U of C economist urges Ottawa to set airport fee rules before private bids

University of Calgary economist Aidan Hollis is urging Ottawa to establish independent regulation of airport charges before seeking bids to operate four major Canadian airports. He warns that setting rules after awarding long-term concessions could leave passengers and airlines paying higher fees for decades.

CTV News Calgary has reported:

A University of Calgary economist is urging the federal government to establish independent oversight of airport charges before inviting bids from private operators to run Canada’s four largest airports. In a new paper, economics professor Aidan Hollis warns that awarding long-term operating concessions before setting regulatory rules could raise costs for passengers and airlines.

The proposal covers Toronto Pearson, Vancouver, Montréal-Trudeau and Calgary airports. Hollis says travellers and airlines have few practical alternatives to major airports, giving operators considerable power to set charges. Without effective regulation, he argues, investors could pay for the opportunity to collect higher fees over the life of a concession.

“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 currently run by private, not-for-profit airport authorities. They can reinvest surpluses but cannot distribute profits to investors, while a for-profit operator could retain earnings under a concession. At Calgary airport, improvement fees account for about 42 per cent of revenue, according to the paper.

Hollis recommends linking improvement fees to approved capital programs and having major projects independently reviewed for their need, size and cost. He also calls for service standards, a binding process to settle disputes over charges, and restrictions on 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 private operators could earn more from retail, parking and property. Whether passengers benefit from those gains, he says, would depend on how airport charges are regulated. He recommends comparing each proposed concession with a regulated, not-for-profit airport authority and proceeding only if the benefits exceed the additional costs of private ownership.