Ottawa dangles rent cut for airports
By SIMON TUCK
Sunday, March 27, 2005
Ottawa — The federal government is preparing to offer Canada's airports a deal that would give them the rent cut they so desperately crave, but would require them to make room on their boards for airlines who want more say in how the facilities are run.
Transport Minister Jean Lapierre said he'd like to make the authorities that run Canada's airports more transparent and accountable, and that guaranteeing airline representation on the boards is a step in the right direction.
The airports, for example, shouldn't be allowed to hike the fees they charge airlines without more consulting, he told The Globe and Mail. “They are not private clubs.”
Mr. Lapierre — like the airports and the airlines — also wants Ottawa to cut the ever-increasing rent it charges the airports, but has so far not been able to convince Finance Minister Ralph Goodale to take action.
Canada's airports, non-profit operations since being transferred from federal to local control about a decade ago, pass on the cost of their rent to airlines through landing and terminal fees. Carriers then pass on those bills to passengers, or eat the cost themselves.
Management of the airports, meanwhile, has been under more scrutiny in recent months, particularly since the opening last year of the pricey new terminal at Toronto's Pearson International Airport. Sardonically dubbed “the Taj Mahal” by some industry officials, the $3.6-billion project angered airlines because it helped drive up their fees, and neither they nor elected officials could do anything about it.
According to a study of 2003 landing fees, Pearson ranked as the world's second-most expensive airport after Tokyo's Narita Airport.
Mr. Lapierre said the authorities running Canada's airports are doing a good job, but they need greater accountability. Although some airports have former airline executives on their boards, airlines have for years wanted a larger role in running the airports.
The minister acknowledged that his plan to force the boards to include airline representatives will meet opposition from the airports. But a rent cut, the single most important issue facing the airports, might be enough to convince the authorities that they can live with a new board structure.
Mr. Lapierre said he hoped to introduce new airport legislation, including the proposals on rent and governance, by June. Mr. Goodale has also vowed that the government will do something about airport rents by that same date, which would likely allow the two largest airports in his home province of Saskatchewan to avoid paying any rent. The facilities in Regina and Saskatoon are among those scheduled to begin paying rent for the first time on Jan. 1, 2006, under the timetables negotiated with Ottawa.
The issues of airport governance and rent go “hand in hand,” Mr. Lapierre said. “It works like a tango — we're working on both issues.”
Airport authorities don't see it that way. “It remains to be seen how the two issues are tied together,” said Jim Facette, chief executive officer of the Canadian Airports Council, which represents those who run the country's 187 airports.
Other authorities say they're not the ones with governance problems.
Paul Benoît, chief executive officer of the Ottawa International Airport Authority, says that the Canadian air travel industry has been battered by the behaviour of some airlines — not the airports. “Airports are not the ones who have abused the public's trust.”
The entire system shouldn't be changed to take care of individual problems, Mr. Benoît added. “If there's an issue with one particular airport — fix it.”
James Moore, transport critic for the Conservatives, said the airlines' lack of representation on airport boards reflects a lack of accountability. Mr. Moore doesn't blame Mr. Lapierre for linking the issue with the question of rent, which he describes simply as “a tax grab.”
Canadian airlines say airport costs — and the federal rent that helps drive those costs — are wounding their industry. They also say that those costs are going to become an even bigger problem if Canada and the United States negotiate an expansion to the “open skies” agreement they signed a year ago. That would allow airlines greater access to the entire continental market, which would mean greater competition among airports and airlines.
“If we have a cost structure that is out of line with our competitors, we're going to lose,” said Cliff Mackay, chief executive officer of the Air Transport Association of Canada.
The two countries took an important step toward freer trade last month when Mr. Lapierre and his U.S. counterpart, Secretary of Transportation Norman Mineta, jointly announced they will hold talks toward a more continentalist approach to the skies. No timetable has been arranged.
Ottawa is scheduled to collect $268-million this year in airport rent. That figure is to increase to $334.2-million next year, $349.4-million in 2007 and almost $500-million by 2010.
Airport authorities have paid nearly $2-billion in rent to Ottawa since the transfers were made in the mid-1990s. The authorities have also invested $8-billion of their own money in improved terminals, runways and other infrastructure.
Canada's airports have been governed by local, autonomous, non-profit authorities since the federal government negotiated the handover of the facilities between 1993 and 1996. Although each of the airport authorities has its own structure, most have boards of between 11 and 16 people that include representatives of all three levels of government, and a variety of community interest groups. Some of the boards include representatives that were once involved the airline industry.
Most board members are nominated, often by the province, the municipality or local bodies such as the Chamber of Commerce. The federal government is also represented on each authority.
Details of Mr. Lapierre's plans to change airport governance, such as how many seats the airlines could get on each board, have not yet been determined.
The man who led the handover of the airports from federal to local control, meanwhile, says the entire plan was a mistake. Former Liberal transport minister Doug Young said last year that he deeply regrets the strategy because many of the airport authorities are gouging travellers and building overpriced terminals. “I don't think there is any incentive for people to be good managers.”
Mr. Young said his government should instead have discarded the non-profit model and handed the airports to civil servants or the private sector — and make them more accountable to Ottawa.
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Ottawa dangles rent cut for airports
Moderators: sky's the limit, sepia, Sulako, North Shore
Re: Ottawa dangles rent cut for airports
Rebel wrote:discarded the non-profit model and handed the airports to civil servants or the private sector — and make them more accountable to Ottawa.
