Canadian Competition Watchdog to Examine Airline Industry

27.05.2024 - 18:17 / skift.com / Air Canada / Gordon Smith

Canada’s Competition Bureau is preparing to launch a major review of the country’s airline sector.

On Monday, the agency said “recent events have raised questions about the state of competition in the industry.” It noted that Canada’s domestic market is dominated by just two major airlines – Air Canada and WestJet. It is estimated that the pair account for almost 95% of industry revenue.

Official figures show complaints from passengers have risen in recent years, with the watchdog further highlighting that new entrants to the sector “appear to face challenges.” 

In late February, Calgary-based budget carrier Lynx Air collapsed. The airline was launched in 2022 in an attempt to shake up the sector. Lynx was the latest in a series of unsuccessful attempts to penetrate the market in recent years. 

The market study format allows the agency to examine a sector to identify factors that may impede competition. 

The bureau said the investigation will allow it to better understand the root causes of the challenges within the industry. Ultimately, it will make recommendations “to all levels of government” to improve competition in the sector. 

The agency has opened an initial public consultation on the scope of the investigation. Once this concludes, its final terms of reference will be published and the study will formally begin.

The bureau stressed that it is not examining any specific allegations of wrongdoing. However, the watchdog could investigate and take action should it “uncover any evidence during the study that the Competition Act has been contravened.”

In a statement, Matthew Boswell, Canada’s Commissioner of Competition said: “Since the Canadian population is spread out over vast distances, other modes of transportation may not be feasible replacements for air travel. More competition in the industry will mean lower prices, better services, and improved productivity.” 

There were 72 million passengers carried on Canadian domestic flights in 2022.

In response to the developments, a WestJet spokesperson told Skift: “WestJet recently put forth three practical recommendations to immediately improve affordability and competition. As the airline that democratized air travel in Canada, we are committed to meeting the diverse needs of our guests and the communities we serve. Air travel is essential to our country and we welcome interest from all groups as we continue to focus on bringing more affordable and innovative travel options to Canadians.”

Skift has also contacted Air Canada for comment.

The Competition Bureau, which is an independent law enforcement agency, aims to release its findings in June 2025. 

What am I looking at? The performance of airline sector stocks within the ST200. The index