Airport operators call for improved management model
Billy Bishop Toronto City Airport was voted the fourth best airport in the world by Condé Nast Traveler. supplied
As president of the Canadian Airports Council (CAC), Daniel-Robert Gooch knows how hard the CAC’s 50 member airports across the country work to provide safe and secure facilities and promote the competitiveness of commercial aviation in Canada.
For nearly 25 years, local airport authorities have been running, operating and funding their airports under long-term leases with the federal government, investing more than $22-billion in airport improvements since 1992 without any funding from taxpayers. And this hard work has paid off. The World Economic Forum’s 2015 Global Travel & Tourism Competitiveness Report ranked Canada’s airport infrastructure as the best in the world.
“Our airports and many others in the industry are concerned about aviation costs, and government-imposed cost is part of that.”
However, Mr. Gooch believes there is still room for improvement, particularly in the partnership between airports and the federal government.
He points out that the 60-year leases with the federal government can be extended but the prospect of a lease ending, even 30 to 40 years out, can be a problem when airports are trying to secure long-term tenants.
Another concern many airports have is the rent they must pay to the federal government. Canada’s major airports paid $323-million to the federal government in rent last year, and more than $5-billion since they were transferred to not-for-profit authorities in 1992, says Mr. Gooch. Most other airports in the world don’t pay rent to their governments.
“Our airports and many others in the industry are concerned about aviation costs, and government-imposed cost is part of that,” adds Mr. Gooch. “Many of our airports would like to see something done on airport rent.”
The current rent formula means airports pay anywhere from five to 12 per cent on gross revenue, which can deter revenue diversification and keep some airports out of lower-margin business lines where there may be strong competition to provide the same service, adds Mr. Gooch.
He believes that changing the rent formula makes sense.
“CAC has said that rent should be eliminated altogether for airports with fewer than three million passengers, which would be all of them other than the eight largest airports,” says Mr. Gooch. “We’re not talking about a lot of money. I understand that it’s about $20-million of the $323-million in rent paid last year.”
One option for government would be to cap the rent at the $323-million raised in 2015.
“If nothing changes, that number will continue to grow as revenue increases through growth in traffic,” he says. “Capping rent at today’s levels would result in significant savings for airports over time.”
While Canada’s airport infrastructure is, for the most part, world class, six National Airports System (NAS) airports on federal land are barred from participating in federal infrastructure programs and have been unable to adequately upgrade their infrastructure.
Mr. Gooch says CAC regards the situation as unfair and will continue its six-year-long lobbying effort to have the ban lifted.
NAS airports operate on a not-for-profit basis, but lease their land from the federal government under long term leases with assets reverting to the federal government after 60 years. The six NAS airports in Charlottetown, Fredericton, Gander, London, Prince George and Saint John have fewer passengers than the federal government’s Airports Capital Assistance Program (ACAP) threshold for assistance, which means they must pay rent but are ineligible for funding from the ACAP or other federal infrastructure programs.
“These six airports are expected to be self-sufficient for both their operating costs and capital costs and they are facing tough times,” says Mr. Gooch.
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