Moreau says in an interview that research indicates consumers are sensitive to modest price decreases, especially for tourism-related travel, adding that a 1-per -cent decrease in the price of a ticket corresponded with a 1.3 per cent to 2-per-cent increase in demand.
“If we reduced the burden of taxes and fees that weighs down the air transport sector, the resulting increase in economic activity and tax revenue would likely compensate for at least a portion of the lost government revenue,” Moreau said.
Every year, federal and provincial governments collect more than $1.5 billion from airlines and airports.
By reducing taxes and fees, Moreau said airlines could lower prices, which would spark increased demand for flights and more revenues for airlines.
A higher demand for flights makes it easier and potentially more profitable for smaller and lower-cost airlines to enter the market, he said.
Airline ticket prices are felt acutely in Quebec, with many people living outside big cities stuck with airline monopolies and high prices for domestic flights.
In order to encourage domestic tourism, the Quebec government recently announced $173 million over five years to renovate regional airports, help low-cost and smaller airlines become more competitive and to directly subsidize flights for Quebecers living outside big cities.
Moreau said, however, the Quebec policy could end up increasing fares over the long term.
“With subsidies for airplane tickets, it’s possible the flights stay the same price or even increase because the companies know consumers will have high purchasing power,” he said.
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