NBTA Canada Urges Canadian Government to Cut Airport Rents

In May 2007 the House of Commons Standing Committee on International Trade produced a report that proposed 12 actions to improve Canada’s international competitiveness. In the report, the Committee recognized the importance that aviation plays in Canada’s ability to compete, and the government acted on the recommendation to improve air service agreements between Canada and other countries around the world. However, the Canadian government looked over one vital issue – airport cost competition. To ensure that Canadian officials are aware of the economic costs involved, NBTA Canada is now urging officials to reduce airport Crown rent at major airports in Canada.

Under the National Airports Policy (NAP) local airport authorities in cities across Canada are required to pay the Federal Government Crown rent in return for granting leases. The Government now collects more than $300 million annually in crown rent. Crown rent is almost entirely unique to Canada – Peru and Ecuador are the only other countries that charge airport rent.

“It’s unfounded,” said International Air Transport Association (IATA) Director General and CEO Giovanni Bisignani in a March 2007 press release. IATA last year also called for Canada’s aviation policy to promote competitiveness. “The airlines have already paid C$2 billion in rents for airports that were only valued at C$1.5 billion when they were transferred to local authorities. And the Federal Government does nothing for its money – all infrastructure improvements have been funded independently by airlines and their passengers.”

NBTA Canada is suggesting that the government eliminate debt financing costs from the definition of revenue used to calculate airport rent, which should apply to all airports. This adjustment would mean a rent reduction of C$58 million annually for Toronto Pearson alone.

The association is also recommending that airport improvement fees be removed from the definition of revenue used to calculate airport rent as these fees are fully applied to help offset construction and development costs at airports.

However, “this is not simply an airport or airline issue,” said Tanya Racz, NBTA Canada President. “It is of national importance to the business travel community and Canada’s economy at large.”

A recent World Economic Forum study ranked Canada 110 out of 124 countries as competitive in the travel and tourism sector, and Toronto Pearson is known throughout the industry as the most expensive airport in the world to land a plane.

“The cost structure of Canada’s airports has direct repercussions for businesses across the country that rely on air transportation for their travelers,” said Racz. “A reduction in airport rents would allow for more airline competition and a potential savings to the business travel community.”

NBTA Canada also contends that a reduction in airport rents would help to make Canada’s airports international hubs. Currently, costs for airlines at U.S. airports are much cheaper, and they are growing at least 50 percent faster. See chart.

“More flights into Canada’s airports would mean more travelers coming into Canada and spending their convention dollars here, as well as more international flight options for Canadian business travelers,” said Racz.

Return to Connecting News February 2008