Study urges Canadian air travel reform to cut costs, improve experience
A new study urges the federal government to reform its “outdated policies” regarding air travel, arguing that a lack of competition forces consumers to pay higher fees for substandard service.
A new study urges the federal government to reform its “outdated policies” regarding air travel, arguing that a lack of competition forces consumers to pay higher fees for substandard service.
The Fraser Institute, a non-partisan public policy think-tank published a study titled Clearing the Runway: Reforms to Enhance Air Travel Competition Thursday outlining key policy changes to make air travel more affordable and efficient for Canadians.
“As Canadian travellers know all too well, airfares in Canada are higher than in other countries, but by aligning federal policies with international best practices, Canadians could see significantly more affordable flights,” said study co-author Jake Fuss, the institute’s director of fiscal studies.
The study presents four key policy solutions that could improve competition and reduce costs while bolstering consumers’ flying experience.
The first is to allow for more flexible airport ownership.
For decades, Canadian airports were exclusively owned and operated by the federal government until the National Airports Policy transferred their management to not-for-profit private corporations known as Canadian airport authorities in 1994.
There are currently 26 airports in Canada managed by CAAs, which remain on land owned by the federal government that are leased annually.
“Airports must pay ground rents to the government based on a fixed percentage of the airport’s gross revenues,” reads the study. “Ground rent can absorb as much as 12 per cent of an airport’s revenue. For context, the federal government collected a total of $419 million in ground rents in 2022–23.”
That money goes directly into the federal government’s general revenues instead of being reinvested into airport infrastructure.
This requires CAAs to pay out of pocket for airport infrastructure improvements, which they ultimately pass on to the consumer.
“Allowing for-profit ownership of airports, as is done in other developed countries, would likely improve efficiency and innovation, and reduce costs for travellers,” read the study.
“Canada maintains an ineffective, not-for-profit airport ownership structure, which is especially punitive for consumers given the degree of ground rents, fees, taxes, and other service charges indirectly or directly paid for through airfare,” reads the study.
“Airports also lack incentives to innovate and bring costs down.”
Secondly, the study is calling for the removal of “cabotage restrictions,” which would allow foreign airlines to operate domestic routes, increasing competition and subsequently reducing fares.
“Strict limitations placed on foreign air carriers operating within Canada also contribute to a lack of competition and high-ticket prices in Canada’s air travel industry,” it said.
“Moving in a new policy direction is critical for enhancing competition in the air travel industry, improving innovation and service quality, increasing consumer choice, and lowering ticket prices.”
Thirdly, the authors noted that permitting further competition would lower taxes and fees, aligning Canada’s airline industry with international standards and providing costs to Canadians akin to what air travellers pay in other countries.
Finally, the study would like to see the government “pursue deregulation” by “streamlining non-safety related federal aviation regulations” to lower airline costs and “promote a more competitive market without affecting safety.”
Study co-author and director of the institute’s Atlantic Canada Prosperity Alex Whalen said that “outdated policies” are the main driver in Canadians paying more to fly.
“Outdated policies are reducing competition and innovation in Canada’s airline industry and driving up airfares for travellers,” said Whalen.
“By aligning our airline policies with those of other developed countries, Ottawa could create a more consumer-friendly air travel market that benefits Canadian travellers.”