Planes, buses and taxis: How governments make your holiday travel more expensive

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Appeared in the Calgary Herald

In the 1987 movie, Planes, Trains and Automobiles, actors John Candy and Steve Martin encountered chronic obstacles in their attempt to reach Chicago, their hometown, for Thanksgiving. Weather, for one, wreaked havoc with their plans.

If the movie had been about Canada, an additional narrative could have been this: how governments make it difficult for families to access cheap travel.  That’s because of how governments too often protect existing companies in the transportation industry, and/or over-regulate them. That’s to the detriment of competition, consumers, low prices and new jobs.

Let’s start with buses, where companies must endure (or actually lobby for in some cases) protectionist over-regulation long ago lifted from airline travel.

For example, on pricing, New Brunswick, Nova Scotia, Quebec and Manitoba all require bus companies to obtain prior approval from provincial regulators for changes in fares, service and schedules.

In addition, in most provinces, new entrants must not only prove they are safe—a reasonable requirement—but also convince regulators existing bus operators won’t be harmed financially by any new competing service. That’s unnecessary coddling. Instead, provinces should let companies deemed safe compete on whatever routes they choose.

However, this unnecessary and anti-competitive requirement exists even in (generally) competition-friendly Alberta. One company, Pacific Western Transportation (PWT) Ltd., wants to add a Calgary-Lethbridge route to its popular Red Arrow services. In April, that company filed an application with Alberta Transportation to provide just such a service. It’ll be at least August before it hears back.

Win or lose the application, the entire process will cost $75,000; that’s equivalent to a year’s salary for two full-time customer service clerks at the same company.  

Here’s a rhetorical question: Why should any bus company in any province seek government approval to add, cut or change a service, or in some provinces, seek approval on fares? Sensibly, airlines haven’t been required to do that for decades.

If provincial governments kept the sensible regulations on safety but dropped the approval process for route changes and fares, well-travelled routes would see more competition, increased service and price drops.

Sure, passengers on less-travelled routes might pay more. (Bus companies are now often forced to cross-subsidize rural travel in exchange for protection on more profitable routes).

But that’s fair. After all, the average home costs significantly more in Canada’s major cities when compared to rural towns and villages. If, in a more competitive market, a rural passenger must pay more and travellers between major centres pay less, so be it; the rural disadvantage on bus fares is more than made up for with vastly cheaper housing costs.  

Briefly, on two other forms of travel that also affect holiday costs for Canadians, we still get a raw deal on airline competition and taxis.

On flying the friendly skies, the European Union long ago opened its markets to allow foreign carriers to pick up and drop off passengers anywhere in the EU. For example, a German carrier can pick up and drop off passengers in Italy; Italian airlines can do the same in Germany. The EU also relaxed rules on foreign ownership and investment in the industry, this to attract new capital and facilitate new entrants into the airline business.

The result, according to a 2009 report from the EU body responsible for transport policy, was a 120 per cent increase in internal EU routes between 1992 and 2008, and a 320 per cent increase in the number of routes served by two or more competitors. Also, the EU noted the emergence of low-cost carriers, which now account for a third of all EU airline capacity and lower fares.

In Canada, consumers are still waiting for such substantive policy reform.

Lastly on government-sponsored limits to competition, cities across Canada often restrict the number of new taxi licences. Sometimes, no new taxis are allowed for decades. Calgary is a prime example, which, according to a former colleague of mine, has had the same number of cabs since 1986.

All that does is favour quasi-monopolistic providers. New entrants can’t emerge and supply is thus restricted. Moreover, insofar as major taxi companies possess most licences, drivers are squeezed by such companies for the maximum rental amount possible for their cabs. The result is that workers and consumers both lose.

Regrettably, when it comes to travel, whether by air, bus or taxi, Canada’s governments too often game the system against consumers. It’s long overdue for them to reverse course, favour pro-competition policy and make vacations—or travel for any reason—cheaper for all. 

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