Canada’s restaurant industry is bracing for the biggest jump in the country’s alcohol excise duty in more than 40 years, spurring warnings the tax hike could force some bars and restaurants out of business.
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Toronto's Pearson airport has a PR problem: It's known as the worst airport in the world – CBC News
Toronto’s Pearson International airport — the busiest in Canada — has a PR problem, sparking concerns some people may avoid travelling to the city.
Disgruntled travellers passing through Pearson are posting about their bad experiences on social media, complaining about long line-ups, flight disruptions and missing baggage.
“Toronto’s Pearson Airport is a special circle of hell. The worst airport experience ever,” tweeted a traveller from Florida last week, along with a photo showing a departures board with more than two dozen delayed flights.
The airport’s troubles have also been featured in major international publications this month, including The New York Times, The Wall Street Journal, and the BBC.
“This is a national embarrassment,” said Walid Hejazi, an associate professor of of economic analysis and policy at the University of Toronto’s Rotman School of Management. “In the short term, this is clearly going to impact Canadian tourism.”
Toronto’s Pearson Airport is a special circle of hell. The worst airport experience ever. Good luck if you have to make a connection here. <a href=”https://twitter.com/hashtag/YYZ?src=hash&ref_src=twsrc%5Etfw”>#YYZ</a> <a href=”https://twitter.com/hashtag/pearsonairport?src=hash&ref_src=twsrc%5Etfw”>#pearsonairport</a> <a href=”https://t.co/kSFfaPTn8q”>pic.twitter.com/kSFfaPTn8q</a>
—@NeonRaygun
Due to a sudden surge in travel, airports across the globe have been plagued with congestion and flight disruptions.
But Pearson’s problems have garnered special attention, often because the airport has scored the top spot for the highest percentage of flight delays this summer: 57 per cent of all Pearson departures between June 1 and July 24 were delayed, according to flight tracking service FlightAware. That was the highest rate among the world’s 100 busiest airports.
“Toronto Airport Is World’s Worst For Delays,” announced a headline in the Wall Street Journal last week.
Montreal’s Trudeau International Airport scored the second spot with almost 53 per cent of flights delayed.
Toronto’s Pearson International has won top honors for airport service for years, but now it’s at the epicenter of a global air-travel meltdown <a href=”https://t.co/uDv3FlDlIl”>https://t.co/uDv3FlDlIl</a>
—@WSJ
As with many airports across the globe, Pearson’s problems began when demand surged in May and many previously laid-off workers, including federal government employees, didn’t return — causing staffing shortages.
“Aviation roles are highly skilled, so it’s not as simple as hiring someone new and getting them on the floor of the terminal or out on the airfield,” said Tori Gass, spokesperson for The Greater Toronto Airports Authority (GTAA) in an email. The GTAA, a non-profit corporation, operates Pearson.
But the explanation is no solace for inconvenienced passengers.
Business traveller Eric Griffin of Philadelphia says he has sworn off Pearson for the time being, following his recent travel experience.
Griffin flew from Philadelphia to Toronto on June 27 for an important meeting with a prospective client for his phone accessories company.
Things didn’t go as planned.
After Griffin’s Air Canada flight landed in Toronto, he said it sat on the tarmac for at least two hours, and then he spent the following three hours dealing with his missing checked bag. The bag, which contained important sales-related materials, didn’t surface until three days after his meeting.
Next, Griffin’s return flight was cancelled, so he drove the 800 kilometres home to Philadelphia.
“At this point, I was just done betting on Pearson airport. I just had no faith they were going to get me out of there,” Griffin said in a Zoom interview.
“My experience at Pearson airport was a zero out of 10 stars. I don’t think it could have gotten worse.”
He too took to social media, writing, “Don’t ever fly to Toronto Pearson airport this year,” in a Facebook post.
Travel’s comeback?
Although travel has surged recently, it has yet to reach pre-pandemic levels. According to Statistics Canada, the number of foreign arrivals to Canada by air in June was down by about one-third compared to June 2019, when adjusted to account for recent changes in tracking air travel.
