Can more competition drive down Canadian airfares? Watchdog launches probe – National
Canada’s competition watchdog is scanning the skies for ways to improve the country’s air travel industry, studying whether new policies could attract more airlines to the sector and lower prices for passengers.
The Competition Bureau on Monday launched its probe into the state of competition in Canada’s airline industry, which it noted in the terms of its study is already heavily concentrated between two major players, Air Canada and WestJet.
Together, the two airlines amount for 80 per cent of capacity in the Canadians airline industry, as measured by the sector’s seat-kilometres metric.
With those airlines scaling back their operations regionally — WestJet focusing efforts in the west and Air Canada to the east — and upstart airlines like Lynx Air collapsing or struggling after take off, the competition watchdog is looking at whether Canada’s aviation policy is lacking when it comes to introducing and supporting new entrants.
The study will examine new dynamics in Canadian aviation such as the introduction of ultra-low cost carriers and consumer demand for direct flights or use of secondary airports, as examples, as it looks for gaps in the policy landscape.
The probe will answer questions such as, “Should government action promote more competition from international players on domestic routes?”
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The Competition Bureau notes there is evidence that domestic airfares are relatively high in Canada and remain above pre-pandemic levels.
The study will take a look at whether consumers have enough information to make informed choices about their fares and other ways that policymakers could put more competitive options on the table.
The introductory report suggests that the study may help the federal government crack down on fees related to seat selection or checking baggage that are levied at consumers.
“Supporting competition in this industry will help reduce prices for consumers, improve quality of service and working conditions, increase productivity, and boost innovation,” the study’s terms say.
The study does not pre-suppose any wrongdoing on the part of airlines, but the Competition commissioner will investigate if the probe finds evidence that the Competition Act has been violated.
The Competition Bureau intends to publish its findings by June 30, 2025, but notes that the schedule may change.
Competition across various industries in Canada has been a hot topic as of late. The Liberal government granted new powers to the Competition Bureau this past fall, including giving the watchdog power to compel documents from corporations as part of its market studies.
Last year, the Competition Bureau published a report arguing for more competition in Canada’s grocery sector to keep prices in check. The watchdog is also specifically investigating the parent companies of Loblaw and Sobeys for alleged anti-competitive behaviour.
Competitive forces have been on the decline in Canada at the same time as profits and price markups are on the rise, a report from the Competition Bureau released late last year found.
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