Canadians Crowd U.s. Airports. Why? Taxes

[Airjetmech]

Interesting article regarding airport taxes in the Wall Street Journal

"Our position is blown out of the water by all the taxes and fees," said Gregg Saretsky, chief executive of WestJet Airlines Ltd., Canada's largest discount carrier. If every Canadian who drove to the U.S. for a flight last year instead flew from Canada, Mr. Saretsky said WestJet's $149 million net profit would have increased by roughly half.

Full article http://online.wsj.co...3616941712.html

[st27]

Calin issued a similar statement last fall while talking to a business group.Something to the effect, if Air Canada operated under US accounting rules and tax structure,the company would have an extra $1 billion on the books each year.

[Seeker]

Something to the effect, if Air Canada operated under US accounting rules and tax structure,the company would have an extra $1 billion on the books each year.

There would have been an extra billion in profit but it wouldn't be "on the books", it would be paid out as executive bonuses!

[mrlupin]

There would have been an extra billion in profit but it wouldn't be "on the books", it would be paid out as executive bonuses!

It's funny how the CEOs and upper management who take in their huge salaries (not even in stock options nowadays), giving very little to investors in terms of stock performance and return, or to employees in terms of cost of living adjustments all the while being incapable of enough introspection to see the paradox in their behavior. They are happy to criticize taxes, airport rents, fuel taxes and every other places money is spent in the airline except their own compensation. They take take take and the wonder why employees do not trust them or in some cases why they have productivity issues.

Maybe it's time we outsource upper management to Bangalore... The myth that you can not attract talent unless you pay 5 million a year might fall then...

[Seeker]

They are happy co criticize taxes, airport rents, fuel taxes and every other places money is spent in the airline except their own compensation.

I remember lots of talk during CCAA of "stakeholders" and the need for everyone and everything to share the pain. Haven't heard that term for years now - the executives take more than their full share, the government takes it's full share, the suppliers have all raised their prices, the customers get their low fares but the employees are told to brace for pension "changes" and LCC work rules 'cause the world has changed.

[Thebean]

Plane Business Quote of the Week

"They government takes for granted aviation's economic contribution – and that it will continue despite their efforts to suppress it. It's completely disconnected in terms of strategy and we're suffering seriously as a result."

-IAG's CEO Willie Walsh, lambasting the British government and its continued efforts to do "everything it can to suppress and damage" the aviation industry at this year's IATA conference on Tuesday.

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A good, localized example of this is in Victoria, BC, where, at huge expense to the taxpayer, a couple of cruise ships disgorge a few hundred passengers for about 6 hours a couple of times a week, (on a Friday night when everythings busy anyway...), for less than half a year for the sole benefit of the charter bus operators, tour bus operators, taxi drivers, the Butchart Gardens, The Empress Hotel, the horse drawn carriage trade and a couple of downtown pubs.

What sort of transborder fees are being extracted from the cruise passengers? What's the infrastructure cost and land value of Ogden Point?

Are the cruise ships loading up in Canada with cheap fuel, food and booze? Not likely when the next stop is likely in a US port.

Heck, the only reason they stop in Canada is because of the US Passenger Vessel Services Act which requires a foreign flagged ship to do so on a cruise between 2 US ports. When that 122 year old law is repealed, stop overs in Canada will drop by 80% or more......

Meanwhile, YYJ, day in and day out, has throughput that wildly exceeds anything the cruise ships can achieve, both in terms of economic impact and raw numbers and yet is expected to subsidize the rest of the economy, including its competitors.....

It is completely ass backwards thinking........

[Spinnaker]

http://www.vancouversun.com/business/2035/Millions+Canadians+flying+airports+save+money/6797282/story.html

Cloverdale resident Scott Henning has flown out of Bellingham’s airport to Las Vegas twice — each time with a group of six friends. He has saved a lot of money travelling through BLI over YVR, and he plans to do it again at the end of the summer. The cheapest flights out of Vancouver that Henning could find were $630; from Bellingham he paid $230.

“You can get it even cheaper,” Henning said. “And the package deals — they’re not even comparable.”

Henning is not alone. A senate committee report on airports — The Future of Canadian Air Travel: Toll Booth or Spark Plug — says that millions of Canadians are opting to drive across the line to take advantage of cheaper flights. About 950,000 Canadian passengers use Bellingham and Seattle airports instead of YVR each year, according to a report prepared by the Canadian Airports Council in March.

Canadian airports are losing 4.5 million Canadian passengers to airports just across the line, which has the senate committee report calling for the establishment of a National Air Travel Strategy, and an end to the practice of charging airports ground rent.

