A new report blames lack of government financial aid during the pandemic for massive Canadian airport debt - that’s being passed along to airlines and their customers, driving airfares higher - when, by all accounts, they should be dropping.
The report by the Canadian Press in the Toronto Star 06MAR cites an analysis by credit agency DBRS Morningstar, which notes that, during the pandemic, U.S. airports “received significant financial aid.”
In contrast, it notes that Ottawa focused its COVID aid on airlines. Canadian federal government support to airports was described as “modest.”
“The Canadian government has not demonstrated a willingness, or perceived a material need, to provide significant financial support to Canadian airports,” the agency said.
But like airlines, airports too lost virtually all their income and revenues during the pandemic. As a result, airlines took on huge debts to stay afloat. That debt is now coming home to roost. Paying it off requires airlines to hike fees - which are subsequently being passed along to air travellers.
Toronto Pearson, for example, lost $383 million in 2020, and $350 million in 2021, pushing it to twice increase fees. It’s not alone:
- YYZ hiked its “airport improvement fee” to $35 during the pandemic;
- YUL increased its airport improvement fee to $35 in 2021; and
- YQR is boosting its airport fee beginning this 01APR by 50 per cent: up $10 to $30.
“The elevated pressure for Canadian airports to raise fees reflects the combined effect of the increased leverage during the pandemic and the unsubsidized and not-for-profit nature of the Canadian airport business model,” DBRS Morningstar’s analysis stated.
Considering new airline entries into the Canadian marketplace that have been touted as increasing competition and offering travellers better airfares, $30 or more in extra fees can help cancel out any fare gains for pax.
Airlines, in an increasingly competitive market, are starting to publicly weigh in on the effects of 3rd party costs on airline fees.
In his ‘state of the union’ statement on the occasion of his recent 1-year anniversary leading WestJet, the airline’s CEO Alexis von Hoensbroech noted that in Canada, air travel is not a luxury, but a necessity, given Canada's size and the distances between destinations. As Open Jaw reported, he added that air travel should be subsidized by the government, like rail travel in Canada, not penalized by added costs.
