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Pole: Slamming the Door

What will it take for Ottawa to wake up?


October 1, 2007
By Ken Pole

Topics

If airlines, air transport stakeholders and their customers were
holding their breath in anticipation of good news in the minority
Liberal government’s first budget, they can be forgiven. Apart from
another modest reduction in the Air Travellers’ Security Charge,
Finance Minister Ralph Goodale offered no fiscal relief for civil
aviation.

The
flash point is rampant airport rents. Effective January 1, Ottawa
raised them by anywhere from 5% (Vancouver) to as much as 43%
(Montreal/Trudeau) and some airports face even larger hikes for 2006.
Airport rents are now sucking more than $300 million annually out of
the system, a 25% jump since 9/11/01 gave governments everywhere an
opportunity to pick carriers’ pockets. Adding insult to fiscal injury,
the revenues from those rents aren’t reinvested in airport
infrastructure.

Transport Minister Jean Lapierre raised hopes
when he told reporters in late November that he would present to
cabinet, by year’s end, a number of ways to cut costs to an
overstressed industry. Just the day before, he had indicated to the
House of Commons transport committee that his department needed the
rental income – any shortfall in its operating costs had to come out of
the government’s surplus.

Well, the surplus was $9.1 billion in
the 2003-04 fiscal year and Goodale forecast in his February 23 budget
speech that it will be $3 billion in the current year and $4 billion in
2005-06. If the Liberals run true to form, the surpluses this year and
next can be expected to balloon by a factor of at least two once the
final numbers are crunched. But even the more modest amounts Goodale is
sticking to for now would give Ottawa room to move on the airport rents.

“They’ve
got all the room they need,” said British Columbia Conservative MP Jim
Gouk, a former air traffic controller who sits on the transport
committee. His explanation for Ottawa’s reluctance to yield echoes
others still in the industry: the government is addicted to the airport
rental revenue.

While many airport authorities, including the
one in the nation’s capital, have invested heavily in new terminal
buildings and other infrastructure and cannot be expected to pass on
100% of any rent reductions, virtually all say they would reduce their
user fees.

Given Lapierre’s musings, the industry was justified
in expecting some concessions from Goodale. However, Air Transport
Association of Canada (ATAC) vice-president Mike Skrobica said the
budget “slammed the door.” Like many others, ATAC had been expecting
“at least a freeze in airport rents for a period of time.”

So
where does this leave airports and their users? Facing hikes in landing
and other fees. Yes, they can be passed on but, as the airlines have
been finding out, there is increased resistance from consumers who
continue to expect patrician service for plebeian fares. At some point,
something’s got to give and you can bet it will be the operators.

The
industry has joined ranks with the Canadian Chamber of Commerce (CCC)
in expressing frustration and disappointment with the rental rip-off.
“It is time for the government to stop treating air travellers like
cash cows,” ATAC president Cliff Mackay said. Giovanni Bisignani, his
counterpart at the International Air Transport Association, said the
latest hikes “exaggerate . . . the policy mistake of Crown rents at the
expense of already heavily-taxed travellers and shippers.”

Bisignani
also reminded Ottawa that air transport, rather than being a luxury,
“is an essential service and a precondition for healthy economic
growth.” Mackay added that increasing rents in the current context is
“bad economic policy” that “runs counter to the government’s stated
goals of job creation, economic growth and smart regulation.” CCC
senior vice-president Mike Murphy called the airport rents a “glaring
example” of a broader tax problem in Canada. “The rents paid by
airports make Canada less competitive globally,” he said.

It seems Ottawa has been snoozing on the issue. Must we have another airline bankruptcy to wake it up?