Gov’t to blame for high cost of air travel: C.D. Howe

By Staff | January 24, 2014 | Last updated on January 24, 2014
2 min read

Canada’s airports and airlines are hobbled by federal government policies that send travelers’ costs soaring, according to a report released today by the C.D. Howe Institute.

In “Full Throttle: Reforming Canada’s Aviation Policy,” Benjamin Dachis finds high fares are symptomatic of wider problems in the aviation industry that Ottawa should address with sweeping policy reforms.

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Federal government policies are a major cause of high costs throughout the aviation supply chain, notes Dachis, senior policy analyst at the C.D. Howe Institute, leading Canadians to waste time and money by pursuing lower fares at nearby US airports, or to not travel at all. High fuel taxes and onerous foreign ownership and airline-specific policies are harming the competitiveness of airlines, while resulting in otherwise higher costs for travelers, he adds.

“If Canadians are to have the most economically efficient aviation system possible – crucial for such a geographically huge country – the federal government should enact a comprehensive set of policy reforms across the aviation sector,” says Dachis.

Dachis recommends that federal and provincial governments reduce, or eliminate, remaining aviation fuel taxes. The federal government should also gradually loosen foreign ownership restrictions on Canadian airlines, eliminate company-specific burdens and protections for Air Canada, and give international airlines the right to operate on domestic routes.

Twenty years ago, Canada was a global leader in moving airports from government to private operation, notes the author. While the federal government still owns the major airports proper, it signed operating leases with not-for-profit airport authorities. These airport authorities make long-term commitments that the looming end of leases soon may jeopardize, necessitating Ottawa to take action soon.

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“The federal government should sell its remaining interest in the leases at airports it owns either to the not-for-profit airport authorities that currently operate them or to for-profit corporations,” says Dachis. “Such sales could make investors, airlines, travelers, and taxpayers all better off.”

Rather than regulating privately owned airports, government policy should focus on increasing competition in the sector, according to the author. For example, if the City of Toronto approves the extension of the runway at the Billy Bishop Toronto City Island Airport and allows jets of all types that meet noise requirements to operate there, that would benefit travelers by enhancing competition locally and beyond.

“Ottawa should treat airports and airlines like regular businesses, remove sector-specific taxes and ownership and operation regulations, and let our Canadian aviation companies compete on the world stage,” concludes Dachis.

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