004 – $10.5 million).

The GTAA’s plan assets consist of:

Percentage of plan assetsAsset Category 2005 2004

Equity Securities 57% 58%

Fixed Income 26% 30%

Real Estate 15% 10%

Cash 2% 2%

Total 100% 100%

The significant actuarial assumptions used in measuring the GTAA’s accrued defined benefit pension

plan obligations are as follows (weighted-average assumptions as at December 31, 2005):

2005 2004

Discount rate 5.25% 6.00%

Expected long-term rate of return on plan assets 6.50% 6.50%

Rate of compensation increase 4.00% 4.00%

Defined Contribution Pension Plan Expense

The GTAA maintains a defined contribution pension plan providing pension benefits to certain of its employees.

The net expense for the defined contribution pension plan is as follows:

(in thousands) 2005 2004

Defined contribution pension plan expense $ 1,536 $ 1,362

The GTAA’s contribution to the defined contribution pension plan matches each participating employee’s

contribution to a maximum of 6% of the employee’s gross earnings.

Other Employee Future Benefits

Some employees are provided with paid-up life insurance at the time of retirement, the cost of which is recorded in

the period in which the insurance is acquired. The estimated accumulated benefit obligation for this expected

payment has not been recorded, as it is not considered to be a material amount.

14. TAXATION

The GTAA, and its wholly-owned subsidiary, are exempt from federal and provincial income tax, federal large

corporations tax and Ontario capital tax.

The GTAA is exempt from real property tax under the Assessment Act (Ontario). However, the GTAA is required

to pay each of the Cities of Toronto and Mississauga an amount determined by the Minister of Finance of Ontario,

as a payment-in-lieu of real property taxes.

15. RELATED PARTY TRANSACTIONS

Directors’ Fees

Directors’ fees expense for the year ended December 31, 2005 were $592,350 (2004 – $483,550).

64

NO

TE

SG

TA

A

20

05

16. COMMITMENTS AND CONTINGENT LIABILITIES

Ground Lease

The GTAA’s commitment in respect of annual Ground Lease Base Rent, including ground rent deferral repayments,

has been estimated at approximately $150.1 million for the year ending 2006; $151.8 million for the year ending

2007; $154.6 million for the year ending 2008; $156.9 million for the year ending 2009 and $159.2 million for the

year ending 2010 (see Note 19, Ground Rent Agreement).

Capital Commitments

In connection with the operation and development of the Airport, the GTAA had capital commitments outstanding at

December 31, 2005 of approximately $213.9 million (2004 – $384.5 million).

The GTAA would be required to pay a Deficiency Rent (see Note 3, Airport Subject To Ground Lease) equal to

any shortfall, which may exist between actual eligible capital expenditures and target capital expenditure amounts

established in the Ground Lease. Target capital expenditure amounts, subject to adjustments for inflation, were set

at approximately $422 million by December 31, 2001, which the GTAA has met. Target capital expenditure

amounts, subject to adjustments for inflation, have also been established for the five-year periods ending December

31, 2006, 2011 and 2016 at $345 million, $313 million and $835 million, respectively, with total target capital

expenditures aggregating $1.915 billion.

Letters of Credit

A letter of credit for $9.0 million was outstanding at December 31, 2005 (see Note 10, Long-Term Debt), relating to

the GTAA’s Clean Energy Supply contract with the Ontario Power Authority (see Note 20, Subsequent Events). The

letter of credit expires April 11, 2006.

Environmental

As part of its obligations prior to the transfer of the Airport to the GTAA, Transport Canada commissioned an envi-

ronmental baseline study report for the Airport. This report delineates the state of environmental contamination at

the Airport and discloses processes and practices which were not in full compliance with environmental laws or

accepted environmental practices at the time of transfer. Since the transfer, the GTAA has performed environmental

assessments as part of its ongoing environmental management program and has achieved ISO 14001 certification.

The GTAA is committed to ensuring that activities undertaken at the Airport are carried out in an environmentally

responsible manner, in compliance with applicable environmental laws and regulations, and with sensitivity to

community and public concerns.

Roadway Infrastructure

In connection with receiving a deferral for the payment of land transfer tax to the Province of Ontario until 2011, the

GTAA has agreed to participate in the development of highway infrastructure and transit improvements related to

the Airport. The timing and amount of funding participation has yet to be negotiated and agreed upon with the

Province of Ontario and will be dependent upon the redevelopment process. The GTAA has undertaken significant

transportation infrastructure work in meeting this requirement.

Boeing Lands

In July 2001, the GTAA and Boeing Toronto, Ltd. (“Boeing”) signed an agreement, amended in June 2002, under

which Boeing agreed to sell to the GTAA 45.73 hectares of land adjoining the Airport property for a total of

$30 million. These lands will be transferred to the GTAA in stages. It is anticipated that the first parcel will be

conveyed in early 2006. The remaining lands will be conveyed from time to time thereafter over a maximum period

of 20 years. Deposits totaling $8 million have been made, of which $3.3 million will be credited to the purchase

price for the first parcel and $4.7 million to the purchase price for the second parcel.

65

NO

TE

S

Insurance

The Government of Canada has issued an Order in Council providing full indemnity to the Canadian Aviation

industry for any coverage that was lost due to the cancellation of war and terrorism insurance. The Order in Council

has been approved for 2006. Official declarations of its status occur every 90 days to account for the potential of

change in the insurance industry. As part of the original Order in Council of September 2001 the GTAA was

required to purchase a $50 million primary layer of war and terrorist coverage from the commercial markets. This

coverage is in place for 2006.

Cogeneration Facility

In conjunction with the Clean Energy Supply contract with the Ontario Power Authority (see Note 20, Subsequent

Events), the GTAA has entered into certain contracts in order to secure the supply and delivery of natural gas

necessary for anticipated future operations of the Cogeneration Facility (see Note 8, Capital Assets). Under these

contracts, the GTAA will be required to make payments relating to both the delivery of natural gas based on

standard rate agreements and the cost of natural gas as determined by market rates.

