A Porter aircraft at Billy Bishop Toronto City Airport, on March 18, 2020.Fred Lum/the Globe and Mail
Mike Arnot is a New York-based airline and aviation consultant and former policy adviser to Canada’s Trade Minister.
Cost-savvy Canadians used to cross the border to New York State and fly south on the cheap with Spirit Airlines and JetBlue. Ever wonder why those airlines have never flown to Canada and likely never will? It’s not for lack of demand but because it’s a pain to operate such a business in Canada.
Ignore Canada’s size and sparse population and current pandemic restrictions. Canada needs a more competitive aviation industry and creative solutions to attract tourists.
The ‘Passenger Pays’ model doesn’t work with no passengers
For every $100 in airfare, your ticket includes a whopping $24 in various fees. Want to fly to Smithers, B.C., Saskatoon or St. John’s? You’ll pay about $35 for airport “improvement” fees, which fund airport operations and capital projects. No funding comes from Ottawa. These fees are much higher in Canada than in Europe and the U.S. (where they’re capped at US$4.50 per leg). For this reason alone, Southwest Airlines will never fly from Calgary to Phoenix or from Vancouver to Hawaii. (If it did, fares would drop substantially.) As for Smithers, tourists may never get to visit, as the airlines have cut service to that destination; airlines know where they can and can’t make money and how much passengers are willing to pay. The fees take a quantifiable bite out of demand.
Most bizarre are the fees to cover the cost of air traffic control, which increased 30 per cent last year. WestJet Airlines Ltd. chief executive Ed Sims previously ran the New Zealand equivalent of Nav Canada, which manages Canada’s air traffic control system. Trust him when he says those fees are “scandalous.” Safe airspace and operational control towers are a public good. Ottawa needs to step in.
You can’t have an airport in Smithers or a control tower in Regina without direct subsidy from the federal treasury. Ottawa should cut domestic user fees, increase them for international flights that overfly Canada and reduce and cap airport improvement fees. Otherwise, voters should ask the government why it’s letting airports bleed to death.
Stop charging major airports rent until traffic returns
Ottawa is the landlord of Canada’s airports – and a bad one at that. It charges rent of up to 12 per cent of airport gross revenues. The formula punishes success. And like an absentee landlord, Ottawa makes no capital investments in airports. It should permanently eliminate ground lease rents at smaller airports such as Charlottetown and Saskatoon. At larger airports, it should cut rents until passenger traffic returns to at least 2019 levels.
Airlines and airports have made painful cuts. So too should Transport Canada
Airlines and airports have laid off tens of thousands of employees, and many of those jobs aren’t coming back. Take a hard look at Transport Canada’s budget and cut some redundant, high-cost jobs in Ottawa. It’s a bitter pill, but Transport Canada has proportionally more employees than the U.S. Department of Transportation, which includes the Federal Aviation Administration.
Air Canada and WestJet provide competition. So do the small carriers
The two major Canadian airlines take up a lot of airtime. But the likes of Porter, Sunwing, Air Transat, Flair, Canadian North or Harbour deserve a disproportionate share of any bailout if they want it. The two largest airlines can sell their aircraft and lease them back, which immediately injects precious cash. It’s not so easy for the others. Don’t allow the smaller airlines to fail.
Brand Canada: Learn from the Portuguese
TAP Air Portugal and the Portuguese tourism authority made the country a must-visit destination through a strong advertising campaign and stopover program. Learn from them. Few Americans know of Mont Tremblant, Fogo Island or Smithers and its steelhead. (It would help if the fares weren’t so high to fly there.) United Airlines launched a bus service to shuttle skiers from Denver to the slopes. Canadian carriers and partners could take it one step further and offer airside pickup plus service to the Rockies or Tremblant, for example. When travel comes back, Canada and its carriers need to be creative to attract tourists.
Allow for arrivals-level duty-free shopping
To the extent you recall walking through an airport, you would find a shiny duty-free store past security before your flight. Flip the model. Ottawa should allow for duty-free stores as passengers exit from Canadian airports (with an emphasis on Canadian products, too). It has worked well in Australia and would help airports and the government earn precious revenue.
Make the phone call for pre-clearance
It’s taking far too long to secure U.S. Customs and Border Protection pre-clearance at Toronto’s Billy Bishop Airport and Quebec City. The physical space is already built, and U.S. authorities love the idea of creating 50 jobs there. When Porter Airlines comes back, business travel out of Toronto’s island airport to the U.S. will be critical. The ministers should pick up the phone, call their U.S. counterparts and make it happen.