Why is flying in Canada so costly? Sky-high airport fees don’t help & More Trending News

 

Canada imposes person fees on passengers and airways which are increased than anyplace else, in response to WestJet CEO Alexis von Hoensbroech.Photo illustration by the Globe and Mail /iStockPhoto / Getty Images

Alexis von Hoensbroech’s airline profession has spanned the globe and past. The new WestJet Airlines Ltd. chief government has labored in the enterprise in Asia and Europe, transferring individuals and cargo in the world’s most dense and aggressive markets. Before that, he obtained a doctorate at a German faculty that focuses on astrophysics, the galaxy and the skies above.

But it was in Canada, the place Mr. Hoensbroech, 52, took the helm at Calgary-based WestJet in February, that he made a stunning discovery: An unlimited nation extremely depending on air journey imposes person fees on passengers and airways which are out of this world.

“I don’t know a single country in the world that’s as expensive as Canada. Landing fees, gate fees – this is far, far, far more expensive than any other country,” he stated.

Alexis von Hoensbroech was an government at Lufthansa and CEO of Austrian Airlines earlier than changing into WestJet Airlines’ chief government in February.Lisi Niesner/Reuters

He is referring to fees charged by Canada’s airports for gate and apron use, safety checks, navigation companies, touchdown expenses, taxes and airport enchancment. Many of those are customary in different nations. But Canada’s are increased, and so they’re the principle sources of income for its airports.

This is stunning, Mr. Hoensbroech stated, given the reliance on air journey in such an enormous nation. You’d additionally assume Ottawa would do all it will possibly to help passengers get monetary savings and Canada’s airways – massive and small – to compete.

Europeans get pleasure from loads of discount air-travel choices, from upstart low cost airways and established carriers, as properly an in depth railway system in a densely-populated area. The U.S. air journey market is additionally intensely aggressive. But Canadians don’t have that a lot alternative.

“You can’t avoid airplanes in Canada. Without airplanes, many communities in Canada would just not be able to sustain. So, airplane flying is a critical infrastructure,” stated Mr. Hoensbroech, who was an government at Lufthansa in his native Germany and CEO of Austrian Airlines. “In a place like Calgary, how many people will be living [here]? What would the economy look like in Calgary without airplanes?”

Toronto’s Pearson International Airport, the biggest in the nation, has lengthy been generally known as one of the crucial costly in the developed world for airways and passengers. And the price is about to go increased.

After a chaotic summer season of journey, Pearson set plans for a $5 enhance to its airport utilization payment on Jan. 1, elevating the quantity every departing passenger pays to $40 plus tax. That will put the airport in line with its counterparts throughout the nation, Pearson stated when it introduced the hike in September.

Another 5 {dollars} doesn’t sound like a lot. Even $40 doesn’t seem to be a sport changer. But for airways and passengers, the approaching enhance at Pearson is yet one more payment on high of an extended record of different prices charged by airports that make Canada an costly and tough place to fly.

“It’s one of the things that make Canadian airports and Canadian air travel so uncompetitive,” stated Olivier Rancourt, an analyst on the Montreal Economic Institute.

Moreover, if something, the most recent payment hikes are nearly sure to make the state of affairs worse – a lot worse.


Analyzing the influence of airport fees on ticket costs isn’t rocket science, nevertheless it is difficult. Comparisons between Canada and different nations are stark – and so they add up.

Toronto Pearson’s $40 airport enchancment payment for departing passengers is a lot increased than the usual US$4.50 ($6) at U.S. airports. In addition, the federal authorities cost for safety checks at Canadian airports runs as excessive as $25.91 per passenger. The commonplace U.S. charge is simply US$5.60 ($7.56). All these prices are finally borne by travellers.

Other Canadian airports have additionally raised passenger fees through the COVID-19 pandemic: St. John’s raised its payment in 2021 by $7 to $42. The Winnipeg Airports Authority raised its utilization cost, known as an airport enchancment payment, by $13 to $38 in June, 2020. On Jan. 1, 2020, Vancouver raised its airport enchancment payment by $5 to $25 for passengers not flying inside British Columbia or to Yukon.

Then there are the costs passengers don’t see however should cowl anyway. These are aeronautical fees airways pay to airports. They embrace separate fees for touchdown, utilizing a gate and a terminal, baggage amenities, air navigation fees, U.S. customs preclearance, apron expenses and gas taxes.

For occasion, Pearson expenses Air Canada AC-T about $1,500 to land a Boeing 737 Max, $7.49 for each home passenger on board and $2.91 for each minute the airplane is on the gate. And the airport is elevating its aeronautical fees by 4 per cent.

