Canada’s Airline Watchdog Looks Into Concerns Over High Prices, Lack of Competition

An Air Canada flight departing for Toronto taxis to a runway as a WestJet flight bound for Palm Springs takes off, at Vancouver International Airport in Richmond, B.C., in a file photo. (The Canadian Press/Darryl Dyck)

Canada’s Competition Bureau will be looking into the state of competitiveness in the country’s airline industry.

The market study will focus on three key topics, according to a July 29 government news release. These include the state of competition in domestic air passenger services, barriers to entry into the industry, and hindrances for Canadians looking to make informed travel choices.

“Air travel is a critical service. We know many Canadians are frustrated by the cost and quality of the service being provided domestically,” Commissioner of Competition Matthew Boswell said in the release.

“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.”

Boswell said they already received 1,400 submissions as the bureau was determining the scope of the study.

In its notice for the study, the bureau notes other key issues the report will address.

“There are also signs that domestic airfares in Canada may be relatively high,” it said. The bureau added that average airfares still remain higher than pre-pandemic levels.

“Canadians are filing an increasing number of complaints with the Canadian Transportation Agency about air travel services in recent years,” it said.

Reactions

WestJet’s vice president of external affairs, Andrew Gibbons, wrote a letter to Boswell saying government policy was responsible for a lack of competition in the market.

“The reality is that Canada has a highly uncompetitive tax and regulatory environment, which is stifling competition and increasing costs to Canadians,” he wrote in the letter viewed by The Epoch Times.

He cited third-party fees that Canadian travellers must pay as an example.

“The Canadian air travel market contains high mandatory third-party fees that drive-up ticket prices for the average Canadian,” he wrote. “These fees are part of a user-paid infrastructure model that is unique to Canada, and there is limited transparency or oversight on how these fees that make up a significant portion of ticket costs, are utilized or determined.”

Discount airline Flair said it welcomed the study.

“The airline hopes that this initiative will highlight the inhospitable environment for low-fare airlines in Canada,” a July 30 statement on Flair’s website said. “Major issues include the state of competition, the barriers to entry and expansion, and the challenges Canadians face in making informed travel choices.”

The company said it believed “disproportionately” higher fees in Canada were a big part of the problem.

“Our concerns lie not only with an unfair competition playing field for other airlines but also with the exorbitant cost of the aviation ecosystem in Canada,” Maciej Wilk, interim CEO and president of Flair Airlines, said in the statement.

“Airport fees, navigation charges, and security fees are significantly higher than global norms, disproportionately benefiting full-service, high-fare airlines.”

Other Issues

John Gradek, a lecturer at McGill University’s aviation management program, says the bureau should consider three key issues in the Canadian industry.

“There’s a need for a review of how we manage airports and how we allow airports to make the investment decisions and their operating decisions,” Gradek told The Epoch Times in a phone interview.

He added that international agreements that larger airlines negotiate are also hurting the domestic industry.

“Most of the damage that we’re seeing in the Canadian marketplace is due to both WestJet and Air Canada being able to cross-subsidize for Canadian services with international performance, international profits—something that the upstart carriers don’t have,” he said, adding it was an unfair advantage.

Gradek also noted that loyalty programs are being used to monopolize customers, presenting a hurdle for other companies to grow.

“The carriers are using loyalty programs as a significant weapon in their charge for market share, and it’s putting all of these smaller carriers, these newer carriers, at a significant market disadvantage,” he said.

The Epoch Times contacted Air Canada for comment but did not receive a response by publication time.