Business
Bad federal policy helps increase airfare in Canada
From the Fraser Institute
By Jake Fuss and Alex Whalen
Canadian air travel can be summed up in a few words—poor service, high ticket prices and little choice. And as a federal election looms, Canadians should understand that bad federal policy is to blame.
According to the International Air Transport Association, Canada ranks 101st out of 116 countries for the cost of air travel. And customer complaints against Canadian airlines have grown more than sixfold between fiscal years 2018/19 and 2022/23.
Why are ticket prices so high?
For starters, taxes and fees (imposed by governments and airports) comprise a large portion (25 to 35 per cent) of airfare costs in Canada. For example, “airport improvement” fees average $32.20 per departing passenger at Canada’s largest airports compared to $6.47 in the United States and $16.38 in Australia. For air traffic control (ATC), airlines pay charges based on distance, geography and other factors, and these costs are passed to consumers. In one illustrative example, to fly a Boeing 777 in Canada, airlines must pay an estimated $802 in ATC fees compared to between $192 and $478 in the United States and $493 in Mexico (all figures in Canadian dollars).
Moreover, Canadians pay between $9.46 and $34.42 per ticket in “security” fees, more than Americans (C$7.65) and Australians (C$4.80). Canada’s “landing” fees—charged by the airports based on the weight of the plane—are among the highest in the world and 35 to 75 per cent higher than at U.S. airports.
Our high fees originate in part due to Canada’s flawed airport ownership structure. The federal government owns the land where Canada’s major airports are built, and leases it back to not-for-profit airport authorities that pay rent—up to 12 per cent of airport revenue—to Ottawa. The airports impose fees on passengers to recoup this revenue.
But while fees help increase costs for airfare in Canada, another culprit is the lack of competition among airlines. Crucially, the federal government prevents foreign airlines from operating domestic routes within Canada’s borders, which severely limits choice and competition. While the government allows a foreign airline such as Lufthansa to fly from Frankfurt to Toronto, it prevents Lufthansa from flying passengers from Toronto to another Canadian city. As a result, there’s little competitive pressure for Canadian airlines to lower their prices for air travel within Canada’s borders.
The European Union, in contrast, removed such restrictions for member-states. The result? More competition including from new low-cost carriers such as Ryanair, a 34 per cent decline in ticket prices, more cross-border routes, and greater flight frequencies. The entry of new low-cost carriers alone helped lower airfares by 20 per cent.
Given the sorry state of air travel in Canada, our new study identifies four ways the federal government can improve competitiveness and lower airfare.
First, the government should reduce taxes and fees to be more in line with other countries. Second, the government should negotiate deals with other countries including the United States to allow foreign airlines to operate within Canada in exchange for Canadian airlines operating in those countries, which would help both Canadian consumers and Canadian airlines. Indeed, according to a 2016 report from the federal government, restrictions on foreign airlines increase air travel costs for Canadians and have outlived their usefulness. The report recommended Canada work towards an “open common market for air services” with peer countries. The key is reciprocity—if U.S. airlines, for example, are allowed access to the Canadian domestic air travel market, Canadian airlines must also have access to the U.S. market.
Third, the federal government should follow in the footsteps of Europe, Australia and New Zealand, and sell its remaining interests in airport leases and allow for-profit organizations to own and operate airports in Canada.
Lastly, the government should reduce the regulatory burden on the airline industry while maintaining strong safety standards. On this front, Canada can emulate the successful deregulation effort undertaken in the United States in the late 1970s and 1980s when widespread reform helped produce more competition, more consumer choice, lower fares and safety improvements.
Canadians will likely head to polls sometime this spring. If the next federal government wants to help improve air travel service quality, increase consumer choice and lower airfares, it should reform Canada’s antiquated airline policies.