“Everything from landing fees to the fees for gates and [service] counters is much higher in Canada versus the U.S.,” stated Duncan Dee, a former Air Canada government.


Fees paid by passengers. One method, home origin

 

 

Airport enchancment payment/

Passenger facility cost

Government air travellers

safety cost

the globe and mail, Source: governments and native

airport authorities

Fees paid by passengers. One method, home origin

 

 

Airport enchancment payment/

Passenger facility cost

Government air travellers

safety cost

the globe and mail, Source: governments and native

airport authorities

Fees paid by passengers. One method, home origin

 

 

Airport enchancment payment/

Passenger facility cost

Government air travellers

safety cost

the globe and mail, Source: governments and native airport authorities

Canadian airport fees for touchdown and terminal use, paid by airways, are 35 per cent to 75 per cent increased than these at U.S. airports, in response to a 2015 submission by Air Canada to a overview of the Canada Transportation Act headed by David Emerson. When the per-passenger fees are included, Canadian airport prices are 83 per cent increased per seat than in the United States.

“This uncompetitive cost environment is not only causing the leakage of Canadian passengers to the United States, but also the loss of international traffic travelling to or via Canada,” Air Canada stated in its submitting.

Peter Fitzpatrick, an Air Canada spokesman, stated expenses paid by passengers – airport enchancment fees, safety expenses and taxes – can account for greater than 35 per cent of whole prices of a flight. That doesn’t embrace levies on the airline, resembling navigation fees, hire and funds to municipalities.

As an instance, Mr. Fitzpatrick used a household of 4 flying to Montreal from Toronto and again. Airport enchancment fees to depart Toronto after which Montreal would whole $300 for the spherical journey.

Travellers at Toronto Pearson Airport’s Terminal One in May 2022. A spokesperson for the GTAA, which runs Pearson, stated the hike in aeronautical fees is wanted to maintain up with the debt funds, inflation and financial uncertainty that got here with pandemic shutdowns.Fred Lum/the Globe and Mail

“Airport fees and taxes add significantly to fares, creating a disincentive to fly,” Mr. Fitzpatrick advised The Globe and Mail. “Airport costs are also a factor in the profitability of a route and, given the industry’s relatively low margins, can make a route unsustainable, limiting growth.”

Critics say the issue is that Canadian airports aren’t accountable to anybody once they set fees. “The airports are just charging what they want to charge,” stated John Gradek, who teaches aviation management at McGill University. “There’s no oversight.”

Experts say excessive fees in Canada additionally discourage airways from serving small centres, which limits competitors there and drives up airfares. U.S. low cost carriers are notably absent. They serve many U.S. cities close to the Canadian border, however solely JetBlue Airways flies into Canada, after it added Vancouver to its schedule this 12 months.

People who run the nation’s airports say the fees enable them to run on a user-pay mannequin, largely unsupported by taxpayers, however funded by travellers and airways. Canada’s 26 main airports are owned by the federal authorities, however in the early Nineteen Nineties, it divested management and financing to not-for-profit native airport authorities.

Those authorities pay hire to the federal authorities, and quantities in lieu of taxes to their native municipality. U.S airports don’t pay hire.

But Canadian airport authorities at the moment are calling for his or her hire cheques to be invested in the airports themselves, moderately than going into authorities coffers.

A United States-bound passenger walks in Toronto Pearson Airport’s Terminal 3. Pearson laid plans for a $5 enhance to its airport utilization payment as of Jan. 1, elevating the quantity every departing passenger pays to $40 plus tax.CHRIS HELGREN/Reuters

Tori Gass, a spokeswoman for the Greater Toronto Airports Authority (GTAA), which runs Pearson, stated the hike in aeronautical fees is the primary in greater than a decade, and is wanted to maintain up with the debt funds, inflation and financial uncertainty that got here with pandemic shutdowns.

She famous that government-owned airports in the U.S. obtain billions in yearly funding from Washington in addition to US$40-billion in emergency support through the pandemic. This is “40 times what Canadian airports received,” Ms. Gass stated.

Monette Pasher, president of the Canadian Airports Council, which lobbies on behalf of the airports, stated measuring fees charged by Canada’s industrial airports in opposition to these of the largely government-owned U.S. system is evaluating “apples to oranges.”

“There are very distinct differences,” Ms. Pasher stated from Ottawa. “It’s very difficult to compare the fees.”

Canada’s main airports paid about $420-million a 12 months in hire to the federal authorities earlier than the pandemic, for a complete of $6-billion for the reason that hubs had been divested in the early Nineteen Nineties. The airports additionally took on $3.2-billion in debt to outlive the pandemic, on high of $15-billion they already owed. They now should elevate fees to cowl the upper funds, Ms. Pasher stated.

