Commons Committee Calls for 75% Immediate Cut in Airport Rents

TORONTO (CP) -- A Commons committee is calling for an immediate 75 per cent reduction in airport rent bills, costs that airport operators say are passed on to tenants and in turn passengers.

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 million this year alone.

The report also calls for all rent money to be reinvested into airports.

In its report, the committee also offers sharp criticism of recent moves by the federal government to reduce rents, referring to a May 9 promise by Transport Minister Jean Lapierre to offer gradual rent reductions under a new formula that would save airports only about $48 million annually.

''The new policy brings no immediate relief to the airport since the policy will not be implemented until January 2006,'' the Transport committee wrote in a report titled Air Liberalization and the Canadian Airports System. ''In addition, the rent reductions are phased in over too long a period _ the term of the lease _ with full impact of the new policy not being seen for approximately 40 years.''

The report was submitted by the committee to the House of Commons on Thursday but got little attention because of the non-confidence vote in the Commons won by the federal Liberals by a razor-thin margin.

''Under the new rent formula, the federal government is still expected to collect $5.1 billion in rent by 2020,'' the committee report said. ''Finally, there is no mention in the policy of where the rental revenue will go. We believe that this is unacceptable.''

Canadian airport authorities have complained that they've been forced to pay more than $2 billion in rent every year to Ottawa on assets that had an initial book value of $1.5 billion.

''The present rent regime is capricious and is seen as nothing more than a 'tax grab''' by the industry, the report claims. ''This is still true with the new rent formula announced on May 9, 2005.''

The 12-member committee is chaired by Liberal MP Roger Gallaway.

The airports have further argued that the formula used to calculate rent is not applied equally across the system, and that consumers end up paying much of the tab.

''... As not-for-profit authorities, they must pass these costs on to tenants and users and ultimately the airline passengers,'' the report states.

Cliff Mackay, president and CEO of the air transport group, which represents carriers such as Air Canada, called the recommendations ''a breath of fresh air for our industry.''

Mackay said the recommendations would ensure that smaller airports do not pay any rent; end the government's ''free ride'' for being granted office space at airports; and expand border services ''at those airports with a demonstrable need.''

Elsewhere in its report, the committee also recommended the government:

- Scrap the Air Travellers' Security Charge that imposes a surcharge on every airline tickets and replace it with money from general revenues.

- Expand border services at airports with a demonstrable need;

- And require that government help pay for any significant new regulatory burdens at airports.

The report has been presented to Lapierre for review.

In the wake of the federal airport rent policy announced two weeks ago, the airline industry wasn't at all impressed with Lapierre's promise, which would take half a century to implement.

Robert Milton, chairman and CEO of the holding company for Air Canada, ridiculed the move last week while discussing his company's first-quarter net loss of $77 million.

''I look forward on my 90th birthday as a retiree from Air Canada to the significant impact it will have had by then,'' Milton scoffed. ''It borders on farcical.''