Adam Pankratz: Mark Carney’s worthwhile plan for privatizing airports

Mark Carney’s investment summit is a sign that perhaps, finally, after a decade of missed opportunities, our government understands that we have to get serious about our lack of productivity, per capita GDP growth and business investment. Among the Prime Minister’s remarks on Tuesday, we learned that the Liberals plan to privatize the operations of Canada’s four largest airports; operations at Toronto, Montreal, Calgary and Vancouver all up for grabs. With any luck, privatizing Canadian airports is a harbinger of further privatization efforts and efficiency in more areas of Canadian life.

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Not everyone is happy. Unions oppose the plan almost unanimously, with Unifor releasing a strongly worded statement. In the letter Unifor National President Lana Payne said “Airport workers know from experience that privatization comes at a cost to them and the travelling public and creates worse working conditions across the aviation industry.” Some commentators have also decried the announcement as something the Liberals “have no mandate” for. On some issues an electoral mandate may be appropriate (Associate membership with EU as one potential example) but not for airport privatization. Privatization should be welcomed, not feared, as it should benefit both passengers and the country.

It is a well established fact that markets and private enterprise are far more efficient than government at running companies and organizations. The reason is simple: corporations and private companies have a clear profit incentive to which they respond. This benefits everyone and is the magic of the market at work. Adam Smith, the father of capitalism, recognized this in his totemic work, The Wealth of Nations back in 1776. “It is not,” Smith wrote, “from the benevolence of the butcher, the brewer or the baker that we expect our dinner but from their regard to their own interest. We address ourselves not to their humanity but to their self-love.” Smith’s recognition that by looking out for their own profit interests, individuals, without any formal coordination, would all move towards producing better products more efficiently and at a lower price. This is the famous invisible hand of the market which makes capitalist societies tick.

Yet somehow this observation, which has done more to produce wealth and prosperity than almost any other in the world, is offensive when applied to Canadian airports. Why? Canadian airport fees are high, and passengers are the victims. IATA, the International Air Transport Association, a trade association representing over 370 airlines worldwide, noted in 2024 that Canada’s air transport price competitiveness ranked 101st. On a typical round trip from Toronto to Montreal, Airport Improvement Fees of $70 were charged between the two airports. A domestic round trip in the United States, by contrast, had a passenger facility charge — the U.S. equivalent — of only approximately $12 Canadian dollars. While not all airports are the same — Vancouver is lower than Pearson’s $40 at $25 — the fact remains that Canadian airports are not as cost competitive as their United States counterparts.

Currently Canadian airports operate as non-profit entities, meaning any profit is reinvested in the airport, as there are no shareholders. In a private model the airport would have a profit mandate to create returns for investors. Critics will portray this as a downside, when is reality it is the profit incentive which drives efficiency and innovation.

Further, the upfront capital provided by companies wishing to operate the Canadian airports in question will be enormous. That capital, as Carney indicated in his remarks, will be “reinvested into infrastructure that Canada needs.” Carney has noted this could amount to tens of billions of dollars of unlocked value for the airport leases. By retaining ownership of the underlying assets and airport, the government seems to be following a model similar to Australia, which underwent the same process in the 1990s and early 2000s. In 2002 the long-term lease signed for the Sydney airport and netted $AUD 5.6 billion for the Australian government. That being the case way back in 2002, Carney’s comment of “tens of billions” in Canada today seems entirely realistic.

By handing over airport operations to profit driven companies Mark Carney is removing unwanted government involvement from an area it doesn’t need to be in, while unlocking significant asset value for Canadians. The fact that the idea has been met as though it is some kind of revolution, is indicative of the fact that Canada has gotten far too comfortable with government control in areas of the economy they should leave.

Airport privatization is a hopeful step towards reigniting Canadian potential and productivity. With any luck, the Carney government will soon take a similar approach to our healthcare system.

Adam Pankratz is a lecturer at the University of British Columbia’s Sauder School of Business.

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