But that is shifting onerous burdens to airways. Peter Cerda is vice-president of the Americas at International Air Transportation Association, which is based mostly in Montreal, and represents carriers in greater than 100 nations. He says Canada’s aviation fees are increased than these of most nations, posing “a huge challenge” for the airline business.

Canadian airport fees for touchdown and terminal use, paid by airways, are 35 per cent to 75 per cent increased than these at U.S. airports, in response to a 2015 submission by Air Canada to a overview of the Canada Transportation Act.Fred Lum/the Globe and Mail

Fees charged by airports and Nav Canada, the non-profit nationwide air navigation service supplier, rose through the pandemic, at the same time as Ottawa and the airports pressed airways to cut back their schedules to alleviate strains on congested terminals, Mr. Cerda stated.

Nav Canada raised its fees to airways by nearly 30 per cent in September, 2020, seven months into the pandemic. The hike was meant to generate an extra $242-million from clients, Nav Canada stated, and cut back its deficit as its income plunged.

WestJet accused Nav Canada of “burdening” travellers and undermining the financial restoration. The enhance amounted to a $6 to $9 enhance per passenger, and the airline handed many of the value on to clients. WestJet later misplaced its attraction of the Nav Canada enhance earlier than the Canadian Transportation Agency.

Studies in latest years have proven Canada is among the many highest-cost nations in the world for flying, although complete knowledge are restricted.

Why vacation air journey might nonetheless flip right into a nightmare earlier than Christmas for Canadians

Recent figures from airline business knowledge firm Cirium present Canadian airways charged a mean of 18 US cents for each seat mile, 10 per cent greater than their U.S. counterparts charged on their home routes. However, this represents solely the airways’ take and doesn’t embrace taxes, airport enchancment fees and different expenses, that are additionally far increased in Canada.

In Mr. Emerson’s 2016 report back to the federal government, he discovered market domination by Canada’s large airways contributed to the upper value of flying. “Canadians continue to pay relatively high airfares, in part due to the lack of competition on many routes,” the report stated. Air Canada and WestJet shared 64 per cent of the home market in 2022, in response to Cirium.


A Flair Airlines Boeing 737 takes off from Vancouver International Airport. Domestic low cost airways, like Flair, are attempting to realize a much bigger foothold in the Canadian market, nevertheless it’s robust for them to make cash.Bayne Stanley/The Canadian Press

In addition to the direct prices, excessive fees are insidious as a result of they reinforce that domination, moderately than selling competitors. Domestic low cost airways are attempting to realize a much bigger foothold in the Canadian market, nevertheless it’s robust for them to make cash.

Vijay Bathija is chief industrial officer at Lynx Air, a self-described low cost airline that flies from Toronto and Calgary to home locations with six 737 Max plane and greater than 200 workers. He says airport fees are an element the airline considers when selecting a vacation spot.

“Generally, the fees are higher in Canada,” and account for about 10 per cent of the price of flying, Mr. Bathija stated. Even so, the airline locations extra weight on market situations and value ranges in any given space.

Lynx not too long ago supplied one-way fares to Halifax from Hamilton for $59. After the airport enchancment payment of $25, a $7.12 safety payment for the federal authorities and gross sales taxes, Lynx’s base take is $20.09. The identical Lynx flight will value $249 on Dec. 22, amid the busy vacation journey season. Mr. Bathija says the airline has decrease prices than conventional airways, and the route is a cash maker.

OPINION: Canada’s airports are falling behind on infrastructure enhancements that ought to replicate our fashionable ambitions

But McGill’s Mr. Gradek doesn’t see how the $59 Lynx flight is something however a loss chief. The base fare doesn’t cowl the $30-per-passenger value for gas alone. He says the airline is making an attempt to stimulate demand, whatever the value. It’s a technique utilized by one other low cost provider, Flair Airlines, which not too long ago flew from Toronto to Halifax and again for $99, he famous.

“They’re not making any money,” Mr. Gradek stated. “That’s the price they pay to stimulate the market,” and get individuals flying.

A Canada Jetlines Airbus A320 jet pulls as much as a gate at Calgary airport on the airline’s inaugural flight, on Sept. 22.Larry MacDougal/The Canadian Press

He additionally factors to the faltering launch of Canada Jetlines, a one-plane upstart based mostly in Toronto that attempted to get off the bottom beginning in 2018. This 12 months, the provider delayed its first flights thrice, together with legs from Toronto to Winnipeg and Moncton. Jetlines lastly took off on Sept. 22, flying twice every week to Calgary from Toronto, however the Winnipeg and Moncton flights by no means occurred. Jetlines didn’t reply to requests for remark.