Litigation

Canada 3000

In 2001 the GTAA, together with other Canadian Airport Authorities (“CAAs”), applied to the Ontario Superior Court

of Justice for an order under the Airport Transfer (Miscellaneous Matters) Act to permit the GTAA and the other

CAAs to seize and detain aircraft operated by Canada 3000 in respect of outstanding fees, charges and airport

improvement fees owed by Canada 3000 and its affiliates who filed for bankruptcy protection on November 11,

2001. The GTAA is owed approximately $12.8 million which was fully reserved in prior years. In a decision released

May 7, 2002, the Ontario court held that the GTAA and the other CAAs were not entitled to seize and detain aircraft

leased by Canada 3000 and its affiliates. The GTAA and the other CAAs appealed this decision to the Ontario Court

of Appeal. In a decision dated January 20, 2004, the Ontario Court of Appeal upheld the lower court’s decision by a

majority. The GTAA and the other CAAs have filed an application for, and subsequently obtained, leave to appeal

the Court of Appeal decision to the Supreme Court of Canada. The Supreme Court of Canada granted leave to

appeal the decision of the Ontario Court of Appeal and argument before the Supreme Court was heard on January

16th and 17th, 2006. A decision in the matter will be released in 2006.

Jetsgo Corporation

On March 11, 2005 Jetsgo Corporation (“Jetsgo”) ceased all operations and was granted protection from its

creditors by the Quebec Superior Court under the Companies’ Creditors Arrangement Act. The GTAA has filed a

claim for $5.7 million, including G.S.T., for amounts due at the time the operations ceased and including airport

improvement fees of $2.5 million. Given the preliminary status and uncertain outcome of Jetsgo’s filing, the GTAA

has taken a provision for $4.3 million against outstanding amounts.

Air France

Subsequent to the Air France incident on August 2, 2005, the GTAA, together with other parties, was named as a

defendant in a class action lawsuit commenced by certain passengers. The GTAA’s insurers are defending this

action. It is the opinion of management that this is an insurable event and that the GTAA’s financial exposure is

therefore limited to its insurance deductibles.

17. GUARANTEES

In the normal course of operations, the GTAA provides indemnification agreements to counterparties in a wide

variety of transactions such as contracts for goods and services, maintenance agreements, design-build contracts,

construction contracts, and information technology agreements. These indemnification agreements require the

66

NO

TE

SG

TA

A

20

05

GTAA to indemnify the counterparties in respect of costs incurred as a result of certain changes in the underlying

nature of the contracts (including, without limitation, changes in laws, delays caused by the GTAA, pre-existing

environmental conditions) and in respect of costs incurred as a result of certain litigation claims that may result

from the transaction (such as, by way of example, patent infringement or personal injury and property damage due

to the GTAA’s negligence). The terms of the indemnification agreements will vary based on the contract. The nature

of the indemnification agreements prevents Management from making a reasonable estimate of the maximum

potential amount the GTAA may be required to pay to or expend on behalf of such counterparties because such

limits are most commonly not set out in the said agreements and the events in question are themselves highly

contingent and variable in nature. Management attempts to limit its liability in respect of the indemnifications

provided to such counterparties through the purchase of liability and property insurance and the allocation of risk

to other contractors.

18. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

Reserve funds, accounts receivable, accounts payable and accrued liabilities and security deposits are reflected in

the financial statements at carrying values which approximate fair values because of the short-term maturities of

these instruments.

Fair value represents the amount that would be exchanged in an arm’s length transaction between willing parties

who are under no compulsion to act and is best evidenced by a quoted market price, if one exists. The GTAA’s fair

values are management’s estimates and are generally determined using market conditions at a specific point in

time and may not reflect future fair values. The determinations are subjective in nature, involving uncertainties and

the exercise of significant judgment.

Set out below is a comparison of the amounts that would be reported if long-term debts were reported at

fair values:

(in thousands) 2005 2004

Book Fair Book FairValue Value Value Value

Long-term debt $ 6,868,042 $ 7,656,055 $ 6,267,448 $ 6,750,517

Prior to January 1, 2004, the GTAA entered into interest rate swap contracts, described below, to mitigate negative

carry arising from investing the proceeds of fixed rate Revenue Bonds and Medium Term Notes in short-term

floating rate investments to fund Reserve Funds (see Note 5, Reserve and Other Funds). The GTAA received the

following fixed interest rates and paid variable interest rates semi-annually based on bankers’ acceptance rates.

Recent issues of floating rate debt provide an effective mechanism to mitigate the risk of investing Reserve Funds

in short-term floating rate investments.

Nominal FixedValue Interest

Series (in thousands) Rate Term Maturity Date

1999-1 July 20, 1999 $ 40,000 6.450% 30 years July 30, 2029

2000-1 June 12, 2000 17,500 6.310% 30 years June 12, 2030

2000-2 July 17, 2000 21,000 6.274% 10 years July 19, 2010

2000-1 reopen January 16, 2001 21,000 6.131% 30 years June 12, 2030

2000-2 reopen January 9, 2001 18,400 5.851% 10 years July 19, 2010

2001-1 June 4, 2001 35,000 6.395% 30 years June 4, 2031

67

NO

TE

S

As of March 30, 2004, the GTAA liquidated all interest rate swap contracts resulting in a payment to the GTAA of

$18.1 million. The unrealized deferred gain of $15.6 million as of December 31, 2003 was recorded as a deferred

gain on interest rate swaps on January 1, 2004 when the interest rate swaps were dedesignated from their original

hedging relationship. For the period from January 1, 2004 to the date the swap contracts were liquidated, the GTAA

recognized a fair value gain of $2.5 million which was recorded in interest and financing costs. The unrealized

deferred gain of $15.6 million is being amortized into interest and financing costs over the remaining term of the

various interest rate swap contracts. As of December 31, 2005, $13.5 million of this deferred gain remains unamortized.

