Thursday, April 28, 2011

Air travelers should be weary of the NDP's de-facto airline policies

With the very real prospect on an NDP lead Federal government, Canadians who have hitherto paid little attention to the details of the party’s economic plans are now scrambling to piece together the NDP’s vision for Canada. Unfortunately, their platform is silent on many important issues. Among these issues are airline regulations, which have been a hobbyhorse for many influential New Democrats over the last few years. Canada’s airline regulations rank among the most backwards in the developed world. If statements from people like Peggy Nash, Olivia Chow, and Jim Maloway are indeed representative of the NDP’s intentions for the airline industry, Canadian travelers may be in for a shakedown under a Jack Layton government.

Three specific policies championed by the aforementioned New Democrats come to mind. First, Peggy Nash, a current CAW employee and President of the New Democratic Party, has advocated for a partial nationalization of the Air Canada, and regulations that would hamstring discount carriers. Her rational is that discount carriers flood the market with supply in order to eat away at Air Canada’s market share. Even if true, it is hard to fathom how this is a bad thing from the perspective of anyone other than a unionized airline employee. Discount carries save consumers a substantial amount of money, especially low income travelers, who might not be able to afford to fly with Air Canada. They also save businesses money, which helps make them more competitive with US companies, who have access to cheaper airfare (this is especially important for small businesses). As it is, we need more competition—foreign or otherwise—not less. Our airline policies shouldn’t be about keeping Air Canada’s unionized employees happy.

The second worrisome policy is contained in Winnipeg MP Jim Maloway’s 2009 private member’s bill, which called for the creation of a “passenger’s bill of rights” for air travellers. This included such gems as compensation of $500 per hour (after the first hour) to customers experiencing flight delays, and up to $1200 for being bumped from a flight. The four largest airlines implemented a watered down version of this bill of rights. While the intention behind this legislation was reasonable, the impact would have been devastating to the airline industry, and bad for consumers. After all, if the cost associated with delays was rendered higher than the expected revenue from many flights, the industry would reduce the number of flights. This could be devastating for companies like Porter and WestJet, where a large percentage of flights are under $500. For instance, a quick search reveals that a flight from Toronto to Chicago on April 30th (booked April 28th) would cost $60 plus tax. Porter would gross $4200 on this flight if it is filled to capacity. If this flight were to be delayed by two hours—which often happens due to circumstances beyond the control of airlines—Porter would be fined $35,000. Given that Porter operates on low margins, the loss from this one flight would be well over $30,000. It’s hard to imagine Porter operating in this environment. In other words, no more $60 airfare to Chicago (Air Canada would charge $139).

The last policy that the NDP has to answer for is their opposition to expansion of the Toronto Island airport. While this issue is specific to Toronto, the mentality behind the party’s opposition should worry air travellers throughout the country. This is the beachhead for Porter Airlines, and Olivia Chow is on record as wanting to shut it down. Her opposition stems from the not in my backyard sentiment against the airport from certain local constituents. This lobby was powerful enough to propel former Mayor David Miller to power, so it seems like a wise political move for Chow, whose riding includes the airport. When opposing airport expansion in the House of Commons, she claimed that “operating an airport is contrary to the vision of a clean, green and vibrant waterfront.” It’s hard to imagine how forcing the 700,000 plus passengers travelling through the Island Airport to instead travel all the way to Mississauga to fly via Pearson would mesh with her stated environmental goals. After all, only 7% of passengers, and 11% of employees travelling to Pearson use public transit. One valid concern she raises is that the airport is subsidized to the tune of $6 million annually. This should be addressed by shifting the burden of financing the airport to the airlines. The $45 million Porter spent on their new terminal is a great start. Nevertheless, it seems odd that Chow is so concerned about a $6 million dollar subsidy, but unfazed by the annual $400 million plus operating subsidy to the Toronto Transit Commission.

If the New Democratic Party is serious about governing, they will have to explain their positions on important issues like airline regulations. One of the reasons why the Conservative Party has been able to build a competitive national party is that they dropped many of their most controversial policy ideas when they were within striking distance of power. Will the NDP make the same prudent decision, or will they govern like an opposition party? This is the question that Jack Layton will have to answer in the closing days of the campaign.

3 comments:

  1. Hey - check your math, it's even worse! Porter's planes hold 70 people. $60 fare x 70 people = $4,200 vs fine of $35,000 per hour of delay. Would they prefer to try to pressure the pilot to fly in unsafe conditions to avoid paying the fine? Higher fares, less safety: what's not to love? As far as stupid policies goes, that one takes the cake.

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  2. The Toronto Port Authority, which controls the airport, seems an odd place to mount a defense of free enterprise. This money-losing, government-subsidized, crony-controlled, and monopolistic government plaything would never survive if not for repeated government interventions.

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