Vancouver, 11 January 2013: Today the Frontier Centre for Public Policy released A New Policy is Required for Air Transportation authored by Mary-Jane Bennett.
Five million Canadians cross the border to the United States each year to fly from U.S. airports. The reason is pocketbook. U.S. airfares are cheaper by an average $428 per round-trip ticket. An examination of the two parts of an 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 a lack of competition in Canadian skies. New policy is required in both areas.
Bennett explains 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. subsidizes air transportation, covering airports, air navigation, security, and financing. By contrast, Ottawa collects fees and taxes amounting to close to a billion dollars annually from Canadian air travellers in security taxes, jet fuel taxes, NAV Canada fees and payments to cover airport ground rents. 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.
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 a higher base fare. 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. 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, policy change is urgent.
Bennett asserts 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.
About the Author:
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. In 1998, she received an appointment by the Governor in-
Council to the newly formed Canadian Transportation Agency where, as a Board Member, she sat on a broad range of transportation issues, including many in the air sector. Mary-Jane Bennett served as a Board Member with the Canadian Transportation Agency from 1998 to 2007.
Download a copy of A New Policy is Required for Airport Transportation here.
For more information and to arrange an interview with the author, media (only) should contact: