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12-SYPHER-Anders-2 ICAO
ICAO
NAM/CAR/SAM Regions
NAM/CAR/SAM Regions
Airport Privatization Seminar
Airport Privatization Seminar
Canadian Airport Devolution
Canadian Airport Devolution
Lessons Learned
Lessons Learned
Michael J. Anders, Partner
Michael J. Anders, Partner
Sypher:Mueller International Inc.
Sypher:Mueller International Inc.
December 1999
December 1999
Sypher 2
Sypher
HISTORY OF AIRPORTS IN CANADA
HISTORY OF AIRPORTS IN CANADA
1939
1939
Municipal airports taken over for
Municipal airports taken over for
war purposes
war purposes
1945
1945
Some municipalities refuse to
Some municipalities refuse to
reassume operations
reassume operations
1948
1948
New policy
New policy
(
(
Federal role in main line sites
Federal role in main line sites
(
(
Encourage municipal control with
Encourage municipal control with
subsidy
subsidy
(
(
Set safety standards
Set safety standards
(
(
Provide support to remote sites
Provide support to remote sites 3
Sypher
HISTORY OF AIRPORTS IN CANADA
HISTORY OF AIRPORTS IN CANADA
1958
1958
Expanded role because of larger
Expanded role because of larger
aircraft. Limit federal role in local
aircraft. Limit federal role in local
sites
sites
1965
1965
Federal government will operate
Federal government will operate
and subsidize
and subsidize
1979
1979
Task force recommends
Task force recommends
devolution and trust fund
devolution and trust fund
1985
1985
-
-
87
87
Beginning of devolution strategy
Beginning of devolution strategy
(LAA)
(LAA)
1994
1994
National Airport Policy (CAA)
National Airport Policy (CAA)
(Continued) 4
Sypher
FORMS OF TRANSFER
FORMS OF TRANSFER
Initial transfer framework (1985
Initial transfer framework (1985
-
-
1992)
1992)
(
(
Long
Long
-
-
term lease with option to review
term lease with option to review
(
(
Transfer to Local Airport Authorities
Transfer to Local Airport Authorities
(
(
Not
Not
-
-
for
for
-
-
profit corporation
profit corporation
(
(
Ground lease based on operating cash flow
Ground lease based on operating cash flow
with minor adjustments for capital
with minor adjustments for capital
(
(
Local appointment of board
Local appointment of board
(
(
Five international airport transferred
Five international airport transferred 5
Sypher
FORMS OF TRANSFER
FORMS OF TRANSFER
1994 Framework
1994 Framework
(
(
Some renegotiations of LAA leases
Some renegotiations of LAA leases
(
(
Three key categories of airports
Three key categories of airports
(
(
National airports (26)
National airports (26)
(
(
Long
Long
-
-
term lease with option to renew
term lease with option to renew
(
(
Transfer to Canadian Airport Authority
Transfer to Canadian Airport Authority
(
(
Not
Not
-
-
for
for
-
-
profit corporation
profit corporation
(
(
Ground lease based on operating cash flow with
Ground lease based on operating cash flow with
minor adjustment for capital
minor adjustment for capital
(
(
Federal, provincial and local board members
Federal, provincial and local board members
(Continued) 6
Sypher
FORMS OF TRANSFER
FORMS OF TRANSFER
(
(
Regional airports (71)
Regional airports (71)
(
(
Scheduled service but less than 2000,000E/D PAX
Scheduled service but less than 2000,000E/D PAX
(
(
Sold to local interest (provincial, municipal, private)
Sold to local interest (provincial, municipal, private)
(
(
One
One
-
-
time operating subsidy
time operating subsidy
(
(
On
On
-
-
going support through ACAP
going support through ACAP
(
(
Corporate form is determined by local interests
Corporate form is determined by local interests
(
(
Small airports (31)
Small airports (31)
(
(
No scheduled service
No scheduled service
(
(
Transfer by sale
Transfer by sale
(
(
If satellite can be transferred to CAA/LAA
If satellite can be transferred to CAA/LAA
(Continued) 7
Sypher
TRANSPORT CANADA PHILOSOPHY
TRANSPORT CANADA PHILOSOPHY
(
(
Out of operations by March 31, 2000
Out of operations by March 31, 2000
(transfer or close)
(transfer or close)
(
(
Airports will be viable March 31, 2000
Airports will be viable March 31, 2000
(
(
Major/national airports leased on long
Major/national airports leased on long
-
-
term basis
term basis
(
(
Regional/small airports sold to local
Regional/small airports sold to local
interests
interests
(
(
Government is no worse off financially
Government is no worse off financially
(
(
Airport authorities are not
Airport authorities are not
-
-
for
for
-
-
profit
profit
corporation
corporation 8
Sypher
TRANSPORT CANADA PHILOSOPHY
TRANSPORT CANADA PHILOSOPHY
(
(
Employment guarantee for two years
Employment guarantee for two years
(
(
Five year performance reviews
Five year performance reviews
(
(
Community consultation committee
Community consultation committee
(
(
Government retains regulatory authority
Government retains regulatory authority
for safety and security standards
for safety and security standards
(Continued) 9
Sypher
THE TRANSFER PROCESS
THE TRANSFER PROCESS
(
(
Negotiation had protracted timeframe
Negotiation had protracted timeframe
(
(
Transport Canada inflexible
Transport Canada inflexible
(
(
Disagreement over Authority costs of
Disagreement over Authority costs of
operation
operation
(
(
Biggest issue is required future level of
Biggest issue is required future level of
capital
capital
(
(
Lease form made financing difficult
Lease form made financing difficult 10
Sypher
THE GOOD
THE GOOD
(
(
Airports have embarked on significant
Airports have embarked on significant
capital programs
capital programs
(
(
Improvements in capacity
Improvements in capacity
(
(
Improvements in passenger service levels
Improvements in passenger service levels
(
(
Airports are now integral part of local
Airports are now integral part of local
economic development initiatives
economic development initiatives 11
Sypher
THE BAD
THE BAD
(
(
Ground rents paid are excessive and are
Ground rents paid are excessive and are
main factor in requirement for airport
main factor in requirement for airport
improvement fees
improvement fees
(
(
Transport Canada changed the rules
Transport Canada changed the rules
after the fact
after the fact
(
(
No regulatory framework for fee increases
No regulatory framework for fee increases
(
(
Many regional/local airports are not viable
Many regional/local airports are not viable
as standalone business entities
as standalone business entities
(
(
Increased fee/charges has had negative
Increased fee/charges has had negative
impact on travel demand
impact on travel demand 12
Sypher
CONCLUSIONS
CONCLUSIONS
(
(
Transfer process is almost complete
Transfer process is almost complete
(
(
Transport Canada lease formula results in
Transport Canada lease formula results in
heavy financial burden at local level
heavy financial burden at local level
(
(
Federal government is revenue positive
Federal government is revenue positive
from process and transfer model used
from process and transfer model used
(
(
Future fees and charges will have to
Future fees and charges will have to
increase significantly to support required
increase significantly to support required
capital development
capital development 13
Sypher
CONCLUSIONS
CONCLUSIONS
(
(
Ownership model needs revisiting in light
Ownership model needs revisiting in light
of financial results and dynamics of
of financial results and dynamics of
Canadian airline industry
Canadian airline industry
(
(
Costs and contribution of airport sector to
Costs and contribution of airport sector to
Federal government needs to factored into
Federal government needs to factored into
assessment of any new models
assessment of any new models
(Continued)