Ontario Government Seeks To "wing" Aviation Industry

[Guest longtimer]

Dumb, dumber Too bad they got back in.

July 14, 2014 4:50 PM
Canada's Airports Disappointed with Ontario Move on Aviation
OTTAWA, July 14, 2014 /CNW/ - The Canadian Airports Council today said it is disappointed with the Ontario provincial government's decision to go ahead with the tripling of its tax on aviation fuel, calling instead for the province to work more closely with the aviation sector on ways to strengthen it.

"Aviation is an important industry for Ontario, helping drive other parts of the economy and providing Ontarians with access to the world," said Canadian Airports Council President Daniel-Robert Gooch. "Airports are working to help Canada grab a healthy share of the growing global market for air travel and tourism. It's time for the province to work with airports, air carriers and our partners in tourism and business to support this sector's growth in ways that will benefit not only industry employers, but consumers and taxpayers as well."

As formalized in today's budget, Ontario's tax on aviation fuel will triple – an increased cost that will be passed on to air travellers and shippers in the form of higher fares and shipping costs. Airport opposition joins concerns expressed by airline and tourism partners, while the Canadian Chamber of Commerce has named travel and tourism competitiveness as one of the top ten barriers to Canadian competitiveness two years in a row.

It is not clear that the increased aviation fuel tax will result in additional revenue for the province. Vijay Gill of the Conference Board of Canada, who has examined the economic costs associated with losing about five million air passengers to cheaper U.S. border airports, says a significant portion of the new tax revenue projected by the measure could be lost if traffic decreases at Ontario airports as a result.

Meanwhile, a recent report from Fred Lazar of the Schulich School of Business projects a $67-97 million cut to provincial gross domestic product from the measure, with a negative impact on 2,000-3,000 jobs.

"As Canada's largest province and home to several of the largest operational hubs for aviation in the country, Ontario should be working to take greater advantage of opportunities for growth of this vital sector," said Mr. Gooch. "Ontarians want vibrant, competitive air access. Let's take this as the impetus to instead start talking instead about ways to do that."

Canadians say the cost of air travel is one of their top concerns. Other important files for airports in Ontario include ensuring the secure, efficient flow of travellers through security and border services at airports, the need for greater marketing/promotion of Canada in overseas tourism markets and infrastructure funding challenges for smaller airports.

About the Canadian Airports Council

The Canadian Airports Council (CAC), a division of Airports Council International-North America, is the voice for Canada's airports community. Its 45 members represent more than 120 airports, including all of the privately operated National Airports System (NAS) airports and many municipal airports across Canada. Canada's airports are independently operated by non-share capital corporations that are fully responsible for self-funding their operating and infrastructure costs, and balancing the needs and interests of the communities they serve. In 2012, Canada's air transportation industry had a $34.9 billion economic footprint, supported 405,000 jobs, and contributed more than $7 billion to federal taxes.

SOURCE Canadian Airports Council
For further information: Daniel-Robert Gooch, President, Canadian Airports Council, (613) 560-9302 ext 16, daniel.gooch@cacairports.ca

[CanadaEH]

Idiots.

[Thebean]

The airlines should quantify the tax and add it as a highly visible Ontario Aviation Tax Surcharge so consumers know precisely why fares have gone up.

The people running US border airports must think Canadians are completely stupid.

We make it easier and easier every year for them to poach more and more potential customers and provide high paying jobs for folks in US citizens in border cities..

[FA@AC]

The airlines should quantify the tax and add it as a highly visible Ontario Aviation Tax Surcharge so consumers know precisely why fares have gone up.

The people running US border airports must think Canadians are completely stupid.

We make it easier and easier every year for them to poach more and more potential customers and provide high paying jobs for folks in US citizens in border cities..

I agree with you on the stupidity of taxing the Canadian airline industry to the extent that the federal and some (Ontarian) governments do, but are the jobs at Allegiant and Spirit that are silly tax policies help to create really high paying jobs?

[Maverick]

I agree with you on the stupidity of taxing the Canadian airline industry to the extent that the federal and some (Ontarian) governments do, but are the jobs at Allegiant and Spirit that are silly tax policies help to create really high paying jobs?

Does it really matter? The bottom line is that the jobs aren't in Canada.

The same people elected Rob Ford so I suppose my surprise is probably unwarranted...

[mrlupin]

The artilcle is vague on the present level of the fuel tax. Tripling the tax might sound huge but if the level is presently 0.1%, the hike has a moderate effect.

Does anyone know what level the tax is at?

[J.O.]

Oops! I read it wrong. The current tax is 2.7 cents per litre and the budget proposes to raise that by 4 cents per litre over 3 years. 130% increase. Nice!

[moeman]

Isn't it raised 4 cents to 6.7?

[Zan Vetter]

What tax has ever been 0.1%?

[canadairguy]

One cent this fall and one cent in 2015, 2016 and 2017.

[Guest longtimer]

The current tax is 2.7 cents per litre and the budget proposes to raise that to 4 cents per litre.

