Despite uncertainties over the federal government's flight plan for the aviation sector, Canadian airport officials say they have the new transport minister on their radar screens.

Lawrence Cannon is still being briefed on his new portfolios, which also include infrastructure and communities, but aviation executives have their message ready: Action must be taken on the issue of reducing or eliminating airport rents, decreasing aviation-related taxes and increasing the number of open skies-type agreements that Canada has in order to liberalize where airlines can fly.

Airline analyst Rick Erickson says it's still too early to tell where the minister stands on these industry-critical issues.

"He's largely an unknown. We don't have a clue," says Erickson, of Calgary-based R.P. Erickson & Associates. "Obviously, he'll have a honeymoon period and we'll expect him to be up and fully briefed by the time the House of Commons sits (on April 3)."

File photo by Dave Olecko, Business Edge
Airline industry analyst Rick Erickson says the Conservative government needs to deal quickly with the airport rents file.

Of all the concerns facing the industry, says Erickson, "clearly, the airports rents file has to be on the top."

"In many cases, the costs are just being transferred to the industry and there's a fair amount of unhappiness at Canada's largest airport" in Toronto, he adds.

The Greater Toronto Airports Authority (GTAA) agrees, saying it's time for fairness to be brought back into the airport rent equation - money local airport authorities pay the federal government, which retains ownership of the properties through long-term leases to guarantee the integrity and long-term viability of the country's airport system.

Toronto's Pearson International Airport has already paid more than $1 billion in rent to Ottawa since the GTAA assumed responsibility for the facility from the federal government in 1996. Not only does Toronto pay a disproportionate share of airport rents, but it hinders the airport's ability to compete, says Steve Shaw, vice-president of corporate affairs for the GTAA.

"The minister (former Liberal government transport minister Jean Lapierre) did change the rent formula last year and most other airports seemed to be satisfied, but we were not satisfied," says Shaw. "We're looking forward to the new government addressing this."

From 1996 to 2004, Toronto paid $982.7 million in rent, or 24 per cent of its revenue, while Montreal's airport rent from 1995 to 2004 was $83.4 million, or five per cent of its revenue.

Critics of airport rents point out that the federal government collects the rents from airports in return for no services, and that the costs on the individual facilities have long since been paid in full.

The Canadian Airports Council (CAC), whose member airports handle 100 per cent of the international passenger and cargo traffic in Canada and more than 95 per cent of domestic passenger travel, is optimistic that the new Tory regime in Ottawa will deal positively with the sector's concerns.

"There are many answers that are music to our ears," says CAC president and CEO Jim Facette, referring to a December 2005 election questionnaire submitted to the party to find out where the Conservatives stand on air industry policy.

Among those answers, the Tories said that "a Conservative government would lower federal government taxes, fees and charges affecting the aviation sector," and that "the Conservative Party believes that the government's role in airports is to ensure sound management of public assets and promote excellence in aviation safety and security. Rather than imposing unreasonable taxes, charges, rents and regulations on our aviation sector, a Conservative government would support Canada's airports and airlines ensure safety, security and economic opportunity in our skies."

The CAC, which has not yet met with Cannon, expects to have the opportunity to get together with the minister over the next few months.

"We have a new government. We hope they continue to recognize the importance of transportation as they move forward," says Facette. Air passenger travel is only going increase, especially with the Olympics coming to British Columbia in 2010, he predicts. "We need to take advantage of these opportunities."

Those opportunities are also on the mind of Larry Berg, president and CEO of the Vancouver International Airport Authority.

"I would like to see the federal government adopt a policy framework that unleashes the tremendous economic potential that airports have (as) regional economic generators," says Berg. "That would mean making them more cost effective, making them more internationally competitive and you generally hang a sign up saying that you're open for business."

Canada has only one open skies agreement, with the United States, he notes, whereas the U.S. has more than 70 such agreements with other nations. Berg adds Canada has a very restrictive international airport policy regime that closely regulates and prohibits air service into many Canadian cities.

Airline economics should dictate routes, as opposed to federal government policy, says Berg, adding it is particularly important for Vancouver's role as Canada's Asian gateway.

"It's all about China today and Asia, and (Vancouver) is the gateway, he says. "What's at stake here is billions in economic activity and thousands of jobs. A daily 747 flight into Vancouver translates into 400 jobs at the airport. Those jobs are going to Los Angeles or San Francisco if they're not going to Vancouver."

The government is starting to understand that concept, he adds, "and we need to advance that."

Vancouver already competes for international service with Los Angeles, San Francisco and Seattle, and Berg is calling for a level playing field in terms of cost effectiveness. "We need to eliminate federal charges on airports, including airport rent and the passenger security tax," he says.

"U.S. airports don't pay those and the security (fee) is not quite what we pay here. Airports in the States have access to cost of capital tax exempt bond financing, which we don't - they have somewhat of a competitive advantage - and the tax on aviation fuel for international flights is higher in Canada than it is in the U.S."

Analyst Erickson agrees that the aviation fuel tax should be removed.

"Aviation pays in excess of 100 per cent of its cost to government," he notes. "No other mode of transport even reaches 50 per cent, road doesn't, rail doesn't and marine is a pitiful 15 per cent. Why is it that aviation pays the full cost when the other transportation modes do not?" In Alberta, where airport rent hikes have been held in check - both Edmonton and Calgary's airports were facing stiff hikes with rents soaring by $17 million (in Edmonton) and $31 million (in Calgary) in 2006 before the federal government took action last year in response to airport lobbying - there is hope the Tories will chart what the industry sees as a more appropriate course.

"I think we're reasonably optimistic that we'll get a fair hearing," says Garth Atkinson, president and CEO of the Calgary Airport Authority.

"I don't know the new transport minister yet. But certainly from their days in opposition we seem to be relatively in tune with the Conservative Party on a number of issues."

In Edmonton, Edmonton Airports president and CEO Reg Milley adds that he's looking forward to progress on issues including rent and bilateral (open skies) negotiations.

"The Harper administration had indicated that they agreed with the rent reduction (airports across Canada) that we got, but they thought it should have been more," adds Milley.

The Air Transport Association of Canada (ATAC) is one of many aviation organizations that has yet to talk to the new federal transportation minister.

"We're pretty heartened by some of the comments that the Conservative Party has made in the past with respect to the need to lower government fees and charges in this industry. In particular, we continue to believe that it's in the best interest of Canadians to remove airport rent charges," says Fred Gaspar, ATAC's vice-president of policy and strategic planning.

"There's a tremendous opportunity for this government to do a fundamental rethink of aviation policy in this country with an eye to making it more competitive, more productive and more affordable."

While Erickson says the issue of airport privatization could be a guaranteed "grand slam" for the minister if he were to move forward on the dossier - Ottawa could realize a revenue windfall of anywhere between $2 billion to $4 billion that could be used to pay down the national debt and end the airport rent issue once and for all - ATAC says it has a slightly different view.

"We think a simpler approach is to reform the way airports are governed to ensure greater accountability by airports to the people who pay the bills - the air service providers and their passengers," says Gaspar. "We don't see privatization as the answer, nor are we opposed."

Most aviation sector officials see their issues as non-partisan, giving them hope that they will be fairly considered even by a minority parliament.

"The key importance is for a minority government to find equal ground. By and large, airport policy is apolitical," says the CAC's Facette.

"We're confident Minister Cannon will want to take some actions; strong, tangible steps to enable us to reach our full capability. The reality is that airports in Canada are the economic engines of the communities they serve."

(Laura Severs can be reached at laura@businessedge.ca)