Proposed airport privatization will drive up costs for travellers, say CEOs

Airports across Canada are warning consumers about potential federal changes they say could drive up costs for consumers. 

"What's happening is that people look around, especially from finance, and say, 'Well that's a heck of an asset, let's sell that off,'" said Craig Richmond, CEO of Vancouver International Airport. 

"The problem with that is, if you sell it off, we would be worth a lot of money, and then whoever bought it has to make that money back. And we know that's going to drive costs up."

Transport Canada is currently consulting with industry experts on a review of the Transportation Act that was tabled earlier this year.

Objectives of the review, which was initiated by the previous federal government, include, "improving the health of the air transport sector in Canada."

"The world is changing and moving inevitably towards a liberal open market for air services," says the report. 

"A system based on competition, market forces and the user-pay principle is the best means to deliver a robust air transport sector in most cases."

Craig Richmond and Ottawa International Airport CEO Mark Laroche recently penned their concerns about the changes in an op-ed published in the Globe and Mail. 

Moving towards privatization

Major airports across Canada, including Vancouver's, are currently operated by non-profit private companies governed by local boards.

According to the report, up to 25 per cent of their costs go towards paying the federal government rent for infrastructure and land, as well as municipal taxes. 

One of the report's recommendations includes, "moving within three years to a share-capital structure ... with equity-based financing from large institutional investors." 

This change would be accompanied by legislation to protect commercial and national interests, according to the report, and there would likely be some limits on the amount of foreign ownership.

But Richmond says operating an airport with a goal of benefiting overseas investors won't benefit consumers. 

"I think it would be a mistake to sell it off to a private company for a one-time hit," he said. "Right now the airport is purpose-driven, not profit-driven."

Richmond points out that travellers have paid for years of upgrades and improvement fees, and to have them now potentially pay off a private company's asset acquisition costs would be unfair. 

'Highly debatable'

Isabelle Dostaler, a professor with the Molson School of Business at Concordia University, said the aviation community is divided over the proposed changes. 

"I think we should take our time to think this through," Dostaler said. 

"Maybe privatization is not a bad idea, but we really have to think long and hard about what will be the price."

She points out that privatization that took place in the 1990s has turned some Canadian airports into more pleasurable places for travellers, and has also allowed them to generate more non-aeronautical revenue than ever before. 

"They really have turned a government-run entity that was not so efficiently run into so much more," she said.

"Having said that, the solutions that are proposed are highly debatable."

Dostaler said it's not clear if consumer costs will increase if airports are privatized further. She calls the federal report an "excellent diagnosis of the situation" that points out how airports aren't as efficient as they could be. 

But what worries her most is the sense that a one-size-fits-all solution is being proposed for airports across the country. 

"A solution that may be good for Vancouver may not be good for Toronto," she said. "The unique situation of each airport needs to be considered."

'The costs will only ever go up'

Meanwhile, Richmond says he's actively campaigning against the proposed changes. 

He says Credit Swiss bankers have already been visiting YVR to evaluate its assets. 

"They're studying it intently. So we want to get the word out that this is a bad idea," he said.

"You're going to regret selling the airports, because once you do, they're gone forever and the costs will only ever go up."

Transport Canada emphasizes that the report's findings are only preliminary; the federal government is reviewing them and has not made any decisions.