“Canada is open for business” was Prime Minister Mark Carney’s message to global finance leaders gathered in Toronto last month for an international investment summit.
There is nothing wrong with welcoming investment. But “open for business” should not mean putting everything on the auction block. Some things should not be subjected entirely to the logic of capital. Essential services and critical public infrastructure should serve the public interest, not primarily boost investors’ bottom lines.
The care sector is one example. Canada’s international airports are another.
Yet in his opening speech at the summit, Carney proposed selling the operations of the main airports in Toronto, Montreal, Calgary and Vancouver to for-profit corporations to help finance improvements at smaller airports.
We’ve seen this movie before.
In the late 1980s, the Mulroney government allowed a private consortium to build and own Pearson’s Terminal 3. The state-of-the-art terminal opened in 1991 at a cost of roughly $400 million.
In August 1993, the government leased Pearson’s Terminals 1 and 2 to the Pearson Development Corporation (PDC), a partnership involving the Terminal 3 group and Paxport Inc., a consortium controlled by Don Matthews, a former Conservative party president and one of Brian Mulroney’s top fundraisers.
The deal reeked of crony capitalism.
Liberal opposition leader Jean Chrétien made challenging the deal a key part of his 1993 election platform. After winning, his government cancelled the agreement.
PDC sued the federal government for more than $600 million. On the eve of the 1997 election, the two sides settled for $60 million. PDC then sold Terminal 3 to the not-for-profit Greater Toronto Airports Authority for $719 million — $319 million more than its construction cost.
Not a bad business after all.
Since then, Canada’s major airports have been operated by not-for-profit airport authorities, while the federal government retains ownership of the land and assets.
In other words, airports’ operations have already been privatized. But Carney is proposing now another step: transferring them from not-for-profit corporations to for-profit companies.
Would that improve performance? Perhaps. But the current system has set the bar remarkably high.
Three of the four airports under consideration rank among the world’s top 100 and the 10 best in North America in this year’s Skytrax World Airport Awards. Vancouver ranks first in North America and tenth worldwide. Calgary is the only one of the four outside the global top 100.
Nor are these airports a burden on taxpayers. Together, they generate more than $500 million annually in rent for the federal government.
Does privatization actually improve airport performance?
But Carney believes privatization can do better. So does Ontario Premier Doug Ford, who says he is “100 per cent confident” that it will produce “more effective, more efficient airports at hopefully lower cost.”
That confidence is not supported by much evidence.
For-profit corporations, by definition, seek to maximize profits. That can mean more revenues through higher parking fees and rents paid by restaurants and retailers, as well as lower costs through outsourcing and reduced wages. That, for instance, has been the experience at London’s Heathrow Airport and Australia’s major airports following privatization. But while profits increased, service did not improve at Australian airports and some services deteriorated at Heathrow.
Carney argues that Canadian pension funds already invest in and manage airports around the world and that it is time to bring that expertise home.
Indeed, the Public Sector Pension Investment Board owns stakes in seven international airports. But only one ranks among Skytrax’s top 100. The four Canadian airports under consideration would be among the jewels of its portfolio. Whether private ownership would improve their performance, however, is far from established.
The rationale for changing ownership therefore appears to rest largely on the promise of additional cash — what a Toronto Star editorial called a “fanciful promise of windfall cash.”
For-profit airports serve the interests of their shareholders. Profit maximization is their objective. Not-for-profit airport authorities, by contrast, are designed to balance the interests of a broader group of stakeholders, with boards that include representatives of governments, airlines and labour.
The current system may not be perfect. But given the strong performance of Canada’s major airports, their contribution to government revenues and the uncertain benefits of for-profit ownership, the case for changing the system has yet to be made.
Yes, Canada should remain open to investment. But we should also learn from other countries’ experiences — and from our own.
The message to the Prime Minister should therefore be clear: Canada is open for business, but Canada’s airports are not for sale.