Seems that the actual raise is to 6.7, at least according to the following article. so on 126,000 litres of fuel (YYZ-NRT) the tax would change from $2520 to $8442 per flight or an additional (at 251 seats) $25.61 per seat. Not sure what the actual burn is so my number is based on a full fuel load.

Canada’s airlines and airports are gearing up to fight Ontario’s plan to more than double the tax on aviation fuel, arguing it will increase the number of Canadians travelling out of U.S. airports where taxes and fees are substantially lower.

The tax will rise from its current level of 2.7 cents a litre to 6.7 cents by April 1, 2017, under the Ontario budget that will be reintroduced Monday. It’s the same budget presented last month by the Liberal government of Premier Kathleen Wynne, which went from a minority government to a majority after a June election.

“This is unbelievably punitive,” Ben Smith, Air Canada’s chief commercial officer, said in an interview. “It’s very bad not only for us, for travellers. It’s bad for Toronto and it’s bad for Ontario, and not just bad for Air Canada, bad for any airline that does significant amount of business in Ontario.”

The tax increase comes as airlines face increased volatility in jet-fuel prices because of the crisis in Iraq, and as they continue to adjust to the decline in the value of the Canadian dollar, which has also hit airlines because the price of fuel is measured in U.S. dollars.

At the full hit of 6.7 cents a litre, the extra tax will cost Air Canada $50-million annually, Mr. Smith said, but he and other industry officials pointed to the impact it will have on air traffic.

An estimated five million Canadians head across the border annually to fly out of U.S. airports or on U.S. airlines, with about three million from Ontario. That’s in part because fares are cheaper, but taxes and fees are a key element of the higher Canadian fares.

“Good air transportation is critical to any economy – Canada is no different – and we’ve effectively priced ourselves out of the marketplace,” said Scott McFadden, president of Thunder Bay International Airport Authority in Thunder Bay.

Travellers are voting with their wallets, said McFadden, who estimates about 30,000 to 40,000 people annually drive from his part of the province to Duluth, Minn., or Minneapolis. The Thunder Bay airport handles about 780,000 passengers a year.

“It’s really difficult to make an argument that it’s more convenient to get in a car and drive for three and a half, four hours [to Duluth] or six hours in the case of Minneapolis,” he said.

Someone taking a Thunder Bay-Toronto-Tampa, Fla., flight would pay a fare of $758 return with fees and charges of $153.34 included. A flight from Duluth to Tampa via Minneapolis would cost $352 US with $65.49 in fees and charges.

Susie Heath, a spokeswoman for Ontario Finance Minister Charles Sousa, said the estimated revenue of $135-million Cdn from the tax during the next three years will be spent on public transit and transportation infrastructure.

The fuel has been taxed at a rate of 2.7 cents a litre since 1992, Heath said, which is significantly lower than the tax on gasoline and diesel fuel.

Ontario’s move is the opposite direction taken by British Columbia, which eliminated its aviation fuel tax on international flights in the 2012 provincial budget and credits the move for contributing to decisions by 22 airlines to add flights into and out of Vancouver.

Smith of Air Canada said the tax is a blow to the airline’s effort to make Pearson International Airport in Toronto a hub for international travel that will draw business travellers from Boston, Philadelphia and other eastern and northern U.S. cities who are flying to Asia or other non-North American destinations.

“I already have a huge disadvantage versus those cities because of airport rent, because of all the other taxes we currently pay,” Smith said. One of Air Canada’s drawing cards is that it offers the only daily service to Haneda airport in Tokyo from North America, but passing on an increase in the aviation tax will make it more difficult to attract U.S. travellers, he said.

“This is basically putting a roadblock in front of economic development,” he said. “Any city that punches above its weight in aviation and gets all the benefit for their home market would never do this.”

http://www.bnn.ca/News/2014/7/14/Airlines-to-fight-unbelievably-punitive-Ontario-fuel-tax-.aspx

[dagger]

The federal excise tax is four cents a litre and has resisted appeals to both Liberal and Conservative government to abolish it. Same with airport rents.

[rudder]

Every layer of government has milked the aviation industry for decades. That is not likely to change anytime soon. The feds could have lead by example but have repeatedly chosen not to do so. The airlines should respond by moving as much infrastructure offshore as possible.

[Lakelad]

[GDR]

I couldn't have imagined any level of government making the already doing anything to make the already atrocious situation worse.

At least this improves the outlook for the growth of the hubs in YUL,YYC, and YVR. In the long run this is going to reduce revenue for Ontario. YYZ doesn't have to be the centre of the aviation universe in Canada.

[dagger]

Every layer of government has milked the aviation industry for decades. That is not likely to change anytime soon. The feds could have lead by example but have repeatedly chosen not to do so. The airlines should respond by moving as much infrastructure offshore as possible.

I guess you can cite the heavy maintenance sphere as a good example of that.

