Tasha Kheiriddin: Airport privatization is now on the ‘Canada Strong’ agenda

Prime Minister Mark Carney has spent the last year and a half asking Canadians to embrace his “Canada Strong” agenda. We’ve all heard the slogans: Build more. Invest more. Approve projects faster. But while much of his plans depend on state action, they also require attracting private capital — and in some cases, trading on the value of public assets currently sitting on the government’s books.

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Now Canadians are about to discover what that means for their local airport. Last week, Carney announced that Ottawa will seek private investment through long-term concessions to operate Canada’s four largest airports: Toronto Pearson, Montreal-Trudeau, Vancouver and Calgary. The government would retain ownership of the underlying land and assets, while private operators would obtain the operation rights.

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The economic case for doing this is an immediate infusion of up to $40 billion into federal government coffers, which will help offset Canada’s ballooning deficits. That compares to the $8.4 billion in rents Ottawa has collected from its airports since establishing the non-profit corporations that run them close to 30 years ago, including $556 million in 2025.

Privatization could also provide the estimated $28 billion in capital needed to upgrade airport infrastructure over the next decade. Carney has also suggested that proceeds from concessions at the big four airports could support investment in smaller regional airports.

But politically, Carney is taking a considerable risk. Airports are not a mine in the backwoods of northern Ontario. They’re one of the government’s most highly visible assets: five million passengers transit through our eight largest airports every month. If privatization gets your luggage on the carousel faster, passengers will notice. If it produces higher fees, more expensive parking and little discernible improvement, they’ll notice that too.

And there will probably be a mix of both. Unlike not-for-profit operators, private operators will need to deliver shareholder value — and that means maximizing profits wherever possible. That could mean everything from using non-union labour to higher fees for a variety of services. If you’re already irked by extra baggage fees charged by airlines, just wait until you get hit with a $19 charge to drop off a passenger, like at London Gatwick Airport in the U.K.

There are indications the political ground may have shifted. A recent poll by Spark Insights found that three in four Canadians believe that airport infrastructure “would be operated more efficiently if done by a pension fund or other investor that has experience operating infrastructure.”

The notion of the Canada Pension Plan purchasing the lease may comfort Canadians who would see themselves as the beneficiaries of the investment as well. But there’s no guarantee the CPP would buy the concession if a higher bidder came along. And that could raise alarm bells for anyone who remembers the last time a major concession was sold for public infrastructure in this country: Ontario’s Highway 407.

In 1999, the Ontario government leased Highway 407 for the next 99 years for $3.1 billion to a Spanish consortium. Twenty years later, SNC-Lavalin sold its 10 per cent stake for roughly the same amount — which meant the value of the concession had mushroomed to $30 billion. The company running the 407 at the time reported annual revenues of $1.4 billion — making it a serious cash cow that gave zero milk to taxpayers.

Australia also provides a cautionary tale when it comes to airport concession privatization. Between the late 1990s and 2016, Australia’s airports monitor reported that private operators raised fees to airlines by $1.6 billion, based on the same passenger volumes. While passengers reportedly enjoyed nicer terminals and services, they also saw those fees passed along to them.

And then there’s the labour vote. If unions get the boot for lucrative airport jobs, expect them, and the NDP, to howl. With the left already calling Carney a corporate sell-out, this would just add fuel to their fire — and make Canada’s skies far less friendly for both travellers and Liberals alike.

National Post

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