A new report finds that a soaring number of jet-setting Canadians are border-hopping to catch cheaper flights.
The Conference Board of Canada report says about five million Canadians now cross the U.S. border by land every year to fly out of American airports.
It says higher airfares and fees and taxes in Canada, as well as differences in wages, aircraft prices and industry productivity makes it 30 per cent cheaper to fly out of the U.S.
The Conference Board says fees and taxes make up about 40 per cent of the cost of an airplane ticket in Canada.
The report suggests that while other factors are beyond government control, small reductions in the airfare differential could lead to traffic gains for Canadian airports and carriers.
It estimates that changes to Canadian policies alone could bring more than two million passengers a year back to Canadian airports.
The analysis, released Wednesday, focused on Vancouver International Airport, Pearson International Airport in Toronto, and Montreal-Trudeau International Airport, along with their cross-border competitors.
“The fact that Canada’s largest airports are losing traffic to cross-border competitors matters because it undermines their role as national and international hubs,” said David Stewart-Patterson, the Conference Board’s vice-president of public policy.
“When a Canadian hub airport loses passengers, it can lead to reduced flight frequencies, higher travel costs and poorer service for all Canadians.”
One key difference between fares in the two countries is that in Canada, airports and navigational systems are mostly paid for by users — and have recently been upgraded, the Conference Board says.
Meanwhile in the U.S., user fees do not cover those costs, the report said, adding that major investment in U.S. airport infrastructure and an accompanying increase in fees, subsidies or both will be required in the near future.
The report acknowledges that reducing airport fees and taxes would reduce revenues for Ottawa in the short term, but much of the loss could be recaptured by a spike in revenues generated by an increase in traffic in Canada.
“Cuts in Canadian fees and taxes will not be effective, however, unless airports and airlines co-operate in passing through the benefits to passengers,” said Stewart-Patterson.