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Airport Privatization: A cash advance from Canadian travellers

Airport Privatization: A cash advance from Canadian travellers

At the Canada Investment Summit in Toronto on Sept. 15, Prime Minister Mark Carney put the operations of Canada’s four largest airports on the table.

Under Ottawa’s proposal, private concessionaires would operate Toronto Pearson, Montréal-Trudeau, Vancouver and Calgary for several decades while the federal government retained ownership of the land and assets.

Mr. Carney said the concessions would raise “tens of billions of dollars” to finance regional airports, more affordable remote connections and a better passenger experience.

What Mr. Carney did not discuss is that Ottawa could incorporate projected concession proceeds into its fiscal framework and present that advance on future airport revenues as new investment capacity.

For a government at risk of lacking the means to finance its ambitions, that is the political key to the entire operation. No new wealth is created. Tomorrow’s airport revenues are simply brought forward to help pay for today’s agenda.

Canada has been through this before. In 2017, Justin Trudeau’s government considered privatizing essentially the same airports. The proposal was eventually shelved after widespread opposition from airlines, airport authorities, provincial governments and municipalities.

The municipal response was particularly significant.

In April 2017, Montreal city council unanimously opposed privatization. Its resolution warned of higher costs for passengers, lower long-term investment in infrastructure and services, and the gradual abandonment of less-profitable routes.

Vancouver, Victoria, Richmond and Calgary also raised objections. The Capital Regional District of Victoria brought the issue to the Federation of Canadian Municipalities, which called on Ottawa to consult municipalities before changing airport ownership.

Toronto city council followed in February 2018. By a vote of 36–0, it formally demanded municipal and public consultation before Ottawa made any ownership changes. A city staff report identified the same concerns heard elsewhere: higher charges for airlines and passengers, the loss of municipal influence over airport governance and the treatment of airports as revenue-generating assets rather than public infrastructure.

Those warnings appear more relevant today than they did nine years ago – particularly with respect to regional routes.

Between 2019 and 2024, domestic seat capacity at Canada’s regional airports fell by 17.1 per cent, according to the Canadian Airports Council. Direct routes declined by 3.9 per cent, while domestic connectivity dropped by between 10.1 and 12.7 per cent.

The Prime Minister now argues that concession proceeds would help reverse this decline. But he has not explained the central paradox: how would adding investors who must recover the price of their concession and earn an acceptable return lower the cost of aviation — particularly on routes that are already marginal?

Asked whether the proposal could increase airfares, Mr. Carney pointed to airport restaurants and shops, saying their returns have “nothing to do with the price of tickets.”

That’s textbook deflection by the Prime Minister.

Airport improvement fees are charged directly to passengers through their tickets. Landing, terminal and other aeronautical charges enter the cost base of airlines, which must recover them somewhere. Parking fees and other ground-access charges are paid directly by travellers.

Those costs do not remain confined to the airport imposing them. Airlines allocate aircraft, frequencies and expenses across networks containing routes with very different levels of profitability. Higher costs at major hubs can therefore mean higher fares, fewer flights or the withdrawal of service from marginal communities.

The international experience that concerned municipalities in 2017 has not become more reassuring. Australia was the clearest warning then, and it remains one today. Recent reports from the Australian Competition and Consumer Commission continue to document rising airport charges and the effects of monopoly pricing on airlines and passengers.

Over a decade, real aeronautical revenue per passenger at Australia’s four monitored airports increased by between 13 and 38 per cent. In 2024–25, their parking operations generated more than $400 million in combined profits, while margins at individual airports reached roughly 77 per cent.

A well-designed concession can attract capital and improve services. Private capital is not inherently the problem. The problem is pretending that its return will come from the ether.

Mr. Carney is promising billions for the federal treasury, acceptable returns for concessionaires, lower travel costs and improved regional services — all from the same airport revenue stream.

Changing the terminology from “privatization” to “concession” changes neither the equation nor who will ultimately pay the bill.

