TORONTO — Canada’s airlines agree the industry could use a reset but for Air Canada and WestJet at least, it’s reform for the user-pay model for airport funding – including all those fees that often dwarf the base fare – that’s the priority.

Not surprisingly, neither of Canada’s two biggest airlines, contacted by Travelweek following yesterday’s coverage, voiced support for controversial recommendation #6 in the Competition Bureau’s report on Canada’s airline industry: raising the cap on foreign ownership for airlines in Canada from 49% to 100% for domestic-only Canadian carriers.

Instead they point to recommendation #4 – airport oversight and the funding model – as the best place to start to help make domestic airfares more affordable for Canadians.

As the bureau notes, Canadian airports and air navigation services are mostly funded by fees paid by airlines and passengers. The fees make up 30 cents of every dollar that passengers pay airlines for traditional full-service airlines, and take up an even higher share of fares for low-cost carriers and ultra-low-cost carriers, typically the new entrants in the market.

The report “highlights how high government fees and charges raise airfares in Canada, hurting consumers and the competitiveness of our industry. These are the main contributing factors to higher fares in Canada, making up 30% of a domestic base fare,” said Air Canada spokesperson Peter Fitzpatrick.

Air Canada’s ‘Myths and Facts on the Canadian Domestic Competitive Landscape’ includes data to support its position on domestic airfare affordability and more.

WestJet spokesperson Josh Yeats said the market study recognizes air travel as essential – not a luxury – for connecting Canadians. “Canadians deserve an aviation system that is affordable, competitive and sustainable. That requires tackling the real root cause of high prices: Canada’s uniquely high fees, charges and taxes,” he told Travelweek.

The report notes that Canadians pay airfares that are more than 40% higher because of government-imposed fees and taxes and third-party fees and charges, he added.

Canadian travel advisors and travellers are well familiar with the sticker shock that comes with Canada’s air travel taxes and fees. “For a typical roundtrip in Canada, a passenger must pay $133 in fees (none of which goes to airlines), compared to only $49 in the U.S.,” said Yeats.

He said WestJet “welcomes a holistic review of the user-pay model to reform Canada’s air transportation policy.” The airline’s priorities? Here’s a look …

• “Modernize the funding of Canada’s air transportation infrastructure based on global best practices through a comprehensive review and government report.”
• “Immediately freeze all federally imposed air travel-related fees and begin a phased approach to explore opportunities for efficiencies to reduce these fees. This will unlock new private capital for critical infrastructure upgrades that address capacity and trade bottlenecks.”
• “Modernize passenger protection: The current rules are well intended but do not work, and the amendments proposed by the government last year (APPR 2.0) would make things worse, creating a system that adds $1 billion per year in costs to air travel with little to show for it. There needs to be a fundamental reform to the passenger protection policies to provide travellers with a simpler system with clearer benefits and choice, without all the overhead costs. As the report finds, APPR is increasing costs, while reducing incentives for airlines to serve regional routes.”

“A FOREIGN CARRIER IS NOT GOING TO SERVICE OUR SMALLEST TOWNS”

The Canadian Airports Council said allowing up to 100% foreign-ownership of domestic-only Canadian airlines should be considered a no-go.

“Cabotage is not the answer to competition in a country as sparse and large as Canada. A foreign carrier is not going to service our smallest towns and thin volume routes,” said CAC President, Monette Pasher.

An op-ed in The Globe and Mail by Cargojet founder and executive chair Ajay Virmani also argued against cabotage: “It risks undermining our aviation industry, threatening Canadian jobs and handing over control of a vital sector – all without getting a single thing in return.”

Virmani added: “The foreign carriers most likely to cash in on this opportunity will be American ones, because of geography. But the United States, our closest trading partner, does not allow foreign carriers to operate domestic routes. It guards that privilege closely – as do many other major nations. … We cannot be the only country willing to give away our market while others protect theirs. That’s not strategy – that’s surrender.”

“BENEFITS THE LARGEST PLAYERS”

With the demise of Lynx Air in February 2024 and then Canada Jetlines in August 2024, low-cost carrier Flair Airlines is one of the few more recent entrants still standing.

Flair’s VP, Commercial, Eric Tanner said Flair “was pleased to see the final report reflect what we’ve long said: Canadian travellers are being held back by structural barriers that limit competition and keep fares high.”

Tanner said the bureau’s findings reinforce key issues that have long affected the airline industry: “opaque slot allocation, unfair airport fee structures, and exclusive commercial arrangements that benefit incumbents and block new entrants.”

He added: “The government must begin implementing the report’s most impactful recommendations without delay. Canadians deserve a more competitive, affordable and transparent air travel market.”

Meanwhile Porter Airlines continues to grow in leaps and bounds following its expansion to Toronto Pearson and many other airports, and new E195-E2 jet aircraft. Since 2023 Porter has added 44 new aircraft to its fleet and introduced dozens of new routes in North America, including presence in Canada’s 10 provinces.

Porter spokesperson Brad Cicero told Travelweek the airline sees value in a number of the study’s recommendations, such as opening international flights at Montreal Metropolitan Airport (YHU) and considering new aircraft technology at Billy Bishop Airport.

And what about the bureau’s foreign-ownership recommendation?

“Porter supports increasing foreign ownership limits to 49% for a single shareholder,” he said. “Additional changes to foreign ownership and market access require much greater scrutiny. For example, allowing foreign airlines to operate domestic routes will further disadvantage smaller carriers. This should not be considered without reciprocal access to other countries for Canadian airlines, but this, again, benefits the largest players with greater resources and brand recognition.”