Dear John,

Why is it so expensive to fly in Canada?

A recent Fraser Institute study tackled this issue and found that – surprise, surprise – bad federal policy is to blame.

According to the International Air Transport Association, Canada ranks 101st out of 116 countries for the cost of air travel.

So - why are ticket prices so high?

Taxes and fees.

• "Airport improvement” fees average $32.20 per departing passenger at Canada’s largest airports, compared to $6.47 in the United States and $16.38 in Australia.
• Air traffic control (ATC) fees: to fly a Boeing 777 in Canada, airlines must pay an estimated $802 in ATC fees compared to $192-$478 in the United States, and $493 in Mexico.
• “Security” fees: Canadians pay between $9.46 and $34.42 per ticket, more than Americans ($7.65) and Australians ($4.80).
• “Landing” fees: charged by the airports based on the weight of the plane, Canada’s are among the highest in the world and up to 75% higher than at U.S. airports.

Why are these fees so high?

In part, it’s due to Canada’s flawed airport ownership structure.

The federal government owns the land where Canada’s major airports are built, and leases it back to not-for-profit airport authorities that pay rent to Ottawa. The airports impose fees on passengers to recoup this revenue.

Another culprit is the lack of competition among airlines.

The federal government prevents foreign airlines from operating domestic routes within Canada’s borders.

Foreign airlines can fly in or out of Canada, but they can’t offer flights between Canadian cities. As a result, there’s little competitive pressure for Canadian airlines to lower their prices.

Contrast that with the European Union, which removed such restrictions for member-states.

The result? More competition including from low-cost carriers such as Ryanair, a 34% decline in ticket prices, more cross-border routes, and greater flight frequencies.

How do we improve things?

Our new study identifies four ways the federal government can improve competitiveness and lower airfare.

1. Reduce taxes and fees to be more in line with other countries.
2. Negotiate deals with other countries including the United States to allow foreign airlines to operate within Canada in exchange for Canadian airlines operating in those countries.
3. Follow in the footsteps of Europe, Australia, and New Zealand, and sell its remaining interests in airport leases. Allow for-profit organizations to own and operate airports in Canada.
4. Reduce the regulatory burden on the airline industry while maintaining strong safety standards.

As we head into another election, these are the types of sensible, pro-consumer policies that all leaders should be championing.

If you agree, please consider supporting our research with a donation. We of course don’t accept government funding – we rely entirely on supporters like you!

Thank you for your ongoing support.

Sincerely,

Niels Veldhuis
President
The Fraser Institute