Good afternoon, and thank you for giving me this opportunity to speak with you today.
I'm Joe Sparling, president of Air North, Yukon's airline. We are a regional airline based in Whitehorse, Yukon. We currently provide scheduled air service between Whitehorse and Dawson City, Old Crow, Inuvik, Vancouver, Victoria, Kelowna, Edmonton, Calgary, and seasonally, Yellowknife, Ottawa and Toronto.
Because people like to travel, airfares are a popular topic for conversation, and more often than not, the conversation involves some unhappiness with what are perceived as high airfares in Canada, this notwithstanding that the individual who is unhappy with the cost of an air ticket might easily spend an equivalent amount on dinner and entertainment without batting an eye. There's simply no comparison in terms of the complexity or cost of the two products, yet airfares seem to take all the heat.
Having said that, Canada seems to have acquired a reputation for high domestic airfares, and I'm pleased to see that your study seems to be directed toward seeing what responsibility the government might take for this.
Airfares in Canada are often compared with those in the United States, and there's plenty of evidence to suggest that domestic airfares are lower in the U.S. than in Canada simply because the U.S. provides a lower-cost operating environment for airlines than does Canada.
A 2017 study showed that, between airport land rents, the air traveller security charge and the excise tax on jet fuel, the federal government directly or indirectly collects close to $1 billion from air travellers in Canada each year. This amounts to almost $15 per passenger and compares with annual subsidies paid to Via Rail of about $500 million and annual subsidies of about $400 million paid by the U.S. government to the nine largest U.S. airports.
Higher federal costs and fees in Canada are a major contributor to average operating costs for Canadian air carriers, which are more than 30% higher than average costs for the 11 largest U.S. carriers, according to a 2016 Oliver Wyman study. This naturally results in higher airfares for Canadian carriers, which, in turn, makes it more difficult for Canada to be competitive as a visitor destination. This also results in more than 5% of Canadian travellers choosing to drive across the border to a U.S. airport for their travel. Clearly, a major problem in Canada is not lack of a low-cost airline but rather lack of a low-cost environment for airlines.
A transportation network is very capital-intensive, and, clearly, somebody needs to pay for the infrastructure and operating costs, but it seems that, with respect to aviation, Canada has taken a different approach than the U.S., and a different approach than with rail, highway and water transportation. This may be because air transportation is viewed as more of a luxury than a necessity, but I think that our experience with COVID has shown us otherwise, particularly in northern and other rural areas.
Yukon represents about 5% of Canada's land mass, but with a population of just over 40,000 people, we represent only about 0.1% of Canada's population, which means that we average about one person in every four square miles. With a large land mass, a small population, a limited highway network and the nearest major centre almost 1,000 miles away, Yukoners rely heavily on air transportation for the essential movement of passengers and cargo and for economic development initiatives, primarily in the mining and tourism sectors. Other rural Canadians are similarly dependent on safe, affordable and seamless air transportation networks for quality of life and economic prosperity.
Because of this, it would be more appropriate to consider air transportation networks, particularly in the north, as essential infrastructure much like highways, ferry systems and railroads and to fund airport and navigation services from general revenues rather than directly or indirectly from the users of these services. While, to a large extent, this ship sailed long ago, it's not too late for the government to address the problem by providing flow-through concessions to airports and to Nav Canada and by providing tax concessions to airlines.
Finally, in today's environment, an air travel cost discussion would not be complete without addressing fuel costs, which have almost doubled during the past year, with the largest increases occurring in the last few months. It's disappointing that, as Canadians, we've allowed our plentiful natural resources to be controlled by foreign interests. High fuel costs are driving inflation and stifling economic recovery, and we have, over many years, done this to ourselves. I hope we learn from it.
Thank you.