TRAN Committee Report

Introduction

During the Standing Committee on Transport, Infrastructure and Communities’ study resulting from Motion 177, the committee heard testimony from witnesses regarding the impact of the federal excise tax on flight schools in Canada.

Additionally, the committee heard frequent testimony from witnesses on the impact of the federal and/or provincial carbon tax on flight schools in Canada.

Carbon Tax

Flight schools function in an industry with very tight margins and are very cost sensitive. With respect to the impact of a carbon tax on flight schools, the Committee heard a great deal of testimony indicating the negative impact it will have on their costs and on their students.

At its meeting on February 7, 2019, the Committee heard the following recommendation from Ms. Terri Super (Chief Executive Officer of Super T Aviation):

“To help keep the cost of training down for the student, we recommend that the federal government: one, exclude flight schools from the carbon tax, which has increased and/or will increase the cost of training for the student dramatically;”

Ms. Super added the following comments regarding the provincial carbon tax which currently exists in Alberta:

“The carbon tax that we have already in Alberta, and it is significant, does increase the costs.

We need the infrastructure. We need airlines. Everyone wants to fly. You guys all fly on an airline to get home on the weekends. We have to provide that.

The idea that the carbon tax will help people to reduce use of fossil fuels is just not going to be true for a flight school. The more students we put out, the more fuel we're going to use.”

On February 19, 2019 Captain Michael Rocha (Owner of Central Northern Airways) made the following comments during the committee’s meeting:

“I think when you add cost to the industry, the customer will ultimately have to pay for it, which will be the prospective pilots and the students. What they're going to do is look at their options and say, ‘Okay, am I going to spend $100,000 to do a pilot's licence to make x amount of dollars, or can I go into another industry and do something else?’ That's ultimately what ends up happening: the costs get so high that they'll do other things and they'll go and find other jobs and professions to pursue. So I think you have to be very respectful of the sensitivity to the cost of doing flight training.”

Also at the committee’s February 19, 2019 meeting, Mr. Richard Foster (Vice-President of L3 Technologies) added these comments following Captain Rocha’s remarks:

“I would agree with that. I think the cost eventually would be passed on to the customer with any kind of regulation. I do think the industry is trying to align itself to reduce its carbon footprint with new technologies.”

Following up on the remarks by Captain Rocha and Mr. Foster, Mr. Martin Hivon (President and Chief Flight Instructor of Aviation MH) contributed the following to committee:

“Basically I fully agree with what I've heard so far. Any additional costs will eventually be passed on to the customer. In the case of a flight school, the customer is the student pilot. But all of that is going to eventually end up at the industry level, and the ultimate customer, the regular passenger on any airline, will end up footing that bill. There's no miracle there.”

Excise Tax

With respect to the impact of the federal excise tax paid by flight schools, the Committee heard testimony indicating the negative impact it has on their costs and on their students.

At its meeting on February 7, 2019, the Committee heard the following recommendation from Ms. Terri Super (Chief Executive Officer of Super T Aviation):

“To help keep the cost of training down for the student, we recommend that the federal government: . . . two, reprise the federal excise tax for fuel on instructional aircraft;”

In its brief to Committee, flight school Ottawa Aviation Services (OAS) noted:

“Typically, one of the largest expenses for flight schools is fuel. That annual expense for OAS is forecasted to reach nearly $2 million by 2021.

In turn, this expense is passed on to our students through tuition fees.

Offering training institutions a refund on the federal taxes levied on fuel used for aircraft during instructional time would mean significant savings. This could be reflected in lower tuition fees, making the sector more appealing for potential students.”

Conclusion:

In conclusion, the Conservative members of the Standing Committee on Transport, Infrastructure and Communities believe that the committee’s report should have addressed comments concerning these two taxes more fully and made recommendations to the Government concerning them.

Recommendations:

• That the Government of Canada scrap the carbon tax, or, at a minimum, exempt aviation fuel used for instructional purposes.
• That the Government of Canada consider a reduction or exemption of the federal excise tax on aviation fuel used for instructional purposes.