Senator Dennis Dawson is chair of the senate committee that wrote the report, and he says Canada is losing $1 billion a year in air travel alone from Canadians who choose to travel out of U.S. airports.

He says it’s quite natural for people to look for the best deal, and that a family of four could save as much as $1,000 by flying out of the United States because the Americans subsidize their airports while the Canadians charge them rent and expect users to cover costs like security and air traffic control.

“The Government of Canada should stop treating airports as a source of public revenue,” Dawson said.

People flying out of Canadian airports often pay 60 and 75 per cent above the airline’s base fare to cover taxes and charges, compared to between 10 and 18 per cent in the U.S., the senate report found.

The CAC report found that a family of four could save $1,365 flying out of Bellingham instead of Vancouver for a vacation in Hawaii. The figures show that the total cost for the family to fly would be $3,165.76 out of Vancouver, including $440.44 in taxes and fees, while the cost to fly out of Bellingham would be $1,800.32, including $151.20 in taxes and fees.

Discovering the reasons the prices are so high in Canada was part of the senate committee’s work.

“... [T]here was a consensus among the majority of witnesses who appeared before the committee that the high cost of flying in Canada is directly attributable to government taxes, fees and other charges that are either paid by passengers directly, or are charged to airports or airlines and passed on to passengers. This conclusion is supported by the findings of the World Economic Forum, which ranked Canada 125th out of 139 countries for ticket taxes and airport charges in 2011,” the report states.

“Government taxes and fees associated with air travel, starting with ground rents, need to be reduced to help make air travel in Canada more affordable and more competitive,” the report concludes.

Dawson said the committee found that the government should transfer ownership of the airports to the airport authorities, which would save them the cost of the rents.

The Vancouver Airport Authority pays Ottawa $34 million each year in rent, said Tony Gugliotta, senior vice-president of marketing and business development.

“[Eliminating the] rent would not solve the gap in ticket prices — it’s more than just rent,” Gugliotta said, adding that Canada has a philosophy that users should cover the cover of air travel while the United States subsidizes airports seemingly because they believe transportation is an enabler of economic growth.

“They view it as an investment,” Gugliotta said. For instance, a recent runway extension at Bellingham’s airport was paid for by the American government, while in Canada, airport improvements are paid for by departing travellers through the Airport Improvement Fee, which is $20 for passengers flying outside of B.C. and Yukon.

YVR serves a total of 17 million passengers each year, of which five million are travellers to the U.S. Gugliotta said most of the nearly one million passengers flying out of Bellingham are headed to destinations within the U.S.

“So 20 per cent of our U.S. traffic is using Bellingham or Seattle,” Gugliotta said. “It’s pretty significant.”

Traffic at Bellingham International Airport is up 115 per cent for the period 2007 to 2011, with 62 per cent of travellers coming from Canada, the Wall Street Journal reported.

Chris Youngson, who lives in North Vancouver, has flown to Las Vegas from Bellingham a half a dozen times and says he usually pays about $180 for the flight, and sometimes even less.

He says if the price difference fell under $50, he would fly out of YVR, especially since with a combination of bus, seabus and Canada Line, he can get from his home at the top of Capilano Road, he can get to the airport in just over an hour. The drive to Bellingham is 80.7 kilometres from Vancouver.

Both Henning and Youngson said the cheap parking at Bellingham’s airport — it’s $9 a day — is one appeal, as is the fact that the airport is small so that there are usually no waits for security or luggage.

“It’s 100 metres to the airport from the parking lot,” Youngson said. “There’s no customs, so usually I don’t have to wait at all.”

At YVR, long-term parking is $15.75 a day and the lot is not within walking distance to the terminal, but there is a shuttle bus. YVR is a high-end airport complete with duty free shops, full services restaurants and other amenities. Gugliotta said some travellers start their vacation at the airport.

But for Henning and Youngson, the bare-bones nature of the Bellingham airport is not a concern. The fact that Allegiant, which is one of the airlines flying out of Bellingham, makes passengers pay for their bags, or to pre-select a seat, doesn’t phase Henning.

“I’ve never had a problem. As long as you get there a bit early the seats are not a problem.”

As far as the extra luggage fees, Henning said it’s worth it to save half the airfare.

Gugliotta said 22 airlines signed on for an incentive deal YVR offered to keep airlines flying out of Vancouver that froze fees at 2010 levels, even if an airline increased their capacity or service.

