Time to ground airport privatization

  • National Newswatch

With the House of Commons rising for the summer, government MPs making the rounds of the barbecue circuit back home will be able to test some of their government's more creative ideas with their constituents.One idea they should run up the Canada Day flagpole is the government's plan to sell off the country's airports.  If recent polls on the subject are any indication, it's unlikely MPs will find many fans.An April Angus Reid poll found that more than half of Canadians oppose the idea – euphemistically called asset recycling in government communications – fearing it would make air travel more expensive and the experience less enjoyable.To his credit, Transport Minister Garneau has made it his priority to improve air travel and reduce its cost.That's a goal we can all agree on – we just don't think the privatization of our airports dovetails particularly well with that objective.Australia, a country with a similar geography and population density, has tried airport privatization, and their experience is instructive.As the Australian consumer protection agency reported recently, privatization resulted in massive increases in costs for airlines and travelers alike.Unfortunately, as has often been the case in Canada, what is driving the airport sell-off idea is not finding a better management model for airports or reducing costs to travelers or airlines, it's raising money for other government priorities.It's easy to see why an estimated windfall of between $8 billion and $20 billion from selling the airports would look attractive to any government -- until we count the off-the-books costs.Since their transfer to not-for-profit airport authorities in the 1990s, Canadian airports have successfully leveraged billions in user-generated revenues to grow into successful global transportation hubs, recognized as among the most efficient in the world.Adopting a business model that puts profit first risks damaging these hubs, hurting their communities and regions and penalizing hard-working Canadians that have no choice but to fly for work or for family.Institutional investors looking at our airports can see the results of 20-some years of user generated investments: assets that are well-maintained, well-capitalized, and for the most part enjoy monopolistic or quasi-monopolistic supply positions.As Sam Pollock, head of Brookfield Asset Management Inc.'s infrastructure group, put it, there would be a “feeding frenzy” among institutional investors if Canadian airports were put on the block.No kidding they're interested. And no kidding Finance Canada is keen to turn that interest into top dollars to bolster a sagging medium term fiscal outlook.The problem with profit maximization in this case – federal and institutional – is that it would require the squaring of the circle.Protecting travelers would require strict regulatory controls on the ability of privatized airports to set rates and fees as well as strong service standards.Depending on the nature of the regulatory oversight and control proposed, this would have the effect of drastically reducing the market value of airports and making their sale both difficult and of little help for government finances.This creates a classic catch-22 situation for the government: put in place strict regulations and make airports unsellable, or allow largely unfettered profit maximization and risk seeing travelers fleeced.So what does this mean for Minister Garneau's goal of reducing the cost of air travel and improving the traveler experience?As long as this trial balloon is allowed to continue floating, the Transport Minister will not be able to focus on reforming Canada's uncompetitive air transport cost structure and policy framework, where there is real work to be done.What is needed is for the federal government to give air transportation the same thought and attention it does to other modes of transportation.Canada has a long history of recognizing that transportation — marine, rail and road — plays crucial social and economic roles in this vast, sparsely populated country, connecting families and communities and opening doors to economic opportunities. Why not air travel?Much as in Australia, air travel in Canada is often the only option when people want to travel for work or to connect with family. Commercial air travel is not a luxury in Canada, nor is it the domain of the one percent, yet the Government of Canada treats it that way.We need the federal government to recognize that the current model of financing air transportation is outdated, uncompetitive and unfair. It fails to recognize that air transportation serves both individual air travelers and the country' larger social and economic interests.Adding costs to air travel in the form of airport rents, fuel taxes and security fees — often with the revenues used to finance non-air related initiatives – penalizes the people that air transportation serves and sabotages its critical role in binding the country together and facilitating economic activity.Any increase in the cost of travel resulting from for-profit privatization of airports would be just another tax on the middle class.What is needed now is not a privatization plan with no demonstrable benefits for either air travelers or their communities. What is needed is the definitive, unambiguous rejection of the idea and a renewed commitment to fixing a system in need of repair.It's something for MPs to think about while flying home.Massimo Bergamini is President and CEO of the National Airlines Council of Canada (NACC).