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ATAC Welcomes Montreal Economic Institute Study

The Air Transport Association of Canada today welcomed an independent research report issued by the Montreal Economic Institute.


September 19, 2007
By Carey Fredericks

The Air Transport Association of Canada today welcomed an independent research report issued by the Montreal Economic Institute, which confirmed that the aviation industry in Canada is being overburdened by industry-specific taxes. The report, which is available on-line at www.iedm.org, outlines the need for fundamentally improving the international competitiveness of Canadian air carriers in order to truly grow air services for Canadians.

"The tax load weighing down the Canadian airline industry is an obstacle to traffic growth in Canada. If passengers become less willing to absorb these costs, there may be a migration to less burdensome destinations or airports. Passengers may choose, for example, to transit through U.S. airports or to select a U.S. air carrier over a Canadian competitor, lured by the lower taxes added to the cost of a ticket."

Today's report outlines three specific areas of taxation, in need of urgent reform:

1. Airport Rents. It's time to end the $2 billion tax grab on airport users by the federal government. None of Canada's G8 trading partners charge airport rents and the government provides no service in exchange for these payments. Pearson airport, alone, has already paid over $1 billion dollars in rents and its total share of the national airport rent bill is scheduled to rise over the next few years. It's time for the federal government to stop reinforcing Toronto's status as the most expensive airport in the world even worse! This approach actually works against the development of major hub and gateway airports in Canada.

2. The Air Travelers' Security Charge. Air travel is the only mode of commercial transportation required to pay for its own security. Furthermore, Canada has one of the highest passenger security fees in the world (compare Canada's $4.65 segment charge for domestic travel to the US rate of $2) and collected more revenues from this fee in its first three years – $1.25 billion – than was spent on aviation security – $820 million.

3. Federal Fuel Excise Tax. The FET is charged at a rate of four cents per litre, almost double the US rate of four cents per gallon. This tax was introduced in 1987 to fight the federal deficit, which no longer exists! Last year, it is estimated that the federa government collected over $100 million from the air sector, alone, through this tax.

"Today's report from a respected economic think tank underscores the urgent need for the government of Canada to fix Canada's competitive gap in commercial aviation by eliminating the punishing taxes of airport rents, the Fuel Excise Tax and the Air Travelers' Security Charge", said ATAC President and CEO, Sam Barone.

"The need for action is all the more clear in light of the government's proposed liberalization of Canadian air policy", he continued. "Canadian air carriers are not afraid to compete but need to be competitive. Unless and until the federal government commits itself to implementing a strategic review of the competitiveness of commercial aviation in Canada, we are kidding ourselves if we think any reform of our air policy will deliver any meaningful or sustainable economic benefits for Canada", concluded Barone.