High flying cost finally worries Ottawa

October 4, 2012 - News

Canadians flocking to U.S. airports in search of cheaper fares have convinced the federal government to look at easing sky-high fees and taxes that are driving up the cost of Canadian tickets.
Under fire from Canadian airlines and airport operators along with the millions of passengers making the trek to airports stateside, Ottawa conceded Wednesday that the trend is worrisome.
“Yes, we are concerned about that,” said Finance Minister Jim Flaherty.
“(Transport) Minister (Denis) Lebel has been working on a consultation project with the airlines, with the airport authorities in Canada, who are very important on this issue, to try to see what we can accomplish, and we’ll hear more from him over time,” Flaherty told the media.
Flaherty did not give any details on what is being considered or when the public might hear what Ottawa hopes to accomplish.
His comments came after the Conference Board of Canada added to the chorus of concerns about the economic toll that sky-high fees and taxes are taking on the Canadian travel sector.
According to the Conference Board, an estimated five million passengers cross the border annually to fly from U.S. airports to escape fees and taxes that result in much higher prices for Canadian flights.
“Cross-border air-fare shopping is being driven by a perfect storm of factors that also includes differences in wages, aircraft prices, and industry productivity as well as U.S. aviation policies,” said the study’s author, Vijay Gill.
“For air carriers flying from American airports, these add up to a 30 per cent cost advantage.”
In an interview Gill said that governments in Canada can no longer turn a blind eye to the price disparity.
“There is a growing recognition within the policy circles that this is actually real and apparent and people do react to prices,” Gill told the Star.
Observers point out, however, the industry in Canada has for years been asking governments to give airlines a break on fees and rents and, since it did not happen in past years when governments were running budget surpluses, it may be difficult at a time when governments in Canada are struggling with large budget deficits.
A Senate report in June said Ottawa should “stop treating airports as a source of public revenue and start treating them as economic spark plugs.”
The study concluded that a Canadian flight between major cities can cost twice as much as a comparable flight in the United States, all because of government taxes, fees and other charges.
As a start, the report said government should stop charging ground rent, which costs airports — and travelers — some $270 million a year.
Indeed, that’s one area where airport officials have been pressing for action.
“There are policies like rent which have been long-standing irritants that we’d like to see some progress with,” said Daniel-Robert Gooch, president of the Canadian Airports Council.
He said he’s encouraged that the issue is now in the spotlight but cautioned against expecting any quick fixes.
“It’s a positive sign that the file is one that is getting attention. We know that government has heard,” Gooch said in an interview.
“We don’t have an easy solution yet.”
While estimates peg the number of travellers avoiding Canadian airports at about five million, Gooch said the actual tally could be higher since it doesn’t count people who drove to their destination instead of flying or stayed home altogether because of the high fares.
NDP MP Olivia Chow urged the federal government to take action, saying reduced fees would lure passengers back to Canadian airports, spurring job creation and economic activity.
“(Lebel) has been talking and not acting. So I think it’s time that he act and lower the airport fees,” Chow said in an interview.
“The Conservatives have been using airports as a cash cow, have been squeezing all types of taxes and rents from airports and as a result, Canadians are just going south.”
The Conference Board of Canada report, entitled, “Driven Away: Why More Canadians Are Choosing Cross Border Airports,” examined fees at Toronto Pearson International Airport, as well as major airports in Vancouver and Montreal and their cross-border competitors.
Some price factors — such as the rise of the Canadian dollar in recent years to near parity with the U.S. currency — are beyond the control of Canada’s policymakers, the Conference Board acknowledged.
But, of the five million Canadian travellers heading to the U.S. to fly, the Board estimates Canadian authorities could lure about two million of them back to airports here by adjusting Canadian airline policies.
Among the report’s recommendations are reducing taxes and fees, re-examining the trans-border Air Travellers Security Charge, bringing Canadian aviation policy more closely in line with the U.S. approach and adjusting airline pricing strategies.
— Torstar News Service