Although he did not have specific numbers, Gugliotta said American passengers sometimes fly out of YVR because Vancouver’s airport has good deals on charter flights to Asia and Europe. He also said there are times that fares to American destinations like Las Vegas are cheaper out of Vancouver than Bellingham, and that it pays to shop around.

tsherlock@vancouversun.com

vancouversun.com/yourmoney

Read more: http://www.vancouversun.com/business/2035/Millions+Canadians+flying+airports+save+money/6797282/story.html#ixzz1y9hALT6Q

[Fido]

Taxes alone do not account for the difference between $630 and $230.

[Spinnaker]

Allegiant has one of the best marketing departments too. While you wait for the Skytrain you read their ads on TV screens and banners in the station. When the Skytrain pulls up to YVR, it is wrapped in a full banner ad about their BLI services, paying less, and website information. They certainly know their audience. I wonder if you'd ever see a YVR advertisement in Washington State...

[Thebean]

With all due respect to Allegiant, they sell one thing and one thing only: Price.

It's not rocket science, nor does it require any particular marketing genius.

Should the GoC ever develop the brains and vision to level the playing field somewhat, it'll be very interesting to see how well they do in the lower mainland and elsewhere in Canada.

Perhaps YVR should counter the Allegiant ads with something along the lines of:

"Cheap fares brought to you by the same folks who made a business in 1994 of operating clapped out DC9's, who expanded too quickly, got sloppy on maintenance and eventually augered Valujet 592 into a Florida swamp in 1996 killing everyone on board. Enjoy your trip".

For the record, I wouldn't let any of my family fly on Allegiant at any price.

[spreadsheet]

I believe that is actually AirTran, and now Southwest, not Allegiant.

[J.O.]

I think he meant that the same people built both companies on start-up.

[Don Hudson]

I wouldn't let any of my family fly on Allegiant at any price.

Actually, that's been my policy too - for years now. None of my family fly them. They fly Alaska/Horizon and if the price is slightly higher, so be it, still out of Bellingham.

[Fido]

A couple of weeks ago there was a cruise ship in drydock on the Northshore.

I would imagine that put more than a couple of dollars into the economy.

[Thebean]

The only reason the cruise industry has discovered Victoria is to be on side with the US Passenger Vessels Services Act of 1886 which requires a foreign flagged passenger vessel to make a stop in a foreign country when transporting passengers between US ports.

Of the 51 cruise ships arriving in Victoria in June 2012, 38 of them arrive between 6 and 7 pm and are gone by 11:59pm. All are traveling from a US port and to a US port. I would imagine that's about the shortest amount of time a cruise shop would/could stop anywhere. Having watched them in Kona for many years, they arrive at 5:00am and leave about 5:30pm, giving folks a full day to explore the area and spend their money buying cheap chinese chit at the local Wal Mart.

http://victoriacruis...cruise-schedule

If/when that act is changed, and the C$ stays where it is, I'd suggest that the infatuation with 7 hour stops in Canada, with 3.5 hours of daylight, even in June, will all but dry up.

Given the price differential in fuel, foodstuffs and liquor between the US and Canada, I would think it is highly unlikely the notoriously low margin cruise industry are loading up in Victoria/Canada on any consumables.

I would imagine that after the passengers have docked, cleared Canadian Customs and found transportation to and from Ogden Point into downtown Victoria, which, whilst deceptively close, is not walking distance, especially for the average cruise ship clientele, there is precious little time to spend their dollars in Victoria.

There are all kinds of studies showing the value of cruise ship passengers to local economies.

I'd suggest they are mostly bunk, especially as they pertain to the economic impact on Victoria. Most cruise schedules simply do not allow their passengers anywhere near enough time on shore to spend ANY money locally. I would think most folks would simply stay on board and enjoy a nice meal in the dining room, especially given the arrival times smack in the middle of the dinner hour.

The point is, various levels of government bend over to attract this sort of tourist / traveller with defacto subsidies at every level, but steadfastly ignore the economic impact of the literally thousands of travellers arriving into Victoria / Vancouver Island by air, day in, day out, 365 days a year.

[mo32a]

^I will disagree with you on that. When there are cruise ships in port the town is chock-a-block with tourists, and they are all clutching bags of newly bought goods. There is a steady stream of busses taking people to Butchart and sightseeing.

[Thebean]

That's a pretty tight schedule.....docking at 7pm, clear customs, round up everyone on the bus, 35 minutes to Butchart, fly through the Gardens as darkness falls, everyone back on the bus and then 35 minutes back to the boat for 11pm for an 11:59pm departure

Not exactly a leisurely time compared to most other ports of call..... A bit of an after thought, actually, and certainly not whole lot of revenue being generated in the community, other than to a bus company for a couple hours of bus time and to the Butchart Gardens.

