This article from NYTimes.com has been sent to you by psa188@juno.com. Sky's the Limit for Canada's Air Taxes October 1, 2002 By BERNARD SIMON TORONTO, Sept. 30 - WestJet Airlines of Calgary set out to prove a point in the summer by offering what it described as a "ridiculous" fare of 3 Canadian dollars ($1.90) one way, or twice that for a round trip, on two of its busiest short-haul routes. The catch was that the fare excluded taxes. Anyone wanting to take up the bargain, valid for just one Sunday, had to pay what WestJet called the equally ridiculous array of fees, taxes and surcharges imposed on air travel in Canada, some by airlines but mostly by airports or the government. All those charges raised the final cost of that 6 dollar round trip to more than 80 Canadian dollars ($51). (A typical price for a round-trip ticket on one of the two routes, between Ottawa and Hamilton, Ontario, was 315 Canadian dollars ($199) in a recent week, or 399.57 Canadian dollars ($253) with taxes and fees.) Canada's airlines and travel agents are up in arms over these charges. Though the charges appeared gradually over the years, they say, they are pinching particularly hard now, as the travel industry struggles to recover from the downturn in traffic after last year's terrorist attacks on the United States. The extra charges "actually scare the client away," said Ornan Sharaby, an agent at Travel for Less in Thornhill, Ontario. "They don't understand how taxes can be so high." Most nations, including the United States, impose taxes and fees on air fares, but the airlines say Canada's are much higher than those in the United States and rank among the highest anywhere. Six separate charges are typically added to a basic air fare. Tango, Air Canada's no-frills arm, offered a bargain one-way Web fare of about 62 Canadian dollars ($39) from Toronto to Ottawa for a flight leaving today. But passengers must also pay a fee to help maintain the air traffic control system; surcharges to cover the airline's rising insurance and fuel costs; an "airport improvement fee" for Lester B. Pearson Airport in Toronto; an air travel security tax; and goods and services sales tax, including tax on the security tax. That brings the total cost to about 119 Canadian dollars ($75), or about 92 percent more than the basic fare. The charges are "insensitive to the carrier's economic circumstances," said Warren Everson, vice president for policy and strategic planning at the Air Transport Association of Canada, an airline industry lobby group in Ottawa. Airlines, he said, should be taxed on profits, not on costs. Travel agents are equally critical of the fees, but they also accuse the airlines of deceptive advertising, by headlining only the basic fare and hiding all the extras - including the insurance and fuel surcharges - in the fine print. "One of our goals is fair advertising," said Louise Crandall, a vice president at the Association of Canadian Travel Agents in Ottawa. Mr. Everson said that the airlines were "sensitive to the point," but that including the taxes in the advertised air fare would be "tantamount to concealing who's getting the money - it's because of costs that other people are putting on our tickets." The airlines complain that because most of the charges are fixed amounts, they have a disproportionate impact on the lowest fares, which are typically for short routes where competition from rail and bus services is most intense. Whatever the cause, the airlines' pain does seem to be rail's gain. For example, the number of first-class train passengers between Toronto and Montreal grew 32 percent in the first eight months of the year, compared with the 2001 period, said Catherine Kaloutsky, a spokeswoman for VIA Rail Canada, which runs the country's passenger rail service. Though a discount air fare between the cities is cheaper than a first-class train ticket, the two work out about the same after taxes and surcharges. Still, Canadian airlines are generally faring better than their American counterparts. Helped by the collapse earlier this year of Canada 3000, a discount carrier that had garnered about a fifth of the domestic market, Air Canada, the dominant carrier, reported net earnings of 30 million Canadian dollars in the second quarter and said it expected to be profitable again in the third. The brash, low-cost WestJet, which models itself on Southwest Airlines of Dallas, has reported profits for 22 consecutive quarters. The airlines say, however, that their financial health is fragile. The extra charges "are money out of our pockets, and we don't have much money in our pockets right now," said Mr. Everson of the Air Transport Association. The loudest protests are leveled against the security tax, which was put in place on April 1 to cover the 2.2 billion Canadian dollars being spent to upgrade security measures at Canadian airports. The security tax is 12 Canadian dollars, counting the tax on the tax, for each domestic flight or flight to or from the United States, and double that for each one-way or round-trip ticket to any other country. According to Mr. Everson, the Canadian security tax is the highest in the world, and as much as three times the $2.50 security charge levied on each leg of an American domestic flight up to a maximum of $10. WestJet says that load factors - the percentage of seats sold - on its Calgary-Edmonton and Hamilton-Ottawa routes have dropped each month since the security tax was introduced. The airline canceled 13 flights a week between Calgary and Edmonton from April to June, and two flights a week between Vancouver and Kelowna, British Columbia, another short route. In response to the complaints, Canada's Department of Finance, which estimates that it collected 48 million Canadian dollars from the security tax from April to June, has hired consultants to review the tax. According to Jean-Michel Catta, a spokesman for the department, the tax will be reduced if revenues exceed the costs of new security projects. Mr. Catta said, however, that since the Sept. 11 terrorist attacks, the government had taken over many airport security functions that used to be the airlines' responsibility. Even if the security tax does come down, the drop could be offset by increases in other fees. The Ottawa Airport Authority, for instance, said recently that it would raise its airport improvement fee in January to 15 Canadian dollars from 10. http://www.nytimes.com/2002/10/01/business/worldbusiness/01AIR.html?ex=1034477964&ei=1&en=8ba7144ef06a77ac HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company