Let’s Make Air Transport More Competitive and Cheaper for Canadian Travellers
Maxime Bernier, Leadership Candidate for the Conservative Party of Canada
Ottawa, August 3, 2016
Canada is the world’s second largest country. Its cities and communities are dispersed far and wide. Some of them, in the North, can only be reached by plane. Air transport plays a crucial role in bringing us together and bringing the world to us.
As Minister of State for Tourism for four years, I was very much aware of the importance of air travel for our tourism industry. I also know how important it is for Canadian families to get the best deals possible when they visit their family in another province, or when they vacation in another country.
In 2014, the air transport industry served 125 million passengers. It directly employs more than 140,000 Canadians.
Canada has a relatively strong air transportation industry and good infrastructure. But like many other sectors of our economy, such as telecommunications and supply management in agriculture, it suffers from a lack of competition and from prices that are too high.
In terms of cost competitiveness, Canada is at the bottom of the World Economic Forum ranking, 124th out of 141 countries. Toronto’s Pearson airport is the fourth most expensive airport in the world to land in.
Many Canadians do not fly, or rarely do, because they find it too expensive. Many others cross the border and fly from an American airport because it’s cheaper there. To tolerate such a situation is to show disrespect to Canadian consumers.
My campaign is based on the four themes of freedom, responsibility, fairness and respect. If I am elected Leader of the Conservative Party of Canada and ultimately Prime Minister of Canada, I will remove the burden of excess taxes and regulation, open the sector to more competition, and encourage more investment.
In other words, I will let entrepreneurs and free markets play their role fully in order to bring more options, better services and lower prices for consumers.
There are several areas of reform that need to be acted on to bring about these changes.
First, the major reason why tickets prices are so high in Canada is that the federal government continues to treat airports as cash cows that should be milked as much as possible.
In the 1990s, Ottawa transferred the management of 26 airports to non-profit airport authorities. But it retained ownership of land and assets, and has been charging excessive airport rent since then.
According to the Canada Transportation Act Review Report, submitted last February by the honourable David Emerson, Ottawa has collected about $5 billion in airport rent since 1992. This is well in excess of the value of the assets transferred, even though Ottawa is not investing any money in those airports. These rents can represent up to 30 percent of airport operating budgets, costs that are of course passed on to travelers.
Moreover, security charges of up to $25 per passenger have exceeded the cost of security screening by an average of 18 percent every year for several years. Again, instead of paying for a service, travelers are penalized by an unjustified tax.
This is why I would abolish the rents, privatize the airports, and treat them instead like other businesses, which would reduce costs and encourage investments.
Privatization of airports is the model that predominates elsewhere in the world. This is just a common sense solution to stop penalizing air travel and put money back into one of our most important industries and into consumers’ wallets.
A second reform that would considerably help the industry and travelers is to raise the foreign ownership limit in airlines. With its current 25% limit, Canada is among the developed countries least friendly to foreign investors. And we are also the only major market in the world not served by ultra-low-cost airlines, because they cannot get the necessary funding in Canada.
Two new ultra-low-cost carriers backed by European and American investors, Enerjet and Jetlines, have asked the Transport Minister to raise the foreign ownership limit to 49%. They want to connect smaller airports such as Hamilton, Quebec City, Halifax, or Edmonton, that are underserved and where there is very little competition. The Minister has yet to respond. This situation is unfair to Canadians who live in these cities and regions.
This is why I would eliminate the 25% foreign ownership limit. But why stop at 49%? Australia and New Zealand allow 100% foreign ownership for airlines that operate domestic services. If foreign investors have enough confidence in our economy to establish a new airline service, we should fully welcome them and the competition they bring.
A third way to help consumers is to allow Porter Airlines to fly jets from Billy Bishop Airport in Toronto. The Liberal Transport Minister announced last November that he would not allow it. This was a reckless and unjustified decision.
Porter had planned to offer new destinations such as Vancouver, California and the Caribbean using CSeries jets, which have a longer range than the turboprops in its existing fleet. I would allow Porter to go ahead with its plan because it would increase competition and lower prices for everyone flying to and from Toronto.
A fourth important initiative would be for Canada to pursue more open skies bilateral agreements with other countries so as to increase the number of flights between Canadian cities and foreign destinations.
As the Emerson report notes, Canada’s policy until now has been focused on protecting Air Canada and WestJet from too much competition on international routes. Because of this, Canadians have fewer options when traveling abroad. This contrasts with the policies of most other developed countries, where consumer interests have been given a more prominent role. I would advance a real open skies agenda. It’s time to put consumers’ interest first.
These reforms are straightforward ways to free the Canadian air transport industry; to be fair to Canadian travellers who live in currently underserved areas; and to show respect for Canadian consumers forced by bad policies to pay much higher prices than necessary.
If I become leader of the Conservative Party and prime minister, I will implement these reforms. They are in line with the resolution to “introduce and actively promote a new framework for increased domestic & foreign airline competition in Canada” proposed by the Vancouver Centre Conservative Association and adopted at the party’s convention last May.
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