Can more competition drive down Canadian airfares? Watchdog launches probe

The Competition Bureau has launched its study of Canada's airline industry, looking to answer whether consumers would benefit from more competitive forces in the market.

Canada’s competition watchdog is scanning the skies for ways to improve the country’s air travel industry, studying whether new policies could attract more airlines to the sector and lower prices for passengers.

The Competition Bureau on Monday launched its probe into the state of competition in Canada’s airline industry, which it noted in the terms of its study is already heavily concentrated between two major players, Air Canada and WestJet.

Together, the two airlines amount for 80 per cent of capacity in the Canadians airline industry, as measured by the sector’s seat-kilometres metric.

With those airlines scaling back their operations regionally — WestJet focusing efforts in the west and Air Canada to the east — and upstart airlines like Lynx Air collapsing or struggling after take off, the competition watchdog is looking at whether Canada’s aviation policy is lacking when it comes to introducing and supporting new entrants.

The study will examine new dynamics in Canadian aviation such as the introduction of ultra-low cost carriers and consumer demand for direct flights or use of secondary airports, as examples, as it looks for gaps in the policy landscape.

The probe will answer questions such as, “Should government action promote more competition from international players on domestic routes?”

The Competition Bureau notes there is evidence that domestic airfares are relatively high in Canada and remain above pre-pandemic levels.

The study will take a look at whether consumers have enough information to make informed choices about their fares and other ways that policymakers could put more competitive options on the table.