Sunday, March 11, 2012

Canada's Aviation Competitiveness Revisited

In a recent development, the United Arab Emirates and Canada entered into nuclear cooperation talks that could see Canada become the main supplier of the UAE's nuclear reactors. A sign of thawing relations that went sour last year over additional flights for Emirates and Etihad to Canada. Canada in an attempt to protect Air Canada refused the UAE carriers additional flights in October 2010.

On a different tack, last week IATA called upon Canada's policy makers to improve the country's aviation competitiveness including the reduction of the tax burden (read story here). This time the comparison is between Canada and Australia
- Direct GDP contribution 2.2% Canada vs 2.6% Australia
- Indirect GDP contribution (tourism and other activities) 2.8% Canada vs 6.1% Australia
- Passengers travelling to Canada 71 million vs 78 million to Australia in 2011 taking into account that Canada's
  population is 50% larger than that of Australia.
- The contribution to tax revenues is 19% higher in Canada than Australia not including the effect of the fuel tax
  which is double in Canada

However, there is a silver lining, British Columbia is removing the provincial tax on international jet fuel starting in April. This is a sign that Canada is starting to view aviation as a strategic asset and not just a tax revenue stream. Clearly the promotion of a competitive aviation sector will yield better results for the economy is terms of contribution to the GDP and employment. The protection of Air Canada at all costs against all competitors whether national or international has been the mainstay of the government's policy. This is similar to the Indian government's aviation policy that is based on the protection of Air India, and we can see the state of the aviation sector these days. It is approaching a melt down.

However, business considerations do come into the decision making process related to aviation matters. On the basis of the possibility that Qatar Airways may purchase the Bombardier C Series aircraft, Qatar Airways was awarded traffic rights 3 weeks after they were rejected for Emirates, Etihad and Qatar Airways.

So, at the end UAE carriers may still get their traffic rights, but Canada still lacks a vision for its aviation sector.

Related Blogs
Government Policy and The Airlines
Politics and The Airlines
Canada's Air Transport Competitiveness

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