Should Canada privatize our big airports?
That’s the idea that Mark Carney is floating.
I reached out to talk to man who has forgotten more about this industry that I will ever know - Duncan Dee. Duncan is the former Chief Operating Officer for Air Canada and recently did a stint as a VP at Spirit Airlines.
You can watch the interview above, below is the rough transcript. It has not been fully edited.
Brian Lilley: Should Canada be privatizing its airports? It’s one of the major questions that the Mark Carney government is dealing with right now.
I’ll tell you straight off the top, I was a bit apprehensive about this.
Spoke to my good friend Warren Kinsella about this. Let me show you Warren’s column on this issue in the Toronto Sun the other day. He said that this was a bad idea. He pointed to, he said, “Cocky Carney should ground any airport privatization plans.”
What was part of the reason that Warren Kinsella was saying that? Well, he hearkened back to his time as assistant to Jean Chrétien and the fact that in 1993, the former conservative government had proposed privatizing the airports and that helped Chrétien and the Liberals win in 1993.
And then you see stories like this one from CBC which says straight up that it’s going to actually cost you more to do this.
“Canada’s government is looking at privatizing airports. What would that accomplish?”
And the sub headline, “Fares rose massively when Australia privatized its airports, expert says.”
Are the experts accurate?
I’m not too sure.
Joining me now to talk about this and break it down is Duncan Dee.
Duncan is someone who knows this industry well. He, like Warren Kinsella, is a former political staffer back in those liberal days, but was also chief operating officer for Air Canada for many years, retired, and then like in The Godfather, they pulled him back in. He was recently with Spirit Airlines VP of Communications there. Duncan, thanks for the time today.
So look, you see these headlines and they would make anyone apprehensive. Oh, fares will go up. I don’t want fares to go up, I want fares to go down. But then when I started researching beyond a CBC sub-headline, I find out that, hold on, where’s the number here that I’ve got, that fares declined between 2008 and 2017 after
Sydney, Australia’s airport was privatized. Fares dropped 40 % or more. So what’s the truth here?
Duncan Dee: I mean, look, the truth is, the fact is that in Canada, we already pay astronomically high fares and the current airports model is part of the reason for that. So, you know, this notion that we have a system that somehow exists, you know, that offers low fares right now and that those fares are going to jump higher because we privatize is completely a misunderstanding of the system.
I actually argue that we already have a privatized system in Canada. It’s just not called privatized. You know, we have these airport authorities that already operate as if they were private companies, but you know, we don’t have the same oversight that a full privatization would allow.
Brian Lilley: So what does that mean for us? I mean, Pearson in Toronto, the country’s biggest airport, and quite frankly, for most of the country, this is frustrating thing for me. You wanna fly to a certain part of the country, there is a good chance you’re gonna have to transit through Pearson. And you can fly Vancouver to Calgary or Calgary to Ottawa maybe if the time works out for you, but you’ve got to go through. Pearson, and they, my understanding is that they have some of the highest landing fees in the world, not just the country, in the world.
Duncan Dee: Absolutely. mean, not just Pearson. Pearson has definitely some of the highest fees and charges, landing fees, rent, counter fees, everything like that in the world.
So Pearson Airport is most definitely, ranks very highly in terms of the fees they charge air travelers and airlines. But they’re not the exception.
Canadian airports, whether it’s Montreal, Vancouver, Calgary, Halifax, these are airports that rank routinely among the highest airport cost in the world.
And so, you know, it’s something that Canadians, I think, need to address, grapple with. And finally, this privatization suggestion is coming at a time when we need these types of bold ideas to get things back on track in terms of airfares and the way we run the air transportation system in Canada.
Brian Lilley: Prime Minister Carney is talking about this as a way to release capital, allow capital to be redeployed, I think is the term he used, into other infrastructure. So you’ve got these assets, let’s privatize them, let’s bring in investors, and then we can deploy that capital elsewhere.
Would it actually bring the costs down? For consumers, for the airlines? I mean, it’s gotta come down for the airlines before it comes down for the consumers. Or does it just depend? Is it the devil’s in the detail type of thing?
Duncan Dee: I look, Brian, the devil is always in the details, but what I can say is the current model guarantees high prices. So you don’t just have, well, you don’t just have these very high cost airports, airports that really have zero cost discipline. They behave like they’re governments. And there’s no oversight over these airports. Like there is no regulatory body that oversees what the airports charge. There’s no, the minister responsible for transportation.
Brian Lilley: Why?
Duncan Dee: The federal minister doesn’t have any direct control over these airports. So what you’ve got in fact are local airports managed by boards of directors where each member of the board or small groups of board members are appointed by different bodies. So you’ve got federal appointees, provincial appointees, municipal appointees, and none of those groups constitute a majority on the board.
So in effect, you’ve got management running roughshod over these boards, none of whom have, you know, effective control over the bodies that they oversee. And since you’ve got it’s just like the way the Liberals have managed the Senate with, you know, these brand new Senate groups, you know, which supposedly aren’t Liberal.
