Air Canada rejects Competition Bureau's report on lack of airline competition
Air Canada and Canada’s competition watchdog are at odds over competition in the country’s airline industry.
The Competition Bureau released a market study report on Thursday, which makes recommendations to governments to increase competition in Canada’s domestic airline industry.
It found that despite new airlines entering and expanding in Canada, the domestic market remains “highly concentrated” and competition remains “fragile.”
“With the right policy changes, governments can create the conditions for new airlines to grow and compete, and give Canadians access to more affordable, reliable options for flights,” stated Matthew Boswell, commissioner of competition with the Competition Bureau.
The report notes that Air Canada and WestJet combined account for roughly half to three-quarters of all domestic passenger traffic.
Competition Bureau
The independent law enforcement agency outlined three recommendations to governments to create optimal conditions for competition in the airline industry:
- Prioritizing competition in Canada’s aviation policy, which includes reviewing airline mergers and collaborations.
- Leveraging international capital and experience to strengthen domestic competition, including reducing barriers to foreign ownership. This includes calling on Ottawa to allow 1o0 per cent foreign-owned airlines to service domestic routes.
- Supporting northern and remote market access, including tailoring regulations to the northern context.
Air Canada released a response on Thursday, challenging the Bureau’s findings by calling the lack of competition in the country’s airline industry a “myth.”
The carrier created its own report, sharing “myths and facts” about the industry backed by data from aviation analytics companies InterVISTAS and Cirium.
“Myth: There is a lack of competition in the Canadian air travel industry. Fact: Canadians have greater choice than ever before on the vast majority of routes they travel on,” reads one infographic.
Air Canada
It also argued that competition in Canada’s air travel market is “as robust, if not more,” than in other countries.
Air Canada
Part of the Bureau’s recommendations include boosting support for the growth of smaller airlines and smaller airports.
Air Canada’s report states that it’s a myth that small carriers can’t succeed in Canada’s air travel market.
“Fact: Smaller carriers are seeing the most rapid growth in Canada, and are making up a larger share of the domestic market,” it reads.
The infographic below shows that Porter and Flair Airlines saw immense growth in capacity last year compared to 2019.
Air Canada
The Competition Bureau also surveyed 1,500 Canadians about airline competition in the country, and one of the main concerns is that “airfare in Canada is too expensive.”
“High domestic airfares restrict their ability to travel within Canada. Many people reported choosing to fly outside the country rather than domestically, as international flights are often cheaper,” reads the report.
The government agency argues that more competition equals lower fares for Canadian travellers. Based on expertise from an independent economist, the report found that Air Canada, WestJet, and Porter ticket prices are 9 per cent ($27.80) lower on average when they face an additional competitor on a specific route.
“This shows that competition drives airlines to improve, and passengers benefit,” stated the Bureau.
Air Canada argues that it’s not a lack of competition that’s increasing airfare in Canada, but rather third-party and government taxes.
Air Canada
Canada’s competition watchdog launched the airline market study in July 2024. It consulted with over 120 stakeholders, including airlines, airports, travel and tourism companies, government organizations, consumer advocacy groups, labour representatives, corporate customers, and industry experts.