Understanding the Assetization of our Biggest Airports

It was foreshadowed in Budget 2025, so it isn’t exactly a shock: the federal government will be seeking private investment for Canada’s four largest airports — Toronto, Vancouver, Montreal and Calgary. 

The government plans to retain ownership of the underlying land and assets, but Canada will allow private investment through long-term concessions. Ottawa expects these deals to generate tens of billions of dollars which will be reinvested into other infrastructure projects.

Since it was floated in the budget last year, this scheme has been controversial.

It is important to note the current structure of airport ownership: the government owns the underlying land and assets, and then outsources operations to not-for-profit airport authorities that manage day-to-day operations under long-term lease agreements. Those non-profit airport authorities pay rent to Transport Canada. 

Prime Minister Carney’s privatization deal would maintain government ownership of the airport assets, but allow private for-profit entities to bring capital investment and get involved in operations in some way. (Details tbd.)

Tyler Meredith, former director of policy to the Finance Minister, provided valuable context for how current airport arrangements work, how they might change and both the potential downsides and upsides of the privatization plans in a thread on X.

The worst case scenario for Canada would be something like what happened in the U.K. where complete privatization of the airports led to higher costs, and significant instability. Smaller airports in some cases became financially unviable, and then needed to be bailed out by the government or closed outright. 

Australia was not quite as bad: privatization led to increased costs, record profits for the private owners of airports with decreased quality of service. However, the Australian government retained ownership of the underlying and established some economic regulations imposing limits on fee hikes and mandatory monitoring of service quality.

Australia also implemented foreign ownership limits. The Australian case also shows how foreign ownership limits have been implemented in the past. There is a 49% limit on foreign ownership of airport-operator companies, and a 5% limit on airline ownership of airport-operator companies. The privatization scheme also limited how much a company could invest in multiple airports, to avoid incentives for prioritizing specific routes. These ownership limits maintained domestic ownership of the major airports, and allowed Australian pension funds to invest significantly.

Airport privatization is an example of the broader investment trends characterized by Professor Brett Christophers as “asset manager culture.” The imperative to turn public infrastructure into financial assets has, since the 1990s, developed into a well-oiled machine of buying public infrastructure, driving up short-term value and selling for record profits — often at the expense of the quality and costs of services.

In Canada, the textbook case is the Highway 407 ETR which was built with public funds from the Ontario government. A 99 year lease was given for $3.1 billion to a private consortium of Canadian and foreign firms in 1999, who then drove tolls up significantly, and brought the asset to a value of $32 billion by 2019.

It is not a foregone conclusion that the government’s airport privatization scheme will be a disaster, though. If we maintain governance and ownership over the infrastructure, an arrangement with private operators can prove beneficial.

For example, in France, regional airports of national interest are owned by the federal government but long-term concessions are given to semi-private or private organizations to operate them. 

The bottom line: There are some risks of screwing it up, but the airport privatization plan could go better than some critics assume, given the decision to maintain government ownership of the underlying land and assets and Carney’s own statements that he’s seen where other projects have gone wrong.

As these deals develop here is what we’ll be watching for:

• Governance rules that ensure proper maintenance of the airports and create some guardrails against price gouging 
• Potential limits on the percentage of foreign ownership allowed for airports and the continued enforcement of limits on foreign ownership of airlines
• Setting the system up in a way that ensures that the government won’t need to prop up infrastructure with public funds

The other big thing to watch for is profit-sharing. This whole scheme is supposed to be about generating cash that the government can use to invest in other things that benefit all Canadians.