Canada’s Airports Opening up to Private Investment

Canada’s airports could soon see an important new source of investment, as the federal government is shifting policy to allow private-sector involvement.

Analysts say the move is designed to encourage big Canadian pension funds to deploy more of their capital on domestic infrastructure. 

“By attracting new private partners, such as Canadian pension funds, Canadian airports can speed up their growth plans and improve the passenger experience,” according to a statement issued by Transport Canada.

Current rules have largely prevented private investment in Canadian airports. Until the 1990s the federal government operated airports across the country.

Today, the National Airports System is made up of 26 airports, 22 of which are run by private, not-for-profit airport authorities. While these authorities are operationally and financially independent, the airports themselves are located on land leased from the Government of Canada.

Canada’s big pensions funds, such as the Ontario Teachers’ Pension Plan and CPP Investment Board, have made significant investments in airports outside Canada. 

Currently, Canada’s airport authorities are funded through fees paid by airport users, including both airlines and passengers. The government said this funding model has been effective, “but more investment will be needed in the next decade to help Canada’s air transportation system grow.” 

In a policy statement, the government said private investors could enter into commercial subleases with airport authorities that will enable them to invest in and develop airport lands. Further, the airport authorities could outsource services like maintenance to private investors, and the authorities could create for-profit subsidiaries that pension funds could acquire shares in, the government said. 

“Canada’s airport operators have built world-class infrastructure, connecting people, services, and goods. As our air sector continues to grow, investment from various sources will be essential to ensure that our airports can meet the needs of Canadians,” said The Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry.

“This policy statement provides clear direction on the many ways private investors can work with National Airports System airport authorities to the benefit of both the airports and the communities they serve.”

Brian Klunder, a lobbyist and former senior aide to a Canadian transport minister, told Dow Jones Newswiresthat pension funds have long sought to invest in major Canadian airports. “The interest is not in the air operations. The interest is in the high-end retail space with a captive audience, and parking garages that charge above market rates. That’s where the money is.” 

The Canadian Airports Council applauded the government’s decision to allow private-sector airport investment in airports. 

“It is just good business to have more financial tools in the toolbox and access to longer investment terms is part of that,” said Monette Pasher, the council’s president, adding the country’s airports require investments of $28 billion to accommodate expanding passenger demand and diversify new markets.