Is there an alternative way to finance Canadian airports?

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2018-09-12
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Abstract
The airport industry has always attracted a great deal of attention. Traditionally, airports were heavily regulated entities. However, in the last decade, there has been a shift in airport governance toward privatization. In Canada, the not-for-profit governance model was chosen over a full private ownership framework. In this model, the so-called airport authority manages, operates and develops its airport under a 60 years lease contract with the federal government, while the state remains the owner of the airport. In view of the challenges faced by the airline industry, many authors have questioned the relevance of the current airport governance model. In particular, its strong emphasis on the user (i.e. the passenger), who is responsible for most of the airport financing, generated concerns with regards to a potential detrimental impact on competition. The not-for-profit governance model has been referred as a user-pay system since the user (in contrast to the general tax payer) is providing most of the airport funds. The Airport Improvement Fee (AIF) is an example of a fee that makes air travel more expensive for passengers in contrast to other airports. Other examples of fees or taxes that are detrimental to the competitiveness of the airline industry include the rent payments or the air traveler’s security charges. In addition to the financing concerns, questions have arisen about the efficiency and transparency of the airport authorities. In fact, as airport authorities have a unique status and are constrained by financing objectives (airport authorities must be self-financing) rather than an efficiency purpose, there may be some improvements in airport management. A review of the current airport governance model suggests that there is room left for improvement in the sector. On the one hand, policies should be taken in order to reduce the burden on passengers. Examples of policies include a reduce rent payment or an AIF scheme that is more constrained by the federal government. On the other hand, the federal government should implement more policies to increase transparency in the management of the airport authorities.
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Vanherf, C. (2018). Is there an alternative way to finance Canadian airports? (Unpublished master's project). University of Calgary, Calgary, AB.