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Why does airfare in Canada cost so much more than the U.S.?

Airport costs
[Many a Canadian traveller has asked themselves that exact question]

At first glance, the Federal government’s announcement to relax foreign ownership rules for Canadian airlines seemed like it could usher in a new era of ultra low cost flights for Canadian travellers akin to the bottom-barrel fares we see south of the border. New entrants Vancouver-based Canada Jetlines and Calgary’s Enerjet hopped on the news that the government would be updating the legislation, raising foreign share limits of airlines from 25 per cent to 49 per cent (with a 25 per cent limit per single or group of invests).

“This will lead to more options for Canadians and allow the creation of new, low cost airlines in Canada,” Transport Minister Marc Garneau told the Montreal audience at the announcement.

By afternoon, Enerjet had already put the word out: it’d be turning to Phoenix, Arizona-based Indigo Partners, the investor which helped get low-cost carriers Spirit Airlines and Frontier Airlines up in the air.

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The excitement is certainly warranted, the government’s move to introduce competition to the existing airline duopoly will no doubt create a little breathing room in the space, giving Canadian travellers more options and cheaper airfares albeit if they pack light and don’t mind losing a couple inches of seat pitch. But the changes ignore some of the key complexities that make airfare in Canada so much more expensive than the U.S.

Forget for a moment that Canada is a larger, less peopled version of the U.S. and thus has less appetite for flights; the country is also one of the most expensive in the world when it comes to airport fees. According to the World Economic Forum’s 2015 Travel and Tourism Competitiveness report, Canada ranked 130 out of 138 countries when it came to ticket taxes and airport charges.

“Quality of experience, ease of access and price point determine competitiveness in global tourism,” said Charlotte Bell, president of the Tourism Industry Association of Canada – of which both WestJet and Air Canada are members – in a statement surrounding the new transportation plan. “Canada is a world class destination, the added cost of fees, taxes and levies added to air often prices Canada out of contention.”

Yes, she’s advocating on behalf of the big two, but the fees can’t be ignored. In Canada (similar to the U.S.) the federal government owns the majority of the country’s 26 largest airports, offloading management duties to private, not for profit companies who pay long term-leases. But there’s a glaring difference between the U.S. and Canada.

Fees in Canada are 230 per cent higher than south of the border. Between fiscal year 2014 to 2015, Transport Canada collected $313-million the airport network. And since airfare is a byproduct of landing fees (which includes rent), seat prices and taxes those costs as well as the lack of competition thanks to a duopoly get passed onto the consumer.

According to Kiwi.com’s Aviation Price Index, Canadians pay around $121 per 100km on a full-service international flight, the most in the world. Americans on the other hand pay $23.22 per 100km for the same.

The new rules allowing foreign ownership will no doubt bring in outside investment and open up the sphere to the ultra low cost carriers with their tight seating and no-frills packages. But you can only squeeze travellers so much before you need to start squeezing elsewhere.