On March 7, 2025, Transport Canada issued a policy statement to encourage more private investment in Canada's airports. The policy aims to "clarify the investment tools available to airports operated by [National Airport System] airport authorities". The policy statement acknowledges that the prevailing, largely "user pay" model of financing airports will not be able to provide the capital needed to build out Canada's air transportation network to meet rising demand for air travel. Transport Canada expects that by attracting new private partners, such as Canadian pension funds, Canadian airports can speed up their growth plans and improve the passenger experience.
The National Airport System, or NAS, is comprised of Canada's 21 largest airports. These airports and the lands on which they are situated are owned by Transport Canada and operated by not-for-profit, non-share capital corporations, called airport authorities, pursuant to long-term ground leases. Under these arrangements, airport authorities have the power to, among other things, set and collect airline rates and charges; negotiate and issue leases, licences and permits; and develop the airport infrastructure. The airport authorities pay Transport Canada variable rents that are calculated based on airport revenue and reinvest profits into their respective airports.
The policy statement highlighted three avenues for economic participation by private investors in NAS airports in the airport authorities' current contractual, regulatory and governance framework:
- Co-development through subleases. Airport authorities may, with Ministerial consent, sublease terminal facilities and operations to private investors. Transport Canada said that it is exploring extensions to airport authority ground leases, which would facilitate longer term subleases with commercial subtenants.
- Subcontracting airport services. Airport authorities can contract with private entities to provide operations and maintenance and other airport services.
- Enabling private investment through corporate subsidiaries. Airport authorities can form and carry on business through for-profit business corporations so long as the terms of their respective ground lease are respected, and the airport authority maintains a controlling interest. Transport Canada indicates that by working with subsidiaries, private investors can build or operate new facilities at NAS airports, which may be for aeronautical or non-aeronautical purposes. Private investors and airport authority subsidiaries can also undertake joint investment projects that will support the development of new airport facilities, like terminal buildings.
Transport Canada further notes that these "flexibilities" are in all cases subject to the airport authorities' obligations under their ground lease and applicable law. In particular, "key board functions" must stay with the airport authority (where the Government of Canada is entitled to nominate directors), all facilities and assets located on airport lands must become and remain the property of the federal government following the termination or expiry of the applicable ground lease, private business activity at airports cannot restrict air carrier competition and should allow for appropriate access to airport facilities and services, and business activity must continue to be consistent with national security policy.
The policy statement, which was previewed by the Government of Canada in last year's budget, is part of the federal government's strategy of courting investment into Canada from all sources of private capital, but especially from Canada's pension funds. Airports are seen as an asset class that is particularly well-suited for investment from our pension funds in part due to the scale of the investment required and in part due to our pension funds' deep experience in airport equity ownership globally.
Transport Canada's policy statement is a clear statement of intention and may be the federal government's first step in fostering conditions that better facilitate private investment in airport infrastructure development. We will continue to monitor structural developments in Canada's airport sector.
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