The Cost of Air Travel in Canada
As in any competitive business, airlines set the price of their product – airline tickets – by balancing the intricacies of supply and demand for air travel with the costs they must incur to do business. Affordability and service ensure that Canada’s airlines can attract travellers in a global marketplace in order to thrive. While Canada’s airlines have some choices regarding the costs they incur, in some key areas, especially in the rent and terminal and landing fees, charged by airport authorities, the airlines have no choice at all, and often very little power to prevent cost increases.
There are also direct added costs for Canadian travellers. Unlike any other transportation sector, the price an airline sets for its ticket is often significantly less than the amount it must ultimately collect from a customer. That is because a number of governments and government agencies in Canada and abroad have found air travel to be a convenient way to collect a number of fees and taxes and to recover costs of public services.
By the time the final bill is calculated, an airline will typically have collected the following from each Canadian traveller:
- An Airport Improvement Fee (AIF) for the airport authority
- Security Charge for the federal government
- Federal sales tax (GST) for the Government of Canada
- Provincial sales tax (PST or the Harmonized Sales Tax – HST) for the provincial government
- Fuel Excise Tax(es) for the federal and sometimes the provincial government
- NAV CANADA surcharge for air traffic control services
International travellers may have further additional taxes and fees depending on their destination.
Making Air Travel More Cost-Competitive
Despite our aviation sector’s promising trajectory, we still have work to do when it comes to being able to be more competitive. The reality is that our airlines compete directly with carriers in other regions of the globe who are supported by public policies that view air transportation infrastructure as an economic engine. In contrast, Canada’s outdated framework treats the industry as an easy and infinite source of revenue by downloading government taxes, fees and other charges on airfares.
Between 2008 and 2014, the cost of air travel did not increase nearly has much as the cost of most goods and services and was well below the rate of inflation. In fact, base fares with Canada’s major airlines have actually dropped 13.6 per cent in real terms over the same time period.
So while airlines are doing their part to keep fares competitive, government taxes and other third party fees continue to take a bite out of aviation in Canada, where, according to the World Economic Forum, taxes and third-party charges are the 5th highest in the world.
Not only is it important to be competitive from a cost perspective, our passenger facilitation must be also word-class. This means that improvements in the areas of security screening, customs and immigration and visa processing are required to make it easier to fly, visit and do business in Canada.