One on One: Garth Atkinson

Aug. 4, 2006
The Calgary CEO, a champion of reform, discusses 'the Act,' rent relief, and more.

Calgary International Airport is the fastest growing in Canada, with a rise in traffic of 40 percent in the past four years - driven by a massive investment of an estimated $8 billion/year in Alberta by the oil industry. Charged to keep in touch with that growth is Garth Atkinson, president and CEO of the Calgary Airport Authority, which operates the facility under a lease with the federal government. Like many of his peers at other large Canadian airports, Atkinson has become an activist for reform, particularly on the hot-button issues of rent relief and airport regulation (sidebar). AIRPORT BUSINESS recently conducted a phone interview with Atkinson to get his views on the hot issues facing Canada's airport system.

Atkinson, 52, is a former Transport Canada employee himself, having held several positions at Toronto's Pearson Airport and at Calgary, where he was involved in the transfer of the airport from the federal government to the local authority. Initially the VP of finance and administration at the CAA, he became CEO in January 2001. He currently serves as treasurer of the Executive Committee for the Canadian Airports Council.

Following is an edited transcript of his interview ...

AIRPORT BUSINESS: It would seem that the recently introduced Canada Airports Act is a good place to start. It appears it's causing a bit of stir among airports.

Atkinson: We had a version that was tabled and died with the last government. Some people thought it might be under wraps for quite some time. Interestingly, the new government quickly brought it back and, without really any consultation, just tabled it to Parliament. Fundamentally, it didn't look much different than what we've seen.

AB: The sense I get from reading the web is that, basically, airports are in a defensive mode over this. And, it would appear that the government felt there wasn't an appropriate level of accountability at airports. Is that accurate?

Atkinson: The current government got elected on a broad platform of accountability. They have an Accountability Act going through Parliament due to some political scandals. I think the Canada Airports Act kind of falls under that umbrella.

Certainly there have been issues over the past number of years - are airport authorities accountable enough? Who to? How do they spend their money? The usual stuff that airports face around the world; airlines criticizing airports. There's nothing really new in the thing.

AB: One concern seems to be airports getting into other businesses, via subsidiaries or partnerships with private companies. Is that a problem?

Atkinson: Vancouver is the only airport that is really involved with subsidiaries to any significant extent; they're involved in airport operations and development to some extent in Canada and in some other countries. There are one or two other smaller examples. It's not a prevalent thing.

This new act draws a very tight string around what an airport authority can do; extraordinarily tight. If I have one concern about the new act it's that they've overstepped. Basically, you can pour concrete and buy snow plows, and that's about it.

It doesn't seem to recognize that airport authorities were created to be economic development engines for their regions. There doesn't seem to be the slightest recognition of that in this current form. That's my biggest issue and something we need to work on with the federal government.

AB: Can you point to specific areas at Calgary that might be affected by this?

Atkinson: Our mandate under our current legislation is to promote aviation. But the act is highly constraining, if you read the actual words. You can't buy a sliver of land if not for a runway or something like that. It's a very buttoned-down definition of what you can do. I think it will create issues.

AB: What about the idea of having airlines or other people in the community as part of your Board of Directors?

Atkinson: I've never been particularly concerned about that; any director owes a fiduciary responsibility to the company.

I should say, from a high level, I'm not actually opposed to the act. In fact, I actually support the right act, a broad principle-based act. The primary reason I do is, I think that governments have to look for a way to sell off the dirt to airports and just get out of this relationship, and take the burden of these ground leases off of us. I accept that you can't do that without some type of regulatory framework. The right act is the way of the future. My argument is around the details of what it does to us, rather than the principle of having a regulatory framework.

AB: Since the transfer of operation of the nation's major airports to local entities by way of long-term leases, airports have called for a review of the established rent policies. Last year, you got some relief. What else needs to be done?

Atkinson: There's good and there's bad. We were in a particularly hazardous position; our rent on January 1, ‘06 was going to go up 125 percent in one day, from $25 million a year to $56 million a year. It was pretty much a going out of business scenario.

The good news is, we stepped around that; the new policy did not impose that on us. We signed a new rent agreement which has some modest declines in rent for three years before it starts to go up again.

The bad news is, we're still going to pay a huge amount of rent. We paid a quarter of a billion dollars just through the end of '05. Over the balance of our ground lease, we're going to pay another $3.2 billion. That's just Calgary; it's unbelievable.

My guess is, the entire industry is going to pay something around $25 billion over the balance of the ground leases. It's just an astonishing money grab from the federal government. It's a tax through and through; a huge tax. So, we've got a big challenge in front of us to get the government to take a more policy-based view of this, that it is not sustainable and is not good for the country or the industry. How do we wean ourselves off this thing? It's going to be tough.

AB: How are the smaller airports that are no longer under federal ownership faring?

Atkinson: There's a small federal pool of funds, I think it's $35 million a year, available for qualified projects at passenger-carrying airports. Small airports have two concerns: one, the fund is not near big enough. And they have an issue that really affects both large and small airports - what I call regulatory creep. Aside from the issue of the Canada Airports Act, there almost isn't a single area where every year we don't see more and more regulation, which usually has more cost associated with it. I don't see any abatement of that.

AB: Will the new Canada Airports Act affect how you implement your Airport Improvement Fee? Will the public now have to be involved in the decisionmaking for the AIF level?

Atkinson: That's how we pay for expansion - ours is $15, and that's relatively standard across the country. The act will impose consultation processes; it will require airports to publish fee methodologies and to adhere to them. So, there's certainly a process in position. The act is a couple of hundred pages; just compliance with the Act will impose costs.

AB: Much of industry is anxiously awaiting the introduction of the very light jets, expected to enter service this year. Do you have specific thoughts about the VLJs?

Atkinson:There are two ends of the stick in what it's going to do. The growth estimates are dramatically different depending on which assumption you use. Some speculate that it will open up a lot of secondary centers. Others say, no, they're going to want to fly into larger centers. But there's no question, no matter how you prognosticate about it, I think it's going to be a rapidly growing segment of the market. It's going to have an impact.