- To many consumers, airfare for domestic flights in Canada can seem unreasonably expensive.
- We spoke with some airline industry experts about why this is, and if this could change in the future.
It’s no secret to the Canadian air passenger that travel within Canada can be absurdly expensive. While there are many factors at play, it’s often much less expensive to travel abroad. For a country that promotes unity from “sea to shining sea,” many Canadians haven’t been too far from their home province.
Canada has two major airlines: Air Canada and WestJet. Both provide domestic services in the country and both charge a similar price point. There are other smaller airlines that struggle to survive in Canada’s economic climate, many of which never take off before they have a real chance to offer an alternative option for passengers.
As it stands today, the Canadian aviation industry is essentially an oligopoly.
Lack of competition doesn’t tell the whole story of why you’re paying upwards of $400 dollars for a round-trip ticket from Montreal to Toronto, however. There are many other factors at play and some may surprise you.
From exorbitant third-party fees and taxes to the government’s sometimes questionable relationship with the aviation industry, Canada has some serious work to do.
I spoke to two experts: Gabor Lukacs, Founder and Coordinator of AirPassengerRights.ca and Massimo Bergamini, President and CEO of National Airlines Council of Canada (NACC) to find out more about high airfare prices in Canada.
I need to visit a family member in Vancouver for one week and I want to book my flight out of here today (August 21st, 2019). Being a conscious consumer, I look at prices for both Air Canada and WestJet.
I’m stunned at what I see. If I’m flying Air Canada, I can expect to pay between $980 economy to almost $3,000 for business class...one-way. WestJet is more of the same. But whatever, it’s a family emergency so I bite the bullet.
Oops, someone forgot to calculate taxes. At the lowest fare price, a round-trip flight with Air Canada from YUL to YVR and back will cost me a grand total of $2,244.90. With WestJet, $1,726.36. Guess I’m not buying groceries for two months!
Those prices are indeed shocking for the average consumer and many don’t know the finer details of why we’re all paying so much for flights within Canada. It’s by design, in fact.
According to the 2016 Emerson Report, a government review that identified “priorities and potential actions in transportation that will support Canada’s long-term economic well-being,” the operation and development of Canada’s airline infrastructure drastically changed in the 1990s.
The government implemented a “user-pay” policy, passing the cost of infrastructure and operations to the consumer and air carrier while still collecting revenue from air transport fees and taxes due to investment in aviation. According to Massimo Bergamini, “in Canada, it is 100%-plus — and I say plus because the federal government derives hundreds of millions of dollars in windfall from commercial aviation every year that is paid by the users, either air travellers or carriers.”
This is one of the major reasons why Canadian airfare is so prohibitive. In Montreal, for example, landing fees are charged at a rate of $10.29 per 1,000kg of the maximum take-off weight. Those fees are charged to the airline, which in turn charges it to the passengers as a tax. The max takeoff weight of a Boeing 737-600 is 66,000kg, which means one aircraft that lands in Montreal-Trudeau airport is charged $679.
“What we found was that on domestic routes, third-party taxes and fees and represent as much as 85% of the cost of a domestic ticket. Though that’s a high-end outlier, the average is anywhere from 50% to 60% of the cost,” according to Mr. Bergamini.
Gabor Lukacs, however, thinks that high airport taxes are an excuse. “Airlines love to complain about high airport taxes and they also love to argue that Canadian geographics are different. In a sense, that’s true but I don’t think it answers the question.”
Geography is, in fact, a key element of why airfare is so expensive. Mr. Lukacs says that “it’s an urban legend to simply say that prices are so high because Canada has different geography than Europe, for example.”
“So, the first question I would ask is to measure Canada’s population density in its inhabited areas, not just full geographic area and to bear in mind how many big cities we have and how they’re interconnected. Then, compare European airlines to evaluate factors such as airport taxes, labour, and fees and see how the costs and figures compare.”
Mr. Bergamini acknowledges that geography contributes to the lack of competition in Canada’s aviation market. Like Mr. Lukacs, he agrees that it’s a government excuse.
“It’s frankly unacceptable that the government of Canada should be imposing 100%-plus of the cost of air travel and the system on passengers and air carriers. Until we, as a country and as an industry — and most importantly, as citizens — effectively convey to the decision-makers that air travel is an essential element of Canadian society, this will continue.”
We’re stuck between a rock and a hard place as passengers for the foreseeable future as Canada’s “anti-competitive cost environment makes it more difficult for new entrants into the domestic marketplace. While there have been suggestions to change foreign ownership limits, the issue really is about eliminating economic barriers to entry. There’s no doubt that the high cost of operating in Canada stands as a huge barrier to competition,” according to Mr. Bergamini.
Canada’s two major airlines have market supremacy and it doesn’t seem like they’ll be going anywhere soon, despite complaints about costs.
As per Mr. Lukacs, “the two airlines in Canada can informally collude and say they have no reason to improve and offer the same poor service. WestJet over the past 4-5 years has become very aggressive and acrimonious with their consumer relations, basically stonewalling passengers about their rights.”
We reached out to both WestJet and Air Canada for comment on this story. Air Canada declined to comment and we haven't heard back from WestJet. We will update with article with responses if and when they become available.
There are potentially many solutions to the issue of high airfare costs. From cabotage to mobilizing the public, both Mr. Lukacs and Mr. Bergamini offer viable solutions to help offset the exorbitant costs of domestic airfare in Canada.
For Mr. Lukacs, one of the more effective solutions is cabotage. “It’s the right of foreign airlines to fly into Canada to pick up passengers. Say you have a flight from Frankfurt to Toronto. Under the current regime, they can drop off some passengers and continue to Vancouver but they can’t pick up more passengers."
"If cabotage was implemented in Canada, it would mean that the same plane would be able to pick up passengers from Toronto and bring them to Vancouver — that way if you do it right, you could end up with European airlines transporting passengers between Canadian cities.”
For Mr. Bergamini, the NACC continues to “try to reduce third-party fees and taxes. We’re not asking for subsidies, don’t get me wrong. What we’re asking for is that the government of Canada reduce the amount of money it takes out of the system."
"Canadians need to push back on their MPs and candidates in the upcoming election to say that we need these safe economic air links to work and engage with family and friends and we reject the notion that the government of Canada is collecting up to 50% of the cost of the ticket.”
There are a lot of moving parts and I have only scratched the surface of what goes into airfare costs in Canada.
“Air travel is as important to Canadian unity and the essence of being Canadian as the railway was 100 years ago,” says Mr. Bergamini. For him, Canada is years behind and needs to progress out of its current approach to domestic air travel.
“You cannot go against progress — you can either accept it or reject it, but it’ll still happen,” says Mr. Lukacs.