Canadian travellers are facing increased airport fees after the COVID-19 pandemic grounded revenues and led to more debt for airports across the country.
COVID-19 disrupted the airport sector’s “relatively stable” and resilient business model, as Canadian airports have added around $3.2 billion in combined debt, DBRS Morningstar said in an analysis note on Monday.
Unlike American airports, which received significant financial aid during the height of the pandemic, Canadian government subsidies mostly targeted airlines rather than airport authorities, according to the credit rating agency.
The latter only benefited from “modest” support, such as Transport Canada’s Airport Critical Infrastructure Program, launched in May 2021, which provides $571.2 million over five years.
“The Canadian government has not demonstrated a willingness, or perceived a material need, to provide significant financial support to Canadian airports,” the agency stated.
During the pandemic, Toronto Pearson International Airport twice increased its airport improvement fee by $5 to $35 for departing passengers. That followed losses of $383 million and $350 million in 2020 and 2021, respectively.
That fee similarly rose at Montreal’s Pierre Elliott Trudeau International Airport from $30 to $35 in 2021. The Regina Airport Authority plans to hike airport improvement fees by $10 per departing passenger to $30 on April 1.
Airports’ operating costs and capital expenditures are also on the rise due to inflation, per the agency. Tariff increases have become “necessary” as airports look to restart capital projects at higher costs after many were paused during the pandemic.
“The elevated pressure for Canadian airports to raise fees reflects the combined effect of the increased leverage during the pandemic and the unsubsidized and not-for-profit nature of the Canadian airport business model,” the analysis note stated.
“The longer it takes an airport to grow/rebuild traffic and match the designed capacity of facilities, which were developed with borrowed money, the longer such pressure will persist.”
The agency said it does not expect a shift in competitiveness between Canadian and U.S. airports to have any material impact on the ratings of major Canadian airports, which remain largely protected by their monopolistic status and resilient demand from consumers.