[Zan Vetter]

I think that aviation workers are largely regarded as highly paid, unionized, and underworked, and therefore an easy target for tax. Air travel is seen as largely upper class, for high earners or paid for by corporate budgets, and therefore also an easy tax target. Furthermore, the air passenger 'diaspora' as it were, is largely unorganized, which makes effective group lobbying against idiotic policies like this very difficult. Ironically that very disorganization is indicative of how broadly air travel is used; rather than being for the rich, it is used by many. Add the fact that jet fuel is a pollutant, and you have an iron-clad election-ready policy idea.

Imagine campaigning against it, which Hudak or any other didn't seem to do, rather they just ignored it. "We're against the tax on jet fuel, in fact we'll eliminate it!" [a progressive policy idea] Liberals: "so you are in favour of pollution, and reducing taxes on the rich and corporations like (insert sinister orchestra riff) AIR CANADA?!" Yet again, the worst policy ideas actually make the best election promises.

The best we can hope for is that these new ULCC's opt not to operate in Ontario at all, which is now even more so a jurisdiction hostile to low aviation costs. The Feds ordered the end of two lockouts to protect march break because that issue pitted regular folks against unionized workers, a political slam dunk. Ironically, this tax policy will end up doing many multiples more damage to regular folks that would have that march break impasse.

I Already Gave At The Office take on even greater meaning, who would have thought it possible..

[rudder]

I think that aviation workers are largely regarded as highly paid, unionized, and underworked, and therefore an easy target for tax. Air travel is seen as largely upper class, for high earners or paid for by corporate budgets, and therefore also an easy tax target. Furthermore, the air passenger 'diaspora' as it were, is largely unorganized, which makes effective group lobbying against idiotic policies like this very difficult. Ironically that very disorganization is indicative of how broadly air travel is used; rather than being for the rich, it is used by many. Add the fact that jet fuel is a pollutant, and you have an iron-clad election-ready policy idea.

Imagine campaigning against it, which Hudak or any other didn't seem to do, rather they just ignored it. "We're against the tax on jet fuel, in fact we'll eliminate it!" [a progressive policy idea] Liberals: "so you are in favour of pollution, and reducing taxes on the rich and corporations like (insert sinister orchestra riff) AIR CANADA?!" Yet again, the worst policy ideas actually make the best election promises.

The best we can hope for is that these new ULCC's opt not to operate in Ontario at all, which is now even more so a jurisdiction hostile to low aviation costs. The Feds ordered the end of two lockouts to protect march break because that issue pitted regular folks against unionized workers, a political slam dunk. Ironically, this tax policy will end up doing many multiples more damage to regular folks that would have that march break impasse.

I Already Gave At The Office take on even greater meaning, who would have thought it possible..

If the feds think that air travel is a 'luxury' then why do they also insist that it is a de facto 'essential service' without which the CDN economy would suffer irreparable harm (witness the repeated intervention in industrial affairs at AC/Jazz and intervention on behalf of AC to prevent insolvency due to paper pension deficits that exist only because of outdated government regulations)?

Cannot have it both ways.

[Zan Vetter]

That's my point. But they can, and they are. The liberals got elected, it's not like that platform policy was a secret.

[rudder]

That's my point. But they can, and they are. The liberals got elected, it's not like that platform policy was a secret.

Provincial government has nothing to do with with airline labour relations or pension legislation for airlines both of which which fall solely under the federal jurisdiction.

The provincial governments are just another parasite feeding off of the airlines.

[Zan Vetter]

My point was more that politicians of varying levels and party affiliation all seem to be able to play the stereotypical viewpoints of the aviation and airline industry to their campaigning advantage, resulting in universally poor aviation policy.

[mrlupin]

Consumers are paying an average of 24.5 cents of tax per liter of gas. Why the taboo for an aviation fuel tax? Does any part of the tax go back into airports and infrastructure or is it a revenue stream?

http://en.wikipedia.org/wiki/Motor_fuel_taxes_in_Canada

[dagger]

Consumers are paying an average of 24.5 cents of tax per liter of gas. Why the taboo for an aviation fuel tax? Does any part of the tax go back into airports and infrastructure or is it a revenue stream?

http://en.wikipedia.org/wiki/Motor_fuel_taxes_in_Canada

I've made that point over and over. The feds got out of airports and air traffic control. The provinces have never had much to do with commercial aviation. The only investment Ontario is making is the UP express train to the airport here.

[boestar]

I've made that point over and over. The feds got out of airports and air traffic control. The provinces have never had much to do with commercial aviation. The only investment Ontario is making is the UP express train to the airport here.

and the only reason that is getting done is because of the Pan AM games next year. Nothing at all to do with ongoing support of the Airport

[dagger]

and the only reason that is getting done is because of the Pan AM games next year. Nothing at all to do with ongoing support of the Airport

I disagree there, We're not talking about the Olympics. The investment would not be made just for the Pan Am games. The project originally was a private sector initiative started long before the Pan Am Games were awarded to Toronto.