The Tourism Industry Association of Ontario (TIAO) says the problems at Pearson, along with remaining travel restrictions such as the ArriveCan entry app, are hampering travel’s comeback.
“Folks are deciding that, ‘You know what? Based on what we’re seeing, we’re just not going to travel to Canada, to Ontario, to Toronto, because it’s seen as being too cumbersome,’ ” said Jessica Ng, TIAO’s director of policy and government affairs.
“It impacts … what people think of Canada as a premier travel destination, and it impacts tourism businesses just as they’re getting out of two years of restrictions and uncertainty.”
The Toronto Region Board of Trade said if Pearson’s problems aren’t resolved soon, it could negatively affect business travel, which picks up in the fall.
“From a reputational perspective, we don’t want to get to that point and we need to get in front of it,” said Jennifer van der Valk, a spokesperson for the trade board.
What went wrong?
Pearson is North America’s second busiest airport in terms of international traffic, following John F. Kennedy International Airport in New York City, according to the GTAA.
On top of dealing with staffing shortages, GTAA’s Gass said Canada’s stringent travel restrictions during the height of the pandemic virtually ground the industry to a halt, making the ramp-up “a lot steeper than other countries.”
Rotman’s Hejazi argues there should have been better pre-planning, and that Canada’s major airlines bit off more than they could chew.
“The airlines sold way too many tickets, more tickets than the airport capacity could handle,” he said.
WATCH | Baggage delays add to travel woes:
Luggage delays are adding to the problems Canadian air travellers face, with some airports seeing mounds of bags piled up and some travellers not getting their luggage during an entire trip.
Canada’s two biggest airlines, WestJet and Air Canada, said they both proactively cut back their flights this summer by 20 and 25 per cent respectively. Air Canada cut thousands more flights in late June as travel chaos spread across the globe.
Meanwhile, both the GTAA and the federal government said they’ve been working hard to increase staff and speed up the movement of passengers through the airport. Efforts to streamline the passenger process include moving random arrival testing outside the airport, and adding more self-serve kiosks at customs.
“We’re seeing improvements, but we still have work to do to smooth the passenger journey,” said Gass.
Transport Canada also noted improvements, stating that for the week of July 11-17, 58 aircraft were held on the tarmac at Pearson, a decline of 84 per cent compared to the peak period during the week of May 23- 29.
“This decrease shows the significant progress that has been made to date to streamline passenger flows at Canada’s largest airport,” said Transport Canada spokesperson Laurel Lennox in an email.
Still, for peace of mind, business traveller Griffin plans to drive to Toronto for his next business meeting in September.
“I can predict when I’ll get there and when I’ll get home,” he said.
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Chapter Two Brewing Company in Windsor is celebrating a milestone this weekend.
“Five years! We’re pretty pumped that we got this far and we’re still going strong,” said brewery co-owner and general manager, Cheryl Watson. “It’s good news, I mean, we’ve gone through a lot.”
From the impact of lockdowns during the pandemic to recent inflationary pressures and wage increases, Watson notes the cost of doing business has been steep.
And that anniversary celebration will clouded by a looming alcohol excise tax increase on all alcohol producers.
“I think everything is just, it’s been unpredictable for suppliers and buyers alike,” Watson said. “We have to look at and figure out what part of it you’re going to cover and what part of it you’re going to ask your customer to cover.”
That question will get harder on April 1 when the 6.3 per cent federal excise tax goes into effect on beer, wine and spirits producers.
Taxes already make up 50 per cent of the cost of beer, 65 per cent of the cost of wine and 75 per cent spirits, according to the Canadian Taxpayers Federation.
“The screws are tightening and we don’t have as many places to play anymore,” said Watson.
The increase on the table is triple the usual jump — a number tied directly to inflation — and has alcohol manufacturers wondering who is going to pick up the tab.
