The Carney government is circling closer to airport privatization and potential investors ‘stand ready’

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As laid out in the economic update, Ottawa’s new sovereign wealth fund will build on its initial $25-billion base through returns on the fund’s investments and other assets that the government may allocate to it.

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“Asset optimization will help address two complementary priorities: unlocking the full value of existing federal assets and directing that capital toward investments with the highest potential return for Canada and Canadians,” the government said in a 167-page document released Tuesday titled Canada Strong for All.

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Airports are among the highest-value federally owned assets that could be considered for sale as much of the infrastructure owned by governments across Canada resides in either provincial or municipal hands.

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Andras Vlaszak, a director in the global infrastructure advisory at KPMG Canada, said fully privatizing airports and using the proceeds to fund government initiatives through the Build Canada Strong Fund is just one option. 

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“Another option would be to sell the airports to a majority investor while retaining a federal stake (and) placing the remaining minority ownership into the Build Canada Strong Fund as a seed investment,” he said.

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A spokesman for Transport Canada did not respond to questions about the likelihood that airports — or stakes in them — would be sold to private investors, or what the government meant by “alternative models of ownership” in the economic update. However, he said the focus is on lowering costs for travellers and better positioning airports to attract private investment.

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Over the past two decades, Canada’s largest pension funds have demonstrated an appetite for airport ownership, with the Ontario Teachers’ Pension Plan Board, the Caisse de dépôt et placement du Québec and PSP Investments taking significant stakes in international airports over the years in the United Kingdom, Australia and Europe. The same opportunities have not been available in Canada.

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The Caisse recently sold the remains of a stake in London Heathrow airport first purchased in 2006, while the Ontario Teachers’ Pension Plan, which first began investing in airports in the United Kingdom in 2001, sold off the last of its airport holdings in Europe after taking in significant profits, which tend to be largest in the early years of ownership.

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But neither fund has ruled out further such investments.

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In March, Jo Taylor, chief executive of the Ontario Teachers’ Pension Plan, said he sees more potential infrastructure investment opportunities in Ontario than at the federal level, but added that airports are desirable for pension funds.

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“Pearson and Vancouver (Airport) are the two choices really that you could start with,” Taylor said, noting that his fund has decades-long experience investing in airports including those with links to international travel.

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Last June, PSP’s chief executive Deb Orida also raised airports in a discussion about ways to fulfill a desire to invest more in Canada.

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“We have airport operating expertise, and capital to pair with that operating expertise,” Orida said at the time. “So, if the opportunity were to become available to invest in the Canadian airports, I think we would be very well positioned to do that.”

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The idea of privatizing Canadian airports was last studied in 2015, shortly after the Liberals were swept to power under then-prime minister Justin Trudeau. Picking up on a process started by the previous Conservative government, Trudeau’s government hired investment bank Credit Suisse Group AG to study the benefits of privatization and the C.D. Howe Institute pegged the value of Toronto’s Pearson International Airport and seven others at $17 billion.