They’ve outsourced the oversight to these boards of directors of these airports, which in effect have zero ability to really ensure change, ensure control of costs, ensure proper governance at airports across the country.
And so that’s why I argue that in effect it’s not privatization the way we normally understand it, where a private sector company would run an airport. What we’ve got are private clubs, these little clubs that exist to run the airport and to whose benefit. At the end of the day, privatization would actually allow us to have a much more transparent look at how these airports are run, how the costs that are extracted from the traveling public and airlines.
But you know the current model doesn’t allow that at all.
Brian Lilley: I hear your dog getting excited in the background. Excited to be back home, I guess. no, mine’s just sleeping over there. She’s just too quiet. I’m amazed she hasn’t heard the barking and started barking. I’m not bothered by that at all.
So you and I have talked before and you have said to me that the Americans treat their airports very differently. We use our airports as cash generators for governments, for these boards that you were talking about. And the Americans treat them differently.
Are American airports privatized? Are they considered a public good? How did they treat them?
Duncan Dee: So American airports tend to be locally run entities. So they’re in effect agencies of government.
Let me give you one example. The New York, New Jersey Port Authority, which is the government agency, which is jointly run by the states of New York and New Jersey, run the ports and the airports in the greater New York City area. So what you’ve got is the New York, New Jersey Port Authority running not just one, but five different airports in the greater New York area, including the three largest in the country, JFK, Newark, and LaGuardia. So you’ve got one government agency running these three airports. And Brian, let me give you an opportunity to guess how much the CEO of, or they call him the executive director of the New York, New Jersey Port Authority who operates five airports. How much does that individual make?
Brian Lilley: Well, based on Canadian numbers, I’d say two to three million.
Duncan Dee: Right, unfortunately you’re wrong. Based on the most recent reports, the executive director of New York, New Jersey Port Authority, who runs five different airports, including the three largest in the United States, pulls in less than $400,000 US per year. And to give you a Canadian comparison for our apparently non-privatized airports, the CEO of the Greater Toronto Airports, which runs one airport, Pearson Airport.
Brian Lilley: Okay.
Duncan Dee: She makes a little over $2 million, $2.1 million a year. The CEO of Vancouver Airport makes $1.9 million a year. We don’t even know what the CEO of Montreal Airport makes. if those aren’t privatized airports, I just don’t know what is.
Brian Lilley: That’s unreal. Like, $2.1 million to run an airport that I try and avoid at all costs. Yeah, look, I don’t fly as much as you, Duncan, but I fly enough, and if I can find a way to fly at a Billy Bishop, fly it to somewhere else, yeah, I’ll take it.
Duncan Dee: I don’t think you’re alone. Most Canadians try to avoid Pearson.
Brian Lilley: You know, it’s not awful. I don’t want to make it sound like it’s a, you know, absolute disaster, but it can be a giant pain in the butt going there. And so not well run, high costs, and high salaries. If you were advising government right now, and you said, you know what, let’s start from scratch. What would you recommend? Would you recommend the American model where it’s actual local control and an actual not-for-profit or would you recommend?
Privatization I mean from my understanding maybe you want to talk about this before we get into what you’d recommend Canadian pension funds already own Airports around the world including Charles de Gaulle in Paris.
Duncan Dee: I mean, Brian, you’ve hit the nail squarely on the head. You know, while we’re having this debate in Canada, whether privatization is right or wrong for our airports, our pension funds are investing in airports all over the world. You just mentioned Charles de Gaulle in Paris. Heathrow, know, Caisse de Depot from Quebec is one of, was one of the largest owners of Heathrow Airport in London, one of the premier airports on the planet.
And other Canadian pension funds own half a dozen airports throughout Great Britain. And you’ve got other examples around the world where Canadian pensioners have money invested in these airports and are doing quite well. And I think that by and large, most airlines and most travelers would probably agree that the costs at least at some of these other examples are much better than what we see in Canadian airports.
Brian Lilley: I couldn’t tell you the cost of Charles De Gaulle or Heathrow, but having flown through them both, it’s more pleasant experience than Pearson.
Duncan Dee: Yeah, look, mean, you know, I think it becomes one of these situations where people can have personal experiences elsewhere. I can just speak from the perspective of somebody who’s run an airline that has to use all of those airports. And I can tell you, know, airlines have a much easier time dealing with airports outside Canada than they do in dealing with airports inside Canada. I mean, Canadian airports are generally unresponsive. They’re extremely expensive.
And these are airports that don’t make it easy to do business in this country. And we need to figure out ways to get things run better.
Brian Lilley: Which is part of why it’s more expensive to fly in the country than to fly out of the country. It’s, there’s always the bane of my existence. I, do I gotta, I love Calgary. I love Vancouver. Okay, I wanna take a trip. I wanna get out of town. It’s cheaper to fly to LAX on a Canadian airline than it is to fly within our own country. That’s absolute insanity.
