Roberta Aguirre
Canadian airports are known for being expensive and inefficient. Consumers in smaller markets are forced to pay more, with often only one choice of airline and a small number of direct flights. Ontario fliers are paying three new taxes for domestic flights since 2010, including HST, jet fuel tax, and carbon tax, which add about 10-12% to flight costs. Additionally, the federal government has retained ownership of the land airports sit on and has been charging them rent, which is passed on to flyers as a user fee. These fees, along with the high cost of living in Canada, contribute to the high cost of flying through Ontario Airport.
| Characteristics | Values |
|---|---|
| User fees | $35 airport improvement fee for departing passengers |
| Landing fees | $0 for Air Canada in Toronto |
| Gate fees | Charged for use of the gate and apron |
| Government taxes | 8% HST, jet fuel tax, carbon tax |
| Debt | $283 million for Halifax International Airport Authority in 2019 |
| Monopoly over charging airport improvement fees | $2.5 billion collected from airport authorities |
| Low airline productivity | 5 million passengers flying out of U.S. border towns |
| Subsidies | U.S. airport system is subsidized |
| Lack of competition | Air Canada and WestJet dominate the market |
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What You'll Learn
High user fees
Ontario airport is considered expensive due to high user fees. Firstly, Canada imposes user fees on passengers and airlines that are the most expensive in the world, according to WestJet CEO Alexis von Hoensbroech. For example, Toronto Pearson's $35 airport improvement fee for departing passengers is much higher than the standard US$4.50 ($6) at U.S. airports. These fees are imposed on top of a long list of other costs charged by airports, which makes flying in Canada expensive and difficult.
Furthermore, Canadian airports are considered expensive and inefficient due to various factors such as taxes, red tape, and low airline productivity. Government taxes and fees have been blamed for the non-competitive nature of Canadian airports, causing a significant number of passengers to seek cheaper flights in the U.S. However, some disagree that taxes and fees are the primary issue. Instead, they argue that factors like the bundling of landing fees and low airline productivity contribute to the high costs.
The federal government's ownership of airport land also plays a role in high user fees. The government charges rent to airports, which is then passed on to flyers as user fees. Additionally, airports have become "debt vehicles," taking on substantial debt to fund expensive construction projects, and relying on airport improvement fees to finance this debt. This further contributes to the high user fees charged to passengers and airlines.
The high cost of living in Canada also impacts the affordability of air travel. Canadians pay above-average prices for various goods and services, including flights. Inflation since the COVID-19 pandemic has also made Canada more expensive overall. Additionally, the dominance of Air Canada and WestJet in the market limits competition, resulting in higher prices for consumers.
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Inefficiency and red tape
One of the key issues is the airport's governance and management structure, which is characterized by layers of bureaucracy and a lack of streamlined decision-making processes. This has resulted in a sluggish response to changing market demands and opportunities. For example, the airport has been slow to adapt to the rise of low-cost carriers, which have driven down costs and increased competition at other airports in the region. The airport's governance has also been criticized for a lack of transparency and accountability, with decisions often made behind closed doors and without sufficient input from stakeholders and the public.
ONT also struggles with operational inefficiencies on the ground. Ground handling services, for example, have been criticized for being slow and cumbersome, with high costs that are passed on to airlines and, ultimately, passengers. The airport has also faced challenges with efficient baggage handling and timely aircraft turnarounds, further driving up costs for airlines. These inefficiencies are partly due to a lack of competition among ground handling providers, resulting in a monopoly-like environment that discourages innovation and cost-efficiency.
Additionally, Ontario International Airport has been criticized for excessive fees and charges imposed on airlines, which directly contribute to higher airfares for passengers. These include significant landing and parking fees, as well as costly terminal and facility charges. Airlines have long complained about these fees, arguing that they are disproportionate to the services provided and are used to subsidize other airport operations or projects. The complex and lengthy process of negotiating and reducing these fees has hindered the airport's competitiveness and led to higher costs for all users.
The high costs at ONT also stem from the airport's location and the resulting infrastructure challenges. Located approximately 35 miles east of downtown Los Angeles, the airport serves a large metropolitan area, but its distance from the city center adds logistical complexities. Efficient and affordable transportation links between the airport and surrounding areas are lacking, contributing to lower passenger numbers and higher per-passenger costs. Efforts to improve infrastructure and accessibility have been slow and hampered by bureaucratic delays.
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Low airline productivity
While there are several factors contributing to the high cost of flying in Canada, low airline productivity is a significant factor.
Canada's major airports are owned by the federal government and are run by not-for-profit local airport authorities. These airports rely heavily on fees charged to airlines and passengers as their main source of revenue. Airports charge airlines for the use of gates and aprons (aircraft parking areas), security checks, navigation services, landing, and airport improvement. These fees are often passed on to consumers, increasing the cost of air travel.
