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Cross-border shopping for cheaper air fares is hurting this this country’s airline industry

Deborah Baic/The Globe and Mail

Canadians are cross-border shopping for cheaper air fares – costing this country's airline industry an estimated 70 flights a day – and a Senate committee report is urging Ottawa to give carriers a fee break that could help them fight back.

The Senate transport committee released a report this week that calls on the federal government to stop charging rent for the use of the country's 26 busiest airports as a means of making Canadian airlines more competitive.

The committee is also recommending that Ottawa hand over ownership of these airports to the authorities that currently operate them.

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Ending airport rent fees would represent a break of $250-million annually for carriers, which the industry argues would be passed on to consumers in the form of lower fares. Ottawa currently earns about $250-million a year from airport lease fees. It charges airport authorities rent because the facilities were built with taxpayer dollars and the government still owns them.

"In a world that is moving toward fewer global aviation hubs, Canada's high-cost environment may inhibit the ability of its larger airports, namely Toronto, Vancouver and Montreal, to achieve that status," the committee said.

The committee said more than five million Canadians are "opting to drive to U.S. airports in order to take advantage of cheaper flights … cross-border leakage that represents a growing amount of lost revenue for the Canadian industry and all levels of government."

It said these U.S. airports, located relatively near the Canada-U.S. border, have a big cost advantage over their Canadian counterparts. For example, surcharges, including landing fees and security levies, at the Canadian counterparts of four U.S. border airports are more than 200 per cent higher. Those four U.S. airports include Buffalo, Niagara Falls and Plattsburgh in New York as well as Bellingham in Washington state.

David Goldstein, chief executive officer of the Tourism Industry Association of Canada, backs the recommendation, saying layers of taxes, fees and levies are a drag on Canada's tourism competitiveness. "Airports and air travel should be treated as catalysts of economic activity, not opportune sources of public revenue."

He said air travel is hindered by what the industry calls a "club sandwich" of surcharges from security screening levies to air navigation charges and ground rent costs. Canada is the only Group of Eight country that "has moved the entire cost structure of aviation down onto the consumer."

Mr. Goldstein said there is about $850-million worth of annual taxes, fees and levies piled on aviation. He said airline executives have estimated the five million Canadians who are crossing the border annually to use U.S. airports are the equivalent of about 70 flights a day.

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Over the last decade, the committee noted, Canada's 26 busiest airports have paid more than $2.5-billion in ground rents to the federal government.

The committee also called on Ottawa to place a priority on expanding and improving infrastructure at northern Canadian airports in order to encourage economic growth in this region.

Editor's Note: An earlier version of this article incorrectly said surcharges at four United States border airports are nearly 230 per cent less than the Canadian counterparts. In fact, the Canadian airports are more than 200 per cent more costly than the U.S. border airports.

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