Mr. Gradek stated Jetlines apparently selected a busier, extra aggressive market with the promise of upper passenger volumes over the upper threat of smaller markets.

So, once more, shoppers in smaller markets are not noted. They are pressured to pay extra, with usually just one alternative of airline and a small variety of direct flights.

“Carriers will stay away from those markets that have a high cost of entry, [airport improvement fees] and landing fees. They’re going to markets that have a high density, high volume of traffic and they’re going make it up on volume rather than on price,” Mr. Gradek stated.

For discounter Flair Airlines, the added fees could make or break a sale. “There is a hypothetical passenger in Canada that will fly with Flair Airlines for $50 but not if they are charged $75,” Garth Lund, the airline’s chief industrial officer. “That jump in fare keeps them on the couch.”

“The tax and fee structure in Canada is one of the most expensive in the world and, while there are some airports in Canada like Abbotsford or Kitchener-Waterloo with a low-cost fee structure, there are others where taxes and fees are so high that it is prohibitive to serve them with our low-fare model. While the demand is there at a certain fare, it may not be there when the fees are added in,” he stated.

But the alternatives for airports are restricted. Their solely sources of income are fees they cost to airways, passengers and tenants. The different supply of capital is debt.

The federal authorities expenses hire to the airport authorities, usually as a share of income on sliding scale. Rents paid for 2019, the final full 12 months earlier than the pandemic, included: Saint John $22,500; Vancouver $60-million; Calgary $44-million; Aeroports de Montreal $76.6-million plus $40-million in municipal funds; Quebec City $4.3-million plus $5.7-million in municipal funds; Toronto Pearson $171-million plus $38-million in municipal funds.

But these revenues then collapsed as COVID-19 took maintain.

Mr. Gradek says Canada’s airport mannequin was modern in the Nineteen Nineties, however is now unsuited to funding the big terminal investments and low-carbon modernization the amenities require. In Europe, airports are run by for-profit corporations, together with Groupe ADP of France, that pay a market-rate concession payment to the federal government. In flip, the businesses can tackle investments from infrastructure funds, governments and airways to develop and replace their amenities.

In the U.S., most airports are government-owned, supported by taxpayers and don’t pay hire.

Ms. Gass, the GTAA spokeswoman, stated Canada’s non-profit airport mannequin is financially sound, regardless that it got here beneath “stress” when individuals stopped flying in March, 2020. “With passenger volumes expected to return to prepandemic levels by 2024, the model remains financially sustainable and equitable. Canada’s airports are paid for by the passengers and airlines that use them,” Ms. Gass stated. But she added that now is the time for governments and airports to overview the best way the amenities are financed, together with redirecting hire towards investments.

Kids look out at Air Canada and WestJet planes at Calgary International Airport. As the pandemic took away airports’ fundamental income – passengers – they added to their already massive debt burdens to get by.Jeff McIntosh/The Canadian Press

The federal authorities got here to the help of airports in the pandemic, waiving or deferring hire. Ottawa has additionally made latest one-time funds to airport authorities that had fewer than a million passengers a 12 months earlier than the pandemic. In October, Windsor International Airport acquired $180,000 to purchase a snowplow; Waterloo Regional Airport was additionally given cash for a plow, on high of $3.9-million it acquired in 2021 for repairs to taxiways, aprons and different work.

Since 1995, Ottawa says it has spent greater than $1.2-billion on enhancements at 199 airports, together with repaving runways, putting in new lights and erecting wildlife fences.

However, because the pandemic took away airports’ fundamental income – passengers – they added to their already massive debt burdens to get by.

Toronto Pearson’s operator, the GTAA, owed $6.8-billion in whole debt as of September, 2022. This is down from $7.2-billion debt in December, 2021, however up from $6.4-billion in 2019.

Halifax International Airport Authority’s long-term debt on the finish of 2019 was $283-million, and elevated to $433-million by the tip of 2021. Like most of its cross-country counterparts, Calgary International Airport sought deferrals of curiosity and principal funds on its debt, elevated its line of credit score to $200-million, restructured its debt and sought reduction from some agreements. The airport’s long-term debt rose to $3.3-billion by the tip of 2021, up from $2.9-billion in 2019.

Mr. Dee, the previous Air Canada government, stated airports have develop into “debt vehicles” to pay for runway development and terminal enhancements. “All they can do to raise money for their very very expensive construction projects is to raise debt,” Mr. Dee stated. “The only way their debt is financeable is because they’ve got a monopoly over the charging of airport improvement fees.”

And guess who pays these fees.

Why is flying in Canada so costly? Sky-high airport fees don’t help

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