Why Canadian airports need to be privatized

Earlier this month, news broke out that the federal government is considering privatizing its major airports to raise money for their infrastructure projects. For Canadians, both those who travel frequently and those who have only been on a plane a few times in their lives, this is good news for many reasons.

For far too long, Canadian airports have been expensive for both the users and owners as a result of government taxes and fees, which have been sending passengers, nearly 5 million a year by some reports, to our neighbors down south for cheaper flights. According to the World Economic Forum, Canada has the night-highest ticket taxes and airport charges in the world.

All this is also a result of Canadian carriers being less competitive than their U.S. counterparts, due to their higher labour, fuel, and aircraft ownership costs. Airport fees account to 25% of a plane ticket in Canada. The solution to this problem; privatizing major airports in Canada.

Private airports, which are becoming commonplace around the world, tend to be less costly, more innovative, and more efficient. There are many problems with the current arrangement that selling the airports can resolve.

First, the government's rent formula discourages airports from pursuing new revenue streams that could reduce the amount they need to collect from passenger charges to make a profit. Canadian airports earn less revenue from creative sources like shopping and retail stores than privatized airports.

Second, the governance of airports under authorities that are non-profit and have no shareholders makes ultimate responsibility and accountability unclear. Corporate accountability is best served when shareholders who bear the financial consequences of corporate decisions have the power to elect their own board of directors.

Last, although there are many decades left in the airport authorities' leases, their expires will soon be a headache to both them and passengers. All airport authority assets, obligations and contracts go back to the federal government when leases end. Airport authorities may soon face difficulty with long-term contracts and issuing bonds that go beyond the end of their lease.

This system of for-profit airports are becoming more popular throughout the world, and have been proven successful. All major airports in Australia and the United Kingdom are private. There is also the middle ground, as airports like the ones in Paris, Copenhagen, Zurich, and Vienna have showed, in which they are jointly owned by the government and private investors.

It is now up to the Canadian government to make their next move.

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