Canada’s Competition Bureau says it will launch a market study into Canada’s airline sector. People make their way through Pearson Airport in Mississauga on March 14, 2023.Chris Young/The Canadian Press
The federal antitrust watchdog is launching a study of airline competition in Canada, three months after the shutdown of low-cost carrier Lynx Air.
The Competition Bureau will first consult with the Transport Minister on the scope of the study, which will examine how government policies affect competition among Canada’s air carriers, said Melissa Fisher, the agency’s deputy commissioner of mergers.
“We intend to study the state of competition in the airline industry and how governments across Canada can improve competition for the benefit of domestic air passengers as well as the workers and entrepreneurs who enable these services,” Ms. Fisher told federal politicians on a parliamentary transport committee Thursday.
The study is the first by the Competition Bureau since the release of its 2023 investigation into the grocery business. That study found Canada is dominated by three grocers – Loblaws, Sobeys and Metro – and needs more competition to ensure food prices do not continue to soar.
The Competition Bureau’s role is to investigate abuses of market power, price fixing and false advertising, in addition to advising the government on mergers. In recent years the watchdog has raised concerns about the proposed takeovers involving Air Canada and Transat AT Inc. TRZ-T, WestJet Airlines and Sunwing Airlines and Canadian North and First Air.
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John Lawford, the director of the Public Interest Advocacy Centre, told the transport committee the Canada’s airline market has long been dominated by two main carriers, Air Canada and WestJet, with low-cost airlines that come and go within two or three years.
“There was and is currently a problem with concentration in the Canadian market,” Mr. Lawford said. He pointed to several factors that limit competition, including high costs of entering the market, a lack of government support for new airlines and the regulator’s failure to police predatory pricing or route matching.
The government has never blocked an airline merger, Mr. Lawford noted.
The committee, which is conducting its own study of airline competition, has heard that other barriers to competition include high airport fees, which inflate airfares, a foreign-ownership limit of 49 per cent and a rule that allows only Canadian carriers to fly domestic routes.
Politicians on the committee said air services to smaller cities are limited and expensive, leaving people with few, costly choices. “We see price wars in communities that have competition – and we don’t see that in places that don’t have competition,” said Taylor Bachrach, who represents B.C.’s Skeena-Bulkley Valley riding.
Ms. Fisher cited the bureau’s policy of confidentiality and declined to say when asked by the committee if it had received an application from a U.S. airline to fly point-to-point within Canada.
Air Canada AC-T controls half of the domestic Canadian market, while WestJet holds 30 per cent, according to Cirium, an aviation data company. The rest is shared between Porter Airlines (12 per cent), which operates mainly in Central Canada, and Edmonton-based Flair Airlines (9 per cent), according to May data. Sun destination carrier Air Transat has less than 1 per cent of the domestic market.
In February, low-cost carrier Lynx Air shut down after two years in operation and was granted court protection from creditors. The Calgary-based airline cited high operating costs and a “difficult regulatory environment.”
Barry Prentice, a transportation professor at the University of Manitoba, told the committee that economies of scale favour larger airlines, which can fly larger, more profitable planes that feed smaller routes on their own networks. He said Canada is vulnerable to “tacit collusion” among dominant airlines, matching prices and routes in a manner that harms consumers.
Speaking to the committee last week, Flair chief executive officer Stephen Jones said high airport fees prevent the airline from entering some markets, including Toronto to Ottawa. He said the airline has received no help from the government when it comes to fighting what he called anticompetitive behaviour by the large airlines.
Bradley Callaghan, the Competition Bureau’s associate deputy commissioner of policy, said Thursday that Flair’s 2020 complaint of predatory pricing by WestJet’s Swoop division was dismissed in 2023 after an investigation. “I can assure you it was looked at very seriously,” he told the committee.