Full Throttle: Reforming Canada's Aviation Policy

Abstract

Federal government policies are a major cause of high costs throughout the aviation supply chain, often leading Canadians to waste time and money by seeking lower fares at nearby US airports, or not travel at all. High fuel taxes and onerous foreign ownership and airline-specific policies are harming the competitiveness of airlines. Meanwhile, airports have been transformed from the rundown state they were in when operated by the federal government to become world leaders in customer service and quality. However, Canada’s airports are now handicapped by federal government policies that result in otherwise higher costs for travellers. If Canadians are to have the most economically efficient aviation system possible – crucial for such a geographically vast country – the federal government should enact a comprehensive set of policy reforms across the aviation sector. The federal and provincial governments should reduce, or eliminate, remaining aviation fuel taxes. The federal government should also gradually loosen foreign ownership restrictions on Canadian airlines, eliminate both company-specific burdens and protection for Air Canada, and attempt to renegotiate open skies agreements with the United States and the European Union to open the right to operate on domestic routes to all international airlines. Twenty years ago, Canada was a global leader in moving airports from government to private operation. While the federal government still owns the major airports proper, it signed operating leases with not-for-profit airport authorities. These airport authorities make long-term commitments that the looming end of leases may soon jeopardize, necessitating Ottawa to take action soon. The federal government should sell its remaining interest in the leases at airports it owns either to the not-for-profit airport authorities that currently operate them or to for-profit corporations. Such sales could make investors, airlines, travelers, and taxpayers all better off.Rather than regulating privately owned airports, government policy should focus on increasing competition in the sector. For example, if the City of Toronto approves the extension of the runway at the Billy Bishop Toronto City Island Airport and allows jets of all types that meet noise requirements to operate there, that would benefit travelers by enhancing competition locally and beyond.Ottawa should treat airports and airlines like regular businesses, remove sector-specific taxes and ownership and operation regulations, and let our Canadian aviation companies compete on the world stage.