In addition, the GTAA entered into a multi-interval commodity swap in July 2002 to fix the price on a portion of

its electricity consumption. From November 2002 to February 2005 the GTAA paid a fixed price per MWh and

received a floating price based on the Hourly Ontario Energy Price (“HOEP”). As of January 2004 a deferred charge

of $1.8 million was recorded and has been amortized to goods and services expense over the remaining term of the

swap as the underlying electricity consumption is recognized. Changes in fair value subsequent to January 2004

are recorded directly to goods and services expense. The fair value of the commodity swap as at December 31,

2005 is nil (2004 – $0.2 million) (see Note 7, Deferred Charges).

Interest Rate Risk

The GTAA’s exposure to interest rate risk relates to its floating rate current and long-term bank indebtedness (see

Note 10, Long Term Debt). The impact of a 1% change in interest rates applied to the average bank indebtedness

outstanding during 2005 would have amounted to approximately $5.6 million (2004 – $5.7 million). The Debt

Service Reserve Fund for bank indebtedness (see Note 5, Reserve and Other Funds) is adjusted annually on

December 2nd based on the prevailing bankers’ acceptance rate.

The impact of a 1% change in the interest rate on the Reserve Funds would amount to approximately

$9.2 million (2004 – $8.8 million).

Credit Risk

The GTAA is subject to credit risk through its accounts receivable. The GTAA performs ongoing credit valuations of

these balances and maintains valuation allowances for potential credit loss.

The GTAA derives a substantial portion of its operating revenues from air carriers through landing fees and

general terminal charges. Passenger activity at the airport is approximately 75% origin and destination traffic, and

although there is a concentration of service with one air carrier, the GTAA believes that any change in the airline

industry will not have a significant long-term impact on revenues or operations.

19. GROUND RENT AGREEMENT

In July 2003 the Government of Canada announced a program to allow for a reduction in the ground rent, for a

two-year period commencing July 1, 2003. The deferral during this period is $41.6 million. For each of the 10 years

following January 1, 2006, the GTAA’s annual ground rent payment will be increased by approximately $4.2 million

per year. The increase in the liability for 2005 was $10.5 million, bringing the total liability to $41.6 million.

In December 2004, the GTAA received a ground rent refund totaling $12.4 million (net of interest) as a result of

published revenue passenger levels from Statistics Canada for 2002 and 2003. The published revenue passenger

levels were lower than passenger thresholds established under the terms of the Ground Rent Agreement.

20. SUBSEQUENT EVENTS

Cogeneration Facility

On February 1, 2006, the term of the Clean Energy Supply Contract (CES Contract) between the GTAA and the

Ontario Power Authority commenced, pursuant to which the GTAA is obliged to have 90 MW of electrical energy

available to the Ontario power grid. The term of the CES Contract is for 20 years, subject to early termination rights

available to the GTAA. Payments under the CES Contract will depend on whether net electricity market revenues

that the GTAA is deemed to have earned are greater or less than the net revenue requirement, as defined in the

CES Contract.

Under the terms of the CES Contract, the GTAA will also be required to comply with certain financial and other

covenants. As at February 17, 2006, the GTAA was in compliance with all such covenants.

Medium Term Notes

In February 2006, the GTAA issued Series 2006-1 Medium Term Notes in the amount of $250 million.

Series 2006-1 has a term of 5 years and bears interest at 4.40%. Interest is payable semi-annually commencing

August 28, 2006. The Series 2006-1 Medium Term Notes are redeemable in whole or in part at the option of the

GTAA at any time at a redemption price based on yields over Government of Canada bonds with a similar term

to maturity.68

NO

TE

SG

TA

A

20

05

69

DI

SC

LO

SU

RE

Subsection 9.01.07, paragraphs (a) to (g) of the Ground Lease requires the GTAA to publish an annual report that

discusses the matters listed below.

A) AUDITED FINANCIAL STATEMENTS

The Auditors’ Report and the audited consolidated financial statements are found on pages 44 to 68 and the

summary of affairs (Management’s Discussion and Analysis) is found on pages 29 to 43 of the Annual Report.

B) REPORT ON THE BUSINESS PLAN AND OBJECTIVES FOR 2005

The projected cash flows in any year constitute the business plan for that year. The business plan for 2005 is the

2005 summary of projected cash flows which is found below in Paragraph C (the “2005 Business Plan”). A report

on the GTAA’s performance relating to the 2005 Business Plan is discussed in Management’s Discussion and

Analysis (“MD&A”).

Further, in the Annual Reports for the previous four years, comparisons to the respective business plans and the

overall corporate performance is discussed in the respective MD&A.

C) VARIANCES AND CORRECTIVE MEASURES WITH RESPECT TO THE REPORT ON THE 2005 BUSINESS PLAN

The following table provides a comparison between the 2005 actual operating results and the 2005 Business Plan.

The results are presented on a modified cash basis consistent with the projected summary of cash flows and the

GTAA’s rate setting methodology. This presentation does not include certain non-cash items such as amortization or

deferred ground rent, but does include other items such as the funding of reserve accounts and notional principal,

which are not included as expenses in the statement of operations.

2005

2005 Business

(in millions) Actual Plan Variance

Revenues

Landing fees $ 406 $ 423 $ (17)

General terminal charges 157 165 (8)

Airport improvement fees, net 175 169 6

Car parking and ground transportation 96 90 6

Concessions, rentals and other 119 126 (7)

953 973 (20)

Operating Expenses

Ground rent 133 133 —

Goods and services 262 251 (11)

Salaries, wages and benefits 99 97 (2)

Real property taxes and payments-in-lieu

of real property taxes 23 24 1

Debt service 411 421 10

928 926 (2)

Debt Service Coverage 33 33 —

Fund Deposits/(Withdrawals) 20 14 (6)

Net Cash Surplus/(Deficit) $ (28) $ — $ (28)

D I S C L O S U R E R E Q U I R E M E N T S O F T H E G R O U N D L E A S E

70

DI

SC

LO

SU

RE

GT

AA

2

00

5

A detailed discussion of the 2005 financial results is contained in the MD&A. Net cash for 2005 was below budget

as a result of lower revenue and higher expenses.

