By Mark Milke, Research Director, Frontier Centre for Public Policy
CALGARY, AB,
For those lucky enough to spend some holiday time in Europe this summer, consider the following: Imagine flying between 10 different cities: London-Edinburgh, Paris-Toulon, Milan-Rome, Duesseldorf-Munich, and Barcelona-Madrid. If you booked those flights, all return, 27 days in advance, you’d pay the not-so-princely sum of just $525.72. And here’s the kicker: that includes all taxes and fees.
The total return distance flown for those flights is 3,358 miles (5,404 km). Now pick five flights in Canada with similar total mileage: Calgary-Victoria, Toronto-Ottawa, Halifax-Montreal, Vancouver-Kelowna, and Regina-Winnipeg. Total return mileage clocks in at 3,336 miles (5,369 km) but the bill would be $1,499.62 (including taxes and fees).
Airfares cheaper in Europe
Consider a U.S. comparison with the same parameters. For the five-flight domestic case study between 10 cities, 3,334 miles (5,366 km) could be travelled with a total cost of $934.72 (all examples are in Canadian dollars). U.S. bargains abound in comparison to Canada. For example, a Winnipeg-Regina flight with 665 return miles (1,070 km) would cost $373.35. A similar U.S. flight, Milwaukee-Des Moines at 616 miles return (919 km), can be had for $207.14.
Contrary to what one might guess, taxes and fees don’t explain the cheaper European fares; they’re higher in Europe – at 52 per cent of the bill in the five-flight example. In Canada, they’re 30 per cent. Taxes and fees are 14 per cent of the U.S. cost but even if Canadian taxes and fees were halved, Canadian consumers would still pay substantially more in the above examples.
Careful readers will note all of the above selections are domestic flights. Now, consider cross-border flights using all the same qualifiers. (I used Kayak.com, which tracks all fares, and
Travelmath.com to calculate travel distances.)
In Europe, one could fly these five cross-border flights — Munich-Rome, Dublin-Berlin, Vienna-Athens, Prague-Barcelona, and London-Paris, travel 6,212 miles in total (9,997 km), and pay $941.93. Taxes and fees account for 41 per cent of the total.
In North America, and with a slightly shorter flying distance in total of 6,004 miles (9,663 km) with cross-border flights such as Toronto-Chicago, Vancouver-San Francisco, Calgary-Denver, Winnipeg-Minneapolis, and Montreal-New York, the total airfare would cost $2,034.21 with taxes and fees accounting for 22 per cent of the total fare price.
If one picked those same flights but began the voyage on the U.S. side, the bill would be $1,971.99, with taxes at 21 per cent, so almost equal to Canada. Unsurprising, given the flights are mirror images of each other.
In short, when it comes to the fare-friendly skies, Europe is by far the cheapest, the U.S. comes second, and Canada is dead-last.
If taxes and fees don’t explain the difference, what does? In short, a lack of competition.
In the European Union, since 1997, any airline from any EU country can pick up and drop off passengers anywhere, regardless of the airliner’s home country.
As a result, the European market is in distinct contrast to the airline business in North America, where both U.S. and Canadian governments prohibit “foreign-owned” airlines from offering domestic flights in our markets.
Canada signed an agreement with the European Union last year that begins to liberalize air travel. But full “cabotage” – the ability for foreign airlines to compete in each other’s markets – is envisioned as only a distant policy possibility. Current Canadian policy, both enunciated by federal Transport Minister John Baird last year and on the department website, is blunt in its rejection of a true open skies policy: “Under no circumstances will the policy approach include cabotage rights – the right for a foreign airline to carry domestic traffic between points in Canada.”
The result is, for example, that Air France can fly a passenger from Paris and drop her off in Toronto. It cannot pick up a Toronto passenger and fly her to Vancouver, or vice versa. This anti-competitive policy means the airline industry, which might otherwise expand (lower fares attract more passengers), and consumers, suffer.
In contrast, Europe’s full embrace of cabotage has led to doubled passenger traffic growth since full competition was allowed, the emergence of low-cost carriers (now a third of all carriers), and an increase in jobs, according to the European Commission – Mobility and Transport, the EU body responsible for regulating Europe’s open skies.
Small market benefit
Some argue Canada can’t duplicate such results because we’re a small market relative to Europe or the U.S. But that’s exactly the point. It’s why Canada should drop the barriers against competition and become part of a larger North American market, and do the same vis-a-vis the EU.
In Europe, even less popular routes, the ones between smaller cities, benefit from the EU’s open skies policy. After full liberalization, the number of routes with more than two competitors increased by 400 per cent.
The EU and Canada made a start on liberalizing air travel in a 2009 agreement, while the Canada-U. S. equivalent is far more tentative. But neither model will, any time soon, offer the possibilities that now exist within the European Union itself. The approach in the liberalized European market – full cabotage on all domestic routes – has been far more daring and, as a result, far more positive for consumers.
Mark Milke is the author of Canada’s Not-So-Friendly Skies, www.fcpp.org.
