Aviation fuel tax will cause ticket prices to soar

By MPP Toby Barrett

Ontario’s massive hike in the aviation fuel tax will largely be passed on to passenger ticket prices. The plan announced in the recent budget is to double the current aviation fuel tax from 2.7 cents per liter to 6.7 cents per liter in stages by 2017.

The increased tax is set against a background of Ontario airports and airlines already struggling with people crossing the border to fly out of jurisdictions like Buffalo, for example, with lower taxes.

National estimates show we are already losing five million passengers to U.S. border airports, and about half of that is occurring in southern Ontario. It doesn’t take a degree in transportation economics to figure that problem will only get worse with an increase in taxes.

The Conference Board of Canada estimated 40 per cent of the plane fare difference is due to fees and taxes on this side of the border.

During budget hearings at Queen’s Park, Daniel-Robert Gooch, president of the Canadian Airports Council, testified that a single daily 19-seat flight at a small airport creates 33 full-time equivalent jobs. A larger flight, or international route, creates employment in the hundreds. The Airports Council represents 11 airports in the province, including large international airports and smaller regional hubs.

Gooch sees international traffic as the growth sector, and as he noted, on international flights, the planes don’t need to land in Ontario. The council is working with the federal government to improve its competitiveness and gain more international traffic.

The major airlines had similar concerns, as presented through the National Airlines Council of Canada – which represents Air Canada, WestJet, Jazz and Air Transat. Executive director Marc-Andre O’Rourke told the same legislative committee that Ontario is already out of step with most provinces and competing U.S. jurisdictions with its existing 2.7 cents per liter fuel tax. In fact, he said, Ontario is one of the only jurisdictions in the world that still taxes fuel for international flights.

British Columbia took the opposite approach. In 2012, B.C. removed the fuel tax from international flights – and 22 airlines added flights. The government reported the $12 million revenue loss from eliminating the tax has been replaced by $20 million in additional payroll and consumption taxes.

Economists are predicting consequences for Ontario with this hike in aviation fuel taxes. Estimates are a $97 million loss in gross domestic product, 2,000 fewer jobs and an additional 400,000 air travelers leaving Ontario to catch their flight.

Most people associate Toronto International with Ontario’s aviation industry, but this also hits closer to home. With Hamilton airport a short drive from the riding, there are sure to be ramifications in our area as business goes to Buffalo. Hamilton is also a major cargo hub.

Looking at the four-cent increase in another way, it is a 148 per cent tax increase. I see this as a new record, but hopefully not a trend of how this government will look at fuel taxes over the next few years. Electricity rates are predicted to increase more than 40 per cent over this time, and this government has often mused about a carbon tax.

An airport is more than a convenience, it’s a connection to the world, a transportation hub and a source of economic activity. As simple and as integral as this concept sounds, the present government fails to recognize it.