Canada’s airports, airlines and tourism industry are right: They need more travellers, from Canadians within Canada, and from foreigners to Canada.
Eliminating ground rents by airports to government, as a Senate report recommended this week, is a correct recommendation as far as it goes, except that the challenge of generating more business goes much, much deeper.
The ground rents are a throwback to an era when Transport Canada ran all the country’s airports. It no longer does – the government still owns the largest airports, but leases them to local authorities. The government gives these large airports no service, yet charges ground rents calculated on gross revenues; for the 11 largest, these rents totalled $268-million in 2009.
The rents are a straight money grab by Ottawa, which takes but does not give. Local authorities paid Ottawa for the cost of these airports long ago, when Ottawa relinquished control of them. For the federal treasury, they are the gift that keeps on giving. Ottawa likes and needs the money. And Ottawa thinks the money will ultimately come from user pay.
So the airports who complain and the senators who are echoing the airports’ complaints are right about the rents. But the challenge of getting more business is a lot more complicated than airport rents, although the challenge is increasingly urgent, as Canadian passengers increasingly head for U.S. airports near the border.
Canadian airports are, in some cases, their own worst enemies. Some of them were overbuilt – Toronto’s Pearson, for example – and so charge the world’s second-highest landing fees.
Since local authorities have been allowed to charge so-called “improvement fees,” dozens have done so with merry abandon. These fees have absolutely helped improve the facilities, which are now in much better shape than train stations, roads, bridges or any other transportation infrastructure.
These authorities, however, seldom seem unable to resist another “improvement.” Fees tend to go up rather than down, and very seldom are they removed altogether. These fees take more from passengers than airport rents.
Then there are the security charges, for a system that costs too much and drives safety checks to absurd lengths. Everybody has a favourite illustration of the excessiveness of it all, but one might be when former transport minister Chuck Strahl held a photo-op to announce how the government was streamlining procedures – two weeks before the implementation of a new swipe check of the palms for chemical residues.
Taxes are higher in Canada for airline fuel and on basic sales: GST, HST. (Federal deficits are much lower in Canada, too, partly because of those taxes.) Canadian airline employees tend to earn more than their U.S. counterparts and have better benefits, although they have made sacrifices in recent years.
On the government side, Canada’s leaky refugee policies have led to the imposition of visas for more would-be visitors. Visas, which are often time-consuming to get, are about to become an even bigger pain as Ottawa closes processing centres and makes applicants send forms or travel to countries where they do not live (Iranians to Turkey, for example).
When visas were required for Mexicans coming to Canada, travel plummeted. Citizens from every country in Latin America need visas for Canada. (Latin American countries have slapped entry fees or visa regulations on Canadians in retaliation.)
The Harper government cut the Canadian Tourism Commission’s budget for advertising Canada as a destination, although it finally persuaded China to approve Canada as a destination for organized Chinese groups. Americans, since 9/11 and still feeling the effects of the recession, have reduced their cross-border travel.
Passport requirements for U.S. citizens to return home are a hassle. Want to get a Nexus card to ease cross-border travel? Wait nine months from application to receipt of the card.
In other words, yes to reducing airport rents. But the challenge is much, much larger.