Up in the air

It may not be a riddle of Sphinxian inscrutability, nevertheless it has plagued businessmen and women for years: If you’re travelling by air, why does it cost so much to get anywhere in Atlantic Canada, especially from New Brunswick? A typical discounted, one-way fare (not including taxes) from Moncton to Toronto, for example, can be as low as $209, while one from Moncton to Halifax—a quarter the distance—can run you $685 or more. What, as they say, is up with that?

Monette Pasher, executive director of the Atlantic Canada Airports Association, responds as if the answer is tattooed to her forearm. Simply put, she says, “Pricing is often a result of market demand and competition. . . There are over 10 flights a day offered from Moncton to Toronto by three air carriers. From Moncton to Halifax there are four f lights a day offered by one carrier.”

Here endeth the lesson, perhaps? Not quite. If competition is the key to price controls in the aviation industry, why are New Brunswick’s otherwise friendly skies so clearly uncompetitive? In this case, the question is not so easily answered. “I think the cost competitiveness issue is really a Canadian aviation issue,” Pasher says. “It’s definitely prevalent in New Brunswick because you have the U.S. airports in close proximity. . .You see the low-cost carriers in the U.S. and they are setting up services at the border to attract Canadians who will travel for cheaper fares.”

Her point is borne out by Keith Collins and David Innes, the CEOs of the St. John’s International Airport and Fredericton International Airport, respectively, who commented on the condition of the Atlantic region’s air capabilities before the Standing Senate Committee on Transport and Communications not long ago.

“In Atlantic Canada, especially New Brunswick, our airports and airlines struggle with price competitiveness daily as they compete for business with Bangor, Maine,” they said. “It is estimated that the Fredericton airport alone loses more than 25,000 passengers per year to Bangor. This represents a significant financial loss to the Canadian economy in terms of airport and airline revenue.”

In fact, as Pasher says, the phenomenon is not exclusive to New Brunswick, though industry analysts generally observe that air travel in and out of this province is reliably among the most expensive available.

According to the World Economic Forum’s 2008 Travel and Tourism Competitiveness Report, Canada ranked 114 out of 130 nations surveyed for overall “price competitiveness” and 122nd for “ticket taxes and airport charges”, even while it scored first for “air transport infrastructure”. The same survey last year showed improvement in the overall standings (105 in price and first, again, for infrastructure), but the country dropped to 125th place in the metric of taxes and charges. “Canada is losing 5 million Canadian passengers to the U.S. annually,” she says. “And that equates to $1.3 billion in lost Canadian GDP and $200 million in lost tax revenue.”

Indeed, according to the World Economic Forum’s 2008 Travel and Tourism Competitiveness Report, Canada ranked 114 out of 130 nations surveyed for overall “price competitiveness” and 122nd for “ticket taxes and airport charges”, even while it scored first for “air transport infrastructure”. The same survey last year showed improvement in the overall standings (105 in price and first, again, for infrastructure), but the country dropped to 125th place in the metric of taxes and charges.

As a result, Macleans Magazine reported last year, “Over the years, a host of foreign airlines, from Hong Kong’s Cathay Pacific and Israel’s El Al to Virgin America and Frontier Airlines, have either shelved expansion plans or stopped f lying to Canada altogether . . . airfares . . . are, on average, up to $120 more expensive than in the United States, according to some estimates.”

Again, though, the question is: Why?

An extensive research paper by the Conference Board of Canada, published in October, sheds some light on the subject. “The relatively high air fares in Canada are often blamed on fees and taxes levied by the federal (and to a lesser extent) provincial governments,” the report’s author Vijay Gill observes. “Those fees and taxes are certainly a large and significant contributing factor. However, other factors are also at play, such as air carrier productivity levels and U.S. aviation policies and fees. . .”

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