Canadian sporting fans may be tuned to the Olympics, but they’re about to watch Canada’s major airlines become political footballs.
The Federal Competition Bureau has officially launched its so-called market study of domestic air passenger competition. Battling it out for the survival of the beleaguered Canadian LCC, politicians will likely be raising the heat on Air Canada, WestJet, and perhaps even an expanded Porter Airlines.
This publication would suggest a different battle ground, that of airport costs, landing fees, and other extraneous expenses which hamper aviation grown in Canada.
“This market study will allow the Bureau to better understand what is driving the competition issues in the domestic airline industry,” officials said. “Specifically, the Bureau plans to examine three key topics:
- the state of competition in Canada’s airline industry;
- the barriers to entry and expansion that exist in the domestic industry, and
- the impediments to Canadians seeking to make informed choices for air travel.’
The hearings come on the heels of the failure of yet another Canadian low-cost airline. Lynx Air folded its wings in late February of this year after rumours of a Lynx merger with Flair Airlines failed to materialize.
Unlike previous market studies, this time, the Competition Bureau has the power to compel testimony from companies.
In an interview with the Toronto Star, Flair interim CEO Maciej Wilk said the study is “long overdue,” and expressed hope it will help companies challenging Canada’s two biggest carriers.
The Bureau says relatively high prices, market concentration, and rising customer complaints are fuelling its study into Canada’s airlines.
“Since the Canadian population is spread out over vast distances, other modes of transportation may not be feasible replacements for air travel,” said Commissioner of Competition Matthew Boswell. “More competition in the industry will mean lower prices, better services, and improved productivity."
“Air travel is a critical service,” Boswell said in a press release issued 29JUL, 2024. “We know many Canadians are frustrated by the cost and quality of the service being provided domestically.
“We heard this in many of the over 1,400 submissions to the consultation on the terms of reference. Our goal with this market study is to examine the current state of competition in Canada’s airline sector and to determine what can be done to improve it,” he said.
“In undertaking this study, the Bureau is not examining any specific allegations of wrongdoing,” officials said.
“However, should the Bureau uncover any evidence during the study that the Competition Act has been contravened, it will investigate and take appropriate action.”
The Bureau said Air Canada and WestJet together account for 80 % of available seat kilometres, a measure of capacity.
“There are also signs that domestic airfares in Canada may be relatively high.”
Officials said, “Recent travel experience has included congestion, flight delays, cancellations, and baggage issues during busy travel seasons in 2022. “In addition, Canadians have filed an increasing number of complaints with the Canadian Transportation Agency about air travel services in recent years.”
In a recent interview with Open Jaw, Air Canada’s Mark Galardo, EVP of Revenue and Network Planning, said AC will, of course, cooperate with the Bureau. “We run a very serious business here, we’re very transparent,” he said. “And we’re prepared to cooperate to the fullest extent.”
In testimony to the House of Commons Transportation Committee earlier this year, Air Canada’s VP of Government and Community Relations, David Rheault, said the Canadian air travel market “is highly competitive.”
“Close to 70 international carriers operate to Canada and compete with Canadian airlines. Some of these carriers are two- to three-times larger than Air Canada,” he said.
There has also been a significant increase in competition in the domestic market, with other carriers increasing capacity – including WestJet, Porter, and Flair Airlines. While in 2001, Air Canada’s capacity share of the domestic market was around 75%, it is currently around 43%, Rheault said.
Experts say the rules allowing the Bureau to compel testimony could make this a different market study from previous versions that examined issues such as grocery prices.
“They can get more detail, and some of it might contradict the narrative that airlines have been putting out there,” John Lawford, executive director and general counsel at the Public Interest Advocacy Centre, an Ottawa-based consumers’ rights organization, told the Star. “This looks like it’s going to be a serious market study.”
Submissions to the Competition Bureau can be made online until 31AUG. The government’s final report is scheduled to be released next June.