GOVERNMENT AWOL AS CUTS TO REGIONAL AIR SERVICE THREATEN RECOVERY

GOVERNMENT AWOL AS CUTS TO REGIONAL AIR SERVICE THREATEN RECOVERY

Air Canada ExpressWith Air Canada forecasting in July it would continue burning through cash reserves at the rate of between $15 and $ 17 million per day if its medium-term outlook did not improve, the decision, announced last week, that it was planning additional cuts to air service in Atlantic Canada was predictable.

The real surprise was not Air Canada’s  announcement, but that the federal government would continue sitting on its hands, as it has since the start of the pandemic, while regional air service is slashed.

And make no mistake; this is not an Atlantic Canada issue. It is a national issue that, if left unaddressed, will linger painfully for months after the coronavirus vaccine starts kindling a return to economic and social normalcy in Canada’s largest urban centres.

On top of massive restructuring measures, including laying off thousands of workers and parking billions of dollars’ worth of aircraft equipment, both Air Canada and WestJet have been shedding domestic capacity for months in an effort to weather the pandemic storm.

Whether it be northern Ontario and Quebec, the interior of British Columbia, or Atlantic Canada, if not addressed quickly, the economic and social fallout from cuts to regional air service will cast a dark cloud on the prospects of a speedy post-pandemic recovery in those regions.

The reasons are rooted in the economic, operational and competitive reality of commercial aviation.

First, regional routes are generally less profitable than long haul domestic or international flights because carriers’ fixed costs are amortized over a smaller number of passengers per mile than on long haul flights that use larger and more fuel-efficient aircraft.

Second, Canada’s domestic industry is currently operating at a fraction of its normal capacity.  It will take time – months, if not longer — before it is back to full strength.

Getting airline capacity back to where it was a year ago will mean bringing back thousands of furloughed employees and dozens of planes that were grounded in the wake of the pandemic.

Many airline employees such as pilots, will need to be recertified, while others will require additional training to deal with things such as health and safety policies introduced after their layoff.  This will take time.

Then there’s the matter of bringing the fleet back online.  You can’t just take a $ 150 million aircraft that’s been on blocks for a few months, taxi to the gate and say welcome aboard.

Planes that have been sitting idle for any length of time will need to undergo nose-to-tail inspections that can each take days and cost hundreds of thousands of dollars before they’re deemed airworthy again. This too takes time.

Finally, while our domestic carriers will be busy gearing up for the anticipated uptick in economic activity and travel next fall, they will also have to be mindful of competition from foreign carriers – including US carriers – that have enjoyed massive government assistance that has given them a capacity advantage and enhanced their ability to cherry-pick the Canadian marketplace.

No one should be surprised when Canadian carriers this fall allocate all available capacity — equipment and staff — to serve their large domestic hubs to take advantage of the long-awaited domestic recovery and safeguard market share from foreign competition.

And no one should be surprised when smaller communities in Atlantic Canada, northern Ontario, northern Quebec, western Canada and in the interior of BC are left out in the cold – again – as the rest of the country starts to pick itself up from the pandemic winter.

The inescapable truth is that government inaction in addressing the unprecedented crisis faced by our air transportation sector will only make regional inequalities worse and accelerate the exodus of residents from regional centres.

Fortunately, mitigating its impact won’t require complex policy solutions – only political will.

First it requires the political will to acknowledge that while assisting air carriers during a global pandemic may not be woke, it is nonetheless necessary.

Then it requires the political will to acknowledge that this crisis is made worse by government user pay policies that syphon billions of dollars from air travellers and airlines each year to pay for airport infrastructure, air navigation and airport security.

Finally it requires the political will to act by providing liquidity assistance for carriers, and cutting the taxes and third party charges that weigh down their air operations like so much ballast.

If the government of Canada continues to avoid addressing these issues, for many – particularly young people — whether in Atlantic Canada or northern Quebec, or any other region that fears seeing its local airport shuttered long after the rest of the country opens up, their next flight could be a one-way ticket out.

Related content: Covid Crisis an Opportunity to Reimagine Air Travel