Total revenues were $20 million below the projected cash summary. Maximum Take-Off Weight (“MTOW”) and

the number of arrived seats, which are the basis for the calculation of landing fees and general terminal charges

respectively, were below projections as a result of Jetsgo ceasing operations and the high load factors experienced

by many of the airlines operating at the Airport. Therefore, these two revenue sources were below projections.

Passenger traffic was on target and consequently Airport Improvement Fee (“AIF”) revenues and parking and some

concession revenues exceeded projections.

Total operating expenses, including debt service, were $2 million over projection. Goods and services were

higher than projected by approximately $11 million. Significant factors leading to this variance include higher than

projected utility prices and usage, greater snow removal operations than anticipated and the provision for bad debts

associated with the Jetsgo bankruptcy. The other operating expense categories were within 2% of projections.

The deposits to the debt service coverage fund were as projected. As AIF collected exceeded projections,

a larger amount was transferred to the AIF reserve fund, resulting in a $6 million variance.

D) SUMMARY OF THE FIVE-YEAR BUSINESS PLAN

The five-year Business Plan is based on assumptions underlying the GTAA’s assessment of various external factors.

During 2006, the GTAA will be focused on the preparations to open Pier F in the first quarter of 2007 and the com-

pletion of portions of the redevelopment of Terminal 3. Within this context, the following areas will be of strategic

concern:

• Net revenue generation from non-aeronautical sources;

• The efficient deployment of staff resources;

• Life cycle management for capital assets; and

• Prioritization of capital expenditures;

all without compromising safety and security.

The economic and operating assumptions for 2006 include:

• GDP growth of 2.8%;

• Inflation as measured by the CPI index of 2.0%;

• 31.0 million total passengers;

• Landed MTOW of 13.1 million tonnes; and

• 21.3 million landed seats.

The primary driver for the GTAA’s Business Plan in years 2006 to 2010 is the growth in passengers over that

period. The forecast average annual growth rate from 2006 to 2010 is 4.2%. Aircraft movements, landed MTOW

and landed seats are expected to grow at a similar rate. The single most influential event projected over this time

horizon is the opening of Pier F on Terminal 1 in the first quarter of 2007. This will result in some additional operat-

ing expenses due to the additional terminal and apron area and an increase in debt service.

The projected Business Plan includes principal repayment amounts but does not include amortization. The

reader is cautioned that some assumptions used may not materialize and unanticipated events and circumstances

may occur subsequent to the date that this summary was prepared. Therefore, the actual results achieved on a

cash basis during the period may vary and the variations may be material. For a more complete discussion the risks

and uncertainties and caution regarding forward-looking statements, see the MD&A and the Annual Information

Form, copies of which may be accessed at www.sedar.com (“SEDAR”).

71

DI

SC

LO

SU

RE

Projected Business Plan

(in millions) 2006 2007 2008 2009 2010

Revenues

Landing fees $ 458 $ 497 $ 508 $ 519 $ 527

General terminal charges 180 209 213 218 223

Airport improvement fees, net 184 192 200 208 217

Car parking and ground Transportation 95 99 103 107 111

Concessions, rentals and other 154 167 174 181 189

1,071 1,164 1,198 1,233 1,267

Expenses

Ground rent 151 155 159 163 167

Goods and services 288 310 318 326 335

Salaries, wages and benefits 99 103 105 107 109

Real property taxes and payments-in-lieu

of real property taxes 22 25 26 27 28

Debt Service (net of interest income) 466 594 608 607 614

1,026 1,187 1,216 1,230 1,253

Debt Service Coverage 31 32 4 — 2

Fund Deposits 14 (55) (22) 3 12

Net Cash Surplus (Deficit) $ — $ — $ — $ — $ —

Projected Capital Expenditures

(in millions) 2006 2007 2008 2009 2010 Total

Operating, Maintenance

& Restoration Capital $ 75 $ 75 $ 66 $ 75 $ 75 $ 366

T3 Redevelopment 35 32 — 4 — 71

Cogeneration Plant 1 — — — — 1

Land Acquisitions 8 — 6 — 11 25

ADP Stage 1 & 2 246 187 13 — — 446

ADP Stage 3 — 37 95 70 6 208

72

DI

SC

LO

SU

RE

GT

AA

2

00

5

F) ETHICAL BUSINESS CONDUCT

The Board has adopted a written code regarding the conduct of the GTAA’s Directors, officers and employees which

is Section 6.13 of the GTAA’s Amended and Restated General Operating By-law 14. (“By-law 14”). The Board has

also adopted a written Conflict of Interest code regarding the conduct of the GTAA’s Directors and officers which is

Section 6.12 of By-law 14, which, among other things, requires Directors and officers to exercise independent

judgment. Both of these codes are currently under review, and can be accessed at SEDAR.

The Board monitors the compliance with these codes by requiring each Director and officer to sign an Annual

Declaration advising that the Director or officer has read the Code of Conduct and Conflict of Interest sections of

By-law 14 and either declares that the Director or officer is in compliance or not in compliance with the codes and

to declare the reasons for the non-compliance. In addition, the Board has implemented an “Ethics Line” which

permits the anonymous reporting of an employee, officer or Director’s unethical behaviour.