If the stop in Victoria was similar to the sorts of stops made elsewhere, where visitors have a full day on the ground, I'd buy into the economic argument.

The point is that an inordinate effort is made to attract cruise ship passengers whilst passengers arriving by air must bend over and assume the position as various levels of government undertake a cashendectomy on their wallets.

The cruise ship panacea is completely ass backawards.

[J.O.]

Is there any customs clearance process to go through? I thought that stuff was all taken care of in advance and processed prior to arrival in port.

[Thebean]

http://victoriacruis...cruise-schedule

If you look at the schedule, the great majority of cruise ship arrivals in Victoria / Ogden Point this summer are between 18:00 and 19:30 from points in Alaska and leave at 23:59 for Seattle.

If they are even an hour late, the opportunity to extract cash from the passengers during their 6 hour or less stay in Victoria decreases exponentially.

There are very, very few arrivals that allow for what most people would consider a "full day" on the ground.

I'd suggest the economic impact of any given morning's passengers arriving into YYJ vastly exceeds that of the cruise ship passengers.

[Thebean]

Note sure how you figure that ....... the ships are dropping 2 to 3,000 pax per ship + crew and even for 6 hours that has to be much greater impact than the AM arrivals into YYJ.

I very much doubt anything close to the full complement disembark to tour the city in the 6 hour or less window.

Given the time to dock with a scheduled 6 pm to 7:30pm arrival, disembark, complete immigration formalities, get to downtown and be back on board, likely by 11pm for a 11:59 departure, I suspect most simply stay on board to enjoy their last night of their cruise, with their money spent elsewhere, especially if the weather is crappy, which, as usual, it is on the West Coast. They aren't calling it Junuary for nothing!

I see people wandering around the breakwater and taking obligatory shots of the Empress and a few shopping bags with tourist trinkets purchased on the first hundred yards of Government Street.

The larger economic impact of cruiseships on Victoria's local economy, most of which arrive in the early evening, is far, far less than advertised.

Vancouver sees way bigger bucks as it is a terminus. Lots of hotel rooms, taxis, tours, restaurant meals etc etc.

[mo32a]

^I'm still going to disagree with you on this. A friend of mine runs a shop in the lower harbour and he is very dependant on cruise ship traffic. Butchart does a roaring business. I agree Vancouver does more with hotel rooms etc. but they are 10 times the size as well, as well as a spot for originating cruises.

[Thebean]

^I'm still going to disagree with you on this. A friend of mine runs a shop in the lower harbour and he is very dependant on cruise ship traffic. Butchart does a roaring business. I agree Vancouver does more with hotel rooms etc. but they are 10 times the size as well, as well as a spot for originating cruises.

How's your friends business in the winter?

I was walking in d/t Victoria the other day and I spotted a ton of recent retail vacancy along lower Pandora, Government, Johnson and Wharf Streets. It used to be pretty cyclical, with stores opening in March and pulling the pin by about Nov 1st. To see all the empty space in peak tourist season, with the "thousands of heavy spending" cruise ship passengers in the city is, er......counter intuitive......

Cruise ship largesse is extremely localized. In Victoria, The economic spinoff drops exponentially every 250 yards one moves from ground zero, lets call it "Milestones", on the inner harbor front.

The economic impact of air travel in and out of a community wildly exceeds that of cruise ship passengers and should not be used to subsidize that business.

[mo32a]

My friends business is much slower in the winter, which just goes to prove how important the cruise ship passengers are to some businesses.

You stated that most cruise ship passengers don't disembark or buy anything, you're wrong, and I don't believe anyone mentioned "thousands of heavy spending" cruise ship passengers despite your quotes, although at $99 for 2.25 hours of entertainment isn't chump change.

Tourism is seasonal, some seasons worse than others.

As to the airport having a bigger economic impact I agree that is the case, but to suggest that the cruise ship passengers are just sitting snuggly in their cabins waiting to leave is .....counter intuitive.

[Thebean]

I have no doubt its important to your friends business in the few blocks downtown that live and breath cruise ship business.

The point I'm making is that in the big scheme of things, the economic impact of whatever % of cruise ship passengers who actually disembark for their 4 hour stay in Victoria is extremely localized.

The economic impact of the airport wildly exceeds the cruise ship business. One should not underwrite the other.

[mo32a]

^On that we agree.