Canadian airports pricing themselves out of competition

Published on : Thursday, September 18, 2014

Canadian-airportsAccording to some observations made by travelers and related agencies a certain fact has emerged regarding Canadian airports. A major international airport like London’s Heathrow has a distinct feel: concourses buzzing with dozens of languages, upscale shops competing for the spending money of the world’s wealthy and bored, runways filled with planes from every corner of the globe.


Canada’s busiest airports are like junior versions of this. And while they would like to graduate to the big leagues, it’s generally not a lack of effort that’s holding them back from becoming global hubs. Instead, critics say government policies turn them into “cash cows” and hurt their ability to compete on the world stage.
The stark disparity between Canadian airports’ strengths and weaknesses is illustrated by the World Economic Forum’s Travel & Tourism Competitiveness Report. In 2013, Canada ranked first out of 140 countries for its air transport infrastructure, but 136th airport charges.


“Are our airports able to compete with other such airports? Given the environment that they operate in, it’s difficult for them to do so,” said Marc-André O’Rourke, executive director of the National Airlines Council of Canada, which represents major airlines.


“We have this great, great infrastructure but it’s really expensive,” said Mr. O’Rourke.

With a ranking that dismal, it’s no wonder that roughly five million Canadians a year choose to save money by flying out of U.S. border airports, according to a recent study by the Conference Board of Canada. That’s the equivalent of 64 Boeing 737s every day that aren’t flying out of Toronto, Vancouver or Montreal.


The reason is pure and simple cost. While American airports receive subsidies from the government, Canadian airports have to pay governments for a host of services — everything from security to air traffic control to the ground they sit on — and these costs are generally passed on to the airlines, which pass them down to passengers.


“While each [fee] is viewed on its own as small and benign, the combined result is anything but benign,” according to a recent report prepared for the National Airlines Council of Canada by Fred Lazar, an economist at York University’s Schulich School of Business.
“The federal government has turned the air transport industry into a cash cow — just the reverse of what is appropriate for an industry that generates large externalities throughout the economy.”


Mr. Lazar’s report found that the total cost of federal taxes and fees in 2011 worked out to $14.18 per passenger, or approximately 5.7% of the average discounted fare.


A 2012 Senate committee examining the global competitiveness of Canada’s airports was informed that Toronto’s Pearson International Airport is the most expensive in the world at which to land a plane.




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