It wasn’t so long ago that many of the largest and most famous airlines in the world were state-owned, including Air Canada, British Airways, Qantas and Lufthansa.
While these were eventually privatized, many others continue to be owned, in part or in full, by their national governments, including Etihad, Emirates, Alitalia and Thai Airways.
Governments originally became involved in the airline business out of necessity—when the cost of creating and maintaining an air carrier was often beyond the means of private industry, yet having one was seen as essential.
Such state ownership also had its benefits, as governments were able to stifle competition from overseas airlines, provide their own airlines with preferential treatment at airports, and subsidize their operation.
Whether customers ultimately benefited remains open for debate. Some travellers claim the old state-owned airlines provided inferior customer service—certainly not true of most state-owned Middle Eastern and Asian carriers today!
But others point out that while a government can feel obligated to provide airline service to remote and unprofitable communities, private businesses rarely feel so compelled, leaving some communities without any air link.
Today, travellers rarely contemplate whether the airline they are using is state-owned or privately owned. For most of us, the cost, the route and the service are the biggest factors in choosing a ride, and whether our mode of transport is owned by the 99 percent or the 1 percent is rarely considered.
But what about airports?
Why is Canada considering airport privatization?
Last December, a formal review of Canada’s transportation system by former federal cabinet minister David Emerson suggested, among other things, that the government consider selling some of the country’s major airports—or the operation of those airports—to the private sector.
Such a move would instantly generate billions of dollars for the government that could be put to other uses—but what would it mean for travellers?
Currently, Canada’s major airports are operated by not-for-profit “airport authorities” (that’s the actual term) but remain owned by the government. While the authorities must follow successful business models in order to make these properties viable, they are at least not compelled by a need to generate profits for investors.
“Such a move would instantly generate billions of dollars for the government that could be put to other uses—but what would it mean for travellers?”
Instead, any profits are reinvested back into the airport itself. The review showed that since assuming control of airport operations from Transport Canada, authorities across the country have pumped $19 billion back into infrastructure improvement in addition to paying more than $5 billion in rent to Ottawa.
The cost of running a Canadian airport
Canadian airports are already among the most expensive in the world, both for airlines and for passengers. Toronto’s Pearson International Airport often ranks in the top five most expensive airports to operate a plane, behind only a few Japanese hubs. Fees that all airlines must pay include terminal charges per passenger, landing fees based on an aircraft’s maximum permissible takeoff weight, parking fees on the apron, use of the skybridge connecting the aircraft to the terminal building and use of the de-icing facilities, among other things. All of which ultimately end up in the cost of an airline ticket.
Meanwhile, any traveller who has gone through Pearson knows firsthand just how deeply other people’s hands are dipping into their pockets, both from the $25 Airport Improvement Fee added to their ticket, to the considerable fees for simple snacks and bottles of water.
What would happen if they went private?
If Toronto and other major Canadian airports were privatized (either in their entirety or just their operation), the new owners would likely need to raise additional funds over and above those currently generated by the airport authorities, merely to make the investment and endeavour worth their while.
These sums could simply come from better business management and greater efficiency. Or through improved and expanded retail facilities including more restaurants, shops and lounges, or enhanced commercial relationships, or more innovative methods that provide passengers with greater services.
“Any impact—positive or negative—would almost certainly be felt most by travellers”
Or, more simply still, from increased fees both to passengers and airlines (which of course ends up borne by passengers!). Alternatively, the extra margin could come by reducing outgoing expenses such as salaries, number of employees or a reduction in renovation or infrastructure improvements.
Either way, any impact—positive or negative—would almost certainly be felt most by travellers.
The bottom line
While the majority of international airports and terminals around the world are still owned by federal or local governments, a number are now managed by private for-profit companies, including London’s Heathrow Airport. And while privatization is not necessarily a bad thing—as many travellers learned upon the privatization of many national airlines decades ago—it’s most certainly something to be aware of, because the last thing any traveller wants are increased travel costs.
The privatization of public services or business is one of those issues that generates heated discussion. Some believe that what belongs to the public should remain with the public, while others believe that government makes a mess of everything it touches and is always better in the hands of private enterprise.