Budget 2025 and the Future of Canadian Airports: Lease Reform and Capital Investment
The 2025 federal budget has received generally positive reviews from the airport industry in Canada. As will be described in later in this article, Budget 2025 seeks to address long-standing needs of the airports: ground lease extensions, ground rent reform, enticing private investment[i], and expanded funding for smaller and remote airports.
Background – Canadian Airport Primer
A more detailed background can be found at the endnotes[ii] of this article, but the short story is that the vast majority of major Canadian airports are operated by private, not-for-profit “airport authorities” which feature locally appointed, apolitical boards. Given that that there are no shareholders, airport authorities reinvest all net revenue back into the airport. It is a model that, in my view, works quite well and balances the often-competing interests of running the airport in the public interest and running it like a business. That said, there is room for improvement.
Airport authorities lease airport land from the federal government, paying roughly 12% of gross revenue as rent. This represents a major expense item for airports and a source of revenue[iii] for the federal government
Canada’s commercial aviation system is based on a user-pay model: airport authorities are self-funded, and Nav Canada (air traffic control) and CATSA (security screening) rely on user-fees that get added to the price of every ticket in Canada. This adds costs to the end users. Smaller airports in Canada, which typically don’t operate as airport authorities, struggle more to operate in a user-pay environment.
Ground Lease Reform
Perhaps most significantly, Budget 2025 acknowledges that the current state of ground leases are hampering growth and development. Many of the existing ground leases expire in just a few decades, which makes it very hard for the airport authorities to attract investment. Furthermore, the onerous ground rents that the airport authorities pay are adding unnecessary cost to airport operations, which are ultimately passed on to end users.
While vague on detail, Budget 2025 signals a clear willingness to:
address the ground lease issues by speeding up the ongoing negotiations surrounding extending the ground leases, and
reform the ground rent formula.
It is hoped that such changes will reduce costs and entice further private investment at the airports.
A Note on Privatization
On the surface, the 2025 federal budget has reopened the on-again off-again conversation in Canadian aviation policy: the potential for-profit privatization of airports. But while the language of privatization reappears, this time with a nod to “options for the privatisation of airports”, the details are conspicuously thin. There is no framework, no timeline, and no indication of which airports might be considered. Instead, the budget pairs its tentative privatization language with a more pragmatic set of reforms: lease extensions, rent formula revisions, and expanded permissions for economic development on airport lands. These measures suggest that Ottawa is less interested in full divestiture of airports to private for-profit entities than in attracting institutional capital through more flexible and bankable lease arrangements as a kind of middle path (read our Canadian Competition Bureau Market Study blog for insights on how competition policy shapes the government’s goals for airport reform).
In short, I do not believe that the federal government is seriously considering handing the keys of our major airports to private, for-profit operators.
Industry voices have been quick to underline why the current structure makes sense. As Monette Pasher, President of the Canadian Airports Council, recently observed:
“That’s why the best role for institutional investors isn’t as majority equity owners, but as financing partners — another investment option for airports, which will have plenty of infrastructure projects to build as they pivot toward new markets and economic realities. With newly extended airport leases providing certainty for airport partners and plenty of shovel-ready capital projects in the works, from aerospace development to energy plants, there will be more opportunity for institutional investment than we have seen in decades.”
This skepticism is rooted in experience, not ideology. Canada flirted with airport privatization in 2016–17, but valuation concerns and governance risks killed the idea. The are also concerns from some quarters in the industry that for-profit privatizations do not result in cost savings.
Funding for Airports
Budget 2025 has set out various funding initiatives for airports in Canada. While there aren’t any clear details surrounding which airports and regions will receive such support, we presume much of this funding will be aimed at regional and smaller airports.
Safety First: Expanding ACAP
The Airports Capital Assistance Program (ACAP) receives a fresh injection of $85.7 million over four years, with $15.7 million in ongoing funding thereafter. This is targeted at safety-related infrastructure, airfield lighting, pavement rehabilitation, and navigational aids, with some flexibility for dual-use priorities in line with increasing military expenditure.
