Federal government must step up to save Atlantic air transport
Without an active financial role by the federal government, the outlook for air transport in Atlantic Canada is bleak.
The lockdown we are experiencing due to COVID-19 has been devastating in Atlantic Canada both for our people, especially those who have lost jobs or loved ones, and for our business community. Our economy – and in particular, the tourism industry – has been decimated: first by the pandemic, then by government-imposed travel restrictions, which led to the permanent cancellation of 14 routes by Air Canada.
Without swift government action to support our airports and air routes, the damage may well be irreparable. A robust air transportation network is vital in Atlantic Canada: two of our provinces are islands, and our region is more than a 10-hour drive from the next major Canadian city. Our provinces need dependable, timely, competitive flight connections for businesses to prosper. If those connections weaken, Atlantic Canada becomes a less attractive place in which to live, work, visit, invest, and do business.
The cost to our airports, residents and communities is already staggering. Atlantic airports anticipate losing nearly $140 million in revenue with a drop in 5.5 million passengers this year alone. And we don’t expect the sector to recover for three or four years at a minimum.
The United States government understands the risk airports and communities are facing. Months ago, it gave its airports $10 billion in direct support that can be used for capital expenditures, operating expenses including payroll and utilities, and debt payments. Neighbouring Maine airports, including Bangor and Portland, received $4 million and $12 million respectively.
This is in stark contrast to Canada, where, other than rent relief for our 22 largest airports, the Government of Canada has not provided direct assistance to the aviation sector.
In some ways, we are the victims of our own success. What we are seeing are the seams bursting on a user pay model for passenger air travel that has served Canada fairly well for the past 28 years. It began by getting government and the taxpayer out of running and funding aviation — selling off Air Canada completely and transferring the operation, development and maintenance for most Canadian airports off to private community-based airport authorities that operate on a not-for-profit basis.
Contrary to popular belief, our sector has largely operated without subsidies since privatization and even delivered a financial return to government. Since 1992, airport authorities have paid over $6 billion to the federal government in the form of airport rent for leased land.
Meanwhile, Canada’s airlines and major airports have seen tremendous growth in passenger traffic: a 54 per cent increase in the last 10 years. This growth has led to new routes and more competitive options, making travel by air more accessible to more Canadians. This not-for-profit model has seen airports take on the risk of operating and maintaining airports so that their communities can have access to quality, safe and accessible air transportation service – service that is vital to local economies.
But there’s a downside to this model when it comes to the ongoing viability of smaller airports. Regional markets such as Atlantic Canada is where a strict adherence to user pay has begun to break down, even before COVID-19 struck. Aviation is by nature a very capital-intensive industry. In markets with low traffic volumes — fewer than one million passengers — it has always been a challenge to generate enough revenue to cover the cost of operations and ongoing infrastructure maintenance.
Now with traffic volumes at only four per cent of normal levels for the region, it is not sustainable without government support for our industry.
But that has not stopped airports from doing their job. Even as passenger numbers and revenues have tumbled, airports implemented enhanced safety and cleaning measures and continued to stay fully operational to serve their travellers and communities. At the same time, they have had no choice but to reduce costs in other area: delaying or cancelling capital investment projects, laying off staff and reducing some services.
Virtually every airport in Canada, regardless of size or location, want the same things from government. For larger rent-paying airports, like Halifax Stanfield and St. John’s International Airport, they need current rent relief to continue until we return to pre-COVID-19 levels of travel. Smaller airports would greatly benefit from interest free loans and grants, and access to Federal infrastructure programs. More funding through current programs such as the Airport Capital Assistance Program would assist smaller airports in ongoing safety related capital infrastructure maintenance.
These actions would give airports some breathing room to maintain essential operations and continue to support Atlantic Canadians and regionally -based corporations with safe air access and essential services and begin to work towards an economic recovery.
By Monette Pasher, Executive Director, Atlantic Canada Airports Association and Daniel-Robert Gooch, President, Canadian Airports Council