So, it\u2019s stunning that the Carney government is actively considering \u2014 indeed, currently holding talks about \u2014 the possible privatization of Canada\u2019s major airports.\n<\/p>\n
It\u2019s even more stunning that the government is doing this, as Transport Minister Steven MacKinnon said<\/a>\u00a0last week, because its \u201cultimate goal\u201d is \u201cto keep air travel affordable for Canadians.\u201d\n<\/p>\n Really? Should someone break it to them that privatization is not the path to affordability?\n<\/p>\n In addition to exceptionally high tolls, the 407 privatization has meant that drivers who aren\u2019t able or willing to pay the tolls are confined to the main 401 highway, which often resembles a parking lot.\n<\/p>\n So, Carney\u2019s move to privatize airports is, let\u2019s say, puzzling.\n<\/p>\n Of course, not all privatizations are as disastrous as the 407. But one feature they all seem to share is that they ultimately cost consumers more \u2014 even though this higher cost is typically denied at the outset, when the privatizers often maintain consumer costs will actually fall.\n<\/p>\n Interestingly, this was the claim made in the case of the 407 privatization. The Conservative government of Mike Harris\u00a0argued<\/a>\u00a0that drivers didn\u2019t need to fear higher costs because the new owners would likely lower tolls in order to attract more drivers.\n<\/p>\n Rob Sampson, minister of privatization in the Harris government, explained that this is how free markets bring down prices: \u201cThe limit is what the market is prepared to pay.\u201d\n<\/p>\n But Sampson didn\u2019t seem to realize the 407 doesn\u2019t operate as a free market. You can\u2019t just build a competing highway beside it.\n<\/p>\n Rather, it\u2019s a regulated monopoly. That\u2019s why it\u2019s so valuable. Millions of Ontario commuters, desperate to speed up their daily commutes, form a captive market, enabling the private consortium (407 International Inc.) to charge exorbitant tolls.\n<\/p>\n Airports are also regulated monopolies, offering lucrative revenue streams that make them highly attractive to private owners who can raise parking rates and charge airlines higher landing fees, which are passed on in higher ticket prices.\n<\/p>\n Passengers can\u2019t just switch to another airport any more than Toronto commuters can just move to another highway. In both cases, travellers are captives, even though they paid to build these assets through their tax dollars.\n<\/p>\n The 407 was sold for just $3.1 billion in 1999 (and is now worth about $40 billion). Imagine if the 407 had remained publicly owned, with all the toll revenue going into government coffers. Or the tolls could have been cancelled.\n<\/p>\n The good news is that in 2098 \u2014 only 72 years from now, when almost everyone reading this will be dead or at least no longer driving \u2014 Ontarians will be able to drive toll-free on the 407, just like they now drive toll-free on all other Ontario highways.\n<\/p>\n The 407 is an example of ruinous privatization.\n<\/p>\n But there\u2019s also well-documented evidence of problems with hundreds of airport privatizations around the world. A 2022\u00a0study<\/a>\u00a0published by the U.S. National Bureau of Economic Research examined more than 2,400 airports worldwide; about 20 per cent had been privatized. The study concluded that, while airport privatization can increase efficiency, it often makes flying more expensive for travellers.\n<\/p>\n Oh well, just because there\u2019s massive evidence that privatization \u2014 and specifically airport privatization \u2014 leads to higher prices, why not just ignore all that evidence and plow ahead with privatization anyway, especially in the middle of an affordability crisis?\n<\/p>\n Since privatization clearly costs more, let\u2019s stop doing it.\n<\/p>\n
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Nick Seebruch, editor<\/p>\n