Duncan Dee: Well, Brian, I I think, you know, my recent experience at Spirit Airlines is a perfect illustration of that. know, Spirit Airlines charges, charged because it’s no longer around, but we charged an average fare of $49 to $59. Well, in Canada, you know, the airport improvement fee alone at Pearson Airport is $40. So, you know, before you’ve paid for fuel,
Brian Lilley: Per ticket per leg, right?
Duncan Dee: Right? Yeah, every time you depart from Pearson Airport, the Pearson Airport, the Greater Toronto Airport Authority is paid $40 every time you catch a flight out of Pearson. That’s before, you you’ve paid for fuel, the crew, the aircraft, and you still have to pay for security, which is $9. Yeah.
Brian Lilley: What’s the security charge? Because there is the CATSA charge,
Duncan Dee: Exactly, it’s nine dollars. The CATSA at charge is nine dollars.
Brian Lilley: Okay, so we’re at $49 just for the airport improvement fee and the security fee before I’ve taken off anyway.
Duncan Dee: Right, before you’ve taken off anywhere and once you take off you’ve got to pay the NAV Canada charge so you’ve got the air traffic control charge that you have to pay you’ve got GST and PST the fuel that’s in the aircraft there’s fuel excise charges which both the provincial and federal government takes so before you even pay for the salary of the pilot and flight attendant and the agent at the gate and the aircraft that you’re sitting in you’ve already probably spent close to a hundred a hundred and twenty dollars.
And you’ve not paid for any of the actual services that you’re going to be using to get to where you need to safely.
So, mean, Canada is a giant black hole in terms of sucking air travelers dollars for very little value at the end of the day.
Brian Lilley: Okay, so back to my earlier question, which in fairness to you, you didn’t answer because I asked you something else before that. So let me get back to the earlier question. If you were advising the Carney government today and you were saying, you know what, let’s start over, clean slate, what would you recommend? Would you recommend an actual privatization instead of this quasi privatization that we have?
Would you recommend going the American route where, you know, my understanding is the Americans subsidize their airports to a degree because they see them as a public good.
Which model would you recommend that would be better for the consumers and the airlines? And look, I want more competition. We have two and a half national airlines. I’d, you know.
I’d like to see companies like Flair do better. I’d like to see ultra low cost carriers here.
I’d like to have the experience of my aunt in Glasgow when I called her one weekend, I said, where have you been? And she said, I went to Warsaw for the weekend because it was less than 50 pounds return to go from Glasgow to Warsaw. What model would get us to what the Americans experience, what the Europeans experience?
Duncan Dee: Well, the model that would work is the one that isn’t Canadian because what you’ve just illustrated is that both the US model and the European model allow for that type of service. Spirit Airlines had an opportunity to enter Canada, but we looked at it and said, there’s no way we would operate into Canada because it’s just so expensive.
The role of an ultra low cost care isn’t just to charge low fares, they use those low fares to actually stimulate the market just like your aunt in Scotland. What they’re actually doing is putting out those fares to people who would normally not travel or not travel very often.
And so if that is your objective, then there are two ways of doing it.
One is, as you suggest, or as you brought up, the US system where they see airports not just as a public good, but as a tool for economic development. You know, they see airports as an active tool for economic development. And there’s proof in that. When Amazon was looking at their establishing their secondary headquarters, one of the key elements in the bid process was airports with enough destinations served, nonstop destinations served for them to consider that location. So
It’s true that these airports are economic development tools and that’s the American model. They’ve got these local airport authorities run largely by states or municipalities or in the case of New York, a joint state body by two different states that manages the airports in the greater New York City area.
Effectively what they do is they use those airports as a way to generate economic activity and then they use the economic activity to subsidize those airports so that it makes those airports attractive to fly.
Or you can use the European model as you suggested with your aunt in Scotland, where you’ve got privatized airports. And in those cases, those privatized airports have an economic reason for making sure that those airports are as cost effective as possible. Because if you aren’t able to attract those ultra low cost carriers into your airport, then you don’t succeed. So my recommendation to the Carney government, because I don’t believe that nationalization of airports is realistic in Canada in this day and age where governments are so strapped for cash.
The only realistic solution in Canada is full privatization. And that means selling these airports off to very experienced airport operators around the world. There are airports around the world that are now run by international airport operators they’re investors.
That they’re going to attract are going to be like the Canada Pension Plan Investment Board, the Caisse de Depot in Quebec, the Ontario Teachers Pension Fund. Those are the most prolific investors in the world and in airports around the world. And it’s a model that’s already exists and is succeeding. So Canada should really go full bore into privatization and ensure that they’ve got the policies and regulations in place to keep those airport costs in check. And I think that’s probably the best way forward for this country.
Brian Lilley: Well, let’s hope that they are listening to folks like you because the current system isn’t working and it makes flying prohibitive. is a cash cow, perhaps for the governments, but it’s not good for the rest of us. Duncan Dee, thanks so much for the time.
Duncan Dee: Thanks, Brian.
