Connectivity drives success in our globalized world. Nothing physically connects people and global business better than airlines. Worldwide, the air transport industry supports $3.5-trillion in business and transports 35% of the value of goods traded internationally. Doing this creates at least 33 million jobs.
What is true for the world is true for Canada. According to a new study by Oxford Economics, aviation contributes $33.3-billion to the country's GDP and supports 401,000 jobs - good jobs. Aviation pays taxes too - more than $5.4-billion a year - including $4.4-billion paid by aviation firms and their employees. Canada's airlines carry 52 million people and 556,000 tonnes of air freight a year.
These numbers are impressive. But I believe that air transport could do much more for the Canadian economy. Unfortunately, aviation's well-being, and therefore its ability to continue to contribute to Canada's economic health, is at risk. Among the biggest challenges is the lack of a consistent national aviation policy that values the importance of the sector to the country's vitality. Instead, Canada's air transport and tourism sectors labour under heavy taxes and fees that weaken their competitiveness and limit their ability to create jobs and drive prosperity.
In particular, many Canadian airports suffer from very high fixed costs owing to the country's policy of charging airports annual rent for the land they occupy. Crown rent, as it is known, is a uniquely Canadian concept that tilts the playing field of North American aviation. In 2010, the size of the competitive disadvantage was estimated at $250-million. Making matters worse, the rent rises with revenue. This de-incentivizes airports from generating more commercial income to offset the cost burden.
Crown rent is not the only issue. Stiff passenger security fees, sales taxes on domestic and transborder travel and fuel taxes on international flights in some provinces also take their toll on competitiveness. According to the World Economic Forum, Canada is ranked 125 out of 139 countries in the specific index of ticket taxes and airport charges.
Not surprisingly, people are seeking lowercost options. Many Canadians choose to start their transborder and international travel from nearby U.S. airports. And tourists are finding destinations that can give better value for money - Canada's attractiveness as a tourism destination is in decline. Since 2002, it has dropped from the eighth most visited country in the world to the 15th. Each visitor that did not come to Canada and every journey started in the United States has an economic cost in lost opportunities for both jobs and business.
Today leaders from the public and private sectors are gathering in Ottawa at the International Air Transport Association's (IATA) first Aviation Day Canada. Among the topics on the agenda is government's role in facilitating sustainable growth for the airline industry. In places like Singapore and China and in the rising economies of the Middle East, we are seeing the tremendous benefits that accrue to the citizenry when governments embrace aviation as an engine for growth and progress, unfettered by punitive taxation regimes.
In my previous life as the CEO of Hong Kong-based Cathay Pacific, I saw first-hand aviation's power to transform economies. Hong Kong, with a population of just seven million, outperforms its size on the world stage because of connectivity provided by aviation. A business-friendly approach to aviation helps attract business to the city and supports 250,000 aviation-related jobs. That's more than half those in Canada, which has a population that is five times larger.
The secret is out. Singapore, South Korea and indeed China are following similar policies to use aviation as a catalyst for jobs, wealth and prosperity.
Canadian policymakers should take note. There is no reason that Canada should be excluded from these opportunities. The country has a long and special heritage of aviation. It hosts the International Civil Aviation Organization and IATA has made its home in Canada since 1945 as a result of a special act of the Canadian Parliament. The policy vision of that time clearly recognized the importance of being a leading-edge aviation player to Canada, with its relatively small population spread over a vast geography.
Let me be very clear. I am not advocating special treatment for aviation. But it is in Canada's economic interest to allow Canadian aviation to do business from a policy platform that keeps it globally competitive. Aviation Day Canada on February 23rd is an opportunity to rediscover the path towards aviation-propelled prosperity that was historically associated with this great country.
National Post, Tony Tyler
Tony Tyler is the director general and CEO of the International Air Transport Association.
Wed, Oct 26 2011 11:48 AM
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