Competition Bureau recommends ways to increase airline competition

The Competition Bureau of Canada released its market study report – Cleared for take-off: Elevating airline competition – and its recommendations to governments for increasing competition in Canada’s domestic airline industry.

It noted that the cost of flying is a major concern for Canadians and for many, particularly those in northern and remote communities, air travel is not a luxury – it is a necessity.

The Bureau’s study found that despite the recent entry and expansion of new airlines, the domestic market remains highly concentrated and competition from new sources remains fragile.

It pointed out that at major airports across the country, Air Canada and WestJet together account for roughly half to three quarters of all domestic passenger traffic.

The Bureau’s report outlines three areas of focus for governments to create the right conditions for competition in the industry. These are:

• Prioritizing competition in Canada’s aviation policy, including in the review of airline mergers and collaborations.
• Leveraging international capital and experience to strengthen domestic competition, including reducing barriers to foreign ownership.
• Supporting northern and remote market access, including tailoring regulations to the northern context.

It said that more competition in the airline industry would mean lower prices, more options and better service for Canadians. The Bureau found that when just one new competitor flies on a route between two cities, airfares go down by 9% on average, highlighting the benefits that competition can deliver

Matthew Boswell, Commissioner of Competition, observed that: “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. With this report, we have identified concrete actions that governments can take to achieve these goals.”