Jake Fuss
Director, Fiscal Studies, Fraser Institute
Alex Whalen
Director, Atlantic Canada Prosperity, Fraser Institute
2025 Federal Election
MEI-Ipsos poll: 56 per cent of Canadians support increasing access to non-governmental healthcare providers
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Most believe private providers can deliver services faster than government-run hospitals
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77 per cent of Canadians say their provincial healthcare system is too bureaucratic
Canadians are increasingly in favour of breaking the government monopoly over health care by opening the door to independent providers and cross-border treatments, an MEI-Ipsos poll has revealed.
“Canadians from coast to coast are signalling they want to see more involvement from independent health providers in our health system,” explains Emmanuelle B. Faubert, economist at the MEI. “They understand that universal access doesn’t mean government-run, and that consistent failures to deliver timely care in government hospitals are a feature of the current system.”
Support for independent health care is on the rise, with 56 per cent of respondents in favour of allowing patients to access services provided by independent health entrepreneurs. Only 25 per cent oppose this.
In Quebec, support is especially strong, with 68 per cent endorsing this change.
Favourable views of accessing care through a mixed system are widespread, with three quarters of respondents stating that private entrepreneurs can deliver healthcare services faster than hospitals managed by the government. This is up four percentage points from last year.
Countries like Sweden and France combine universal coverage with independent providers and deliver faster, more accessible care. When informed about how these health systems run, nearly two in three Canadians favour adopting such models.
The poll also finds that 73 per cent of Canadians support allowing patients to receive treatment abroad with provincial coverage, which could help reduce long wait times at home.
Common in the European Union, this “cross-border directive” enabled 450,000 patients to access elective surgeries in 2022, with costs reimbursed as if they had been treated in their home country.
There’s a growing consensus that provincial healthcare systems are overly bureaucratic, with the strongest agreement in Alberta, B.C., and Quebec. The proportion of Canadians holding this view has risen by 16 percentage points since 2020.
Nor do Canadians see more spending as being a solution: over half say the current pace of healthcare spending in their province is unsustainable.
“Governments shouldn’t keep doubling down on what isn’t working. Instead, they should look at what works abroad,” says Ms. Faubert. “Canadians have made it clear they want to shift gears; now it’s up to policymakers to show they’re listening.”
A sample of 1,164 Canadians aged 18 and older was polled between March 24th and March 28th, 2025. The margin of error is ±3.3 percentage points, 19 times out of 20.
The results of the MEI-Ipsos poll are available here.
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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
The Canadian Taxpayers Federation released Leger polling showing 70 per cent of Canadians believe businesses pass on most or some of the cost of the industrial carbon tax to consumers. Meanwhile, just nine per cent believe businesses pay most of the cost.
“The poll shows Canadians understand that a carbon tax on business is a carbon tax on Canadians that makes life more expensive,” said Franco Terrazzano, CTF Federal Director. “Only nine per cent of Canadians believe Liberal Leader Mark Carney’s claim that businesses will pay most of the cost of his carbon tax.
“Canadians have a simple question for Carney: How much will your carbon tax cost?”
The federal government currently imposes an industrial carbon tax on oil and gas, steel and fertilizer businesses, among others.
Carney said he would “improve and tighten” the industrial carbon tax and extend the “framework to 2035.” Carney also said that by “changing the carbon tax … We are making the large companies pay for everybody.”
The Leger poll asked Canadians who they think ultimately pays the industrial carbon tax. Results of the poll show:
- 44 per cent say most of the cost is passed on to consumers
- 26 per cent say some of the cost is passed on to consumers
- 9 per cent say businesses pay most of the cost
- 21 per cent don’t know
Among those decided on the issue, 89 per cent of Canadians say businesses pass on most or some of the cost to consumers.
“Carbon taxes on refineries make gas more expensive, carbon taxes on utilities make home heating more expensive and carbon taxes on fertilizer plants increase costs for farmers and that makes groceries more expensive,” Terrazzano said. “A carbon tax on business will push our entrepreneurs to cut production in Canada and increase production south of the border and that means higher prices and fewer jobs for Canadians.”
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