Report says high airfares hurting Canadian airports as well as economy
Beacon Staff Reporter
High Canadian airfares send five million Canadians out of the country for significantly cheaper flights. Photo courtesy b-townblog.com
According to a report issued by the Frontier Centre for Public Policy on Friday, five million Canadians cross the border to fly with U.S. carriers each year due to significantly lower airfares.
The report, called ‘A New Policy is Required for Air Transportation,’ was authored by its research associate Mary-Jane Bennett.
According to the report, Canadians cross the border to fly because U.S. airfares are cheaper by an average $428 per round-trip ticket.
An examination of the two parts of an average air ticket, the tax portion and the base fare both show a wide U.S. advantage.
The tax portion of the Canadian air ticket is ratcheted up with hefty federal fees and taxes. The base fare is higher for a number of reasons, including lack of competition in Canadian skies.
Bennett’s report says a new policy is required in both areas.
She explained that while the U.S. sees air transportation as essential to trade competiveness and economic growth, Canada sees the air sector as a source of tax revenue. To spur growth, the U.S. subsidises air transportation, covering airports, air navigation, security, and financing.
In contrast, Ottawa collects fees and taxes amounting to close to a billion dollars annually from Canadian air travelers in security taxes, jet fuel taxes, NAV Canada fees and payments to cover airport ground rents.
“A new policy is required to level the playing field. This would mean reducing a number of items in the tax portion of an air ticket,” she said.
The base fare portion is higher for a number of reasons. Higher labour wages and lower labour productivity in Canada are part of the reason.
Competitive issues significantly fuel higher base airfares. Competitive issues could be addressed in a number of ways. Raising foreign ownership limits would allow Canadian carriers broader access to capital markets.
Further competitive policy is required to liberate Open Skies agreements. Ottawa’s current policy is to closely regulate and prohibit service into many Canadian cities.
The report shows that this anti-competitive policy is hurting Canada’s airports and preventing economic growth. With studies linking the loss of a daily flight to the loss of hundreds of millions of dollars to a city economy, it says a policy change is urgent.
Bennett asserted that there is a close relationship between the health of airports and the health of an economy. Airports are one of the best known generators of jobs and economic activity.
The five million Canadian passengers travelling to U.S. airports means that Canada is losing out on the equivalent of 64 flights daily. This should provide sufficient signal to Ottawa that a new air policy is required.
Mary-Jane Bennett is a lawyer and transportation consultant, and a research associate at the Frontier Centre.
She began her career with the Ontario Ministry of Justice and has since practised law in Manitoba and British Columbia. She also served as a Board Member with the Canadian Transportation Agency from 1998 to 2007.