Privatizing Canadian airports: a bad idea

HEC Montreal, University of Montreal Press Release | February 21, 2019

Estimated reading time 3 minutes, 28 seconds.

Aéroports de Montréal and the Canada Border Services Agency are working together on a series of measures to accelerate border clearance processes at the airport. Montréal-Pierre Elliott Trudeau International Airport Photo
The Trudeau government is considering privatizing the eight largest airports in Canada, but according to a recent study, privatization could have a negative impact. Montréal-Pierre Elliott Trudeau International Airport Photo

The Trudeau government has been considering privatizing the eight largest airports in the national network since a report was tabled on the future of transportation in Canada, but the idea has not received unanimous approval. While it is certainly attractive in terms of public finances, the prospect has been strongly criticized by different stakeholders, from airlines worried about seeing user fees increase to certain airport authorities who see no benefits for the country. The Centre for Productivity and Prosperity–Walter J. Somers Foundation, wishing to shed more light on this question, has now released a study on the potential impact of this change for Canada. The centre unhesitatingly concludes that privatizing Canadian airports would not lead to any significant productivity gains.

A broadening trend
According to Jacques Roy–a professor at HEC Montreal and the author of the study–privatizing airports is an increasingly popular phenomenon, making it easier to understand the issues and assess the benefits and drawbacks in terms of efficiency and productivity. “In 2016, 41 per cent of European airports were owned entirely or in part by private interests, as opposed to just 22 per cent in 2010,” Roy explains.

By analyzing the impact of different governance models at airports around the world, Roy found that privatization does not guarantee more efficient and effective management. “Based on data from the Air Transport Research Society, which compares the performance of 206 airports and 24 airport groups, we can see that public-sector airports have productivity indicators comparable with those of airports owned entirely or in part by private interests,” said Roy. “Looking at these results, it’s hard to claim that private-sector governance would help boost productivity, especially since it is often the best-performing airports that get privatized.”

Canadian performance
In fact, some results seem to show that Canada has made the right choices. “Its largest airports have invested close to $20 billion over the past 20 years to improve their infrastructure, under relatively advantageous credit conditions. It’s not clear that private, for-profit airports would have done better–in fact, the opposite is possible,” Roy maintains.

“Airports are strategic infrastructures for a country the size of Canada, and I feel that it would be preferable for the federal government to remain the owner,” he concludes. “This consideration should not justify the status quo, however. In the short term, it would be a good idea to review regulatory and monitoring mechanisms to ensure that Canadian airports remain functional and competitive, with respect for the interests of users and communities. In my opinion, Australia has an interesting model, as its largest airports are overseen by an organization that monitors prices and service levels.”

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