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Op-Ed: Liberals may privatize airports to raise money and also donations

As the Metro news puts it: The federal government is looking at whether Canada’s major airports should be sold off to private investors as a way to raise tens of billions of dollars in new cash to fund other infrastructure projects.
Transport Canada bureaucrats are reviewing the ownership structure of Canadian airports, now operated by not-for-profit airport authorities, to assess the possibilities of transferring them to for-profit enterprises — and collect a windfall in the process.
This move would give the Liberals cash for financing new infrastructure projects, which no doubt they could also sell off at an attractive price to allow investors to profit from public investments. This could ensure as well that investors will see the Liberals as a private-sector friendly party and generate more donations perhaps at the expense of the unpopular Conservatives.

Airport operators are rather nervous about the plan, fearing that the Liberals are rushing in to generate cash without weighing the potential impacts on travelers from making airports generate profits. Craig Richmond CEO of Vancouver Airport Authority said: “If you went to this model, my experience tells me in five years you would not recognize Canadian airports. You would see cutbacks on maintenance, cleaning, you would see them become much more crowded because (of) the pressures on the management to deliver that return.” Mark Laroche, the CEO of the Ottawa International Airport Authority said the change would likely give rise to higher fees and travelers would be required to pay more even as airlines are also jacking up fees to help their bottom line.

The Liberals could fund public infrastructure by selling off non-profit infrastructure such as airports. The new buzzword does not talk of anything so crass and old-fashioned as privatization it is the much more euphemistic asset recycling, as if the process must be environmentally friendly and something to be adopted by Elizabeth May leader of the Green Party. Asset recycling is said to give the private sector a stake in existing infrastructure assets, such as ports, or highways, to raise cash to be used for other investments. In other words it is a way of ensuring that existing assets can be used for private profit. An external review submitted to the Liberals last December suggested that airports would be a good starting place of an asset recycling program.

The report is by David Emerson, whose career path shows the symbiotic relationship of the Liberals and Conservatives: Emerson is a former Member of Parliament for the riding of Vancouver Kingsway. He was first elected as a Liberal and served as Minister of Industry under Prime Minister Paul Martin. After controversially crossing the floor to join Stephen Harper’s Conservatives, he served as Minister of International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics, followed by Minister of Foreign Affairs.

The Emerson report notes that the airport authority has worked so far. Airports are efficiently run and the authorities have invested more than $19 billion in “badly needed” infrastructure. It sounds as if things are working out well as they are. However Emerson claims the not-for-profit model is “antiquated” and puts their cost competitiveness at risk. Nothing about serving the public who use the airlines or ensuring that they have good service at reasonable prices. What is antiquated are services provided to the public without making a profit. Of course this must all be glossed over with high-sounding phraseology. The asset recycling is to be accompanied by legislation to “enshrine the economic development mandate of airports and to protect commercial and national interests” Nothing about the interest of air travelers or employees at airports. But the asset recycling miracle goes on in that it would “restore Canada to its place as a world leader in the governance of airports and in the use of competition and market forces to determine optimum investment and service levels and costs.” One can see with such a worthy theorist as Emerson, that he is welcome in both Liberal and Conservative quarters.

However, as Mark Laroche notes the system will work only by raising fees, investing less in capital or finding efficiencies. Or to put it more bluntly it will work only if the private investors can make a profit. Craig Richmond the Vancouver airport CEO noted that the value of his airport on the open market was about $6 billion and that any investors who buy it will want to get that money back. He said it can only come from the customers’ wallets.

Transport Minister Marc Garneau is undertaking a review to hear feedback on the Emerson report’s recommendations. No mention is made of public hearings. Apparently the government wants a review of options by bureaucrats by August. Why not hold public hearings? This is too serious a matter for that since it involves finding further means to turn public non-profit services into a source of private profit.

Pearson International Airport in Toronto with 41 million passengers a year would be a prize plum for the private sector. Airport operators claim that the high cost of air travel results from policies that are forcing passengers to pay the entire costs of air travel with no subsidy from general government revenues. This is of course in line with a market model and will ensure that the less well off will be able to fly only infrequently.

Among the private investors interested in the asset recycling process is the Ontario Teacher’s Pension Plan (OTPP)
The OTPP is already invested in UK airports. It owns 100 percent of Bristol airport and almost half of Birmingham airport. It also has interests in Brussels airport and Copenhagen airport in Denmark. In order to improve profit, emissions may be increased, weight restrictions on aircraft removed, and noise levels increase. Also airports could encroach on more adjacent land.

Of course there are many supporters of asset recycling such as Michael Fenn, a former Ontario deputy minister and now a management consultant who specializes in the public sector who crows: “Asset recycling is a way to attract private-sector investment into activities that were formerly, exclusively, in the public realm. It’s something that we should pay a lot of attention to and I’m really pleased to see the federal government is looking seriously at it.” Apparently to specialize in the public sector is to find ways to turn the sector into a source for private profit. Coincidentally, Fenn happens to be a board member of Ontario Municipal Employees Retirement System (OMERS) which invests in public infrastructure around the world.

Asset recycling is trending internationally with Australia at the forefront of a plan for the federal government to offer Australian states incentives for asset recycling programs. The idea of public infrastructure as designed to provide services to the public at a reasonable cost is just too antiquated in the brave new world of asset recycling. In the appended video the Australian’s Green Party view on the recycling is outlined.

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