The federal government should work on reducing costs for the entire airline industry instead of contemplating a possible bailout of struggling Air Canada, says the head of Calgary’s airport.

Eliminating airport rents and cutting other taxes for security and aviation fuel would be a good start in helping restore a level playing field and lowering costs for travellers in trying times, Garth Atkinson, president and CEO of the Calgary Airport Authority, told a Calgary business audience last week.

While rumours continue to circulate in Ottawa that the government plans to ease up temporarily on airport rents – it will collect about $264 million this year from Canadian airports – Atkinson and other airport chiefs are calling for an immediate moratorium. Every dollar the federal government reduces in federal airport rent would be passed on to air carriers in reduced fees and charges, he said.

The Calgary airport is paying about $23.4 million in federal rent this year, which amounts to 36 per cent of its operating costs, but those rents are expected to increase to more than $50 million by 2006.

“That noise you hear coming from the east is probably the Federal Airport Rent cash register, working overtime,” Atkinson said wryly.

Air security taxes have added to the burden by extracting nearly $300 million from the industry last year, while the federal government rakes in up to $90 million each year in fuel excise taxes.

Reducing or removing these taxes should be the only role the federal government plays in helping Air Canada, Atkinson said, adding it’s important that the struggling airline be allowed to sort out its business affairs with its creditors, employees and shareholders.

“Unfortunately, I think there’s a good chance” the federal government will be involved in bailing out Air Canada, said Atkinson. “That’s why we’re encouraging them to absolutely stay out of it.”

The Canadian Airports Council estimates that Montreal-based Air Canada, which is $12.9 billion in debt and has filed for protection from its creditors, owes about $80 million in unpaid fees to airports across the country, money mostly used for airport improvement projects.

The airline owes Calgary International Airport $5 million, and an additional $2.5 million to Edmonton Airports. Both airport authorities have said they do not expect the debt will be repaid. In Calgary, officials will meet this week to discuss where to pare costs to make up the estimated loss of four per cent of the authority’s annual revenue, likely on near-term items such as maintenance and operations, or the possible deferral of capital projects.

Atkinson said the airline industry has managed to weather the challenges posed by the war in Iraq, high fuel prices, the SARS outbreak and even ice storms in Toronto that closed down the country’s largest airport. It is the “legacy” air carriers – those with low labour productivity and high wage rates – that are stumbling, he said, while airlines such as Calgary-based WestJet and Southwest in the U.S. continue to thrive.

“You have to look beyond individual air carriers,” said Atkinson. “This industry will prosper if left alone, and if the cost burns of government are reduced and removed. If you look back over the past 10 years, airlines have come and gone, they’ve merged, all kinds of things have happened, yet there are millions of people flying. There will be millions of people flying tomorrow . . . the industry will continue to change, as it has over the past 10 or 20 years.”

Meanwhile, Air Canada announced last week that its total revenue passenger miles fell 10 per cent last month compared to March 2002, with capacity decreasing by 5.5 per cent.

“While North American competitive conditions continue to be difficult, the war in Iraq together with Severe Acute Respiratory Syndrome (SARS) have further suppressed the demand for air travel, particularly internationally,” said Rob Peterson, the airline’s executive vice-president and chief financial officer.

The timing of Easter this year, in April rather than March, also accounted for a portion of the year-over-year decline, he added.

Peterson said Air Canada will move to reduce its capacity by 12 per cent in April and 16 per cent in May to better match supply with demand.