A Business Point of View

The Need for Improved Regional Air Service within Atlantic Canada*

(* This column was written a few days before the recent announcement of a three-year funding agreement by the three Maritime Provinces and the Federal Government to support regional air service using Halifax as a hub.)

Let’s be clear, it has hardly been more difficult to travel within Atlantic Canada by air than it is today. Atlantic Canada is currently suffering from a lack of air service within the region. Indeed, Atlantic Canada’s regional air service has been the last region to recover from the pandemic. This has gotten worst since the pandemic when Air Canada’s regional service essentially disappeared. Not that that service was very good. Anyone remember those Air Georgian antiqued prop planes without any onboard facilities or services?

In fact, the regional air service provided by Air Canada was plagued by unreliable service due to the aging equipment used, predatory pricing that saw a return half-hour flight between Halifax and Charlottetown cost most than a thousand dollars and schedules that were less than convenient, especially for business travellers. Despite all these drawbacks, at least there were flights within the region between Halifax and the three major New Brunswick airports and Halifax and Charlottetown and Halifax and Sydney, and more frequency in flights between Halifax and Newfoundland. It seems apparent that for regional air service to be successful, Halifax must be the hub for regional service and serve as a gateway for travel outside the region.

Emerging Regional Airlines

The good news is that there are new entrants to the regional market that are attempting to rebuild regional air service. The two main airlines involved in rebuilding regional air service are Pascan, a Quebec based airline and Newfoundland based PAL Airlines, which focuses on serving mainly Newfoundland and Labrador and the Quebec market but does have a regular flight between Deer Lake and Moncton. Pascan main focus are flights between Quebec and the Maritimes. Pascan does have regular service between Saint John, NB and Halifax.

The challenge, as Monette Pashette, the CEO of the Canadian Airport Council pointed out in a recent Insights Podcast, is that these airlines have yet to establish codeshares with other airlines to connect passengers within the region with other destination beyond Atlantic Canada that would stimulate demand within the region for their services. The latest consequence of this problem was the cancellation of daily flights between Sydney and Halifax by PAL Airlines due to lower-than-expected demand.

Importance of Regional Air Service

As David Campbell and I pointed out in our recent book, “Toward Prosperity: The Transformation of Atlantic Canada’s Economy”, having vital transportation links between major urban centre within the region is critical to growing the economy. One key example is the tourism industry which has an interest in the fly and drive market. Another is the business community that relies on timely access to markets. It is important for communities looking for capital investment and it is also important for the transport of goods between communities. If you are doing business in Charlottetown, it was a half-hour flight to access that market from Halifax. This compares to at least a three-and-a-half-hour drive both ways. The only air alternative to fly through Montreal or Toronto to Charlottetown, with the quickest flight combination of just over four hours and a cost of over a thousand dollars return. To fly to Fredericton from Halifax, the shortest route is over four hours through Montreal and costs over nine hundred dollars. In both cases, these flights necessitate an overnight stay. To fly between Sydney and Halifax necessitates a four-and-a-half-hour flight through Montreal, normally about a half hour flight direct between the two Nova Scotia cities. Clearly, none of these examples are either time effective or cost efficient and only add to the cost of doing business in the region.

Challenges to Commercial Air Travel

New federal regulations since the pandemic have further limited the time pilots are allowed to fly. These new regulations have led to an increase in demand for pilots across Canada by 30 percent according to Pashette and is one of the reasons cited for the difficulty in rebuilding regional air service in Atlantic Canada. Currently, there is a need for an additional 5,000 pilots in Canada. This means regionally focussed airlines are in stiff competition for pilots to fly their routes.

Another challenge for smaller regional airports is the lack of capital to re-invest in their infrastructure. Since the transfer of the operations of airports to local community boards, the money to invest in the infrastructure has fallen to these boards to generate their own capital, mainly through airport improvement fees that have been steadily rising since the transfer of the airports in the 1990s. For larger airports with significant passenger volumes, this has not been the problem based on their airport improvement fee revenue. Indeed, since the airports in Canada were transferred to local community boards, they have invested more than $30 billion in capital in their infrastructure and the national airport system (there are 26 NAS designated airports in Canada). Canada’s national airport system has been completely modernized as a consequence of having their operations transferred to local community boards and its now among the best in the world. This would never have occurred without the transfer to local authorities.

However, some of the smaller NAS airports and other regional airports (there are about a hundred airports in Canada represented by the Canadian Airport Council), do not generate sufficient revenue due to the limited number of flights at their airports, to be able to fund their capital improvements. The cost of a single runway renewal can cost more than $10 million according to Pashette.

What Can Be Done

Since the transfer of the airports to local authorities, the NAS airports have returned more than $7.5 billion in rent to the federal government for the lease of airport facilities without any investment in the infrastructure except a small capital assistance fund of $38 million per year. The Canadian Airport Council estimates the capital infrastructure needs of the smaller regional airports at $150 million per year. Each year, the federal government receives more than $500 million in rent from the NAS airports. It is time for the government to make better use of this windfall and to re-invest a larger portion of their rent revenue into modernizing these smaller airports to help them attract more airline clients.

The federal department of transportation who is responsible for the negotiating tariffs that guide the operations of the major airlines in Canada can insist on service within regions, particularly between capital cities as part of their tariff agreements. This might include accelerating codeshares with small regional airlines like PAL and Pascan.

If Atlantic Canada is to achieve its full potential economically, it needs a fully functional regional air service. The four premiers in the region need to work collaboratively with a stronger voice to address this deficiency and hasten the rebuilding of regional air service across Atlantic Canada.