Canadians flee as flying costs rise
Mark Sutcliffe, Ottawa Citizen
Published on: July 10, 2014, Last Updated: July 10, 2014 10:34 AM EDT
When you search for flights on Allegiant Air’s website, the opportunistic airline lists its Niagara Falls, N.Y., departures under “Toronto” even though the centre of the universe is more than 100 kilometres away. Likewise, Allegiant refers to the airport in northern New York as “Plattsburgh/Montreal”. Soon, Allegiant could be operating out of Ogdensburg, N.Y. Or as they might choose to call it: Ottawa/Ogdensburg.
Allegiant is just one of several U.S. airlines enticing Canadian travellers with cheaper flights. According to the Conference Board of Canada, some five million Canadians drive across the border every year to fly out of American airports. For a long list of reasons, American carriers have a huge cost advantage over Canadian competitors. And with the overwhelming majority of Canadians living within an hour of the U.S. border, we’re easy pickings. As a result, Canadian airlines and airports are losing millions of dollars of annual revenue and thousands of jobs. And governments are losing lots of potential tax revenue.
I picked a random date in November and compared the price for a flight to Fort Lauderdale from Plattsburgh and Montreal. The Allegiant flight out of Plattsburgh cost $357 return. Round trip from Montreal on Air Canada cost $562. Even factoring in the exchange rate, the Montreal flight cost 40 per cent more. For a family of four, the premium to fly out of Montreal would be close to $700. That’s a lot of incentive to drive to an airport 100 kilometres to the south.
So far, Ottawa hasn’t been hit as hard as other Canadian cities including Toronto and Vancouver. Even so, Ottawa’s airport authority estimates that it loses more than 100 passengers a day to U.S. airports.
That could get much worse if Ogdensburg goes ahead with its expansion plans, including new routes to vacation destinations to be provided by Allegiant. The northern New York airport isn’t expecting a sudden spike in traffic from the 11,000 people who live in Ogdensburg. Instead, they’re launching a direct competitive attack on Ottawa’s business, taking advantage of the fact that Ogdensburg’s airport is located less than 10 kilometres from the junction of Highways 401 and 416.
Airlines and airports have been pointing out the economic costs of the Canada-U.S. price disparity for years. The solutions aren’t simple. According to the Conference Board, the price disparity is driven by a wide range of factors that are more favourable in the U.S. including wages, productivity, the price of aviation fuel, and leasing and depreciation costs. Those may not be easy to change, but the government could look at Canada’s higher airport fees, navigational costs and other taxes.
But rather than help, some governments are flying in the other direction. Ontario is about to make the cost of flying out of the province even more expensive. Monday’s provincial budget is expected to reintroduce a 150 per cent increase in the airline fuel tax, adding an estimated $100 million to the cost of airline tickets in Ontario.
Governments in the U.S. see airports as economic development tools to boost tourism and business whereas in Canada they are viewed as sources of tax revenue. If it goes ahead, Ogdensburg’s runway expansion will likely be subsidized by tax dollars. Any improvements to Ottawa’s airport are funded entirely by air travellers.
The solution is not to pump public dollars into airports or airlines to make them more competitive with American counterparts. But considering every political party in the land is talking about job creation and economic growth right now, you’d think they would be interested in policies that help Canadian airlines and airports rather than deprive them of revenue and jobs.
The federal and provincial governments have an opportunity to work with the air travel industry to find ways to make it more competitive. The Conference Board estimates that the right changes in policies could bring back two million of the five million cross-border flyers to Canadian airports. Unfortunately, right now the runway is tilting even more in the opposite direction and the bleeding is more likely to go up than down.
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http://ottawacitizen.com/news/national/sutcliffe-canadians-flee-as-flying-costs-rise
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