WestJet Raising Vital Fee and Airport Rent Issues; Is Trudeau Listening?

WestJet is once again railing against government fees and airport rents, but experts say they’re not sure it will sway the minds of Ottawa politicians.

“I think they’re getting a little antsy and trying to put some pressure on the government,” McGill University aviation professor John Gradek told Open Jaw in an interview. “It’s not a new story, as Alexis (von Hoensbroech, the CEO of WestJet) has been on this kick for many months.

"Both he and Stephen Jones from Flair are saying that Canadians aren’t getting low fares because of all these fees that are in place. They’re trying to get Canadian air fares at the same level as Europe or the U.S., but we don’t have the density of markets that they do or the number of travellers.”

Von Hoensbroech on 22MAY called for a freeze on mandatory government-imposed fees and a permanent end to airport rent collection.

“Given concerns around affordability and competitiveness, WestJet is making the following policy recommendations to the federal government,” airline officials said.

- A comprehensive review of Canada's user-pay system for aviation infrastructure. This review should consider competitiveness impacts, intermodal equity, border leakage and value for taxpayers.

- An immediate freeze on mandatory imposed government fees, charges and policies that increase the cost of travel.

- The cessation of the collection of airport rents by the federal government.

"WestJet is committed to maintaining a transparent and low-cost structure that welcomes competition and drives the best value for our guests. Yet we operate in a very expensive and user-paid infrastructure environment that significantly drives up ticket prices for the everyday Canadian and hinders competition," said von Hoensbroech. "Air travellers are paying too much in government fees and charges on their plane ticket compared to other nations and other modes of travel. These changes would increase competition, lower ticket prices, and foster greater transparency for our guests.”

“There’s no other place in the world where it’s so expensive to operate an airline,” von Hoensbroech told the Globe and Mail, “and this is not just because of the distance, but also because of the high cost of infrastructure.”

“Right now, there are the fees that are being charged to the passengers — ultimately through the tickets — that are not just paying (for) infrastructure, but they are also funding the federal budget,” von Hoensbroech told reporters after a lunch event in Calgary on 22MAY, the Calgary Herald reports.

Calgary Airport Authority CEO Chris Dinsdale said the non-profit organization paid about $50 million in rent to the federal government last year and could find many uses for the revenue, including new infrastructure, if it were allowed to keep the money.

"The issue of fees and charges on travellers in Canada has been of longstanding concern to us and the industry, and it should also be of concern to travellers and anyone with an interest in Canada's competitiveness," Air Canada said in an email to Open Jaw. "We have regularly highlighted this in presentations to the government and through NACC."

David Rheault, Air Canda's Vice President of Government and Community Relations, recently made a submission to the House of Commons Transport Committee, where he cited the airline's concerns.

Rheault said the so-called Emerson report some years ago noted that Canada is "unique among its competitors in charging onerous rents and taxes that undermine competitiveness."

"We plan to keep encouraging the government to look hard at the funding model, something the Transport Committee committed to doing last year when it issued a report recommending reviewing all costs imposed on airports and airlines, and reinvesting all rents collected in airport infrastructure," Air Canada officials said.

Jeff Morrison, president and CEO of the National Airlines Council of Canada, told Open Jaw that WestJet’s critique could give the matter a needed push toward the finish line.

“It’s very consistent with what we’ve been saying,” Morrison said. “The House of Commons in Ottawa has a committee that’s been looking at airline competition in Canada for the past couple weeks. They recently announced a master study on air competition in Canada, so this (von Hoensbroech’s comments) are all part and parcel of that.”

Morrison said he’s hoping for “a heightened conversation about how to make Canadian aviation more competitive.”

“What I recently told the House Committee is that air travel in Canada is exorbitantly expensive. I agree that we need a full review of the Canadian user pay system with an eye to lower fees. If you do a side-by-side comparison with Canadian fees versus American fees, it’s very blatant and very obvious.”

Morrison said Canadian airports pay the federal government five to seven times the airport improvement fees that U.S. airports pay. He also said Canadian airports pay Ottawa CAD $400 million more in benefits than they get back.

“And there’s the potential for more fees if the government introduces onerous passenger protection legislation,” he said.

He also warned Canadians will continue to fly out of U.S. airports unless prices for Canadian air travel drop.

Many people in the industry are no doubt hoping for major changes. But Robert Kokonis, president of Air Trav, told Open Jaw he doesn’t see anything big coming down the pipe with a federal election less than 18 months away.

Gradek said a new model is needed for Canadian aviation. But he said taxpayers in Canada don’t want to subsidize air travel.

Canadian airports need to spend $30 billion to $40 billion over the next ten years to modernize, he said. But Canadian taxpayers likely don’t want to pay the freight.

One solution, he said, is to let so-called sovereign funds invest in Canadian airports.

The wealthy Ontario Teachers’ Pension Plan, for example, owns a large stake in London Heathrow Airport. But Canadian law doesn’t allow them to take an ownership stake in Canada’s airports, Gradek said.