CANADA encouraged private investors to help “speed up” the development of its airports in an attempt to show that the tightly controlled sector is open for business amid a push to boost domestic investment.
The government will consider longer subleases on federal land to sweeten development terms, it said in a Friday (Mar 7) policy statement that also listed a menu of existing investment options. The statement highlighted Canadian pension funds as potential partners.
Canada’s largest pension funds tend to deploy a smaller proportion of their capital in domestic assets now than they did two decades ago, when reforms were kicking in that permitted them to become more active in global public and private markets. In its 2024 budget, the government committed to identifying opportunities for pensions to invest in domestic assets, and to support investments in airport facilities.
Canada is in a developing trade war with the US, its largest export market, and policymakers are looking for ways to support the economy. Even before US President Donald Trump imposed tariffs, the Bank of Canada said in February his threats to do so were weighing on investment.
Most airports in Canada’s system are run on federal land by airport authorities, which hold long-term ground leases. These authorities are private, not-for-profit, non-share-capital corporations, such as the Greater Toronto Airports Authority, which runs Toronto Pearson International Airport. Authorities can secure long-term private sector credit but otherwise raise money only through user fees, not equity.
That model has worked so far, “but more investment will be needed in the next decade to help Canada’s air transportation system grow”, said Transport Canada, the ministry responsible. It did not immediately respond to requests for more information.
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Transport Canada called airports “a major opportunity for private investors” because of the country’s growing but thinly spread population.
Airport authorities can create for-profit share-capital subsidiaries with external partners so long as the authority remains in control, according to the statement. These ventures have more financial flexibility than the authorities themselves, and can fund large investments such as terminal buildings.
Subsidiaries can also develop hotels and shopping centres to make money to support airport operations while improving the travelling experience, the government said.
The statement stressed airports must operate with national security in mind and remain free of “inappropriate foreign interference”. Key board functions must also stay with airport authorities. BLOOMBERG
