Study calls for tax cuts in airline industry

A new study suggests federal and provincial governments can help ease some of the frustrations of travellers and grow the country’s air transport sector by reducing taxes and fees imposed on the industry.

Alexandre Moreau of the right-leaning Montreal Economic Institute says Canada’s massive geography and low population density help keep airline prices high, but even a small reduction in taxes and fees could make a big difference for travellers.

In his study, Moreau writes that comparatively high airport rents and security charges, coupled with provincial taxes, are restricting the potential for growth in the country’s air transport sector.

Canada is ranked 31st out of 32 countries in the Organisation for Economic Co-operation and Development (OECD) for the competitiveness of airport fees and taxes.

Moreau says Transport Canada collected $349 million in the 2016-17 fiscal year in airport rents and over the past five years, the federal government collected $404 million more in security fees than it spent on security-related expenses during the same period.

Moreau says in an interview that research indicates consumers are sensitive to modest price decreases, especially for tourism-related travel, adding that a one-per-cent decrease in the price of a ticket corresponded with a 1.3 per cent to two-per-cent increase in demand.