Canadian air travellers are being taken for a ride by excessive taxes, industry organizations say.
The head of Ottawa-based Air Transport Association of Canada (ATAC), the voice of commercial aviation in Canada, is calling on the federal government to eliminate or reduce the air travellers security charge (ATSC). The fee was set up in the wake of the Sept. 11, 2001 terrorist attacks to help fund airport security.
"This over-taxation is unfair to Canada's passengers and should stop," says ATAC president and CEO Sam Barone.
According to ATAC, Ottawa reported a surplus of revenue over expenses of $80 million in regards to the security charge for the fiscal year ending March 31, 2005 - the most current audited figures that are available.
ATAC also wants to know where about $220 million in collected security charge revenue has gone, saying it was not spent on the Canadian Air Transport Security Authority (CATSA), a Crown corporation that protects the air transportation system.
"It is clear that governments can always find ways to spend money they shouldn't have collected in the first place, but that doesn't make this tax grab any more appropriate," adds Barone.
Finance Canada, which collects the fee, has already reduced the ATSC more than once since it was introduced on April 1, 2002. Currently the fee ranges between $9.90 and $17, depending on whether travel is within Canada, transborder or international.
Mike Skrobica, ATAC's vice-president for industry monetary affairs, says if there's a one-per- cent increase to the gross fare, there will be an equivalent one- per-cent decrease in air-travel demand, The federal transport department has said there are no plans to reduce or eliminate the ATSC and says the surplus recorded through 2004-2005 does not provide a sustainable basis for reducing ATSC rates. Ottawa also says preliminary numbers this year indicate that expenses for air travel security will likely exceed ATSC revenue by a modest margin.
ATAC is not alone in the battle to cut the security tax. Both the Canadian Airports Council (CAC) and the Association of Canadian Travel Agencies (ACTA), along with a number of the country's major airports, say that Ottawa must act now to deal with a transportation sector that's been unfairly burdened with fees and taxes while other modes of travel, such as rail and bus service, are left alone.
"We've said for some time that if they're going to charge it, all the funds need to be used for aviation security and that it needs to be transparent," says Jim Facette, president and CEO of the CAC, the industry association for Canadian airports. "We have also said that aviation security is a public good, so why is it the only mode of transportation that the user pays for with a security fee?" ACTA, which represents 2,600 small, medium-sized and large travel agencies employing 18,000 retail travel professionals, echoes the point.
"ACTA has been asking for the removal of the air travellers security charge since its inception, advocating that every other significant security enhancement made in the wake of 9/11 was financed from tax revenues," president and CEO Christiane Theberge said in a statement.
"It's time that the government acts to significantly reduce the unsustainable burden of almost $1 billion of government fees and surtaxes imposed on the air travel sector that are ultimately passed down to the travel consumer."
ATAC's Barone says it all comes down to a money grab.
"We're treated like a cash cow and we're under the strain of competition," says Barone. "We're not asking for a subsidy, we're not asking for a handout. We're open to free markets and competition. We want to be able to give our customers a chance to travel with us. But we want an even playing field."
Executives at some of Canada's busiest airports are also upset by the continuation of the tax.
"In the discussions that I've had with federal government representatives, they want as much money as they can possibly get - where people are not going to make a lot of noise about it," says Barry Rempel, president and CEO of the Winnipeg Airports Authority.
"It's very comfortable for the departments involved just to not change. Whether Canada is competitive or not it just doesn't seem to be a priority for them."
Rempel says although Winnipeg has one of the fastest-growing business air travel markets in the country, his airport is not seeing the growth it should be for such a strong economy. The airline industry's competitive nature is also a factor, he adds.
"Border airports are actually picking up traffic from Canadian cities," says Rempel. "It's just inappropriate to have a hidden tax where the proceeds go into the general revenue of the country to do other things."
Rempel notes people tend to forget Air Canada was recently under bankruptcy protection, and even though the industry is now in recovery mode, things can change.
At the Greater Toronto Airports Authority, spokesman Scott Armstrong says even though passenger growth is strong, the security charge does have an effect.
"If you're riding the train in Canada you don't pay a security surcharge. If you're riding the bus you don't pay a security surcharge," he says. "Because it's a national security issue, the funding for it should come from government and not from air travellers specifically."
"Passenger numbers have risen in the past six years, but who knows how it's been affected by this surcharge? If there was one less fee on the cost of flying, maybe we would see even bigger growth."
Edmonton Airports, whose Edmonton International is the country's fastest-growing airport with passenger numbers soaring, also backs the ATAC position.
"We believe the current charge that singles out air passengers is fundamentally unfair," says Edmonton Airports spokesman Jim Rudolph.
"Transportation security, whether related to air, ground or sea travel, profoundly affects all Canadians and should be funded as such."
However, Rudolph says the fee is likely not hurting air travel in Alberta, given the red-hot economy there.
"It's more of an issue of fairness, though it's also an issue that could arise in the future in a different economic environment."
Nathalie Gauthier, a spokeswoman for Finance Canada, says the government plans to be prudent with revenues generated from the ATSC.
"To ensure that all revenues collected for air travel security are used for that purpose, the surplus will be taken into account when establishing the funding framework for air travel security in coming years," says Gauthier.
"Consistent with this approach, Budget 2006 announced new funding of $133 million over fiscal years 2006-07 and 2007-08 for air travel security, without increasing ATSC rates."
Gauthier adds that since the funding directly benefits air travellers, "it is fair and fiscally responsible that air travellers, rather than the general public, pay for the costs of enhanced air travel security."
(Laura Severs can be reached at laura@businessedge.ca)
