If air passengers don't pay fees, Canadian taxpayers will, experts respond to WestJet CEO

CBC

2 days ago

A speech by WestJet CEO Alexis von Hoensbroech is reigniting the conversation about air travel costs in Canada — a conversation he stands to benefit from more than Canadians do, some experts say.
Speaking to a business audience in Calgary Tuesday, von Hoensbroech compared extra air ticket fees in Canada and the United States in a slide presentation and called on the federal government to reduce those fees.
According to von Hoensbroech, in Canada, sales tax, navigation fees, airport improvement fees and security fees amounted to $133 in a round-trip ticket price, whereas south of the border the excise tax and segment fee, passenger facility charge and security fee added up to $49.
"If the government wants to unite Canada and take down internal trade barriers, then reducing the cost of air travel by reducing fees that are imposed on air travel and ultimately make tickets cheaper would be the right thing to do," von Hoensbroech told reporters, according to the Canadian Press.
But two air travel experts point out that what von Hoensbroech didn't say is who he believes should pick up the tab for those costs.
"He's really looking at just one side of the equation," said John Gradek, an aviation management lecturer at McGill University.
"If the charges aren't levied against the passenger, who's going to pay?"
'No such thing as free lunch'
Gabor Lukacs, who founded and runs an air passenger advocacy group, called von Hoensbroech's statements "populist" and echoed Gradek.
"I'm sure he know as much as anybody else in business: there's no such thing as free lunch." Lukacs said.
"Someone has to pay for the airports, someone has to pay for security.… Where is the money going to come from?"
In his speech, the CEO questioned why transport infrastructure like bridges, passenger rail and ferries get federal support, while the government imposes a host of costs on the airline industry that are then passed along to consumers.
"We need to build Canada — now even more than in the past — and aviation plays a key role," he said.
Gradek said von Hoensbroech seemed to suggest Canadian taxpayers be charged for airport infrastructure costs, security and air traffic control.
He says that while he agrees air travel costs are high in Canada, much of that has to do with the small size of our population in relation to our large land mass, and our choice to deregulate the industry in the 1980s.
Smaller communities left behind
Many small, remote communities rely on air travel that is hardly serviced by larger carriers like WestJet, which in fact dramatically reduced its regional services during the pandemic in favour of high-density markets, such as Calgary-Toronto and Vancouver-Montreal.
Flights to and from northern communities, for example, are often prohibitively expensive, Gradek says.
"They just charge what they want to charge," he said. "To me, we're considering the population north of [the 50th parallel] as second-class citizens."
Gradek believes that if large carriers want to offset costs onto taxpayers in order to be able to offer lower prices, they should also have an obligation to service regional areas at low costs as well.
"If it wasn't for air service, you wouldn't have a country," Gradek said, agreeing with von Hoensbroech that air travel is essential to Canada.
But adds that, "if you're going to have that type of philosophy and that type of mindset, that you need to have some oversight to make sure that the decisions being made by the private sector … provide services to all Canadians on a fair and equal footing."
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Gradek says deregulation of the airline industry in Canada has ended up concentrating the power among few large carriers, who have chosen — for business reasons — to focus on big cities rather than regional transport, which has in turn resulted in less competition among companies.
The federal government in 2018 increased the percentage of foreign shareholder value Canadian airline companies could sell from 25 per cent to 29 per cent (the U.S. has a similar policy) to stimulate lower-cost airlines, but low-budget airlines have struggled to stay afloat.
More competition solution to passenger woes?
Ottawa resident Melissa Cummings was stranded an extra five days at her resort near Cancun, Mexico for an extra five days in 2023 — sometimes having to sleep on a bench because the hotel didn't have rooms when Sunwing failed to pick her up at a convened time.
Though she was compensated $500, she reckons the whole ordeal wound up setting her back nearly $3,000 in extra costs.
"I have no clue to this day why I was stranded," Cummings said. She believes more competition among airlines could help force companies to be more accountable to their passengers, and lower costs.
The 45-year-old and her daughter, who is in university, have a tradition of taking a five-day trip together every year. She says that while the pair haven't to explore Canada more, they usually opt for a destination in South America with Latin American airlines because flights are cheaper.
"We have such a beautiful country. My my daughter moved to Canada when she was 8. She's going to be 21 and she's hardly seen our country," Cummings said.
Lukacs says the federal government should be the one stepping up when it comes to enforcing passenger rights, but he agrees that "increasing competition — that's very, very important and pressing."
WestJet calls for review
Increasing competition does not appear to have been among the solutions proposed by WestJet CEO von Hoensbroech.
In response to a request for comment, WestJet spokesperson Josh Yeats said, "Alexis's comments yesterday were aimed at helping to draw attention to the fact that Canada is one of the most expensive places in the world to operate an airline."
Yeats did not say whether von Hoensbroech is calling for taxpayers to foot costs but that the company would like to see a review of airline regulations in Canada.