Canada’s Airports Leaking Business to U.S.

While London’s own International Airport is one of our great success stories, most of Canada’s airports are leaking a dangerously increasing amount of business to their U.S. counterparts.
The Canadian airports and air carrier industry are a vital part of our national economy but they are plagued by high operating costs and excessive taxation when compared to the United States. And, the higher costs manifest themselves in higher air fares from Canadian cities. The differences are significant and result in an increasing passenger and cargo leakage from Canadian Airports to U.S. border city airports.
• 21% of Canadians say they travel to U.S. airports, where the cost of a ticket can be between half and three-quarters of the price at home and that number is growing rapidly
BC residents are driving from the lower mainland to Bellingham and Seattle. In the interior they may also travel to Spokane. In Alberta, Saskatchewan and Manitoba, the airports of Montana, North Dakota and Minnesota are readily available. And of course in Ontario, tens of thousands take advantage of lower fares in Detroit and Buffalo on a daily basis.
Canada’s airports have been severely impeded in their efforts to compete with their well-funded U.S. counterparts largely because of these factors but as well by the onerous rents imposed on them by the federal government.
Airports in Canada directly employ approximately 200,000 people and account for $45 billion in economic output. Furthermore, Canada’s airports have invested over $9.5 billion in infrastructure improvements within the last decade. Since 1992 Canada’s airports have paid over $2.5 billion in airport rents that were only worth $2.0 billion at the time of transfer.
On the infrastructure side of the argument, a study conducted by ACTA (the Association of Canadian Travel Agencies) concludes that the U.S. Government invested about $4.5 billion in airport infrastructure last year alone while the Canadian Government put in just $430 million over the past nine years combined. What we (Canada) should have been spending, according to the ACTA report (taking into account the size differential in the two markets) was $450 million just this past year alone, much less over nine years.
If we are to have any hope of growing the country’s important travel and tourism industry and the much needed job growth that accompanies it, the federal government has to take the breaks off Canada’s aviation system and put some air under the wings of our airports.
Exacerbating the problem further are the increasing security requirements, regulations and harmonization of rules between the U.S. & Canada – none of which are bad things in and of themselves – but they will doubtless lead to higher costs for carriers and airports.
And while our U.S. counterparts get substantially more funding to offset these costs, Canadian operators are forced to make up those costs by raising the price of air tickets. This has resulted in a significant loss to the economy of Canada, including much needed tax revenue and a loss of revenue to providers of aviation services in Canada. Added to this is that Canada is losing substantial employment to U.S. border cities.
Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA) indicated that Canada has fallen from eighth place in 2002 to fifteenth place in 2009 among most visited countries and 106th in cost competitiveness behind Japan, the UAE, India, China and the United States. An airline ticket to Canada is on average $160 more expensive than a ticket to the United States, he added.
And Canada is alone in the world at charging Crown rents to airports. Here it is estimated that the federal government takes in $257 million a year from Canadian airports and our air navigation system while the majority of other countries in the world put significant amounts back into the system to grow their whole travel industries and move them forward.
If we are to break through this impasse and become truly competitive in a global sense the federal government must re-think its position on airports and view them as an engine that can drive huge amounts of local investment, jobs and revenues for Canadians and stop considering them just as a source of tax and rental revenue.
The aviation industry in Canada, together with the Federal and Provincial Governments, need a collective approach to addressing the economic imbalance between Canada and the United States. A full analysis of the impact on Canada of this imbalance should be undertaken.
The London Chamber of Commerce will be recommending to the Federal Government that they move immediately to eliminate airport rent by the end of fiscal 2015/16 and examine the cost structure for airlines and airports in Canada with the goal of reducing costs and stimulating the aviation sector. Furthermore, we want the federal government to allocate within its budgetary process, sufficient infrastructure money for airports on a proportional basis to that of the U.S. effective by the end of fiscal 2015/16.
The Canadian air transportation sector is a critically important contributor to the well-being and growth of the Canadian economy. If we really want it to fly, in this case at least, we are going to have to act more like our competition…..and yes – it’s the U.S.!


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