G) REPORT ON CONTRACTS OVER $75,000 NOT TENDERED

The By-laws of the GTAA, the Public Accountability Principles for Canadian Airport Authorities and the Ground

Lease provide that all contracts in excess of $75,000 (as adjusted annually by CPI) must be awarded through a

public tendering process, except as may be otherwise determined by the Board of Directors having regard for what

may be efficient and practicable. The contracts that are not awarded through a public tendering process must be

described in the GTAA’s Annual Report.

Board of Directors’ Remuneration – 2005

Badger, Gregg $ 34,000

Brigham, Patrick S. 29,750

Butt, Michael A. 38,043

Cole, Scott R. 14,207*

Cosburn, B. Mac 40,625

Day-Linton, Marilynne E. 35,000

Hart, Christine E. 34,550

Hurren, Warren C. 79,300

Hutzel, Benjamin J. 36,550

Knipe, Catherine J. 29,250

Loberg, Norman B. 14,207*

Lyons, Jeffery S. 17,793

McCormack, Thomas W. 14,793

McKelvey, Bruce A. 12,457*

Parsons, Louis H. 33,300

Richmond, Dale E. 32,500

Soberman, Richard M. 32,250

Worrall, Lawrence D. 38,250

* New Board Members’ term started May 11, 2005.

Messrs. Butt, Lyons and McCormack’s term ended

May 11, 2005. Mr. Hurren was appointed Chairman

of the Board effective January 1, 2005.

Senior Officers’ Salaries – 2005

Kaldeway, John $ 340,000

Burke, James J. 212,022

Fountain, Judy A. 224,295

Grant, Gordon D.(1) 58,261(1)

Lackey, Brian R. 206,546

Lotito, Vito 181,228

Love, Douglas A. 219,631

McCoomb, Lloyd A. 231,351

Shaw, Stephen A. 193,368

(1) Mr. Grant resigned April 26, 2005.

Senior Officers are also eligible for a performance-

based bonus. Additional information is available in

the Annual Information Form which is available on

www.sedar.com.

E) REMUNERATION TO BOARD AND SALARY OF SENIOR OFFICERS

In 2005, remuneration to the Board of Directors and salaries paid to Senior Officers were as follows:

73

DI

SC

LO

SU

RE

Reason for Award without

Contract Value Range Contractor Description of Contract Public Tender

$75,000 – $174,000 Trecata Corporation Technical and functional services for HR A

payroll interface.

CRA Contractors Limited Handling of contaminated soil at the federal level A

of the Boeing site.

Humble Equipment Company Inc. Surface re-texturing of Runway 25R/06L. B

Safegate Airport Systems Inc. Supply and install gate operating system at C

Terminals 1 and 3.

Siemens Building Technologies Inspection and warranty services for life safety C

Ltd. – Fire Safety Division system – Terminal 3.

Pioneer Transformers Ltd. Two transformers. A

$175,000 – $274,000 McCormick Rankin Corporation Groundside transportation planning services A

for Pickering site.

$275,000 – $374,000 Larter Associates Inc. Advertising campaign to support the GTAA rent issue. B

Premium Technologies Inc. Information technology consultancy services. A

$375,000 – $474,000 Powerwave Technologies Design and testing of distributed antenna C

Canada Ltd. system (Pier F of T1 and T3).

Microsoft Licensing GP Microsoft licences for 1000 desktop computers. C

$475,000 – $574,000 Powerwave Technologies Equipment for distributed antenna system C

Canada Ltd. (Pier F of T1 and T3).

ThiessenKrupp Airport Provide repairs and modification services to C

Systems Inc. Thyssen passenger boarding bridges at T1.

$575,000 – $774,000 Intervistas Consulting Inc. Facilitation advocacy services. B

$775,000 – $874,000 —

$875,000 – $974,000 —

$975,000 + Brooke Laker Associates Limited Audit/operational review assignments (ADP). A

Revay and Associates Limited Construction claims services (ADP). A

Dell Financial Services Leasing of computer hardware (as requested). B

Canada Limited

Microage (a Div. of Syspro IT&T service desk. A

Proven Systems Limited)

74

DI

SC

LO

SU

RE

GT

AA

2

00

5

REASON FOR AWARD GLOSSARY

A. Where the Corporation determines that in connection with an existing contract for the supply of goods or

services which is expiring, it is most efficient and practicable to award a new contract to the existing contractor

or services supplier where such contractor or services supplier has developed a specific skill set or knowledge

base in respect of that contract, or where the circumstances of the redevelopment program dictate that

efficiency, time, cost or safety concerns dictate such action.

B. Where there is limited number (or just one) contractor, or services supplier who can provide the required goods

or services.

C. Where warranty, patent or copyright requirements or technical compatibility factors dictate a specific supplier.

D. In any other circumstances where the President and Chief Executive Officer determines it is necessary to do so

having regard to the safe, efficient and practicable operation of LBPIA.

75

BO

AR

DO

FD

IR

EC

TO

RS

WARREN C. HURRENPartner, Hurren, Sinclair, MacIntyre

NGO – Nominated by the Durham RegionBoard of Trade

GREGG BADGERSecretary, Asset and Risk Management

Ronald A. Chisholm Ltd.

Appointed by the Province of Ontario

PATRICK S. BRIGHAMChairman, Mad Catz Interactive, Inc.

At-large – Nominated by the GTAA Board

SCOTT R. COLEPresident, Cole Engineering Group Ltd.

Nominated by the Regional Municipalityof York

B. MAC COSBURNPresident, B. McGregor DevelopmentsLimited

NGO – Nominated by the York RegionBoard of Trade

MARILYNNE E. DAY-LINTONChartered Accountant

NGO – Nominated by the Institute ofChartered Accountants of Ontario

CHRISTINE E. HARTPresident, Accord/hart & associates inc.

Appointed by the Government of Canada

BENJAMIN J. HUTZELPartner, Bennett Jones

Appointed by the Governmentof Canada

CATHERINE J. KNIPEPartner, Meadow Group Consulting Inc.

