New York, NY — Privatization could present numerous pluses for the major airports in Canada, though widespread support for the idea is having a hard time getting off the ground, according to a new Fitch Ratings report.
Currently operating under a partial model, a greater role for the private sector in Canadian airports could lead to many of the same positives other major airports throughout the world experience, according to Senior Director Seth Lehman.
“Many European and Latin American airports have established histories under private airport control, with many of these same airports positioned to drive growth in the sector for decades,” said Lehman.
Certainly helping the case for airport privatization is passenger traffic, which is up nearly 25% in Canada despite competition from neighboring U.S. airports. This could lead to more operating revenues and net cash flow opportunities.
Converting to a fully privatized model, however, has also been met with healthy criticism. Some argue that the current model’s sizable rent payments dis-incentivize needed investments, while others are taking the “if it isn’t broke, don’t fix it” approach by claiming that airports are self-sufficiently financed and operated under the current structure. Additionally, Canadian airports remain financially connected to the government through the remittance of ground rents exceeding $300 million a year.
“While there are local pros and cons, global experience indicates that there will be opportunities for operational improvements and more efficient capital investment. The private sector is also more likely to take greater advantage of available real estate to make investments that maximize value,” said Lehman