What will airport privatization mean for travellers in Canada? | Canada Voices

Travellers could see fewer cancelled flights, more international routes offered by low-cost carriers and sleeker amenities if Ottawa’s plan to privatize airports follows in the footsteps of major regional hubs in other countries, proponents say.

But critics warn that success elsewhere won’t be easily replicated in Canada, where a lack of competition adds different considerations.

The model proposed by Prime Minister Mark Carney at the inaugural Canada Investment Summit would involve opening up the doors to private investment in Canada’s major airports, while the federal government would retain ownership of the underlying land and assets.

Proponents argue that this model has revitalized airports around the world.

The bottom line is “the airports seem to improve,” Michael Weisbach, co-author of a seminal study on airport ownership models by the U.S. National Bureau of Economic Research, said in an interview. “They start to win awards, the cancellation rates went down, the number of routes that fly into cities goes up.”

In fact, the study, most recently updated this year, found that flight cancellation rates dipped as much as 39 per cent under private equity ownership. (It found no similar benefits after private acquisitions that didn’t involve private equity.)

When JPMorgan Asset Management first bought a stake in Cairns airport in Queensland, Australia, as part of a 99-year lease with the regional government, the effects on service and infrastructure were immediate, Mr. Weisbach said.

Some improvements were small and aesthetic. “Where the other airports look a little bit rundown,” Mr. Weisbach said, “they had nice coffee shops, nice gift shops – the stores are all much nicer.”

But the biggest changes involved the number of international routes available, including from lower-cost carriers.

“They negotiated with governments all around Asia to put in non-stop flights from Tokyo and Seoul and Singapore to Cairns,” said Mr. Weisbach, who is also a professor of finance at Ohio State University. “The whole community benefited.”

While Cairns has a uniquely favourable location near some of Australia’s most famous natural landmarks, the advantages it experienced were not outliers.

A 2023 University of Alberta study of 2,400 airports found that those privately operated routinely functioned more efficiently, with airports purchased by private equity funds in particular seeing flight cancellations decline by 50 per cent on average.

But a direct comparison with other jurisdictions may fail to consider Canada’s unique competitive environment and regulations, which would affect how privatization plays out, according to researchers who have studied international models.

A privatized airport would need to examine both airport fees and flight-related costs to maximize revenue for shareholders, said David Macdonald, a senior economist for the Canadian Centre for Policy Alternatives.

Airport fees include “everything that you’re going to pay as an individual going to the airport,” such as parking or baggage carts, Mr. Macdonald said.

In Britain and Europe, many privatized airports charge the equivalent of up to $3.50 for baggage carts, for example.

“You’re also charging the airlines more to deplane passengers, to take off, to land,” Mr. Macdonald said.

At Scotland’s busiest airport, Edinburgh International, drivers are charged the equivalent of roughly $17 to enter the drop-off zone, with similar fees across a handful of privately operated airports in Britain. Besides being unpopular with locals doing pickups, the fees also increase the cost of ride-hailing services.

While in Edinburgh’s case, the charges were introduced decades after the British Airports Authority was privatized, fees have been raised aggressively in the past 10 years. The Scottish Conservatives last year accused the airport of making travellers a “cash cow.” Airport bosses, for their part, said the move was meant to reduce emissions from automobiles, which they called “the most polluting mode” of travel.

While some airports privatized internationally may draw in more routes and still keep airfares from rising substantially, a competitive environment could be an important factor, Mr. Macdonald said.

“If you have a situation where there’s actual airport competition, then you can steal flights from other airports,” he said. “Instead of increasing the cost to passengers, you increase the volume of flights, you move more people through your airport, have better use of space.”

Such a move is possible in Europe, with many airports in close proximity, but not in Canada. “People in Montreal aren’t going to drive to Ottawa,” Mr. Macdonald said.

Meanwhile, a report from the Canadian Labour Congress released this week said that privatization of airports in Australia both squeezed more money from passengers and put airport jobs at risk.

Revenue collected from airlines per passenger at Perth Airport, for example, rose by more than 60 per cent over 10 years, the trade union organization found, while Sydney Airport trimmed 40 per cent of its work force after postsale job protections expired.

Matthew da Mota, research director at the Canadian Shield Institute, a public-policy think tank, has researched Ottawa’s proposal. He emphasized that while much remains unknown, Mr. Carney’s model could generate consumer benefits beyond travel at Canada’s major airports.

A shift toward private investment could unlock new funding for more airports in remote communities, better roads and digital infrastructure, without requiring the government to borrow as much to finance them, he said. One example cited by Ottawa is new broadband internet infrastructure.

But he still feels that the the immediate gains for travellers remain dubious. “I’ve had people ask me in the last day, ‘Do we have a major problem with airports not functioning super well?’” Mr. da Mota said. “I think for most people, it’s not always the best experience, but it’s fine.”