Ottawa-imposed 'airport rent' is driving up cost of plane tickets, think tank finds

OTTAWA — A leading free-market think tank is calling on Ottawa to stop playing landlord to major airports, arguing that exorbitant land rental fees are driving up the cost of domestic air travel.

“Using airports as cash cows instead of treating them as critical infrastructure hurts families, workers, and patients who depend on reliable air service for treatment access,” says Samantha Dagres, the communications manager at the Montreal Economic Institute (MEI).

Canada’s airports are operated by private, non-profit organizations, known as airport authorities, but the land they sit on is owned by the federal government, which collects rent.

Airports forked over a record $494.8 million in rental fees to Ottawa last year, with the ‘Big Three’ — Toronto Pearson, Montreal-Trudeau and Vancouver International — footing most of the bill .

This was a 68 per cent increase from 2014.

Each airport’s rental fee is calculated based on its gross revenue, topping out at 12 per cent.

These costs are passed down to air travellers, making up as much as a third of the airport improvement fee tacked onto the price of their ticket.

The average airport improvement fee charged on a Canadian domestic flight is $38, according to Westjet . This is twice the corresponding Australian fee and four times more than what U.S. air travellers pay on their tickets.

Canadian air travellers also pay higher airport security charges and, indirectly, aviation fuel excise taxes than their Australian and U.S. peers.

All told, MEI found that government-imposed taxes, fees and rent charges made up as much as 43 per cent of ticket prices along major domestic routes.

“Reducing the cost of air travel is entirely within Ottawa’s control, because it is Ottawa that is driving prices up in the first place,” said Dagres.

Dagres and her colleagues found that the government-levied charges on a Toronto to Montreal flight alone ($68) were enough to pay for a budget flight from Los Angeles to Las Vegas.

This isn’t the first time that Ottawa’s ownership of airport lands has been tied to higher ticket prices.

A Senate committee recommended in 2013 that Transport Canada make a plan to phase out rental fees and transfer ownership of airports to the airport authorities that operate them.

“Many witnesses raised concerns that these rents do not take into account the differing state and value of airport facilities when they were first transferred to the airport authorities … Since the airport authorities are mandated to be not-for-profit entities, witnesses told the committee that these costs are recovered from users,” wrote committee members.

This recommendation was never followed up on, despite the subsequent spike in rent costs.

A spokesperson for Transport Minister Chrystia Freeland declined to say if she intends to start the process of divesting government ownership of major airports.

Polls show that Canadians are largely dissatisfied with the quality and selection of domestic air travel.

A recent Leger/National Post study found that half of Canadians are open to allowing U.S.-owned airlines to fly domestic passenger routes in Canada.

National Post rmohamed@postmedia.com

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