Canada is not for sale—except for its airports?
“Canada is not for sale.”
This phrase has become a familiar refrain whenever the words “51st state” are mentioned or the ownership of strategic Canadian assets is debated. Yet, one category of nationally significant infrastructure continues to surface in discussions about asset sales: Canada’s largest airports.
Prime Minister Mark Carney has said the government is exploring whether mature public assets could be "recycled" to help finance the next generation of infrastructure, with airports identified as one possibility. The objective is understandable: unlock capital tied up in established assets to fund future infrastructure investment.
But are airports the right assets to sell?
The idea of selling this country’s airports is not about privatization. Canada's 26 largest airports are already privately operated by independent airport authorities, which are non-profit corporations with no shareholders demanding dividends. The federal government retains ownership of the airport lands and infrastructure, leasing them to the authorities in exchange for annual ground rent. Last year alone, the financial statements of the Toronto, Montreal, Vancouver, and Calgary airport authorities show that they collectively paid approximately $476-million in rent to the federal government, with Toronto accounting for nearly half.
The real question here is whether these airports should remain non-profit organizations serving the public interest or become for-profit businesses serving shareholders.
Supporters of airport sales make two principal arguments. First, a sale would generate a large one-time payment that could finance other infrastructure projects. Second, they contend that shareholder-owned airports would operate more efficiently because the profit motive creates stronger incentives to reduce costs and improve commercial performance. As transportation gateways with substantial market power, airports certainly offer significant commercial opportunities.
However, by selling Canada’s eight largest airports, the federal government would exchange an ongoing stream of airport ground-rent revenues for a one-time payment estimated at around $16-billion, by my calculations.
Assuming ground rents continue growing at two per cent annually and applying a conservative four-per-cent discount rate, the present value of the foregone rent over the next 30 years is approximately $11-billion. Given that governments can also finance infrastructure through long-term bond issues, Canadians should ask whether receiving roughly $5-billion more today justifies relinquishing ownership of strategic assets that generate dependable revenues while supporting wider economic and community objectives.
The efficiency argument is also not persuasive. Existing research provides little evidence that for-profit airports are economically more efficient than Canada's non-profit airport authorities. The assumption that shareholder ownership automatically produces better outcomes remains largely an article of faith rather than an empirically established fact.
More fundamentally, is changing airport ownership solving problems with the current system? As with everything, Canadian airport authorities have had their critics. In the past, both Liberal and Conservative governments introduced their own Canada Airports Act—in 2003 and again in 2006—that would have strengthened oversight, accountability, and transparency. Both bills enjoyed broad support, but died when elections interrupted the legislative process. They were never revived. If accountability remains the concern today, why not finish that work instead of changing the ownership model altogether?
Does ownership structure really matter? After all, safety and security standards will be maintained no matter who runs the airports. The difference is in the incentives created by different ownership structures. A non-profit airport authority by definition exists to recover costs, and maintain and expand infrastructure as required. In Canada, our current airport authorities also embed wider economic impacts in their strategy plans.
In contrast, a for-profit airport corporation’s sole objective is to maximize shareholder value. What interest does a distant pension fund have in airport investments that benefit the local economy? Those for-profit owners will be much more interested in monetizing all possible commercial aspects of airport lands and assets. No Canadian airport currently charges you for dropping off passengers at the departure terminal. At the United Kingdom’s for-profit airports, you pay for this privilege. London’s Gatwick airport charges drivers £10 (approximately $18) for the first 10 minutes, plus £1 for every additional minute.
Canada’s airports are more than transportation facilities. They are essential public infrastructure that connects communities, supports trade, drives tourism, and contributes to regional economic development. The government’s objective of financing new infrastructure is a worthy one. But selling one set of strategic public assets to finance another needs to take account of all of the economic, financial, social and community impacts.
Canada is not for sale. Maybe that should include our airports.
William Morrison is a professor of economics at Wilfrid Laurier University.
The Hill Times