Airport Rent
Canada’s airports paid nearly $260 million in rent in 2009 to the federal government – a heavy financial burden for which Canada’s airports receive nothing in return.
While investing more than $10 billion in infrastructure improvements since 1992, nearly all of it self-funded, Canada’s airports have paid nearly $3.3 billion in rent to the federal government. This rent was paid on airport assets that were valued at $2 billion at the time of their transfer to local authorities.
Airport rent places Canadian airports at a competitive disadvantage to U.S. airports and other modes of transportation. It also serves as yoke on the ability of an airport, and the community it serves, to further invest and expand on trade opportunities.
CAC members’ preferred option is the elimination of federal rent, in recognition of the importance of air transportation to Canada and the airport authorities’ mandate for regional economic development. However, as an interim measure the CAC has requested a revised definition of the formula used to calculate rent that would exclude Airport Improvement Fees and revenue raised to cover debt servicing costs.
Background
Canada’s airports are essential components of Canada’s infrastructure for global trade. The imposition of airport rent is an ongoing impediment to Canadian communities enjoying full advantage of the opportunities available to them for global trade by making the cost of air travel and cargo more expensive and by placing Canadian airports at a competitive disadvantage over other world airports in the quest for international air service.
Airport devolution in 1992 transferred 100% of airport operating and capital expansion costs, along with the associated risks, to airport authorities. Since 1992, Canada's airports have committed to more than $10 billion in infrastructure improvements to expand and improve the terminals and airside facilities inherited from Transport Canada. This massive level of infrastructure improvement would not have been possible had these airports remained in government hands. Indeed, prior to 1992, the federal treasury subsidized airports to the tune of $135 million a year.
Airport authorities continue to find themselves obligated to pass on part of their rent costs to airlines. This places Canadian airports at a competitive disadvantage when airlines are considering which destinations to serve with their aircraft. Airlines consider a city’s comparative airport costs as an important factor in new route selection. Meanwhile, Canada's airports are losing millions of passengers and truckloads of freight to airports located just inside the U.S. border.
U.S. airports pay virtually no rent, no municipal taxes and are able to issue tax-free bonds. In addition, they receive billions of dollars in U.S. government funding. Again, this puts Canadian airports at a competitive disadvantage. U.S. border airports such as Bellingham, Wash.; Buffalo, N.Y.; Burlington, Vt; Detroit, Mich.; and Plattsburgh, N.Y. each year attract millions of Canadians who choose to fly out of U.S. airports instead of Canadian airports because added taxes and fees in Canada make ticket prices higher.
In addition, a significant portion of CAC members’ traffic and revenue comes from connecting passengers using Canadian airports as gateways between Europe/Asia and the Americas. Many passengers will choose to fly via the U.S. instead of via Canada if the cost of their travel is cheaper.
