The investment case for airport privatization is strong, but Ottawa still needs a regulatory regime for pension funds, says KPMG's Andras Vlaszak
At Tuesday's Canada Investment Summit, Prime Minister Carney confirmed what the federal government has been signalling for nearly a year: Canada will seek to privatize its airports, moving from budget language to a formal commitment.
The decision to pursue privatization of four of Canada's largest airports has handed institutional investors something they rarely get on home soil: ready-made infrastructure assets with immediate capital deployment potential, said Andras Vlaszak, senior director, infrastructure, capital projects, and sustainability services lead at KPMG Canada.
He framed the move as "a test of consistency" from the Carney government, adding that "the government is doing well so far."
"The government said that they would do something, and now they're following up. They're not only following up with one of the assets, but the four largest assets, creating really a market here that didn't exist before for private infrastructure investors, both Canadian and international," said Vlaszak. "It allows institutional investors to deploy capital immediately in Canada. So it's very important."
PSP welcomes privatization opportunity
Andrew Alley, managing director and global head of infrastructure investments at PSP Investments, one of Canada’s Maple Eight pension plans, said the pension fund welcomes Carney’s announcement to privatize airports.
"We have recently announced that we expect our fund to grow from a current level of $75 billion invested in Canada to the $100 billion mark, and we see infrastructure being a big driver of that," Alley told BPM, adding that PSP already owns seven airports globally through its infrastructure platform, and sees the domestic privatization as a chance to redeploy that operational knowledge at home.
"As we think about deepening our investments in Canada, we really like the opportunity to bring experience that we've gained internationally back to Canada," he added, underscoring that PSP views airports as core infrastructure with scalable investment potential.
"We would like to be a participant in the process," said Alley.
The investment case for pensions
Vlaszak also believes the investment case is strong for pensions. As demand-risk assets, he explained, they carry variable revenues that can deliver stronger returns than the regulated utilities that make up much of the available infrastructure market. Their established positions in distinct geographical markets, with high barriers to entry, provide the downside protection institutional investors need.
If international precedent is any guide, particularly as concessions in Europe and Australia can run 50 to 100 years, he noted, the asset life is long enough to match pension obligations.
"These are long-lived assets that pensions really want to put in their portfolio and match those liabilities that they have towards their members," he said.
According to Vlaszak, the airports slated for privatization - Toronto Pearson International Airport, Vancouver International Airport, Trudeau International Airport in Montreal and Calgary International Airport - sit in distinct geographical markets where they handle the highest traffic, giving investors a degree of certainty over throughput and revenue.
Additionally, he noted airports are high-margin businesses as the heavy capital spending happened during construction, and they now generate strong EBITDA and free cash flow without the reinvestment demands of earlier-stage assets.
Vlaszak believes that translates into the kind of regular, long-duration cash distributions pension funds are after. He also pointed to upside beyond steady-state operations: more efficient management under private ownership, capital projects in cargo and passenger capacity that could drive higher revenues, and greater flexibility to time financing decisions to favourable markets rather than operating within the constraints of public ownership.
While major pension funds already operate in each of the airports' local markets, the key question is how aggressively they participate in the initial process and whether they grow their stakes over time, said Vlaszak.
The prudent approach for institutional investors now, he suggests, is to enter an asset, learn how it operates, and then deploy additional capital as opportunities emerge, whether that means buying out foreign partners who came in early or funding growth projects identified through ownership.
To that end, he highlighted cargo capacity and domestic aircraft maintenance as areas where airport owners could find further investment opportunities, pointing to existing efforts at Calgary Airport to build out servicing infrastructure for certain airlines.
Yet, the challenge for pensions at the moment, Vlaszak suggests, is Ottawa needs to design a regulatory regime and transaction structure that works for long-term institutional owners.
"From a pension perspective, the key to success is to find that good operator, to make sure that the regulatory regime that they go into and the transaction structure is supportive of their long-term ownership and provides them with flexibility and also certainty," he said.
From his perspective, Vlaszak said Canadian airports rank high in North American passenger satisfaction, have recovered from the COVID cycle, and operate in a mature, well-developed market - all of which makes them substantially de-risked.
Labour congress opposes privatization
Yet, there are parties who oppose the federal government’s move, particularly the Canadian Labour Congress, who released a report ahead of the Canadian Investment Summit, warning that airport privatization would raise the cost of flying and put workers at risk.
Drawing on cases from Australia, New Zealand, Portugal, the UK, and the US, the report found a pattern of higher charges, workforce cuts, and lost public value. It estimates private investors would need airports to generate 15 to 20 percent more revenue than the current nonprofit model to deliver competitive returns.
"Canada’s airports are already productive public assets, generating approximately $525 million a year in revenue for the federal government. Giving private investors long-term concessions means trading away decades of that value for cash today," said CLC spokesperson Lily Chang in a statement.
"In the middle of a trade war, handing profitable public infrastructure over to private investors is exactly the wrong move," she added. "Canada needs to invest in itself and protect good jobs."
Why privatizing airports is the right move now
In Vlaszak’s view, he stands firm that monetizing them is the right call, provided customer protections and a sound regulatory framework are in place. He believes airports are the logical assets to sell at this stage because they offer limited incremental value creation from an economic development standpoint, while the government needs capital to fund broader buildout across the country.
He noted the concession model, where Ottawa would retain ownership of land and assets while investors would operate the airports, isn’t new ground for Canadian airports as most already operate under federal ground leases as nonprofits, and the proposed change simply replaces them with for-profit private leaseholders.
The real question is how Ottawa structures the rent: upfront value through the sale or ongoing ground lease payments. That decision will shape what investors bid into. While he doesn’t view the concession approach as a competitive disadvantage, Vlaszak acknowledged it will affect the total value Ottawa can extract from the assets.
"Both of these freehold ownership and concession are very well understood in the infrastructure market and they're completely bankable either way," he said.
Still, the bigger question, he said, is how Ottawa sequences the process and structures it to attract foreign capital. Investors will now be watching not just the airport deals themselves but whether domestic pension funds step up and whether the process proves the government's broader claim that Canada is doing business differently.
"It will have impacts on not just on the airport sector but other capital investments in the country," said Vlaszak.