Nominated by the Regional Municipalityof Halton

NORMAN B. LOBERGChairman, Quadra Bay Inc.

At-large – Nominated by the GTAA Board

A. BRUCE MCKELVEYRetired Executive

Nominated by the City of Toronto

LOUIS H. PARSONSPresident, Lou Parsons & Associates Inc.

Nominated by the Regional Municipalityof Peel

DALE E. RICHMONDRetired Executive

At-large – Nominated by the GTAA Board

RICHARD M. SOBERMANAssociate, Trimap Communications Inc.

NGO – Nominated by the Toronto Board of Trade

LAWRENCE D. WORRALLRetired Executive

Appointed by the Regional Municipalityof Durham

B O A R D O F D I R E C T O R S

76

CO

RP

OR

AT

E

IN

FO

RM

AT

IO

NG

TA

A

20

05 C O R P O R A T E I N F O R M A T I O N

HEAD OFFICE ADDRESS

GREATER TORONTO AIRPORTS AUTHORITY

3111 Convair DriveP.O. Box 6031Toronto AMFOntario, CanadaL5P 1B2

Telephone: 416-776-3000Fax: 416-776-3555Web: www.gtaa.com

SENIOR OFFICERS

JOHN KALDEWAYPresident and Chief Executive Officer

JAMES J. BURKEVice President and Chief Information Officer

JUDY A. FOUNTAINVice President and Chief Financial Officer

BRIAN R. LACKEY Vice President, Operations andChief Engineer

VITO LOTITOVice President, Human Resourcesand Administration

DOUGLAS A. LOVEVice President, General Counsel and Secretary

LLOYD A. MCCOOMBVice President, Planning and Development

STEPHEN A. SHAWVice President, Corporate Affairs

ANNUAL PUBLIC MEETING

The GTAA’s Annual Public Meetingwill be held on May 10, 2006 at1:30 p.m. at the Toronto Board of Trade Airport Centre830 Dixon Road Toronto, Ontario

PUBLIC INFORMATION

Media inquiries, requests for generalinformation and copies of publicationsshould be directed to:Vice President, Corporate Affairs Telephone: 416-776-3580Fax: 416-776-7593email: corporate_affairs@gtaa.com

AUDITORS

Deloitte & Touche LLPMississauga, Ontario

LEAD BANK

Canadian Imperial Bank of CommerceToronto, Ontario

PRINCIPAL LEGAL COUNSEL

Osler, Hoskin & HarcourtToronto, Ontario

PUBLICATIONS AVAILABLE

NEWSLETTERSGTAA Today Employee NewsletterToronto Pearson Today

BROCHURES ANDMISCELLANEOUS PUBLICATIONS

Airport Development

Art, Architecture and the Airport – The Visual and the Visionary

Bus Connections to the Infield Terminal

Central Deicing Facility Annual Financial Report

Customer Assistance Guide for Airport Employees

Customer Service at Toronto Pearson

Environmental Management

IT&T Business Services

Noise Management (Annual) Report

Nominators’ Report

Safety, Security and AirportOperations

Transportation and Parking

ST

RA

TE

GIC

DIR

EC

TIO

N:

S.D

. C

OR

PO

RA

TE

CO

MM

UN

ICA

TIO

NS

C

ON

CE

PT

AN

D D

ES

IGN

: S

ER

RE

DE

SIG

N C

OM

MU

NIC

AT

ION

S

PH

OT

OG

RA

PH

Y:

SC

OT

T A

RM

ST

RO

NG

, P

AT

RIC

IA W

ILK

INS

ON

, LO

RE

LLA

ZA

NE

TT

I

TY

PE

SE

TT

ING

: C

OR

PO

RA

TE

TY

PE

SE

TT

ING

SE

RV

ICE

S

PR

INT

ING

: T

RA

NS

CO

NT

INE

NT

AL

O’K

EE

FE

TO

RO

NT

O

PR

INT

ED

IN

CA

NA

DA

The Greater TorontoAirports Authority missionstatement is to developand operate for the publicbenefit, an airport systemwhich supports theeconomic developmentand cultural diversity ofsouth central Ontario andCanada, providingaviation facilities andservices that achieve:The highest standards ofsafety and security;Excellence in customerservice;Environmentalstewardship andsustainability; andCost effectiveness andefficiency.This mission will beachieved through:Developing a skilled anddedicated work force;Maximizing technologyinnovation; andExcellence in corporategovernance.

PASSENGERAC JazzAeroflotAeromexicoAerosvitAir CanadaAir FranceAir IndiaAir JamaicaAir New ZealandAir TransatAlaska AirlinesAlitaliaAll Nippon AirwaysAmerica WestAmerican AirlinesAmerican Eagle Atlantic SoutheastAustrianAviancaBmiBritish AirwaysBWIACanjetCathay PacificChatauqua AirlinesComairCondorContinental CubanaCzech AirlinesDeltaEL ALEtihadFinnairHarmony AirwaysIberiaJapanKelowna FlightcraftKLMKorean Air

LACSALan ChileLOT PolishLTU Int’l AirwaysLufthansaMalevMartinairMesa AirlinesMesaba AirlinesMexicanaMiami AirMidwestMyTravel AirwaysNorthwestOlympicPakistan PiedmontPinnacle AviationPSAQantasRoyal JordanianSAS ScandinavianSata InternationalSingaporeSkyserviceSN BrusselsSunwingSWISS InternationalThai AirwaysThomas CookUnited AirlinesUnited Express/AirWisconsinUS AirwaysVarig BrazilianWestJet Zoom

CARGODHL Airways Federal ExpressKorean CargoMorningstarUPS

DOMESTICCalgaryCharlottetownEdmontonFrederictonHalifaxKelownaKingstonLondonMonctonMontrealNorth BayOttawaQuebecReginaSaint JohnSarniaSaskatoonSault Ste MarieSt. JohnsSudburyThunder BayTimminsVancouverVictoriaWindsorWinnipeg

