Canada pension funds permitted to invest in Canadian airports, but it will be no easy ride

Canada has operated its unique 'not for profit' stakeholder board system, that is mainly run by the public sector to manage its airports, since the 1990s. It has its admirers and its detractors, both within and outside Canada.

One thing that system does not support, to the level it might, is the profit motive. But the airports have to turn a substantial profit on their operations to pay hefty ground rents to the government - which bases them on the revenues they work hard to generate.

A Catch-22 level conundrum.

Various types of privatisation models were examined by the government in 2017, but the procedure fizzled out. One of the peculiarities of Canada's economy is that its pension/superannuation funds for public sector workers can invest in foreign airports (and they do), but they aren't allowed to at home.

Now the government is preparing the ground to permit them to do that, through a Mar-2025 policy statement. Partial privatisation might help to relieve the burden of the ground rents, especially if the private sector investors can obtain up to 49% of an airport's equity (bearing in mind that there are no traded shares yet).

That would give the airports more money to invest in infrastructure, or pay off debt.

And the airlines are delighted, as they envisage lower charges to them - leading to lower fares to passengers who won't have to jump ship to the Unites States to find a cheap flight.

It seems as if everyone is a winner, but these major changes in long-established philosophies are never easily accomplished, and it is worth bearing in mind that some elements of the existing model have value.