What to watch as negotiations ramp up for Carney’s airport privatization plans

The call itself was audacious, but it was just the first step.

Canadians have debated privatizing the country’s airports for years, and a 2016 federal review went so far as to formally recommend selling shares to large institutional investors. Yet both that study and the idea itself have largely gathered dust since then. The concept was just too politically toxic.

So Prime Minister Mark Carney made a bold move in mid-September when he green-lit the privatization of Canada’s four largest airports – Toronto, Vancouver, Montreal and Calgary – with plans to sign long-term concession agreements, or operational contracts, with institutional investors.

Since his election in 2025, Mr. Carney has argued that Canada’s economy and infrastructure assets need to be revitalized. The tens of billions of dollars that institutional investors will pour into Canada can be reinvested to help fund that transformation.

But the announcement is merely the first step of a complex process, and Ottawa must now prepare for high-stakes negotiations with some of the most sophisticated investors on the planet.

Among the details to be finalized: the structure and length of the contract, including whether to offer full or partial operational control; the form of payment; and the rules and regulations that will protect travellers from tactics such as price gouging.

The good news is the government isn’t starting from scratch. Airports around the world have opened themselves up to private investment since the 1980s, and there are scores of case studies to learn from.

Yet lawyers with expertise in these investments say Canada will likely need a bespoke contract. “I don’t know that we can so easily just take best practices from around the world and dump them into Canada,” said Andrea Sepinwall, a lawyer at McMillan LLP who specializes in aviation law.

Airports in Europe, Britain and Australia are often studied for their privatization models. But Australia is an island that is thousands of kilometres away from its most-common flight destinations, while Britain is close to densely populated Western Europe, where cheap airfares are abundant.

At the same time, institutional investors will each have their own demands, particularly on structuring the terms of payment. “I don’t think there’s any one model investors are asking for,” said lawyer Catherine Doyle, who specializes in major projects and public-private financings at McMillan.

Ottawa may desire upfront cash, but investors could scoff at writing a large cheque, preferring instead to share revenues over many years.

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Today, the four Canadian airports up for privatization are owned by the federal government, but run as not-for-profit businesses and managed by third parties. These airports charge user fees to airlines and travellers, then use these fees to pay rent to the government.

When this unorthodox model was established in the 1990s, it was supposed to be a stepping stone toward broader privatization, according to the 2016 federal review.

One problem with the current structure is that it leaves Canada’s airports with little money to invest in new terminals or other upgrades, so expansions are funded with debt, stretching some of their balance sheets. Toronto’s Pearson International Airport owed $6.7-billion at the end of 2025, while the Calgary airport’s long-term debt stood at $3.3-billion, according to financial statements.

Fresh capital from institutional investors would provide a chance to upgrade terminals, attract better shops and restaurants or build new e-commerce warehouses adjacent to runways, said John Gradek, who teaches aviation leadership at McGill University.

These investors are already drawn to airports as an asset class. They view the facilities as long-term, low-risk investments supported by strong travel demand and a near monopoly on the services they offer.

Each year, the Australian Competition and Consumer Commission releases a report on the country’s airports. Its latest, from fiscal 2024-25, showed that Sydney Airport, Australia’s largest, earned a 66-per-cent operating profit margin on parking.

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Such margins help explain why a consortium of private investors bought that airport for 23.6-billion Australian dollars in 2022 (roughly $21-billion), even though international travel then remained subdued owing to the COVID-19 pandemic.

Under Mr. Carney’s privatization plan, Ottawa will keep equity ownership of the airports and their land, and instead sign concession agreements with the investment partners. These agreements are common for transportation assets, as well for large infrastructure assets including power plants and water supply stations, but they are not one-size-fits-all.

“There’s a panoply of options,” said Ms. Sepinwall, the aviation lawyer.

The first variable: time. Concession agreements tend to last decades, sometimes up to a total of 99 years, but they can be shorter. Ottawa must decide what it is comfortable with, recognizing that a bad long-term deal could define Mr. Carney’s legacy.

If a shorter term is proposed, Ottawa will need to negotiate an end-of-term transition. Without iron-clad conditions, the operator may underinvest in the airport near the end of the contract, knowing it will soon be free of the commitment.

The second variable is the payment model. Long-term concession agreements often include an upfront payment, as well as some form of revenue-sharing throughout the contract.

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Ottawa has been clear that it wants to use the proceeds to invest in regional airports, new local transportation infrastructure and nation-building infrastructure. But there is a trade-off. If the private investors aren’t sure of the returns – a global pandemic could derail their dreams, for one – they may offer a discounted price on upfront cash to provide some wiggle room.

On the flip side, if the private operators end up delivering strong returns, Ottawa may find that splitting revenues with them over many years would allow Canadians to share in the solid performance.

The third big bucket up for negotiation: rules and regulations. Federal Transport Minister Steven MacKinnon has already said the four major airports will have fares and fees subject to partial regulation, but multiple approaches are available.

The options include: imposing a user price cap that is monitored by an independent regulator and is periodically adjusted; permitting a rate of return that allows investors to recover their costs, plus a preset return on their investment; or signing stringent contracts that set out fee and service requirements from the outset.

Ottawa may also want rules around foreign ownership. Transportation assets are often protected from foreign buyers – Canadian airlines are subject to foreign ownership caps of 49 per cent, and no single foreign investor can own more than 25 per cent of any airline – so one option is to require that the lead partner of any operating consortium is Canadian.

If so, domestic funds stand ready with ample capital – and expertise. The Public Sector Pension Investment Board, for one, manages $321-billion for federal government workers, and it already owns stakes in seven airports in cities such as Athens, Düsseldorf, Hamburg and Glasgow through its AviAlliance subsidiary.

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Deborah Orida, the fund’s chief executive officer, said in an interview that that experience has taught PSP how to operate airports successfully, adding that it is attuned to consumer fears over fees and services. “You are not successful unless you have happy customers,” she said.

Finally, Ottawa will have to negotiate its fees for financial and legal advisers. With tens of billions of dollars expected to be raised, investment bankers and lawyers could have a feeding frenzy.

One option here is to follow the model of Hydro One, which was privatized by the Ontario government in 2015. At the time, the Ontario Liberals brought on former Toronto-Dominion Bank chief executive Ed Clark as an adviser, and he was adamant about keeping fees low in order to prevent Bay Street from feasting on taxpayer-owned assets.

“We are quite determined that when we do go public, you will see a fee structure that the industry has never seen before,” he said then. “There is not going to be a lot of money made off this.”

The government stuck to this plan, and the Ontario Liberals signed a deal that paid the IPO’s investment bankers a 1-per-cent fee for stock sold to institutional investors, and 3 per cent for shares sold to retail investors. IPO fees generally range from 5 per cent to 7 per cent.

Asked about any arrangements with investment banks for the airport deals, the Finance Department said in an e-mailed statement that Ottawa “will engage the necessary advisory expertise to structure a concession process and model that is transparent, competitive and for the long-term benefit of Canadians and air travellers. More information on the next steps will be announced in due course.”

With reports from Stephanie Levitz in Ottawa