TRANSBORDERAlbanyAllentownAtlantaBaltimoreBostonCharlotteChicagoClevelandColumbusCovington/CincinnatiDallas-Fort WorthDenverDetroitFt LauderdaleHoustonIndianapolisKansas CityLas VegasLos AngelesManchesterMemphisMiamiMiddletownMilwaukeeMinneapolisNashvilleNewarkNew YorkOrlandoPhiladelphiaPhoenix

PittsburghProvidenceRaleigh/DurhamRochesterSan FranciscoSeattleSt. LouisSt. PetersburgTampaWashingtonWhite PlainsWindsor Locks

INTERNATIONALAmsterdamAthensBirminghamBridgetownBudapestBuenos AiresCancunCayo CocoDelhiDublinFrankfurtGlasgowHamiltonHavanaHolguinHong KongKingstonLisbonLondonManchesterMexico CityMilanMontego BayMoscowMunichNassauParisPort Of SpainPraguePuerto PlataPuerto VallartaPunta CanaRomeSan JoseSantiagoSao PauloSeoulTel AvivTobagoTokyoVaraderoViennaWarsawZurich

76passenger

airlines

26direct Canadian

destinations

44direct international

destinations

44direct US

destinations

➤

➤

➤

➤

➤

➤

➤

AWARDSReflective of the GTAA’scommitment towardsexcellence, thecorporation receivedawards for a broadrange of endeavors in2005, including:

An achievement awardfrom the TransportationHealth & SafetyAssociation of Ontariofor operating with injuryfrequency and cost ratefactors below thecompany’s group ratefor three consecutiveyears

Two awards ofexcellence from theAmerican Council ofEngineering Companiesof New York in thecategories ofBuilding/TechnologySystems andTransportationEngineering

An Award of Excellencefrom the Association ofRegistered InteriorDesigners of Ontario forthe DistinguishedVisitors’ Lounge inTerminal 1

A Silver Screen Awardfrom the InternationalFilm and Video Festivalfor the DVD “FondMemories, NewBeginnings”.

➤

➤

➤

➤

$10,000GTAA donation

to Katrina relief

3interfaith

centres

3medical clinics

with 24 staff

$18,000landing fee waived for

tsunami relief flight

PASSENGERS BY TERMINAL

1

23

1 Terminal 1 47%

2 Terminal 2 20%

3 Terminal 3 33%

PASSENGER TRAFFIC BY SECTOR

1

23

1 Domestic 43%

2 Transborder 30%

3 International 27%

2005

2010

2015

2020

29.93

36.98

44.00

50.00

PASSENGER MOVEMENTS BY FORECASTin millions

ESTIMATED2005 ANNUAL CARGO VOLUMESFor YYZ in tonnes

1

23

1 Domestic 95,000

2 Transborder 126,000

3 International 189,000

ECONOMIC IMPACT

Total economic impact is broken into

three components: Direct, Indirect

and Induced impacts. The airport

and its associated activities were

responsible for output, jobs and

employment income as listed.

AIRCRAFT MOVEMENTS BY AIRCRAFT TYPE

1

23

1 Propeller 15%

2 Small jets 26%

3 Narrow body jets 46%

4 Wide body jets 12%

4

AIRCRAFT MOVEMENTS BY SECTOR

12

3

1 Domestic 42%

2 Transborder 45%

3 International 13%

2005

2010

2015

2020

410.0

477.6

556.4

645.6

AIRCRAFT MOVEMENTS BY FORECAST*in thousands *excluding general aviation

GROUNDSIDE ORIGINS/DESTINATIONSToronto 56.0%

Mississauga 15.0%

Brampton 4.3%

Markham 3.8%

Oakville 3.3%

Other 17.6%

Source 2005 survey

EmploymentOutput IncomeM, $ 2004 Jobs M, $ 2004

Direct $ 9,094.7 69,253 $ 1,684.7

Indirect $ 4,796.2 26,459 $ 978.1

Induced $ 3,056.0 28,714 $ 932.0

Total $ 16,947.0 124,426 $ 3,594.7

50ha dedicated to cargo

154,000sq. m. new apron

71roadway bridges

The Greater TorontoAirports Authority missionstatement is to developand operate for the publicbenefit, an airport systemwhich supports theeconomic developmentand cultural diversity ofsouth central Ontario andCanada, providingaviation facilities andservices that achieve:The highest standards ofsafety and security;Excellence in customerservice;Environmentalstewardship andsustainability; andCost effectiveness andefficiency.This mission will beachieved through:Developing a skilled anddedicated work force;Maximizing technologyinnovation; andExcellence in corporategovernance.

PASSENGERAC JazzAeroflotAeromexicoAerosvitAir CanadaAir FranceAir IndiaAir JamaicaAir New ZealandAir TransatAlaska AirlinesAlitaliaAll Nippon AirwaysAmerica WestAmerican AirlinesAmerican Eagle Atlantic SoutheastAustrianAviancaBmiBritish AirwaysBWIACanjetCathay PacificChatauqua AirlinesComairCondorContinental CubanaCzech AirlinesDeltaEL ALEtihadFinnairHarmony AirwaysIberiaJapanKelowna FlightcraftKLMKorean Air

LACSALan ChileLOT PolishLTU Int’l AirwaysLufthansaMalevMartinairMesa AirlinesMesaba AirlinesMexicanaMiami AirMidwestMyTravel AirwaysNorthwestOlympicPakistan PiedmontPinnacle AviationPSAQantasRoyal JordanianSAS ScandinavianSata InternationalSingaporeSkyserviceSN BrusselsSunwingSWISS InternationalThai AirwaysThomas CookUnited AirlinesUnited Express/AirWisconsinUS AirwaysVarig BrazilianWestJet Zoom

