Ruth Haines
Canada's airports are mostly operated by private, not-for-profit airport authorities on long-term leases from the federal government. The country's airport model is based on the principle that direct users, rather than taxpayers, should bear the costs of air transportation. This has led to airports diversifying their revenue streams through retail, dining, and other services, reducing their reliance on aeronautical income. While this model has faced criticism for high fees and inadequate infrastructure, studies suggest that private ownership leads to improved efficiency, customer service, and route expansion.
| Characteristics | Values |
|---|---|
| Airport ownership | Privately owned airports are the exception rather than the rule in Canada. |
| Airports in the National Airports System, except the three territorial capitals, are owned by Transport Canada and leased to local authorities. | |
| 21 airport authorities operate these airports, with Mirabel and Montreal Trudeau operated by the same authority. | |
| Kelowna Airport is the only airport listed that is not operated by an airport authority; it is operated by the City of Kelowna under a long-term lease with Transport Canada. | |
| The Winnipeg Airports Authority is an example of a privately-owned airport. | |
| Airport funding | Canadian airports are diversifying their revenues by adding new retail, dining, and beverage options for travellers. |
| Airports are helping air carriers keep their costs low, with savings passed on to travellers. | |
| Canada's approach is based on the notion that direct users, not taxpayers, should shoulder the costs of air transport as much as possible. | |
| Canada's airports pay back: the federal government collects up to 12% of airport gross revenues in the form of rent. | |
| In 2019, Canada's airports provided $419 million in federal rent – more than $6.5 billion transferred back to the federal government since 1992. | |
| Airport performance | Airports perform better when owned by private equity funds, with improved customer service, fewer cancellations and delays, and more routes, according to a study by the U of A's Alberta School of Business. |
| A study of 2,400 airports worldwide by corporate finance expert Hyeik Kim found that those owned privately were more efficiently run according to several criteria. | |
| Airports owned by private equity firms saw their net operating income increase from both airline fees and terminal retail revenue. |
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What You'll Learn
Most Canadian airports are privately owned and operated
Canada has built the world's best air transportation infrastructure, offering travellers high levels of comfort and safety, as well as sufficient capacity for new air routes and competitive choice in the market. Canadian airports are diversifying their revenues by adding new retail, dining, and beverage options for travellers. These new or expanded business lines allow airports to reduce their reliance on aeronautical income, helping air carriers keep their costs low. Canada's approach is based on the notion that direct users, not taxpayers, should shoulder as much of the costs of air transport as possible.
Under the National Airports Policy, a program commenced in the 1990s, nearly all of Canada's airports are privately operated. Twenty-one airport authorities operate under this policy, with the federal government collecting up to 12% of airport gross revenues in rent. In 2019, Canada's airports provided $419 million in federal rent, transferring more than $6.5 billion to the federal government since 1992. While most airports are privately operated, they are still owned by Transport Canada and leased to the local authorities operating them.
There are some exceptions to private ownership and operation. For example, the City of Kelowna operates the Kelowna airport under a long-term lease with Transport Canada. Additionally, the three territorial capitals' airports are owned by the government.
Some critics argue that the privatization of airports has led to increased airport fees and an inability to meet infrastructure requirements. However, studies have shown that airports owned by private equity firms experience improved customer service, fewer cancellations and delays, and more routes. According to passenger surveys, there is still room for improvement in Canadian airports, particularly regarding flight cancellations, delays, lost luggage, and overall satisfaction.
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Transport Canada owns 23 airports, leased to local authorities
Canada has built the world's best air transportation infrastructure, offering travellers high levels of comfort and safety, as well as sufficient capacity for new air routes and competitive choice in the market. Canadian airports are diversifying their revenues by adding new retail, dining, and beverage options for travellers. This allows airports to reduce their reliance on aeronautical income and helps air carriers keep their costs low.
Canada's approach is based on the notion that direct users, not taxpayers, should shoulder as much of the costs of air transport as possible. Under this model, Canadian airports are responsible for both the operational and capital costs associated with operating, maintaining, and growing airports to improve the traveller experience. Airports operate on a not-for-profit basis, reinvesting all financial surpluses for the benefit of users and the communities they serve.
Transport Canada owns 23 airports, which are leased to 21 local airport authorities. The three territorial airports are owned by their respective territorial governments, except for Iqaluit Airport, which is operated by Nunavut Airport Services, a subsidiary of the Winnipeg Airport Services Corporation. Transport Canada also owns several small airports in BC, Manitoba, Quebec, and Newfoundland and Labrador.
The National Airports Policy, commenced in the 1990s, involves the privatisation or private operation of nearly all of the country's airports. This policy has been controversial due to increased airport fees and the inability of airports to meet infrastructure requirements. Despite this, Canada's airports are locally accountable, with boards of directors nominated by groups representing government and local business and community interests.
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Airports pay rent to the federal government
Canada's airports are mostly privately operated, with the federal government collecting rent from them. The country's airports are responsible for both operational and capital costs associated with operating, maintaining, and growing airports. This means that instead of taking funds from taxpayers, as is the case in many countries, Canada's airports pay the federal government up to 12% of their gross revenues in rent. In 2019, this amounted to $419 million, and since 1992, over $6.5 billion has been transferred to the federal government.
