Vancouver International Airport shifts cost burden from airlines to passengers

Travellers departing Vancouver International Airport (YVR) for destinations outside the province of British Columbia (BC) (with the exception of Yukon) will find it more expensive doing so when the airport raises the airport improvement fee from C$15 to C$20 from May 1. The fee for travel within BC and to Yukon remains at C$5.

The reason given by YVR president and CEO Larry Berg is unsurprisingly one of economics. The airport needs funding to launch a C$1.8 billion upgrade to fend off growing competition from other airports, and interestingly YVR fears how growing compatriot airports notably Calgary and Edmonton in the neighbouring province of Alberta may be poaching its gateway traffic.

Indeed, Mr Berg recognized how gateway traffic has been increasingly eroded by the capability of airlines to operate point-to-point traffic, not just to nearby Calgary and but beyond those points to Toronto and even American ports such as Seattle, Chicago and New York. It is no secret that YVR’s key interest is the growing traffic from China.

YVR is Canada’s second busiest airport after Toronto. It recorded a throughput of 17 million passengers last year (capacity 23 million passengers). Already named as North America’s best airport by more than one survey, it plans to further improve its facilities, all the more the need to do so as other airports are trying to catch up.

There was even a hint that YVR’s success story – growing from connecting six US cities to 22 and from hosting 15 weekly flights to Hong Kong to 15 – in itself is justification enough for the hike in the airport improvement fee, which was introduced in 1993 and has since become a permanent feature. Besides, other major Canadian airports such as Montreal and Toronto are already charging C$25.

Yet tongue-in-cheek, Mr Berg was quick to cast doubt on the expansion plans of YVR’s closest competitors; Edmonton is opening 12 international gates next month and Calgary is constructing a new runway and 22 new gates to be opened in 2015. He reportedly said: “Neither Calgary nor Edmonton has the passenger traffic to fill those gates today – so guess whose traffic they are looking at?” (The Globe and Mail, Jan 25, 2012)

Mr Berg said: “The aviation industry is a very competitive industry and if YVR wants to continue the sort of growth projections that we’ve enjoyed in the past, and the job creation, we have to attract more carriers.”

Such reasons – with a strong dose of self-preservation – are a safe bet to push an agenda that may be a bitter pill to swallow in these not-so-good economic times. More carriers mean more revenue and more jobs. But that which may not have been adequately highlighted is how the cost burden has shifted from the airlines to the travellers; while increasing the passenger fee, YVR has decided to freeze airport charges to airlines for five years and to remove the provincial tax on jet fuel.

Clearly, YVR wants to not only anchor present operators but also attract new and more airlines and flights. Cost is a key consideration for gateway traffic, and that is probably why the threat of Edmonton and Calgary loom large on YVR’s radar. BC with its lure of beautiful tourist spots can be easily reached not only from Edmonton and Calgary but also across the national border from Seattle.

So it is conversely true that travel beyond BC needs not originate from YVR but from these neighbouring airports. In fact, there is a already a concern that Canadians are crossing the border to commence their journeys (especially for travel to destinations within the United States) to save not only on costs of the tickets but also surcharges imposed by the US government for entry by air by Canadians. This has largely affected the border airports such as Toronto and YVR, and in the case of the latter, Seattle and Bellingham in Washington State are attractive alternatives.

The carrot that YVR gives to its operators and that which it dangles before potential ones may yet soften the impact of the 33-per-cent increase in the airport improvement fee if it means there is no less reason for airlines to also increase their fares. But that would be wistful thinking, and certainly it is not something YVR expects of its airline customers. Nor would the airlines feel it behoves upon them to do so.

In the end, it is Canadian travellers that will feel the pinch most. YVR has probably done its sums that the nouvea riche from China and other parts of Asia will probably more than make up for the small drift by comparison of local travellers to neighbouring airports or the unlikelihood of a cutback in their travel. Besides, most airports would not deny that they exist first for the airlines, then the passengers – who will come with the airlines. And, with no exception this time, passengers do not, if seldom, have the choice.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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