CARGODHL Airways Federal ExpressKorean CargoMorningstarUPS

DOMESTICCalgaryCharlottetownEdmontonFrederictonHalifaxKelownaKingstonLondonMonctonMontrealNorth BayOttawaQuebecReginaSaint JohnSarniaSaskatoonSault Ste MarieSt. JohnsSudburyThunder BayTimminsVancouverVictoriaWindsorWinnipeg

TRANSBORDERAlbanyAllentownAtlantaBaltimoreBostonCharlotteChicagoClevelandColumbusCovington/CincinnatiDallas-Fort WorthDenverDetroitFt LauderdaleHoustonIndianapolisKansas CityLas VegasLos AngelesManchesterMemphisMiamiMiddletownMilwaukeeMinneapolisNashvilleNewarkNew YorkOrlandoPhiladelphiaPhoenix

PittsburghProvidenceRaleigh/DurhamRochesterSan FranciscoSeattleSt. LouisSt. PetersburgTampaWashingtonWhite PlainsWindsor Locks

INTERNATIONALAmsterdamAthensBirminghamBridgetownBudapestBuenos AiresCancunCayo CocoDelhiDublinFrankfurtGlasgowHamiltonHavanaHolguinHong KongKingstonLisbonLondonManchesterMexico CityMilanMontego BayMoscowMunichNassauParisPort Of SpainPraguePuerto PlataPuerto VallartaPunta CanaRomeSan JoseSantiagoSao PauloSeoulTel AvivTobagoTokyoVaraderoViennaWarsawZurich

76passenger

airlines

26direct Canadian

destinations

44direct international

destinations

44direct US

destinations

➤

➤

➤

➤

➤

➤

➤

AWARDSReflective of the GTAA’scommitment towardsexcellence, thecorporation receivedawards for a broadrange of endeavors in2005, including:

An achievement awardfrom the TransportationHealth & SafetyAssociation of Ontariofor operating with injuryfrequency and cost ratefactors below thecompany’s group ratefor three consecutiveyears

Two awards ofexcellence from theAmerican Council ofEngineering Companiesof New York in thecategories ofBuilding/TechnologySystems andTransportationEngineering

An Award of Excellencefrom the Association ofRegistered InteriorDesigners of Ontario forthe DistinguishedVisitors’ Lounge inTerminal 1

A Silver Screen Awardfrom the InternationalFilm and Video Festivalfor the DVD “FondMemories, NewBeginnings”.

➤

➤

➤

➤

$10,000GTAA donation

to Katrina relief

3interfaith

centres

3medical clinics

with 24 staff

$18,000landing fee waived for

tsunami relief flight

PASSENGERS BY TERMINAL

1

23

1 Terminal 1 47%

2 Terminal 2 20%

3 Terminal 3 33%

PASSENGER TRAFFIC BY SECTOR

1

23

1 Domestic 43%

2 Transborder 30%

3 International 27%

2005

2010

2015

2020

29.93

36.98

44.00

50.00

PASSENGER MOVEMENTS BY FORECASTin millions

ESTIMATED2005 ANNUAL CARGO VOLUMESFor YYZ in tonnes

1

23

1 Domestic 95,000

2 Transborder 126,000

3 International 189,000

ECONOMIC IMPACT

Total economic impact is broken into

three components: Direct, Indirect

and Induced impacts. The airport

and its associated activities were

responsible for output, jobs and

employment income as listed.

AIRCRAFT MOVEMENTS BY AIRCRAFT TYPE

1

23

1 Propeller 15%

2 Small jets 26%

3 Narrow body jets 46%

4 Wide body jets 12%

4

AIRCRAFT MOVEMENTS BY SECTOR

12

3

1 Domestic 42%

2 Transborder 45%

3 International 13%

2005

2010

2015

2020

410.0

477.6

556.4

645.6

AIRCRAFT MOVEMENTS BY FORECAST*in thousands *excluding general aviation

GROUNDSIDE ORIGINS/DESTINATIONSToronto 56.0%

Mississauga 15.0%

Brampton 4.3%

Markham 3.8%

Oakville 3.3%

Other 17.6%

Source 2005 survey

EmploymentOutput IncomeM, $ 2004 Jobs M, $ 2004

Direct $ 9,094.7 69,253 $ 1,684.7

Indirect $ 4,796.2 26,459 $ 978.1

Induced $ 3,056.0 28,714 $ 932.0

Total $ 16,947.0 124,426 $ 3,594.7

50ha dedicated to cargo

154,000sq. m. new apron

71roadway bridges

Greater Toronto Airports Authority

2005 Annual Report

Toronto Pearson is emerging as a significant

major airport for North America with the

capacity and facilities to accommodate the

anticipated future growth of the industry.

Enhancing access to regional and global

markets, the airport supports the economic

development of the Greater Toronto Area, the

Province of Ontario and Canada.

G T A A

5runways

43taxiways

143gates

1810ha – area of

airport land

GREATER TORONTO AIRPORTS AUTHORITY

Toronto Pearson International AirportP.O. Box 6031, 3111 Convair DriveToronto AMF, Ontario, Canada L5P 1B2

www.gtaa.com

P O S I T I O N E D T O D E L I V E R

Greater Toronto Airports Authority

2005 Annual Report

Toronto Pearson is emerging as a significant

major airport for North America with the

capacity and facilities to accommodate the

anticipated future growth of the industry.

Enhancing access to regional and global

markets, the airport supports the economic

development of the Greater Toronto Area, the

Province of Ontario and Canada.

G T A A

5runways

43taxiways

143gates

1810ha – area of

airport land

GREATER TORONTO AIRPORTS AUTHORITY

Toronto Pearson International AirportP.O. Box 6031, 3111 Convair DriveToronto AMF, Ontario, Canada L5P 1B2

www.gtaa.com

P O S I T I O N E D T O D E L I V E R