SPEAKING NOTES FOR
TRANSPORT MINISTER JEAN-C. LAPIERRE
ON AIRPORT RENT
OTTAWA, ONTARIO
MAY 9, 2005

Thank you for coming here this morning.

I’m really happy to be here to make a major announcement that will have a significant impact on Canada’s airports and our air transportation sector.

This announcement responds to concerns expressed by airport authorities. By airlines. And by air travellers.

Everyone in the air industry told us that "airport rents are too high." They said "high rents drive up landing fees and hit travellers in the pocketbook."

We heard those concerns loud and clear. And as I promised, we are taking appropriate action.

Today I am announcing that the Government of Canada is adopting a new airport rent policy that should bring approximately $8 billion in rent relief to Canada’s airport authorities over the remaining life of those leases. This new policy will also address issues of inequity that have plagued our airport lease arrangements over the years.

The government is lowering total, long-term airport rent payments by more than 60 per cent. By doing this, we’re radically changing the financial outlook of the air transportation sector in Canada. Our major airports will see a substantial reduction in long-term costs, which should greatly benefit airlines and the travelling public alike.

To better understand how we arrived at this new rent policy, let me take you back through some important events that affected Canada’s airports and the greater air transportation system.

Starting in 1992, the government began leasing major Canadian airports to not-for-profit community interests — what we know today as airport authorities. Under this policy, the federal government retained ownership of airport lands, while responsibility for airport operation, management and development was transferred to local interests. This lets communities take greater advantage of their airports. Reduce costs. Tailor levels of service to meet local demands. And attract new and different types of business.

Most airports in the National Airports System have been transferred to local airport authorities. These airports handle about 92 per cent of all passenger traffic in Canada.

In 2001, Transport Canada began a review of the existing rent policy for these airports. We started the review to respond to demands of the Canadian airport and aviation communities, as well as concerns raised by the Auditor General, who thought that the government might not be collecting an appropriate amount of rent.

The review examined the impact of rent on the financial viability of airports and the domestic airline industry. It considered that Canadian airports and airlines must continue to become more efficient and cost-effective to compete internationally. It recognized the critical role that our airlines play in the Canadian economy. And it looked for the best way to ensure that taxpayers receive fair value for the assets leased to airport authorities.

The goal of the review was to ensure that the rent policy balances the interests of all stakeholders, including airports, airlines and Canadian taxpayers. In a nutshell, it has to be fair to all parties involved.

It was a long haul, but we recently finished the rent review. We also took into account the findings of the Auditor General’s audit of the review, which was conducted earlier this year. And we took advice from business, real estate and financial experts, including federal departments such as Finance Canada.

Through our extensive research, review and consultations, we developed a new rent formula. This formula addresses inequities in existing rent agreements. It will help Canada’s airport authorities and our air industry remain viable over the long term.

The bottom line — every one of the 21 rent-paying airports across Canada will benefit financially every year that they are to pay rent over the life of their leases. Under the old system, they were scheduled to pay $13 billion. This will be reduced to $5 billion over the course of existing leases. This represents a reduction of $8 billion, or more than 60 per cent.

In addition, the new rent formula will address concerns related to fairness and equity among airports of similar size and activity. The original process of negotiating lease arrangements resulted in 21 separate deals, each with its own peculiarities.

Therefore, the impact of this new formula is different at each facility. For example:

Toronto, as Canada’s largest and busiest airport, will see the largest long-term reduction in rent. It will now pay $3 billion instead of an estimated $8 billion under the old system — roughly $5 billion in savings.

Some airports will see a substantial drop in the earlier years. Calgary and Edmonton — whose rents were to double and triple next year — will avoid huge rent increases in 2006. Calgary will save over $100 million in the next four years and Edmonton will save more than $40 million in the same period. Vancouver will see a $90 million reduction over the next four years, with savings of $1.1 billion over the remaining life of its lease.

Montreal, Halifax and Winnipeg will see their rent reduced by half over the life of their leases.

For the Quebec City airport, the federal government is renouncing chattel payments worth $1.3 million. In the case of the Montreal airports, we are also resolving real estate impediments. This is in addition to the rent reduction totaling $26.5 million dollars for the airports in Montreal and Quebec City.

Ottawa, our gracious host today, will get a two-thirds reduction.

Smaller airports will also benefit. Most will see at least a 70 per cent reduction in rent over the long term. And once each of these airports begins paying rent, they will get short-term reductions. For example, in 2006, Regina will pay about $49,000 instead of $680,000. Thunder Bay will pay approximately $12,000 instead of $331,000. In 2016, when Moncton begins paying rent, it will pay about $197,000 instead of $1.3 million.

Smaller airports will also benefit from another announcement I am making today. The Government of Canada will also forgive chattel repayments on assets such as runway sweepers, snow blowers and computer equipment from airports. This will result in additional savings of about $22 million for airport authorities.

Okay, so how does this impact travellers?

Most major airport authorities have promised me that a significant portion of their rent savings will be passed on to air carriers and passengers. This can be done by cutting fees to airlines. The government also intends to bring forth legislation to enhance transparency and accountability measures for Canadian airport authorities.

In closing, today’s announcement is more than just an $8 billion reduction in long-term costs for our airport authorities. It is a balanced and fair policy.

It’s good for airports because it offers short-term and long-term financial relief.

It’s good for the greater air transportation industry because it reduces operating costs and can help the Canadian air sector remain competitive.

And it’s good for all Canadians because it can translate into lower travel costs, while ensuring that taxpayers receive fair value for their airports through rent payments.

Back in February, immediately following the last budget, I got into trouble for suggesting that some officials at the Department of Finance should be put on a no-fly list. I was reacting to the fact there was no mention of rent reductions for our major airports in the budget.

Well, I am happy to tell you that effective immediately, they have all been removed from my no-fly list! And I sincerely hope that those Finance officials, who helped make today’s announcement a reality, enjoy nothing but first class treatment from here on in!

And of course, I’d also like to thank my Deputy Minister and all of the dedicated officials at Transport Canada for their persistence in moving this important file ahead.

Thank you.