Press Release No.:
16 November 2005
Crown Rent Policy Madness
Further Damages Canada’s Competitiveness
(Montreal) The International Air Transport Association (IATA) renewed calls for the immediate elimination of Crown Rents charged at Canadian airports by the Federal Government in light of proposed 6.9% landing fee and 8.9% terminal fee hikes by the Greater Toronto Airports Authority (GTAA).
Crown rents today account for 34% of landing charges at Toronto’s Pearson airport where an estimated 138,000 people are employed and earn C$3.6 billion in wages. Together they generate C$14 billion in economic activity for Toronto and for Canada.
“Ottawa’s air transport policy is out of sync with its overall approach to the economy. Monday’s mini-budget recognised the economic stimulus of reducing taxes. The enormous and growing Federal surplus gives the government tremendous freedom to set Canada on a course for economic prosperity. Yet they insist on crippling the goose that lays the C$14 billion golden egg to continue a rent policy that should have died when the government recouped its airport investments,” said Giovanni Bisignani, Director General and CEO of IATA.
“We insist that the GTAA must do a better job of managing its costs. We are paying a heavy price at Toronto for the excessive airport redevelopment that the Government allowed to proceed unchecked. That being said, rent is the single largest obstacle to lowering airline fees at Pearson. For that only the government is to blame,” said Bisignani.
Bisignani also highlighted the danger of liberalising relations with the US without solving Canada’s infrastructure problems. “The bilateral air services agreement reached between Canada and the US last week is a step in the right direction. But it will only be another half-measure if Canada does not strengthen the competitiveness of its airport infrastructure. Crown rents add costs that place Canada’s largest air hub at a competitive disadvantage to its US neighbours in attracting hub traffic,” said Bisignani.
“Pearson is Canada’s most important airport and Toronto is Canada’s gateway to the world. It is simply incomprehensible why the federal government continues to undermine the competitiveness of the airport through its rent policy. A clear and effective policy vision from Ottawa for air transport is long overdue,” said Bisignani.
Notes for Editors:
- The Government now collects more than $148 million annually in “Crown rent” from Pearson International, with little or none of it re-invested in air transportation. Since the National Airports Policy was introduced in 1994, Pearson has paid more than $1 billion in rent.
- When the government transferred control of Pearson to the Greater Toronto Airports Authority (GTAA) the airport was in desperate need of repair. The federal government at the time could not afford those repairs. The GTAA has since invested $4 billion in airport redevelopment. The government assumed none of that risk and has no responsibility for the debt incurred. The redevelopment is being completely paid for by airport uses through the fees and charges paid by airlines and passengers.
- On May 9 the government announced immediate rent cuts to all major airports in Canada – except Pearson.
- In Vancouver, rent will drop by 63% by 2010.
- In Montreal, rent will drop by 20% by 2010.
- In Calgary, rent will drop by 60% by 2010.
- For Toronto Pearson, rent will only drop by 6% by 2010.
- Worse still, in 2006 the GTAA must begin paying back the rent that was deferred during the SARS crisis (about $40 million). This means rent will actually go up in 2006 at Pearson while it goes down for just about every other major airport in Canada.
- Under the government’s new rent formula, Pearson will pay two-thirds of the national rent bill while handing only one-third of the traffic.
- Rent reduction or elimination at Pearson is supported by:
- Mayor David Miller and Toronto City Council
- the Canadian Chamber of Commerce
- the Canadian Airports Council
- the Air Transport Association of Canada
- the American Air Transport Association
- the Association of Airline Representatives in Canada
- the Tourism Industry Association of Canada
- the Hotel Association of Canada
- the Toronto Board of Trade
- the Greater Toronto Hotel Association
- the Canadian Courier and Messenger Association
IATA is the trade association representing approximately 265 airlines, including the world’s largest. Flights by these airlines comprise 94 percent of all international scheduled air traffic. IATA is headquartered in Montreal and has executive offices in Geneva.