Opening Canadian market to foreign airlines a ‘lose-lose,’ pilots union says

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They said the level of concentration in the industry means that on many routes, travellers have limited choice and pay higher fares than they might in a more competitive environment.

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While other countries have adopted looser regulations, Canada’s restrictions make it harder for airlines to access capital from investors outside the country, and harder and more expensive for new and existing carriers to find funding to expand, the agency said.

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Porter Airlines said it supports increasing foreign ownership limits to 49 per cent for a single shareholder, but additional changes to foreign ownership and market access require much greater scrutiny.

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“For example, allowing foreign airlines to operate domestic routes will further disadvantage smaller carriers,” Porter Airlines said in a statement.

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It said the proposal should not be considered without reciprocal access to other countries for Canadian airlines, although the practice will ultimately benefit the largest players with greatest resources and brand recognition.

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John Gradek, a faculty lecturer of supply networks and aviation at McGill University, said cabotage is basically “a poor man’s approach to increasing competition in Canada,” as foreign airlines are given the right to fly “whenever they feel like it, at whatever price they feel like.”

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“Cabotage is not a globally well-accepted commercial concept, because it does threaten the Canadian entity,” Gradek said.

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He added that, in this case, it’s like giving away Canadian rights to a foreign carrier without having any reciprocal rights for Canadian carriers. “I’m very surprised that the Competition Bureau is leading us down that path.”

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The bureau also recommended eliminating international flight exclusivity clauses, which limit only one airport in a local area to have international flights.

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Another recommendation is to shift financial burden of airport maintenance away from passengers. Airlines collect both airport improvement fees and passenger facilitation fees from customers as part of their ticket price and then transfer the funds to airports, keeping a processing fee for the transaction.

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“Many stakeholders told us that airport fees make it more expensive for airlines to operate,” the report said.

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In a statement, WestJet said it welcomes the bureau’s market study and agrees that third-party fees, charges and taxes, which it said are much higher in Canada than in other jurisdictions, undermine affordability and deter competition in Canadian air travel.

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As an example, for a typical round-trip in Canada, a passenger must pay $133 in fees (none of which goes to airlines), compared to only $49 in the U.S., WestJet said.

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“Lowering fees and charges would allow millions more Canadians to afford air travel, grow the size of the market and create room for new entrants and more competition, which in turn delivers more choice and more affordable travel for Canadians,” it said.

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Flair Airlines said the bureau’s findings reinforce key issues that have long affected the airline industry, such as opaque slot allocation, “unfair” airport fee structures, and exclusive commercial arrangements that benefit incumbents and block new entrants.

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“The findings show that Canada’s airline industry needs to expand beyond the large carriers that currently dominate the market,” said Eric Tanner, Flair’s vice president of commercial.

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Meanwhile, Air Canada released its own report on Thursday refuting some of the Competition Bureau’s claims, the main one being a lack of competition in the Canadian air travel industry.

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“Canadians have greater choice than ever before on the vast majority of routes they travel on,” Air Canada said. It also said competition in Canada is as robust, if not more, than other jurisdictions.