A University of Calgary economist is calling on Ottawa to establish independent oversight of airport charges before inviting bids from private operators to run Canada’s four largest airports, including Calgary. In a new paper, economics professor Aidan Hollis warns that awarding long-term operating concessions before setting regulatory rules could expose passengers and airlines to higher costs. The paper examines the federal proposal for Toronto Pearson, Vancouver, Montréal-Trudeau and Calgary airports. Hollis argues that travellers and airlines have few practical alternatives to major airports, giving operators considerable power to set charges. Without effective regulation, he says, investors could pay for the opportunity to collect higher fees over the life of an agreement. “The price a bidder will pay depends on what the rules will let it charge,” Hollis writes in the report. “If the rules are written after the price is set, the government will have sold the right to raise charges at airports that travellers and airlines can rarely avoid, and users will pay for that decision for decades.” Canada’s major airports are already operated by private, not-for-profit airport authorities. Those authorities can reinvest their surpluses but cannot distribute profits to investors. A for-profit operator could retain earnings under the terms of a concession. The paper says airport improvement fees account for about 42 per cent of Calgary airport’s revenue. Hollis recommends tying those fees to approved capital programs and independently reviewing major projects for their need, size and cost. He also calls for service standards, a binding process to resolve disputes over charges and restrictions preventing operators from passing acquisition premiums on to airport users. “Canada needs economic regulation of its major airports with or without a sale,” Hollis writes. “If a sale is contemplated, the regulatory framework must be established before bids are invited.” Hollis acknowledges that private operators could generate more revenue from retail, parking and property. However, he says whether those gains benefit passengers would depend on how airport charges are regulated. He recommends assessing each proposed concession against a regulated, not-for-profit airport authority and proceeding only where the benefits exceed the additional costs of private ownership.
