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Press Release No.: 34

Date: 5 January 2005

Canadian Government Milks Air Transport Cash Cow Again

The Associations representing all commercial airlines operating in Canada joined today with the Canadian Chamber of Commerce to express frustration and disappointment with the most recent increase in 'Crown rent' being charged by the Federal Government to Canada's largest airports.

Effective January 1, 2005 the Federal Government raised Crown rents by a total of 6.5% over 2004 levels.  Ottawa is now taking over $300 million annually from local airport authorities across Canada, fees which are ultimately paid by airlines and travellers.  Since 9-11 Crown rents have increased by 25%. Rents are not even re-invested in air transportation infrastructure.  They simply go to the Government's general revenues.

"It is time for the Government to stop treating air travellers like cash cows," stated Cliff Mackay, President and CEO of the Air Transport Association of Canada (ATAC).  "We are calling on the Federal Cabinet to significantly reduce Crown rent in the 2005 Federal Budget, and set a timetable for its elimination."
 
"Instead of solving Canada's massive airport problems, this increase exaggerates the policy mistake of Crown rents at the expense of already heavily taxed travellers and shippers. Effective air transport is not a luxury item; it is an essential service and a precondition for healthy economic growth," said Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA). 

"Competitive airports are vital to attracting investment, promoting tourism and stimulating growth," stated Mr. Mackay. "Raising airport charges yet again, when the Government is running large surpluses, is simply bad economic policy.  It runs counter to the Government's stated goals of job creation, economic growth and smart regulation."

"What investment justifies rent in the first place? And what additional costs justify the increase? The answer to both is zero. What is more galling is that Crown rents are not even re-invested in air transport infrastructure," said Bisignani. "Canada has suffered from flawed aviation policy for far too long. Transport Minister Lapierre identified the need to reduce Crown rents. It is imperative that his Cabinet colleagues share this vision for a healthy low-cost air transport industry that serves Canada well."

Without action in the 2005 Federal Budget, Crown rents will continue to increase sharply in the coming years.  For example, rents will increase by an additional $60 million on January 1, 2006, and by a further $140 million by 2010.

Major business groups and municipalities are also calling on the Government to significantly reduce the Crown rents charged to airports.  These groups recognize the harmful impact that Crown rent is having on the economy, job creation and investment. 

"We have a tax problem in Canada and the airport rent paid to the federal government is a glaring example of this," said Michael Murphy, Senior Vice-President, Canadian Chamber of Commerce. "The rents paid by airports make Canada less competitive globally."

(A list of groups that have formally written to the Government is listed in the following notes to editors).

Notes to Editors

Under the National Airports Policy (NAP) local airport authorities in cities across Canada are required to pay the Federal Government Crown rent in return for granting leases.  The purpose of Crown rent was to ensure that the Government was to be "no worse off" as a result of its divestiture.  Over time the Government has become much better off.  The Government now collects over $300 million annually in Crown rent – compared to an annual loss of $150 million when the divestiture program started. 

Since the NAP was introduced, over $2 billion in Crown rent has been extracted from local airports and the communities they serve across Canada.

Toronto's Pearson International Airport is the second most expensive airport in the world and the most expensive airport in North America to land an airplane.  Pearson pays federal Crown rent of over $140 million annually, representing 18% of its operating budget.

Cities Faced with Unreasonable Increases in Crown Rents:

Effective January 1, 2005
· Montreal's Trudeau International Airport will see rent increase by 43% over 2004 levels.
· Quebec City's Jean Lesage International Airport is being charged over $300,000 in rent.  This is the first year the Federal Government charges rent to Quebec City.
· Edmonton's rent was increased over $1 million, an increase of 41% from 2004.
· Ottawa's rent was increased by nearly $1.5 million (up 12% from 2004).
· Vancouver's rent increased by over $4 million (up 5% from 2004).

Effective January 1, 2006
· Calgary's Crown rent will more than double to over $51 million. 
· Edmonton's Crown rent will increase by over $18 million – a 447% increase in one year.
· Airports in St. John's, Saskatoon and Regina will all begin paying rent for the first time ($584,000, $684,000 and $690,000 respectively).
· After paying rent for the first time in 2005, Quebec City faces a further 100% increase.
· Montreal will face another 22% increase in 2006 on top of the 40% increase in 2005.  In two years Montreal's rent will have increased by $15 million.
 
List of Business Associations and Cities that have Written to the Federal Government to Request that Crown Rent be Drastically Reduced:

Canadian Chamber of Commerce
Tourism Industry Association of Canada
Hotel Association of Canada
Toronto Board of Trade
Greater Toronto Hotel Association
Halifax Mayor Peter Kelly
Montreal Mayor Gerard Tremblay
Vancouver Mayor Larry Campbell
Winnipeg Mayor Sam Katz

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