Canadian airports and cities

Is Canada setting itself up for cross-border air passenger leakage?

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There are growing fears that support for aviation in the U.S. combined with increased fees in Canada may lead to a leakage of air passengers across the border once it opens

The empty passenger concourse at Vancouver International Airport March 4, 2021 (Supreet Jhudge).

Southwest Airlines announced new service Tuesday that would normally go unnoticed outside the affected cities. But one passage is raising eyebrows concerns in Canadian aviation circles. The airline’s plans are renewing concerns about air passenger leakage to airports just across the border.

Southwest announced new service to Bellingham, Washington Tuesday. Bellingham is about an hour south of Vancouver.

“Following the reopening of the Canadian border, we expect a return of the value-minded travelers who already drive to this alternative airport to escape high fares and taxes,” Southwest chief executive Gary Kelly said in an email to staff. “And that’s very, very typical for Southwest destinations. Southwest provides a great value for them.”

Canada and the U.S. agreed a year ago to close the border as a way to stop the spread of COVID-19. Most non-citizens are not allowed across, except in limited circumstances. But the governments must renew the agreement, if they don’t, the borders will reopen.

That leaves border facilities, in particular, vulnerable to competition from south of the border. In the air business, that’s called a passenger leakage.

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Treading water

Airports in Canada have, at best, been treading water to survive the pandemic. Air travel is down 90% in the year since the pandemic began. Airlines have cut flights and cities from their route maps. As a result, airports say they will lose $5.5 billion in revenues over two years. (In Canada, airport revenues are heavily dependent on passenger fees.)

Airport20192020% change
Edmonton7,657,0722,294,057-70.0
Kelowna2,032,019737,447-63.7
Ottawa5,106,4871,363,512-73.3
Prince George496,714176,994-64.4
Victoria1,924,385574,837-70.1
Halifax4,188,443995,426-76.2
Charlottetown383,18371,480-81.3
Saskatoon1,488,810462,557-68.9
Kamloops351,586123,657-64.8
Calgary17,957,7805,675,483-68.4
Toronto50,496,20113,307,077-73.6
Montreal20,305,1065,426,862-73.3
Vancouver26,379,8707,300,287-72.3

The U.S. aviation market has received billions in federal supports. The industry has suffered, but airports and airlines have been able to step up with new services and new routes. Qatar airlines, for example, has launched four-times-weekly service between Seattle and Doha.

A bridge links Seattle’s remote terminal to the new $1 billion international arrivals facility set to open later this year (Port of Seattle).

Seattle is challenging Vancouver for supremacy as an Asian gateway to the Pacific Northwest. The airport is set to open a new $1 billion international arrivals facility later this year. It will handle up to 2,600 arriving passengers per hour.

“As one of the top airports in the U.S., passengers will have an increased number of convenient connections when Alaska Airlines joins the oneworld alliance on March 31st – including to Alaska, Canada, and Hawaii,” said Qatar Airways Group Chief Executive Akbar Al Baker.

Before the pandemic, Alaska flew from Seattle to Vancouver, Kelowna, Calgary, and Edmonton.

“International carriers are able to indirectly access several Canadian markets through nearby U.S. airports,” said Conservative Transport Critic Stephanie Kusie. Her party presented a motion Tuesday calling on the government to offer subsidies and low-interest loans to Canada’s airlines. “We see this with the three Bs as I refer to them – Bellingham, Burlington, and Buffalo.”

Price sensitive travel

For now, the border remains closed. Anyone entering Canada by air must be tested before their flight, then again on arrival. Once they take their test, the travellers have to wait for their results at a government-approved hotel. If they test negative, the traveller can then go serve the rest of a two-week quarantine at home.

But it won’t be that way forever. Vaccines are raising hopes that people will start travelling again. Flair Airlines is adding 13 Boeing 737 Max aircraft starting in two months in preparation. It targets services and fares at people who want to save money when they fly.

Canada’s airports have warned they are taking on debt and raising fees to cover their costs through the pandemic. And when the border reopens, it’s likely an airport such as Bellingham will have flights that are hundreds less than comparable Canadian service. The risk is families going on holidays or to visit relatives will drive an hour or more to the nearest airport if it means saving hundreds, perhaps thousands, of dollars.

“In the next 12 to 24 months, the airline world will look for leisure travel products,” René Armas Maes, the Vice President Commercial and regional partner at MIDAS Aviation, told a recent symposium hosted by McGill University. “Including more price sensitive travel, more narrow bodies flying, and more point to point flying.”

That’s exactly the kind of service Southwest offers.

It’s not the first time Canada’s airports have faced the threat of people driving south to catch a flight. The last time it happened in a major way was in 2012-13 when the Canadian and U.S. currencies were at par. Then, the Conference Board of Canada estimated more than five million Canadians drove south to catch a flight.

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