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A photo taken at Pearson International Airport in Toronto on Feb. 5, 2014. (Kevin Van Paassen/The Globe and Mail)
A photo taken at Pearson International Airport in Toronto on Feb. 5, 2014. (Kevin Van Paassen/The Globe and Mail)

Daniel-Robert Gooch

Why Canada’s airport model is working for taxpayers Add to ...

Canada’s airports appreciate the attention being paid recently to the important economic and social role they play in the communities they serve. As critical components of Canada’s national transportation infrastructure, airports have made many improvements to support this role and the demands of growing traffic volumes. Perhaps a better job can be done explaining how airports in Canada are operated and funded.

Twenty years after the operation of airports was transferred from the federal government to independent local airport authorities, many Canadians still do not realize that the federal government no longer runs our airports. In fact, most are not operated by any level of government. While the federal government retains legal title to the land, most major airports in Canada are operated by non-share capital corporations that are fully responsible for self-funding all operating and infrastructure costs and must invest any profits back into the airport.

It wasn’t always this way. Until the early 1990s airports were managed by the federal government with civil servants running the business and taxpayers bearing the burden for all capital investments and operational costs not covered by airport charges. With taxpayers directly subsidizing the Canadian transportation system in these times, by the early 1990s the annual cost to taxpayers for operations alone was $135-million a year (with minimal investment in facilities).

To get government out of the business of running airports, operating and funding responsibilities were transferred to local airport authorities under detailed long-term leases that set out the governance and consultation mechanisms under which the airports are run. This model was intended to make airports more like private enterprise, while ensuring they became more responsive and accountable to a broader range of stakeholders through local management.

Under this system airports have invested more than $19-billion in airport improvements since 1992 with virtually no funding from taxpayers. This is not generally understood: With few exceptions, Canada’s major airports are not subsidized by government. Rather, they pay $280-million a year in rent to the federal government – more than $4.8-billion since 1992 – and hundreds of millions in “payments in lieu of tax” to municipal governments across Canada.

Canada essentially has a “user pay PLUS” system for aviation in which users pay for airport infrastructure, security screening and air traffic control, plus a little extra to the federal government.

In addition to making Canadian airports more pleasant for travellers (with facilities ranked first in the world by the World Economic Forum and regularly winning international awards), these investments mean that our airports are able to handle the doubling of traffic we have seen since 1993.

These investments also have allowed airports to diversify and expand profitable revenue streams through food/beverage, retail, hotels and commercial real estate that have kept in check charges that airports would otherwise pass on to airlines (and their passengers). While government-related costs contribute significantly to the relatively high cost of air travel in Canada, the revenue generated from these non-aviation airport ventures ensures Canada’s cost competitive disadvantage is not worse.

With continued concerns about the impact that Canada’s user pay plus approach to aviation has on cost competitiveness, there could certainly be improvements in the system and airports actively contribute to these discussions. However among those who know and understand the airport model in Canada, the broad consensus is that the model works.

In Canada we have airports that have invested billions of dollars to ensure they are able to exceed safety and security requirements and meet the demands of ever growing traffic. We have an air transportation sector with a $35-billion economic footprint and 140,000 directly employed Canadians (according to the Conference Board of Canada). Our system works because it balances the needs of all stakeholders. This is good for Canada, air travellers and the communities our airports serve.

Daniel-Robert Gooch is president of the Canadian Airports Council.

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