Recent media attention has been focused on two items that have the potential to negatively impact the Ottawa International Airport and the aviation industry in Ontario in general: the possible expansion of the airport in Ogdensburg, New York; and the Ontario Government’s decision to increase the aviation fuel tax.
With respect to the Ogdensburg expansion, media reports indicate that their plan is to lengthen their runway, improve terminal facilities, and set the stage for a possible new entrant, Allegiant Air, to provide air service. Will this have an impact on Ottawa? Yes, but to what extent is hard to determine at this point.
We know that approximately 5 million Canadians fly from U.S. airports each year. Over 100 per day are from the Ottawa-Gatineau area. Travellers from our community use Syracuse, Ogdensburg, Plattsburgh and Watertown airports. Why? Because the cost of flying is lower.
American airports, particularly many of those close to the Canadian border, enjoy significant government subsidies to support their business. Governments in the U.S. are injecting funds into Ogdensburg and other airports to stimulate jobs and aviation activity because they recognize the potential and the economic importance of airports in their communities.
Airlines are taking note of these opportunities too. In fact, Allegiant Air is reportedly considering providing a loan to help fund the Ogdensburg expansion project. Media reports indicate that Allegiant may add 40,000 new annual passengers at Ogdensburg. How much of this increase will come from Ottawa’s existing customer base? How much might come from passengers who currently travel to one of the other U.S. airports? How much will be entirely new travellers? The answers to these questions are all unknown at this time. What we do know is that many things could change before a low cost carrier like Allegiant will actually provide regular service at an airport that has a limited economic catchment area, has limited service potential, and that counts on the current Canadian airport model remaining uncompetitive compared with the cost of flying from the U.S.
Aside from the subsidies, why are U.S. airports able to offer prices that are considerably lower than those in Canada? As recent Senate reports, confirm, Canadian governments view airports as a revenue source for their coffers.
For example, airport rent, paid to Transport Canada each year, is considerable. In Ottawa’s case, we paid just over $4.7 million dollars in 2013. The rent system requires that as airport revenues increase, so do our payments to the government. In fact, as airport revenues increase, the proportion of those revenues taken by the federal government increases, meaning a smaller proportion of that revenue gets reinvested back into the community’s asset. Further, our passengers face a “club sandwich” of fees and charges, including the Airport Improvement Fee, the Air Travellers Security Charge, existing fuel surcharges, Navigational Surcharge, Insurance Surcharge (some carriers) and HST/GST. Other costs, such as airport policing, have been downloaded to airport authorities, and must be recouped through fees that are charged to airlines. The list goes on.
Aviation is the only mode of transport in Canada that pays entirely for itself, and is required to pay for costs that other modes of transportation are not.
We recognize that these fees are an issue. That said, we also want our passengers and the community to know that the Airport Improvement Fee is only used to pay for capital infrastructure projects. Because we are self-sufficient and operate without any government subsidies or assistance, we must generate revenue to pay for projects such as the $35 million runway reconstruction project in 2014. Revenues generated through parking and concessions are used to pay for ongoing operation and maintenance costs, and help to keep our costs to airlines as competitive as possible.
What about Ontario’s fuel tax increase? Our partners echo our concerns. As Air Canada’s Ben Smith stated, “It will be bad for travellers, bad for Ottawa, bad for Ontario and bad for any airline that does business in Ontario”. He confirmed that airlines will think twice before placing their assets in Ontario, because arguably, it will be more profitable to deploy their aircraft to other markets. Many other provinces have acknowledged the competitiveness aspect of this issue and have either reduced or eliminated the fuel tax, and yet Ontario is going in the other direction. The proposed increase, which has already been earmarked for investments in other (non-aviation) transportation infrastructure improvements, will make it more expensive for members of our community to travel, and also for visitors to come to Ontario for business and tourism purposes. In Ontario, the mode of transportation that already pays for itself will now also be required to subsidize the other modes that don’t pay for themselves.
Economic impact studies at airports have proven the value that airports bring to the communities they serve. In Ottawa’s case, we inject more than $2 billion into the local economy each year, support more than 5,000 direct jobs, contribute to the existence of more than 11,000 total jobs, move 25,000 tonnes of cargo and more than 4.5 million passengers each year. We want to grow these figures, not watch them shrink because we aren’t competitive as an airport or as a mode of transportation.
Are we asking for special treatment or subsidies from any level of government? The answer is no. We have never asked for a handout. All we ask is that the governments change their view of airports and airport authorities, and recognize that we inherited money-losing entities, invested in them, made them efficient, profitable, and in many cases, the pride of their communities. We want governments to support our success by helping to level the playing field with our competitors south of the border, and to understand that each time they increase a tax or download a cost, it’s at our expense, meaning that our community will face higher travel costs, and could even face diminishing travel choices if the market becomes too expensive or unprofitable for airlines to serve.
Transport Minister Lisa Raitt indicated recently that “reducing federal cost at airports and improving their efficiencies will be a significant part of the review of the Canada Transportation Act”. She further indicated that “I am cognizant of the issue of people going across the border to fly instead of staying on this side of the border”
You can count on OMCIAA to be an active participant in the review if provided the opportunity. Airports are an important contributor to the competiveness of the Canadian economy. We must continue reforming the model if Canadian airports are to continue to be recognized as being among the world’s best, without asking air travellers to pay an unfair amount compared with other modes of transportation.
The bottom line is that if we remain on the current path, more “leakage” to airports across the border will be the result – to the detriment of Ottawa-Gatineau’s local economy.
What can you do about it?
First, most travellers from the region do choose to fly from the Ottawa Airport, and we are grateful for your support. The Ottawa Airport supports thousands of jobs right here in our community. When you fly from our airport, you help to support more jobs, you help to sustain more air routes for your community, and you help ensure your airport is as competitive as possible. The City of Ottawa has formally recognized the importance of the airport through the Council-approved Shared Vision for Ottawa’s Economic Development.
Second, you can tell your Member of Parliament and your Member of Provincial Parliament that aviation competitiveness and tourism are important issues to you. Let your MP know that the federal government should recognize airports and aviation as economic engines for communities. Let your MPP know that increasing the aviation fuel tax in Ontario is likely to drive aviation business away from our province, and may cause real damage to our economy. Reducing avation’s onerous tax burden will make Ottawa, Ontario, and Canada more competitive. This means lower costs, lower fares, more flights, more choice, and a more significant economic contribution right here in our city.
Find your MP’s email address here: http://www.parl.gc.ca/Parlinfo/Compilations/HouseofCommons/MemberByPostalCode.aspx?Menu=HOC
Find your MPP’s contact info here: http://www.ontla.on.ca/web/members/member_addresses.do?locale=en
 The Standing Senate Committee on Transport and Communications, The Future of Canadian Air Travel: Toll Booth or Spark Plug?, June 2012
The Standing Senate Committee on Transport and Communications, One Size Doesn’t Fit All: The Future Growth and Competitiveness of Canadian Air Travel, 2013
President and CEO
Ottawa International Airport Authority