Vancouver airport first candidate for private investment, sources say

Vancouver International Airport is poised to become the first of the country’s large airports privatized by the federal government, as Ottawa’s advisers offer British Columbia Indigenous groups an opportunity to be minority investors, four sources say.

Three weeks after Prime Minister Mark Carney announced plans to open up four of the country’s biggest airports to private investment, the bankers and lawyers advising Ottawa have decided Vancouver’s airport, known in the industry as YVR, should be the first facility where a long-term lease on its ground operations is sold to outside investors, according to the sources, who are involved in the process.

YVR earned first spot in line because the government and its advisers expect to land First Nations investment, the sources said. The Globe and Mail is not naming the sources because they are not permitted to speak for their employers.

Mr. Carney made the privatization pitch during September’s investment summit in downtown Toronto, where he gathered executives with the goal of drawing new capital to Canada and reframing the country’s approach to investment. But the plan has raised concerns about the potential for increased prices for travellers and higher fees for airlines.

Along with YVR, the federal government plans to sell leases to run all or part of Calgary, Toronto and Montreal’s airports. The federal government will retain ownership of the underlying land and assets, a structure that is common in Europe and Australia.

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Indigenous investors are expected to take a minority stake of up to 20 per cent in YVR, two of the sources said, with majority control sold to institutional investors experienced in operating these complex facilities. Leading candidates for this role are large domestic pension plans such as the Public Sector Pension Investment Board, known as PSP Investments, which already operates airports in Europe and Puerto Rico.

The federal government and its advisers want Indigenous investment in YVR and other airports as part of a strategy to promote reconciliation and address concerns that privatizing operations will mean handing control to faceless asset managers, or foreign airport operators.

The government’s airport privatization process is in its early stages, and the timing and structure of investments could change, according to the four sources.

Indigenous investors listening to pitches for stakes in YVR include the Musqueam First Nation, two of the sources said. The airport, located in the Vancouver suburb of Richmond, is on the Musqueam’s unceded territory.

Last year, the First Nation struck a revenue-sharing agreement with the federal government on YVR, the country’s second-busiest airport.

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On Wednesday, Musqueam chief administrative officer Robyn McVicker said the First Nation wants a role in YVR’s future.

“Following the Prime Minister’s announcement at the Canada Investment Summit, Musqueam indicated to government that any discussion and plans about the future of YVR must include meaningful participation by Musqueam Indian Band,” said Ms. McVicker in an e-mail. She said: “At this time, it would be premature to discuss any negotiations.”

Ottawa’s advisers have also reached out to MST Development Corp., a Vancouver-based real estate company backed by three First Nations – the Musqueam, Squamish and Tsleil-Waututh – according to one of the sources.

MST owns a $3-billion property portfolio. CEO David Negrin has attended two fundraisers for Mr. Carney over the past two years. MST did not respond to a request for comment.

On Wednesday, Ministry of Transport spokesperson Marie-Justine Torres said the government is working on plans to bring private investment into airports “in partnership with Indigenous groups.”

“There are more important steps ahead, and details will be developed in the coming months working with the airport authorities,” said Ms. Torres.

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Canada’s airports are run by non-profit companies that pay rent to the government and fund operations through a host of fees charged to users, including passengers, airlines, restaurants and shops.

YVR spokesperson Stephen Smart said in an e-mail that “YVR will continue to engage with the Government of Canada, as well as with Musqueam, given our unique relationship.”

At the Canada Investment Summit in September, Mr. Carney made signing operational contracts for airports a key part of his pitch to many of the world’s largest asset managers.

“We, as a government, will be able to get tens of billions of dollars of proceeds from this process,” Mr. Carney said at the time.

The Prime Minister also said Canada intends to draw on the experience of other countries throughout the process – and learn from the pension funds and others who already own airports.

After Mr. Carney’s announcement, Transport Minister Steven MacKinnon said the government would partially regulate airport fares and fees after privatization. He did not rule out costs rising for travellers.

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An executive at the International Air Transport Association told The Globe last month that major airlines oppose the plan, warning it would drive up fees paid by the airlines, which would be forced to pass on the higher costs to travellers.

On Wednesday, a report from the University of Calgary’s economics department said the government needs to set the rules on airport operations before inviting offers from institutional investors.

The country’s four largest airports could fetch between $12-billion and $29-billion, according the report’s author, economist Aidan Hollis. In the report, he said: “That range is not a fact about airports, it is a bet on how they will be regulated.”

Putting passenger-friendly regulations in place “will determine both what users pay and what the airports are worth,” Dr. Hollis said.

Canada’s airport authorities have long pushed for the federal government to reinvest the rent it receives from airports. Since the 1990s, the airports have paid a cumulative total of $8.4-billion in rent to the government, including $556-million in 2025, while spending more than $30-billion in infrastructure and improvements.