TRANSPORT CANADA STUDY ON
REGIONAL AND SMALL AIRPORTS

In 1994, the Government of Canada introduced the National Airports Policy, which provided a framework that defined the federal government's role regarding airports.

Under this policy, the Government of Canada reduced its involvement in Canada's regional and small airports. While it would continue to regulate these airports, it would no longer be owner and operator of them. In this way, the policy allowed communities to take charge of their airports, reduce costs, tailor levels of service to local demand, and attract new and different types of business. As part of the policy, transitional arrangements were made to assist in the transfer from federal government to private or municipal ownership. To date, the ownership and day-to-day operations of 91 regional and small airports have been transferred.

As a result of air industry changes over the past few years, regional and small airport operators have expressed concerns regarding their ability to sustain and operate their airports effectively over the long term.

In response to these concerns, Transport Canada undertook a study of the financial situation at regional and small airports that had been divested by the federal government since 1994. The study assessed each airport's ability to cover its operating and regular capital expenditures, analyzed the factors that have affected airport operators since transfer and looked at local demographics. Transport Canada also held consultations with stakeholders to gain a broader understanding of the issues involved.

Over 90 operators of divested airports, mostly municipalities, were contacted and 70 per cent participated in the study.

The study, which was completed in July 2004, found that divestiture, in and of itself, has had a neutral or positive impact on the financial state of these airports. The great majority of airports that were in a deficit position at the time of transfer have been able to significantly reduce that deficit, or even generate a surplus since divestiture. This was possible despite some very difficult years felt by the entire airline industry as a result of September 11^th, SARS and the war in Iraq.

Key findings of the study include:

• 90 per cent of regional and small airports that are still experiencing operating deficits are in better shape now than they were shortly after they were privatized.
• 52 per cent of airports studied had an operational surplus (subsidies excluded). The majority generated over $1 million in revenues, and costs such as insurance, property taxes, utilities and security do not seem to have had a significant impact on their bottom line.
• Airports currently experiencing operating deficits almost all have the same obstacle. They lack a sufficient potential passenger base to attract or support significant air carrier service. There is a lack of users to support the level of airport facilities and services maintained. The demography of each catchment area, such as population, income and industry has a direct bearing on the operational and financial opportunities available to airport operators.

In cases where airports are continuing to experience difficulty in covering their costs, a number of options are possible. Airport operators could further rationalize airport infrastructure and services to match demand, increase user fees, or implement a combination of these measures. Additionally, other jurisdictions which benefit from these airports may choose to offer financial support.

In April 1995, the Government of Canada introduced the Airports Capital Assistance Program, which has become an integral part of the National Airports Policy, to help maintain safe operations through improvements to critical infrastructure. The program assists eligible airports with the financing of airside safety-related projects such as runways, taxiways, visual aids and heavy airside mobile equipment. To be eligible, an airport must receive year-round regularly scheduled passenger service (minimum 1,000 passengers/year), meet airport certification requirements and not be owned by the Government of Canada. Since 1995, the Government of Canada has provided $297 million for 374 projects at 143 airports across Canada.

The Government of Canada will continue to work in collaboration with governments, industry and other partners so that transportation issues at the regional and small town level can be incorporated into future initiatives.

A copy of the Regional and Small Airports Study can be found on the department's website.

May 2006