– The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies through research that is nonpartisan, evidence-based and subject to definitive expert review.
CANADA – Ottawa should sell its stakes in Canada’s major airports to better serve travellers and raise cash, according to a new report from the C.D. Howe Institute. In “A Better Flight Path: How Ottawa can Cash In on Airports and Benefit Travellers,” author Steven Robins provides a roadmap for government to unlock the value of federally owned airports in a way that maximizes the public interest.
“Canada is the only country in the world in which the largest airports are operated by non-profit, non-share capital airport authorities, with the federal government owning and leasing land to the airport authorities,” states Robins. “Selling equity stakes in Canada’s major airports could raise between $7.2 billion to $16.6 billion for investment in other critical social and economic infrastructure even after paying off their existing debt,” he adds.
The author reasons that selling equity stakes would not change the incentives airport operators face from competition from other airports and modes of travel. “Air travellers are highly price sensitive, and this means that any investor-owned airport would seek to maximize revenues by boosting its value proposition through improved quality, lower prices, or both. Airports can’t just raise prices for travellers.”
Most importantly, selling equity can improve the airport experience for travellers by creating more opportunities for services at airports and removing the onerous airport rent that leads to higher costs for travellers. However, the government must have in place the appropriate regulatory and transaction policies to ensure that any private owners of airports put travellers first.
“The federal government has between $7.2 billion and $16.6 billion invested as equity in our eight largest airports, but this equity does not show up on Ottawa’s balance sheet,” notes Robins. The government should sell equity in these airports with the proceeds recycled to fund new investments in other infrastructure. “These transactions are likely to be in the public interest if decision-makers get the transaction and policy details right,” he concludes.