Accessing New Markets with TDCF
Less usual for airports, however, is the creation of the $5 billion Trade Diversification Corridors Fund (TDCF). This fund is designed to support infrastructure that enhances Canada’s export capacity and reduces reliance on U.S. trade routes. For regional airports serving agrifood, manufacturing, or tech sectors, the TDCF offers a chance to align airside and landside projects with broader trade and supply chain strategies, opening new avenues for airport development.
Developing Northern Connectivity
The Arctic Infrastructure Fund (AIF), with its $1 billion allocation, is more geographically targeted but still relevant nationwide. While aimed at dual-use northern transportation infrastructure, its criteria: civilian connectivity, defence readiness, and Indigenous benefit-sharing, may influence procurement standards and funding expectations across the country.
What Next?
So where does this leave airport authorities? The budget offers opportunity, but not certainty. With no formal process for privatization or lease reform, the onus is on authorities to engage early and strategically. That engagement starts with clarity of purpose: understanding where the funding streams align with operational priorities and where governance changes could unlock new investment potential.
From there, mapping projects to the right funding envelope (i.e., ACAP for safety, TDCF for trade, AIF for northern connectivity) should be the first priority. At the same time, opening conversations with Transport Canada on lease extensions and rent reform will help shape the emerging framework. Internal readiness matters too: standardized templates for lease amendments and operator agreements can streamline transactions and ensure compliance as new opportunities arise.
Budget 2025 is not a blueprint for privatization—it’s a pivot toward flexibility. By addressing the structural barriers that have constrained airport authorities for years, Ottawa is inviting a new kind of partnership: one that retains federal oversight while enabling local innovation and investment. Whether these measures deliver on their promise will ultimately depend on execution. For now, the message is clear: the door is open, and the question is who will take advantage first?
For more information on how Budget 2025 affects your operations, contact our experts at Avra Law.
End-Notes
[i] Including vague references to privatization, which, on further consideration, appears to be a reference to enticing private capital investment at airports (stopping short of equity ownership of airports).
[ii] The vast majority of Canada’s major airports are run by “airport authorities”. Prior to that, Canada’s major airports were owned and operated by the federal government. By the 1970s, it became clear to the federal government that they could no longer afford to keep up with the airports’ growing capital demands. Rather than continuing to own and operate the airports (as is the case in the United States) or spin the airports out to private, for-profit airport operators (as is the case in Europe), the federal government chose a middle ground: the Canadian “airport authority” model.
The transfer of airports to the airport authorities commenced in the early 1990’s. Airport Authorities are private, not-for profit corporations, with locally appointed (and apolitical) boards. They are self-funded and all net-revenue is reinvested back into the airport; there are no shareholders and, thus, no dividends to pay out. It is a model that, in my view, works quite well and balances the often-competing interests of running the airport in the public interest and running it like a business.
Airport authorities operate under a ground lease from the federal government, whereby they pay ground rent to the federal government (approximately 12% of gross revenue). Not only is the federal government not funding the airport authorities, but they are generating major revenue from them (the flip side is that ground rent is major expense item for the airport authorities). These revenues go into general tax revenue; they are not earmarked for aviation in Canada.
It is important to note that commercial aviation in Canada (especially at the larger airports in Canada) is based on a user-pay model: airport authorities are self-funded, airport authorities pay ground rent, NavCanada (air traffic control) and CATSA (security screening) are funded by user-fees that get added to the price of every ticket in Canada. I imagine that frequent travellers (as well as some (or all!) of the airlines and airports) lament the user-pay model while taxpayers that don’t travel frequently are OK with it. Let’s save that debate for another article.
Of further note is the fact that smaller and remote airports, which are typically not run by airport authorities, but by a variety of other airport operators (e.g. municipalities, commissions, and private operators) have a particularly hard time operating under a user-pay system. Given our geography and climate, these airports are crucial to connecting rural Canadians with critical services. The government have helped with funding these airports, but more is needed.
[iii] The federal government applies ground rents to general tax revenue. It is not earmarked for reinvestment into aviation.
