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Travellers make their way through Pearson International Airport in Toronto on Nov. 14, 2022.Cole Burston/The Canadian Press

If you’re looking to unravel the thread of the rolling chaos that is Canadian air travel, you need look no further than the symbiosis that operates between the federal government and airports to the detriment of consumers.

For three decades, Ottawa has siphoned off hundreds of millions of dollars each year in “ground rent,” putatively to compensate the national purse for the airports’ use of federal land and other assets. In return, the non-profit governance model for airport authorities ensures that federal politicians don’t interfere with investment and operational decisions.

Ottawa gets free money, and airport authorities get a free pass, accountable neither as part of government (as in the United States) nor as a private corporation, as is the case in much of the rest of the world, including London’s Heathrow Airport.

Canadians travelling by air, meanwhile, have to endure some of the highest flight costs in the world, paired with some of the worst service.

Tougher rules for compensation in the event of delays and cancellations are necessary, as we argued on Friday. But faster, easier payments are only remedies for the manifest deficiencies of the Canadian air travel system, not a solution.

Flint, Rainville and Sartor: Canada’s airports are falling behind on infrastructure improvements that should reflect our modern ambitions

Fundamental reform should start with scrapping ground rents. Over the last three decades, the nation’s airports have paid $6-billion to Ottawa; Pearson International Airport alone has paid $3.3-billion. Those annual payments were instituted in the early 1990s, after responsibility for operating airports was divested to airport authorities.

Of course, those dollars need to come from somewhere. In part, airports have scrimped on infrastructure. The flying public also feels the pinch. It’s no coincidence that airport fees for Canadian travellers are among the world’s highest.

During the pandemic, Ottawa has taken some small steps toward easing the fiscal burden it imposes on airports. It waived ground rents for all 21 of the nation’s airports for March, 2020, through to December. In 2021, Ottawa deferred payments for the four biggest airports, and waived payments for the rest.

The Canadian Airports Council would like to see ground rents waived for the next decade, to allow airports to pay down debt and fortify their infrastructure.

That proposal is not ambitious enough. Ground rent payments sap the financial strength of Canada’s airports, a problem made worse by their inability to raise equity capital.

By contrast, the federal government has been more than compensated for the assets that it transferred to airport authorities in the 1990s, as a 2015 position paper from Aéroports de Montréal points out.

There is no justification for continuing those payments. Eliminating them would allow airports to bolster investment and reduce fees paid by travellers.

However, any such change needs to be accompanied by a shift in the governance structure for airports. Today’s airport authorities, of course, argue that they are accountable, through boards appointed by various public stakeholders. Those directors may be accomplished professionals, filled with good intentions and bound by their fiduciary duties.

But the responsibility is too diffuse to lead to accountability. Transport Minister Omar Alghabra cannot fire the head of an underperforming airport authority. There are no shareholders to drive down share prices, or to elect dissident directors, if an airport flails.

One choice would be to return airports to the embrace of government, as is the case in the U.S. Such a move would provide a clear line of sight for political accountability, but would ultimately leave customer service and innovation up to the less-than-agile reflexes of Transport Canada.

A preferable approach would be to move to a fully privatized model. Airport authorities, transformed into corporations, would be able to raise equity, creating a fiscal springboard to upgrade infrastructure. Shareholders would have an obvious and direct interest to ensure this year’s service fiascos stop. As part of that change, Ottawa could swap its rental payments for an equity share.

Such a shift would, in essence, complete the half-measure privatization of the 1990s. Canadian airports would have a new fiscal runway – allowing them to enhance service, cut fees and improve their competitiveness.

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