“You’re going to see probably a six to 10 per cent increase on the price of your beer,” said Shane Meloche, the owner of Frank Brewing Company in Windsor. He’s weathered the storm that is the past few years in the hospitality industry and doesn’t want to raise prices but worries this time, he may have no choice.
“We’re here to make money. We’ve got 20 to 30 people that work here. We need to stay in business,” Meloche said. “We want to keep everybody employed. So the only way to do that is to pass along that price to the consumer.”
Restaurants who sell alcohol will also feel the effects. A recent Restaurants Canada survey found about half of Canadian restaurants are operating just at or below profitability levels, noting the tax increase will cost Canada’s food-service industry about $750 million a year.
“Their profit margins are very slim. And then when you have a six per cent increase, it’s slimmer,” said Paul Boots, who along with business partner John Conlon launched Suds Runner just a few months back.
It’s a licensed manufacturing representative retailer for nine different Breweries in Ontario where customers can go online and order flights of beer from them that you can’t get at the LCBO or Beer Store — and they bring it to your door.
They started the venture to support local breweries and give their less popular brews more exposure for customers who can’t make it out to craft breweries as often as they’d like.
They hope the increase doesn’t crush their suppliers, customers, or them.
“It’s important, I think, for people to understand that if the price is going up a little bit, it’s not because they’re making more money,” said Conlon.
“They’re just trying to work, trying to make it work.”
Tumbling stocks dragged down other major banks across Europe, fuelling fears about a banking sector crisis.
Shares in Deutsche Bank have fallen sharply, dragging down other major European banks and reigniting fears about a widening banking sector crisis.
Germany’s biggest lender dropped more than 14 percent on the Frankfurt Stock Exchange in Friday morning trading before clawing back ground in the afternoon to trade 9.5 percent lower, at 8.43 euros ($9.07) a share.
Tumbling bank stocks dragged down markets across Europe on Friday with Germany’s Commerzbank down 7.5 percent, France’s Societe Generale off 5.9 percent and Austria’s Raiffaisen down 5.9 percent.
Deutsche Bank is one of 30 banks considered globally significant financial institutions, so international rules require it to hold higher levels of capital reserves because its failure could cause widespread losses.
The long-troubled bank has become the focus of investor concerns after the collapse of three regional US lenders and the Swiss government-brokered takeover of Credit Suisse by rival UBS triggered market turmoil this month.
The cost of insuring the bank’s debt against a risk of defaulting, known as credit default swaps, has surged as investors fret about the banking sector’s health.
Rising costs on insuring debt were a prelude to Credit Suisse‘s rescue by UBS. That hastily arranged takeover on Sunday and jitters about Credit Suisse’s long-running troubles led its shares to tank and customers to pull out their money.
Asked whether Deutsche Bank could be the next Credit Suisse, German Chancellor Olaf Scholz said, “There is no reason to be concerned.”
Scholz expressed confidence in Deutsche Bank, saying it had “modernised and organised the way it works. It’s a very profitable bank.”
Speaking in Brussels after a summit of EU leaders, he also said the European banking system was “stable” with strict rules and regulations.
Deutsche Bank said on Friday that it would redeem $1.5bn in tier 2 bonds early. Such a move is normally aimed at boosting confidence in a bank although its shares plunged regardless.
The bank was hit by a string of problems linked to its attempts before the 2008 global financial crisis to compete with Wall Street investment banking giants.
But it launched a major restructuring, which involved thousands of job cuts and a greater focus on Europe, and has returned to financial health. Last year, it booked its highest annual profit since 2007.
European officials said banks in the European Union’s regulatory system, which does not include Credit Suisse, are resilient and have no direct exposure to the failed California-based Silicon Valley Bank and little to Credit Suisse.
Efforts to strengthen banking regulation in recent years “puts us all in a position to say that European banking supervision and the financial system are robust and stable and that we have resilient capitalisation of European banks”, Scholz said.
European leaders, who played down any risk of a possible banking crisis at their summit on Friday, said the financial system is in good shape because they require broad adherence to tougher requirements to keep ready cash on hand to cover deposits.
