Presentation to Southern Ontario Area Airports Study

Lawrence Solomon
Consumer Policy Institute
October 19, 1994

Re: Lester B. Pearson International Airport Passenger and Aircraft Traffic Forecasts An Overview

North York, Ontario

Good evening, I’m Lawrence Solomon, Executive Director of The Consumer Policy Institute.

Thank you for the opportunity to address this proceeding concerning South Central Ontario’s needs. Its needs, as you are all too aware, have been seriously misjudged in the past.

We applaud Transport Canada’s decision to leave the airport business – this departure will greatly diminish the likelihood of future miscalculations such as Mirabel and the Pickering lands expropriation, and serve taxpayers and local communities well.

Transport Canada’s forecasts have been so wrong for so long – and seemingly always in the direction of building more capacity well before it would be needed – because they haven’t been tempered by any private sector discipline.

No one lost his job over the Pickering airport fiasco, which cost taxpayers $250 million. No private shareholder has to stop and think about whether a premature investment at Pearson might turn sour. No one needs to worry about being efficient or making a profit, because taxpayers will pick up the tab.

Transport Canada, like other government operations, does not have an incentive to maximize profits – the government’s incentive is to maximize growth. That’s why your forecasts are systematically high, and that’s why the public justifiably distrusts them.

To your study’s question of options at Pearson when it becomes capacity constrained, let me first say that there is no credible evidence that a capacity constraint is imminent – Pearson has no capacity constraint except at peak, and peak management tools – particularly pricing – are capable of eliminating any constraint for the foreseeable future. But in the distant future, the options to allay any constraint will include not just additional runways and rationalized use of the other airports in the region, but road and rail options, and the empowering of local communities with property rights, so that Canadians whose rights are affected by additional flights will have the right to say yea or nay to the new developments.

Now that Transport Canada is abandoning the running of airports, it should also abandon the Southern Ontario Area Airport Study. Our preference is for the federal airports in this study to be placed into private ownership, and where airports have monopoly pricing power they should be regulated by Transport Canada to ensure that charges stay reasonable.

In the UK, the British Airport Authority – which ran Heathrow and 6 other airports in South-East England – was sold to 750,000 British citizens 8 years ago. Heathrow used to be one of the highest cost airports in the world – now it is 24th. Passengers pay lower fares as a result, so they’re winners. Airport shoppers – who could count on being gouged when the airport was run as a non-profit – are also winners – Heathrow’s shops will not be undersold by City shops. Shareholders are winners too – they’re making money hand over fist. And taxpayers are winners – BAA is a big company paying big taxes – previously, the publicly owned authority, like Transport Canada, was a commercial welfare bum.

But the biggest winners of all were Heathrow’s neighbours. Prior to the privatization, BAA planned to build another runway – BAA thought it was needed, the government thought it was needed, the airlines thought it was needed – everyone thought it was needed except for the neighbouring communities who would be affected. After privatization, BAA did its sums and realized that its shareholders would be worse off if the new runway were built … a new runway wouldn’t be needed until 2015!

So BAA opposed the plans fore a new runway, joined the communities who were fighting it, and defeated the government and airline lobby.

If Transport Canada airports were sold to various private interests, and then strictly regulated, Canadians would get the best of all worlds. Our advice to you is to scrap the Southern Ontario Area Airport Study, sell off your airports, and watch the efficiency of the system take off.

Thank you.

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