Air transport is key to Canada’s economy, But instead of having policies to welcome more visitors, Canada’s excessive taxes turn them away. Canada’s idiosyncratic system of Crown rents should be abolished.they have good airports, but the $268 million annual Crown rent bill is an unnecessary competitive disadvantage. It discourages visitors and encourages Canadians to start their air travels from the United States.”
It's well established that Canadians routinely pay more to fly than Americans and Europeans. One reason is the lack of competition, but another may be the rent the Canadian federal government charges airports, which pass that cost on to the airlines, which in turn pass it to their passengers. Perhaps that’s why so many Canadians regularly fly from American airports.
Now one airport has had enough. Calgary Airport is reportedly trying to break its 60-year lease with the federal government and buy the land on which it operates. The airport expects to pay C$22.1m ($21.2m) in rent this year, 40% more than last year, under a complex formula that supposedly adjusts for market circumstances. But Garth Atkinson, the head of the Calgary Airport Authority, believes the regularly reviewed and revised lease is still fundamentally flawed and unfair. “It’s an amazing drain in time and resources to live under this complex lease document,” he said. “There’s no purpose to keeping the huge bureaucracy to inspect airports and administer rent.”
Since 1992, when Transport Canada started shifting control of the country’s main airports to local non-profit bodies, Calgary has paid C$332m in rent. All told, Canada’s 14 largest airports paid over C$250m last year, though smaller airports are eligible for government subsidies. American airports are also often subsidised, a big reason why airlines there can charge less than Canadian counterparts for similar flights. Mr Atkinson wants Calgary to buy out the lease for a price equivalent to the present value of a future rent stream. That would give the airport more cost certainty, but any savings for passengers may be negligible unless the value of the deal is considerably less than what the rent is today.
Before we all cry for the airport authorities, one source reports that the 15 major airports earned C$680m between 2006 and 2009. That’s less than the C$2.1 billion the federal government collected in rent and security fees, but still a tidy profit compared with the C$24m Canada's big airlines managed to eke out while their passengers paid some of the highest fares in the developed world. Something’s clearly not right with the model, and it may be simpler for the Canadian government to cut the rent and treat airports as a stimulus for increasing tourism and business, rather than as cash cows to be regularly milked.
Canadian Airline Blog
Sources: The Economist and Flyvertosset
Fri, Jan 28 2011 9:54 AM
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