Numerical simulations of groundwater flow and heat transport are used to provide insight into the interaction between shallow groundwater flow and thermal dynamics related to permafrost thaw and thaw settlement at the Iqaluit Airport taxiway, Nunavut, Canada. A conceptual model is first developed for the site and a corresponding two-dimensional numerical model is calibrated to the observed ground temperatures. Future climate-warming impacts on the thermal regime and flow system are then simulated based on climate scenarios proposed by the Intergovernmental Panel on Climate Change (IPCC). Under climate warming, surface snow cover is identified as the leading factor affecting permafrost degradation, including its role in increasing the sensitivity of permafrost degradation to changes in various hydrogeological factors. In this case, advective heat transport plays a relatively minor, but non-negligible, role compared to conductive heat transport, due to the significant extent of low-permeability soil close to surface. Conductive heat transport, which is strongly affected by the surface snow layer, controls the release of unfrozen water and the depth of the active layer as well as the magnitude of thaw settlement and frost heave. Under the warmest climate-warming scenario with an average annual temperature increase of 3.23 °C for the period of 2011–2100, the simulations suggest that the maximum depth of the active layer will increase from 2 m in 2012 to 8.8 m in 2100 and, over the same time period, thaw settlement along the airport taxiway will increase from 0.11 m to at least 0.17 m.