Canadians paying $428 more than Americans for roundtrip flights: report

Many Canadians have gone the extra kilometres – and across the border – to save a few hundred bucks on a flight.

The extra time and trouble taken to travel to places such as Buffalo, NY, or Bellingham, Wash., can often be the difference between being able to afford that much-needed sun vacation and staying home.

An estimated five million Canadians go stateside each year to catch a flight from a U.S. airport. The numbers aren’t surprising when you consider that about two-thirds of Canadians live within 90 minutes of the U.S. border.

But out-of-country travel doesn’t have to be this way, argues a new report from the Montreal Economic Institute.

It blames taxes and surcharges on flights leaving from Canada for the price difference between our country and the U.S., adding to the growing number of voices calling for a new flight model.

“Airfare prices have become one of the biggest competitive advantages of airports in the quest to attract more passengers,” says the report titled, Canada's High Airfares and Passenger Leakage.

It cites research showing the difference between Canadian and American round trip flights is about $428 per traveller.

Author and Montreal Economic Institute CEO Michel Kelly-Gagnon also uses an example of a flight from both Montreal and Plattsburgh, NY to Fort Lauderdale, Fla. His research shows a passenger leaving from Montreal would pay 36 per cent more. And, he discovered about 80 to 85 per cent of passengers at the Plattsburgh Airport are Canadians.

Viewpoint explaining why taxes, fees and charges increase the prices of airfares and make Canadian airports less …

“The same phenomenon affects other Canadian cities,” says Kelly-Gagnon in the report.

Citing Canadian Airports Council data, he says this so-called “passenger leakage” leads to an economic loss of about $2.4 billion and about 9,000 jobs each year.

Base fares aren’t the problem, but instead government policies that lead to taxes, fees and other charges on your airline ticket.

The system where the federal government rents out airports to non-profit authorities, such as Toronto Pearson Airport Authority or the Vancouver Airport Authority, also doesn’t work because they must pay a tax on revenues, which in turn is passed on through its services to passengers.

Eliminating that rent would increase passenger traffic at Canadian airports by about 590,000 each year, according to a 2009 report from InterVISTAS Consulting Inc. and cited by Kelly-Gagnon.

The recommendation is to instead transfer ownership of airports to the airport authorities. While Ottawa would lose the rent money, some of that would be offset by increased revenue from more Canadians starting their trip at home.

In fact, Kelly-Gagnon recommends the government go further and sell airports to private investors. Pension funds are often looking for infrastructure plays, and Kelly-Gagnon notes that the Caisse de dépôt et placement du Québec owns a chunk of London’s Heathrow airport.

He also recommends other steps such as cutting the aviation fuel surcharge to help make Canada’s airports more competitive, “greatly benefitting Canadian travellers and the Canadian economy more generally.”

His report comes almost two years after a Standing Senate Committee on Transport and Communications recommended that Canada adopt a national air travel strategy to help boost air travel out of this country.

The committee said the government should “stop treating airports as a source of public revenue, such as toll booths, and start treating them as economic spark plugs,” according to a statement in June 2012 from the committee chair, Senator Dennis Dawson. “It should stop charging airports ground rent and plan to transfer Canada’s main airports to the authorities that already operate them.”

Senator Stephen Greene, deputy chair of the committee, also stated in a release at the time that “the changes we are recommending would position the Canadian air travel industry for growth, put it on course to compete successfully in a future of increasing global air travel and enable the industry to deal with fierce competition from U.S. airports located near the Canadian border that are doing whatever they can to attract Canadian clients.”

The senators released another report in April 2013, also recommending the airline industry should “coordinate and focus on ways to provide better access to air travel for all Canadians.”