Travellers at Toronto Pearson International Airport’s Terminal 1 are photographed on May 25, 2022. Most of Canada’s larger airports are owned by the government and operated by non-profit companies that pay rent to Ottawa. There are 26 government-owned airports in the national system, 21 of which pay rent.Fred Lum/the Globe and Mail
Canada’s airports rely on passenger fees to operate and pay rent to the government – a model that failed in the pandemic when air travel collapsed.
Now a report from a parliamentary committee is calling for the government to revamp the user-pay system, returning the rent payments to the airports and allowing the hubs to upgrade terminals and runways without charging passengers ever-increasing amounts.
Monette Pasher, president of the Canadian Airports Council, said the recommendation is in line with the wishes of the airports she represents. She is calling for the rent to be reinvested for the next 10 years to allow airports to make improvements to runways, terminals and technology systems, including better check-in procedures.
“We need help for a limited amount of time to get back to where we were,” Ms. Pasher said from Ottawa.
Other recommendations in the report from the standing committee on transport, infrastructure and communities include that the government provide more aid to rural airports; encourage agreements between airlines to give customers more access to international routes; and set and measure service standards for flight delays, security screening, baggage handling and other aspects of air travel.
The committee, chaired by member of Parliament Peter Schiefke, wrote the report after holding five hearings in 2022, with testimony from 32 witnesses. Mr. Schiefke tabled the report in the House of Commons last week. “It is the committee’s hope that [Transport Minister Omar Alghabra] and the Department of Transport will review the recommendations and, wherever possible, consider the implementation of the recommendations,” he said.
Most of Canada’s larger airports are owned by the government and operated by non-profit companies that pay rent to Ottawa. There are 26 government-owned airports in the national system, 21 of which pay rent.
Since they were created in 1992, the airport authorities have paid more than $6-billion in rent to the government, or about $400-million a year. In the pandemic, they borrowed $3.2-billion, while halting capital improvements.
The airports’ main source of revenue is the fees it levies on passengers and airlines. These airport improvement fees are generally $25 to $35 per passenger, on top of the charges airlines pay to use the gates, runways and other infrastructure.
Guy Nicholson, a spokesman for the Greater Toronto Airports Authority, which operates Toronto Pearson Airport, said the committee’s recommendations and government support would reduce the need for fee increases and allow Canada’s largest travel hub to pay off its debt more quickly.
“The pandemic was hard on airports. The Canadian airport model is financed by users, and user fees fell hard when our traffic dropped to less than 20 per cent of what it was before COVID,” Mr. Nicholson said.
The government waived or deferred airport rent during the pandemic, and regularly provides grants for maintenance and improvements to the hubs. But the passenger remains an airport’s main source of revenue.
“The pandemic has shown us that user-pay doesn’t work,” said John Gradek, who teaches aviation leadership at McGill University. He described Canada’s airports as being in “dire straits.”
“Their balance sheets are a mess,” said Mr. Gradek, who testified before the committee. “Somehow they have to repay the interest or repay the debt.”
In an interview, Mr. Gradek said Canada has two options if it is to create a viable airports network: open its airports to private investment or make them fully supported by taxpayers. The current system forces airports to continually raise fees for passengers and airlines just to afford the interest on their debts, he said.
Globally, Mr. Gradek likes the Mexican airports model, which gives airport authorities control over a region’s major hub, as well as the smaller ones nearby. And in Europe, large institutional investors – including some Canadian ones – have become major stakeholders in airports, allowing capital improvements to be made without raising fees or taking on new debt.
Ms. Pasher opposes the idea of returning airport operations to the government, but is open to equity investments from the private sector.
“Financially, we need more tools in the tool box,” Ms. Pasher said.