"Canada Markets Airports to Investors in Push to Attract Capital"

Canada is on a mission to attract private capital to its airports, and the stakes couldn't be higher. With a population spread thin across the second-largest country in the world, air travel is the lifeblood of connectivity, commerce, and community. The government's recent policy statement on investment at National Airports System (NAS) airports is a clarion call to investors, particularly Canadian pension funds, to step up and fuel the growth of this critical infrastructure.

The air sector in Canada is a juggernaut, handling 150.7 million passengers in 2023 alone. Air transportation makes up about 30% of the value of Canada’s non-United States cargo traffic, underscoring its importance for international trade. The government's user-pay system, where most airports are funded through fees paid by users, has proven resilient and cost-effective. But the writing is on the wall: more investment is needed to keep pace with growing demand.

The NAS airport authorities, operating on federal land through long-term ground leases, have a unique governance model that balances private investment with government ownership. This model has enabled significant growth over the past three decades, primarily through long-term debt from Canadian sources. The policy statement issued by Transport Canada outlines several flexibilities for attracting investment, including subleases, subcontracted services, and subsidiaries. These avenues provide a structured framework that ensures operational independence while respecting government ownership.



The benefits for private investors are manifold. Stable long-term investments in this key part of Canada’s trade and transportation system offer far-reaching benefits. A strong system of sustainable transportation infrastructure is also an important aspect of national security policy. By investing in Canada’s air transportation sector, Canadian investors can support the national interest, facilitate economic growth, and help ensure that Canada’s infrastructure is well-positioned to respond to future challenges.

However, the road is not without its potholes. Regulatory and governance constraints, market volatility, competition, and high operational costs are potential risks that investors must navigate. The government's commitment to exploring negotiations to extend airport authority leases is a step in the right direction, but it remains to be seen how these flexibilities will translate into tangible investment opportunities.

The impact of private sector investments in airport infrastructure goes beyond financial returns. Modernization and expansion of terminal buildings can significantly enhance the passenger experience, making air travel more efficient and convenient. This, in turn, supports economic growth in local communities by creating jobs and stimulating demand for goods and services.

The Canadian Airports Council (CAC) has been vocal about the need for more investment tools and an extension of government land leases at airports. The budget announcement in April 2024 created a working group to identify pension fund investment opportunities for many sectors, including airports. This is a positive step, but the CAC's call for more financial investment tools and an extension of government land leases at airports underscores the urgency of the situation.

The budget also provided investment for new measures to support biofuels production in Canada, with a focus on renewable and sustainable aviation fuel (SAF). This is a welcome development, as it aligns with Canada’s net-zero goals and supports long-term sustainability. The proposed $108 million for Transport Canada and the RCMP to administer the Transportation Security Clearance Program is another positive note, enhancing the safety and security of air travel.

In conclusion, Canada's push to attract private capital to its airports is a bold move that holds the promise of economic growth and enhanced connectivity. However, it is not without its challenges. The government's policy statement and the flexibilities it offers are a step in the right direction, but the onus is on private investors to seize these opportunities and contribute to the growth and sustainability of Canada's air transportation system.