Canadian airports - and the air industry as a whole - must press Ottawa for what is really needed, namely the commercialization of air terminals in this country, if the aviation sector hopes to thrive, experts say.

"Calgary is in competition with Seattle and with Denver, and to a lesser extent Spokane, but under the current structure, the Calgary airport can't do much," to lure more air traffic away from U.S. destinations, said Rick Erickson, a Calgary consultant and an expert on the airline industry.

Measures to cap airport rents announced last week by the federal government didn't go far enough to make Canadian terminals more competitive with their counterparts in the United States and elsewhere in the world, Erickson added.

Ottawa will not steam ahead with dramatic rent increases planned for most of the country's airports - including in Calgary and Edmonton.

Transport Minister Jean Lapierre said the new policy will result in about $8 billion in rent relief over the course of existing leases at 21 airports across Canada.

"Through this policy, our major airports will see a substantial reduction in long-term costs, which should greatly benefit airlines and the travelling public," Lapierre said last week.

The Edmonton Airport Authority saluted Lapierre's decision to cap rents, saying without the agreement it would have been required to pay $22.6 million in 2006, a five-fold increase over the $4.3 million paid in 2005.

While relieved by the announcement, the authority's president and CEO Reg Milley acknowledged that privatization is probably necessary for the long-term viability of most large Canadian airports.

"What (privatization) does is allow us access to capital markets from an equity perspective, which gives us more options to grow the airports," said Milley, who also heads the Canadian Airport Council.

"At the moment, we can only raise capital from a debt perspective, but allowing us to get out and tap into the equity market would be a positive thing," said Milley.

The United Kingdom, Australia and the U.S. are all examples of where federal governments have successfully turned over ownership of airports to private entities, Milley added.

"There are a few of us bigger airports that are looking at (commercialization) and it is probably the next thing on the agenda," he said, adding that early feelers put to the federal government have drawn little response and no immediate talks have been scheduled.

Garth Atkinson, president and CEO of the Calgary Airport Authority, isn't convinced outright privatization is the answer, although being allowed to buy the "dirt" is an attractive option.

Like all of Canada's major airport authorities - including Edmonton - Calgary's is a non-profit society and a change in corporate status would mean the loss of certain tax breaks.

But, he added, "we should at least have the option of getting out of the leasehold arrangement we're currently in right now.

"We would be looking at debt servicing (to buy the airport) instead of paying rent, but at least we'd end up owning it at the end of the day."

Although the Calgary Airport Authority still must pay $100 million in federal rent over the next five years, the cap represents a substantial reduction. Federal airport rent in Calgary will be $24.9 million this year; the authority will have paid a cumulative $250 million in rent since 1992.

"The good news is it's not going to drive us off a cliff, which is the way it was looking before this announcement was made," Atkinson said.

Erickson commended Lapierre on the move, adding he was sure Edmonton MP and Deputy Prime Minister Anne McClellan had a hand in pushing through the agreement - "this minister has acted on a file, probably the No. 1 file on the aviation desk of the past three ministers."

But the move still falls far short of what is needed to allow Canada's aviation industry to soar, he insisted.

"Here, the federal government takes and takes and takes from the sector and puts very little back. In the U.S., the airports - virtually all of them there are commercial - own their own dirt, they are able to access areas of finance that (Canadian) airports can't because of the ownership issue, they have much more latitude to develop airport property and they have much more latitude to attract foreign carriers."

The Canadian air industry must "continue to point out to the federal government the costs faced by these airports and the economic engines they could become, and (tell the feds) they are throttling them," Erickson noted.

The issue dates back to 1992, when Ottawa transferred control of about two dozen of the country's biggest airports to local, not-for-profit airport authorities. In return, the authorities agreed to pay rent to Ottawa under several different formulas that were worked out with various airports at different times.

Cliff Mackay, president of the Air Transport Association of Canada, echoed Erickson's concerns, saying Ottawa's offer is far too little and moves too slowly to help Canada's aviation sector remain competitive with those of other countries.

"We're pleased to see some progress has been made, but we still have a long way to go," Mackay said, noting that very few savings from the lower federal rents will likely trickle down to passengers.

"This is coming down in extremely small increments," he said.

Critics have long complained that the fees Ottawa charges airports were too high and rising too quickly, making Canadian airports too expensive. Airport authorities pass the rental costs on to the airlines through landing fees.

That's not enough to help a struggling industry, said James Moore, Conservative transport critic, who added "(the) announcement is a timid half-step that will not result in the broad tax relief and assistance Canada's air industry needs."

- With files from The Canadian Press (John Ludwick can be reached at ludwick@businessedge.ca)