Since the 1990s, Canada’s major airports have been operating as private, not-for-profit self-sustaining businesses. Today, airports contribute over $1 billion a year in rent and other fees to the federal government, and Canada is recognized as having the best aviation infrastructure and most efficiently run airports in the world.
But all of that could change if the federal government moves forward with a proposed sell-off of Canada’s major airports. Acting on the recommendation of former federal cabinet minister David Emerson, the government has asked investment bankers Credit Suisse to provide an analysis of the proposed sell-off to private investment groups to operate on a for-profit basis. Given the success of Canada’s major airports, the proposal has raised a number of concerns.
The consequences can’t be ignored
According to Ottawa International Airport Authority (OIAA) President and CEO Mark Laroche, selling off Canada’s airports would be a mistake as it will raise the cost of flying.
“The experience of other jurisdictions, notably the U.K. and Australia in the 1990s, demonstrates that there are serious consequences that can’t be ignored,” says Laroche. “Airports in Australia that were sold to private interests did not produce the promised returns to the government and did not deliver anticipated tax revenues. What did happen is that customer fees increased and service levels declined. We can expect the same thing in Canada if this sell-off goes forward.”
Laroche and others argue that selling airports to private investment groups will result in higher costs to passengers because private investors will be focused primarily on maximizing the return on their investments. In the U.K. and Australia cases, increased airline charges were passed on to passengers through higher parking and airport improvement fees. In a bold statement, Rod Sims, Chairman of the Australian Competition and Consumer Commission, has called a halt to the continued privatization of assets such as airports and said it is “severely damaging our economy.”
Other factors to be considered include the debt that many airports carry. It would have to be factored into estimates of any potential returns on the sale of these assets before they can be sold. In Australia, the government absorbed the debt as a means of making the sales more attractive.
In addition, the local voice on Authority boards of directors that has ensured that local interests are well-served would all but disappear in a for-profit structure, as investors would be expected to install board members who share their interests and priorities. Susan St. Amand, OIAA Board Chair, confirms this view: “The board is invested in this community and takes its stewardship role very seriously. To lose this commitment and focus would be a loss for the community.”
All of these factors suggest to the Ottawa Airport’s Laroche that the idea of selling off these critical assets should be shelved.
This is in no one’s long-term interest
“While the possibility of a short-term cash injection is appealing to the federal government, ultimately the cost to our passengers and communities is not in anyone’s long-term best interest.”
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