MONTREAL, March 27, 2014 /CNW Telbec/ - With 75 per cent of Canada's
population living only 90 minutes from the U.S. border, many Canadian
airports are competing for passengers with their northern American
counterparts. This geographic proximity has made prices one of the
biggest competitive advantages of airports in their quest to attract
more passengers. According to a Viewpoint on Canada's High Airfares and Passenger Leakage published today by the Montreal Economic Institute, taxes and
surcharges are to blame for the cost difference between Canada and the
The MEI illustrates this phenomenon by comparing two typical flights for
a passenger leaving from Montreal with one leaving from just across the
border. When breaking down the prices of flights from Montreal to Fort
Lauderdale or New York City and their equivalents from nearby U.S.
airports, it's impressive to observe that Canadian base fares are
actually lower or of equal value, even if Montreal is farther away from
both destinations. In opposition, Canadian taxes and fees are more than
twice as high as U.S. taxes and fees for equivalent flights from
Plattsburgh and Burlington. These additional charges account for
roughly a quarter of the Canadian airfares.
"On the same day, a passenger flying from Montreal to Fort Lauderdale
will pay 36% more than if he had left from Plattsburgh. Similarly, the
flight to New York City is 10% more expensive from Montreal than from
Burlington," says Michel Kelly-Gagnon, President and CEO of the MEI and
author of the study.
Estimates show that Canada's airline industry is losing approximately
five million travellers annually who choose to cross the border into
the United States to begin their journeys from an American airport
largely due to the high prices of airline tickets at their local
Canadian airport. The trend is more present than ever and is costing
Canada nearly 9,000 jobs and $2.4 billion a year in economic output.
Many studies have demonstrated that the higher costs in Canada's
aviation supply chain are mainly the result of government policies,
through the form of taxes, fees and other charges. Eliminating airport
Improvement fees is one of the changes that should be made to help
reduce passenger leakage. "An alternative solution could be to
eliminate airport rent to increase passenger traffic. Even if such a
measure would deprive Ottawa of the $280 million it collects each year
from rents, this would be mitigated by an extra $50 million in revenue
from increased passenger traffic. To recover these losses in revenue
and much more, the federal government could sell airports off to
private investors," concludes Michel Kelly-Gagnon.
The Viewpoint titled "Canada's High Airfares and Passenger Leakage" is written by
Michel Kelly-Gagnon, President and CEO of the Montreal Economic
Institute. This publication is available on our website.
* * *
The Montreal Economic Institute is an independent, non-partisan,
not-for-profit research and educational organization. Through its
studies and its conferences, the MEI stimulates debate on public
policies in Quebec and across Canada by proposing wealth-creating
reforms based on market mechanisms.
Image with caption: "Airline ticket price differences between Montreal-Trudeau Airport and its regional American competitors for two typical North American destinations (CNW Group/Montreal Economic Institute)". Image available at: http://photos.newswire.ca/images/download/20140327_C7340_PHOTO_EN_38387.jpg
SOURCE: Montreal Economic Institute
For further information:
Interview requests: Mariam Diaby, Communications Director, Montreal Economic Institute / Tel.: 514-273-0969 ext. 2231 / Cell.: 514-668-3063 / Email: firstname.lastname@example.org