Canada Weighs Privatizing Airports to Fund Infrastructure
Canada's government is exploring whether to put up for-sale signs in front of airports across the country to raise billions of dollars for ambitious infrastructure projects through “asset recycling.”
Transport Canada is reviewing the recommendations of a recent report that calls for the privatization of the country’s airports, a spokesperson for the agency confirmed.
The airport review is part of a larger effort by the Trudeau government to explore the lease or sale of public assets as it looks to raise capital for a much-touted campaign to spend $92 billion over the next decade on everything from new bridges to new schools.
While some airport managers are wary, supporters say the plan could boost the amount of money available to maintain and upgrade the country’s airports and “recycle” funds into other infrastructure projects.
“I would observe [that] both the federal and most provincial governments are facing big challenges in terms of deficits and debts,” said Michael Fenn, former Ontario deputy minister and author of the Mowat Centre study on asset recycling. “It would make a lot of sense to leverage legacy assets and derive some benefit from them to do some other things that the public sees as a higher priority.”
The review, released earlier this year, notes that Canada could sell its airports to private investors, following the path taken by the British government in the 1980s, or convert government airport agencies into for-profit operators.
Australia provides another model, wherein government ownership is coupled with the privatization of airport operations.
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However, some Canadian airport officials have expressed reservations about the privatization proposal.
Craig Richmond, CEO of the Vancouver Airport Authority, Vancouver, British Columbia, has warned that privatization could result in cutbacks to airport maintenance and infrastructure as new for-profit operators seek a return on their investment.
“If you went to this model, my experience tells me [that], in five years, you would not recognize Canadian airports,” he told the Toronto Star. For Vancouver's airport, he pegged the value to private investors at $4.6 billion.
However, a successful Canadian example can be found at Hamilton International Airport, located between Toronto and Niagara Falls and, since 1996, managed by TradePort International Corp., Fenn noted. It claims to have invested $208 million in the Hamilton airport over the past two decades.
“There has been a lot of investment in it,” Fenn said. “The suggestion that the private sector would run the asset down or run it on empty—that has not been my experience.”
The Canada Transportation Act report suggests that “fully privatized” airports could issue “new share capital” for various projects and bring more private-sector discipline to Canadian airports in management and on boards.
Fenn said any well-thought-out agreement to bring in private investors would include specific requirements for investment in maintenance and infrastructure.
“If you look at the balance sheets of municipal and public authorities, one of the big things that stands out is the big liability in terms of deferred maintenance,” he said. “There just isn’t enough money available in government for major capital infusions.”