The National Airports Policy, implemented in the 1990s, led to the privatisation or private operation of nearly all of Canada's airports. This policy has been controversial due to increased airport fees and the inability of airports to meet infrastructure requirements. The high rents and taxes imposed on airports in Canada are a significant factor contributing to high airfares within the country. Airports also pay additional fees to municipalities, and these costs are passed on to travellers.
The National Airlines Council of Canada (NACC) has urged political parties to address the affordability and sustainability of air travel in the country. They have called for a freeze and reduction in federal fees and charges, and for airport rent to be reinvested into airport infrastructure. This would enable airports to become more accessible, efficient, and secure.
Some commentators have suggested that the federal government should sell its remaining interests in airport leases to for-profit organisations, reduce taxes and fees, and negotiate deals with other countries to allow foreign airlines to operate within Canada. These steps could improve the competitiveness of Canadian airlines and lower airfares for travellers.
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Airports are diversifying revenue streams
Canada has built the world's best air transportation infrastructure, offering travellers high levels of comfort and safety, as well as sufficient capacity for new air routes and competitive choice in the market. Notably, Canadian airports are not funded by taxpayers; instead, they pay the federal government up to 12% of their gross revenues in rent. Canada's airports are privately operated, leased to local authorities, and responsible for their operational and capital costs.
To maintain their competitiveness, airports are diversifying their revenue streams. Aeronautical revenues have proven volatile due to regulatory uncertainties, while non-aeronautical revenues have consistently contributed 25-30% of total revenues. Airports are, therefore, seeking to reduce their reliance on aeronautical income by expanding their non-aeronautical revenue streams.
Non-traditional revenue sources for airports include retail, dining, and beverage services, baggage handling, telecom infrastructure, food delivery, consulting services, event management, entertainment, branding, and utilising vacant land for non-airport use. Airports can leverage digitalisation, customer insights, and integrated advertising to enhance these non-aeronautical revenue streams.
Additionally, airports can explore partnerships with other industries. For example, airlines can collaborate with travel companies, hotels, or car rental services to offer bundled packages that include air travel and other travel-related products. Loyalty programs are another effective strategy, where airlines offer perks such as priority boarding, free checked bags, and exclusive lounge access to incentivise customers and build loyalty.
Cargo services also present significant growth potential for airports. During the pandemic, airlines that focused on cargo transportation fared better, as cargo operations became a crucial revenue source when passenger demand decreased. Airlines like Air Canada and Korean Air expanded their cargo services, transporting goods like pharmaceuticals and electronics, thereby generating new revenue streams.
By diversifying their revenue streams, airports can improve their financial performance, customer satisfaction, and overall competitiveness in the aviation industry.
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Airports owned by private equity perform better
In Canada, airports are mostly operated by private, not-for-profit airport authorities with long-term leases on federal land. The country's airport model is based on the notion that direct users, not taxpayers, should shoulder as much of the costs of air transport as possible. The federal government collects up to 12% of airport gross revenues in the form of rent. In 2019, Canada's airports provided $419 million in federal rent, with over $6.5 billion transferred back to the government since 1992.
Despite this, Canadian airports have been criticised for cancellations, delays, lost luggage, and poor service. For instance, Toronto's Pearson Airport was ranked among the worst in North America for overall satisfaction in 2022, with over 50% of its scheduled flights delayed between May and July.
However, a 2023 study by the University of Alberta's School of Business found that airports owned by private equity firms tend to have better customer service, fewer delays, and more routes than those owned by governments or other private companies. The study examined 437 airports, 102 of which had been acquired at least once by an infrastructure fund. It was found that airports purchased by private equity funds performed better than their non-equity counterparts. Private equity infrastructure funds are "closed-in", with a limited term of about 20 years, and investors expecting a return. This motivates fund managers to improve efficiency and create value for investors, which leads to better airport performance.
Between 1996 and 2019, private equity invested $388 billion in airports globally and raised another $300 billion in investment capital. Airports owned by private equity firms saw their net operating income increase from both airline fees and terminal retail revenue. In Canada, the private-equity-owned Vantage Airport Group has helped transition 20 airports from public to private ownership.
Therefore, while Canadian airports have faced challenges in recent years, the study suggests that privatisation, particularly with private equity involvement, could be a potential solution to improving airport performance.
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Frequently asked questions
Canada's airports are predominantly privately owned and operated. There are 23 airports owned by Transport Canada and leased to Canadian airport authorities.
No, Canadian airports do not receive government funding. Instead, the federal government collects up to 12% of airport gross revenues in the form of rent.
A study by the University of Alberta's Alberta School of Business found that airports perform better when owned by private investors, with improved customer service, fewer cancellations and delays, and more routes.
The National Airports Policy, which facilitated the privatisation of airports, has been criticised for greatly increased airport fees and the inability of airports to meet infrastructure requirements.
No, private property owners are not required to give a reason for denying someone entry. If a person does not comply with the owner's request to leave, they can be arrested for trespassing.