Additionally, Canada imposes user fees on passengers and airlines that are among the most expensive in the world. These fees contribute to the overall cost of air travel in Canada.
The high cost of operating in Canada makes it challenging for airlines to service communities across the country. Air Canada and WestJet dominate the market, and smaller markets may have limited choices and higher prices. Carriers tend to focus on high-density, high-volume markets to maximize profits, leaving smaller markets with higher costs.
Furthermore, the structure of fees in Canada can impact airline productivity. For example, Pearson Airport in Toronto bundles its landing fees into one charge, which can make it more expensive for airlines compared to other airports that break out their fees individually.
The combination of high fees, market dominance by a few airlines, and the focus on high-volume markets contributes to low airline productivity and higher costs for consumers in Canada.
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High cost of living
Canada has some of the most expensive user fees on passengers and airlines in the world. These fees are passed down to consumers, making Canadian airports and air travel uncompetitive. Toronto Pearson's airport improvement fee for departing passengers, for example, is much higher than the standard fee at U.S. airports.
Canadian airports are considered well-run by world standards, but they are either very profitable or badly run. Airports are not run for profit, and their biggest expenses are debt and fees to the government. Airports have become "debt vehicles" to pay for expensive runway construction and terminal improvements, and the only way to finance this debt is by charging airport improvement fees.
The federal government retains ownership of the land airports sit on and charges them rent, which is passed on to flyers as a user fee. An estimated $2.5 billion has been collected from airport authorities, which has become a point of contention for Canadian carriers.
Canada's major airports are owned by the federal government and controlled by not-for-profit local airport authorities whose main sources of revenue are fees. Airports charge airlines for the use of the gate and apron (the airplane's parking area), security checks, navigation services, landing, and airport improvements.
The high cost of living in Canada also contributes to the high cost of air travel. Canadians pay above-average prices for goods and services, and inflation has remained high since the COVID-19 pandemic. Additionally, taxes, regulations, and low airline productivity impact the cost of air travel in Canada.
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Lack of competition
While there are many factors contributing to the high cost of flying in Canada, a lack of competition is a significant factor. Canada's aviation market is dominated by two major players, Air Canada and WestJet, which means consumers often have little choice but to pay higher prices. Smaller markets are particularly affected, with fewer airlines serving them and a limited number of direct flights. This results in higher prices for consumers in these markets.
The high cost of servicing communities across Canada also contributes to the lack of competition. It is more expensive for airlines to operate in Canada compared to other countries, due to various fees and taxes imposed on airlines and passengers. These costs are then passed on to consumers, making air travel in Canada less competitive compared to other countries.
Furthermore, Canadian airports, including Pearson International Airport, have high landing fees, which are often bundled into a single charge. This is a result of government ownership, and the fees are used to finance expensive construction projects. As a result, airlines may choose to avoid these markets with high costs, opting for markets with higher traffic volume to maximize profits.
The structure of airport fees also plays a role in the lack of competition. Airports charge airlines for various services such as the use of gates, security checks, navigation services, landing, and airport improvements. These fees are then passed on to consumers, further increasing the cost of air travel in Canada.
Additionally, the federal government charges rent for the land airports occupy, which is reflected in the user fees paid by passengers. This adds to the overall cost of air travel and further reduces competition in the Canadian aviation market.
To address the lack of competition and high prices, Canadian airports, such as Pearson, are working to unbundle their fees. By separating charges, such as counter fees, they aim to reduce costs for customers and attract more airlines and passengers.
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Frequently asked questions
There are various reasons why the Ontario airport is considered expensive. Firstly, high user fees are imposed on passengers and airlines, making it costly for airlines to operate and resulting in higher prices for consumers. Additionally, government taxes, landing fees, gate fees, and other charges contribute to the overall expense. The cost of living in Canada is generally high, and inflation has further increased expenses since the COVID-19 pandemic.
Canada's major airports are government-owned, and the high landing fees and various other charges make it expensive for airlines to operate. This results in higher ticket prices for passengers.
Canadian airport fees are often considered higher than those in other countries. For example, Toronto Pearson's airport improvement fee is $35 for departing passengers, while the standard fee in the US is around $4.50 to $6.
Yes, smaller airports in Canada, such as Abbotsford, Kitchener-Waterloo, Hamilton, and Orlando, often offer more affordable options. These smaller airports have lower-cost fee structures and can provide cheaper flights and parking rates compared to larger airports.
In addition to airport fees and taxes, low airline productivity and regulatory factors contribute to higher costs. The dominance of a few major airlines in the Canadian market also reduces competition, leading to higher prices.
