Thank you, Mr. Chairman, and good morning. Thank you for the opportunity to speak with you today as part of your study on the current state of the Canadian tourism industry. Mindful of time, I will be brief.
The Canadian Airports Council is the voice of Canada's airports. Our members handle 95% of the passenger traffic and 100% of the cargo traffic. You can see why the tourism business is important to Canada's airports. As gateways to the communities they serve, Canada's airports have an integral role in promoting tourism in this country. We are a key part of Canada's tourism value chain. Our airports are the front door to Canada and to the communities in which they serve. We are a significant part of the tourists' Canadian experience.
For Canada to be competitive in the tourism business, each link in the value chain must be competitive, efficiently operated, and customer focused. As an airport community, our competitiveness depends on three key areas: cost competitiveness, air access, and border facilitation. Canada's airports need a competitive business climate to compete.
This morning Air Canada announced a 7% reduction in its capacity for the coming winter months. Air Canada notes that in addition to record high fuel prices, Canadian carriers must contend with federal and provincial fuel excise taxes, security fees, and high airport charges, charges that are largely the result of an airport rent policy that has outlived its usefulness.
To operate in a cost-competitive business climate and provide a competitive product, we need the federal government to view aviation as an economic generator and not as an industry to be taxed at will. Canada's airports have invested more than $9.5 billion to upgrade airport infrastructure since the transfer of airports to local operating authorities. Our members pay nearly $300 million a year in rent. Since transfer rent payments to the federal government have totalled more than our airports' initial asset value, CAC members have paid in excess of $2.5 billion in rent. The revamped rent formula in 2005 did reduce the expected rent that was to be paid by nine airports in Canada; however, it did not go far enough. The new formula takes a percentage of gross revenue on a graduated scale, regardless of the size of the airport. To put this in context, the Greater Toronto Airport Authority will pay 12% rent on each dollar of revenue over $250 million. The GTAA is a $1.1 billion corporation. You do the math.
The elimination of airport rent would help everyone. Airports generate income for the federal treasury through job creation, both direct and indirect, and they attract tourists and investment. Airports in Canada are committed to passing along any savings from rent relief to their users, be it the airlines or the passengers.
Another important pillar of competitiveness is air access. Air access is a simple concept. If they can't get here from there, everyone suffers. For airports, it means that Canada needs better air service agreements. We define “better” as open skies agreements. Open skies means unfettered access of carriers between two states. The current EU talks are vital to growing our tourist base in Europe.
Few things will leave as bad an impression for tourists as long lineups at border facilitation halls. Border facilitation and the availability of customs officers is crucial. Currently we do not have enough border officers to meet the demand at Canada's airports. Whether for small airports or Toronto, Canada needs more officers at airports. We are using Nexus, and it has been a great boost, but tourists are not always members of trusted traveller programs. Making airports pay for services outside of core hours only adds costs to the business of any given airport.
Working with their local and provincial tourism sectors, Canada's airports today are actively promoting their communities in the United States and abroad. They attend air service trade shows, they are meeting with air carriers from around the world, and they are making the case for Canada as a tourist destination. We need federal policies that encourage more tourists, not ones that will result in a less competitive business.
In closing, we urge this committee to recommend elimination of airport rent, more open sky air service agreements, and greater investment in border officers at airports.
Mr. Chairman, thank you very much.