International negotiators agreed to those rules after the 2008 financial crisis, triggered by the failure of US investment bank Lehman Brothers. US regulators exempted midsized banks, including Silicon Valley Bank, from those safeguards.
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Bar and eatery operators across Canada have endured lockdowns, labour shortages, supply chain mayhem and soaring costs for everything from payroll to cooking oil. Rising inflation has also softened demand as some consumers stay home to save money.
“Many of us haven’t recovered from the pandemic and now they want to raise this tax,” she said. “It’s hard to get blood out of a turnip. We’ll see more restaurant closures if this goes ahead.”
The federal beverage alcohol duty is set to increase 6.3 per cent on April 1.
While the duty is separate from provincial liquor board fees and sales taxes, it ultimately filters down to higher prices for consumers, said CJ Helie, the president of Beer Canada.
“It’s imposed at the point of production and paid by the manufacturer, which means it’s built into the price of the product and magnified as it goes through the supply chain from the distributor to the retailer,” he said.
The automatic annual tax increase is a long-standing irritant for the beverage industry, but was “digestible” when inflation was around two per cent, Helie said.
But this year’s adjustment is more than triple the usual increase and should be reconsidered given the state of the industry, he said.
Some brewers may try to absorb the higher cost by delaying investment plans like new hiring but he said there’s only so much they can do before passing the tax hike along.
“They’ll try to recoup what they can through the wholesale price but it could impact demand and end up costing them in lower sales volumes anyway,” Helie said.
Alcohol excise duty rates are adjusted by law on an annual basis to account for inflation, Adrienne Vaupshas, press secretary of Finance Minister Chrystia Freeland, said in an email.
The increase next month works out to less than a penny on a can of beer, she added.
But industry group Restaurants Canada said it will cost Canada’s food-service industry about $750 million a year, with the average casual dining restaurant expected to pay an extra $30,000 towards alcohol.
At the retail level, the impact may be more subtle. Though added on top of other price increases, consumers may notice higher prices.
The Liquor Control Board of Ontario said customers may experience a price increase on select products by the end of April if manufacturers pass along the federal excise tax increase.
A spokeswoman for the Nova Scotia Liquor Corp. said beverage alcohol prices are increasing by just over three per cent overall next month.
But these increases are due to a number of factors, including higher excise taxes and the rising cost of raw goods such as bottles, cans, barley, and labels, NSLC spokeswoman Allison Himmelman said in an email.
In British Columbia, a spokesperson for the BC Liquor Distribution Branch said it’s not possible to confirm what level of price increase consumers may or may not see.
“Each liquor supplier will decide whether or not to increase its wholesale price to account for the increase it must pay in excise duty,” Robin Fraser said in an email.
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“Then retailers will make the decision on whether to adjust the prices for consumers for those products,” Fraser said. “It is up to each retailer to determine if, and by how much, to raise its prices.”
Alcohol beverage prices rose 5.7 per cent in February compared with a year before, according to Statistics Canada.
While that’s only slightly higher than the overall inflation rate of 5.2 per cent last month, the tax hike in April along with other increases could see the alcohol inflation rate rise faster than general inflation later this spring.
“Our industry is struggling and we can’t absorb more increases,” said Olivier Bourbeau, vice-president of federal affairs with Restaurants Canada. “Restaurant margins are always thin but right now they’re around two to three per cent.”
This is in part because restaurants are absorbing some of the higher costs due to inflation, Bourbeau said.
Indeed, while grocery prices recorded a 10.6 per cent year-over-year increase in February, restaurant food prices only rose 7.7 per cent, Statistics Canada figures show.
Also, alcohol beverages purchased from stores rose 6.0 per cent in February, while alcoholic beverages served in licensed establishments increased only 4.3 per cent, the agency said.
“Restaurants can’t absorb any more price increases,” Bourbeau said. “But if they pass those costs to customers it could hurt their business.”
“At the end of the day, consumers will only pay so much before they start to cut back.”
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