Historically, airports in Canada were owned by the federal government. Beginning in 1992, the federal government, through Transport Canada, began to transfer either oversight or direct ownership of the nation’s airports to local entities. That transfer included all assets and liabilities and revenue opportunities; for the largest airports, it also included federal rent responsibilities which, in time, airports came to see as a major liability to long-term growth. In their efforts to lobby Ottawa for relief and to have an ongoing impact on future aviation system policies, many of the airports joined the Canadian Airports Council (CAC), which has played a central role in obtaining rent relief, which was announced on May 9th to mixed reviews. Many challenges remain, particularly for small airports. Here’s an update, primarily from the CAC’s perspective, on the state of the Canadian airport industry.
According to David Plavin, outgoing president of the Airports Council International - North America, the process which Canadian airports have gone through since 1992 is an example of the impact private capital can have on airports and on a country’s aviation system. Since 1992, private capital and local oversight have transformed the major airports in Canada, from Toronto to Vancouver to Calgary and even in the nation’s capital, Ottawa, which opened a state of the art terminal in late 2003. An ongoing point of contention in the debate is that the capital stands to benefit disproportionately from the investments made by local groups.
At the same time, local communities were forced to assess the value of their airports as they assumed ownership either directly by assuming full control or through quasi-private authorities with long-term leases with Ottawa.
Unlike the U.S., Canadian airports do not have access to a federal Airport Improvement Program and, in general, generate much of their improvement funds from an airport improvement fee collected from passengers upon departure. For most small airports, this fee can be the primary generator of development. For many of these airports, this is still a work in progress, according to Jim Facette, president of the Canadian Airports Council.
“The very small airports have a viability concern,” he says.
For the larger airports, which ultimately remain under federal ownership, the greatest challenge, according to Facette, has been the rent charged by Ottawa under the terms of the long-term lease agreement. It has been the primary cause which the CAC has undertaken since its inception.
On May 9, the federal government announced a new rent policy which was its attempt to alleviate the concerns of the major airports.
Lobbying for Change
Canada’s National Airports System, similar to the National Plan of Integrated Airport Systems (NPIAS), encompasses the 25 airports deemed to be essential to the nation’s airport system. These remain under federal ownership and handle some 92 percent of national commercial airline traffic, according to Transport Canada. Of these, nine pay Ottawa annual rent, based on a formula put together when the transfer was initiated and not modified since, until May. They include: Calgary, Edmonton, Halifax, Montreal, Ottawa, Toronto, Vancouver, Victoria, and Winnipeg. At least four others were scheduled to begin paying rents in 2006.
Comments CAC’s Facette, “Independent airport authorities operate federally owned airports in Canada and for that privilege they pay Ottawa rent. Since 1994, when they began to pay rent, Ottawa has collected about $2 billion [CAN] in rent.
“The Canadian Airports Council has for years now called to fix this situation. Our position has been that the airports in Canada with less than two million enplaned passengers should not pay rent. That would leave 8 percent of them paying rent.
“The total amount of rent collected by Ottawa needs to be drastically reduced by 50 percent, if it collects rent at all.”
The Air Transport Association of Canada on Friday applauded the report by the Standing Committee on Transport, estimating that the 75 per cent reduction would save Canadian airports almost $230...