In a recent market study report published on June 19, 2023, Competition Bureau Canada put forth a set of recommendations aimed at enhancing competition within the Canadian airline industry. One of the primary suggestions is to allow international airlines to operate domestic flights in Canada, which could reshape the current competitive landscape.
Additionally, the bureau proposes that domestic-only airlines be allowed to have complete ownership by foreign investors. It has also recommended increasing the existing limit on foreign ownership from 25% to 49% for Canadian airlines. According to the bureau, "Allowing more foreign investment in Canadian airlines improves access to capital, drives growth, and promotes competition."
These recommendations come in response to what the bureau perceives as a highly concentrated Canadian airline market. As of 2023, Air Canada leads this market with a 34% share of domestic passenger traffic, followed closely by WestJet at 30%. Flair and Porter airlines collectively account for 19% of the market. Despite the dominance of these major players, the report highlights a notable decrease in market concentration across major Canadian airports from 2019 to 2023. Flair and Porter, among other airlines, have begun to capture market share from Air Canada and WestJet.
Air Canada responded to the Competition Bureau’s findings with its own analysis, emphasizing that Canadian competition is at least as robust as that in other jurisdictions. The airline provided a slide show on Canadian airline competition, which included visual comparisons of market shares. The data illustrated how Canada’s domestic market compares to more concentrated markets like Australia, France, and India.
In its analysis, Air Canada suggested that if Canadian air travel fees and taxes were reduced by 12.5%—bringing them closer to U.S. levels—this could lead to a significant increase in demand for air travel, estimated at 10.7%.
In an ongoing trend of international investment in Canadian carriers, Delta Air Lines and Air France-KLM recently announced an investment in WestJet Airlines. Delta has committed to purchase a 15% stake in WestJet, amounting to $280 million. Subsequently, Delta plans to offload a portion of this stake (2.3%) to Air France-KLM, which will invest $50 million in the Canadian airline.
The Competition Bureau’s recommendations and the recent influx of foreign investment underscore potential changes to the Canadian aviation sector, which many stakeholders hope will increase competition and improve service for travelers across the country.
