TORONTO — Up to 100% foreign ownership for domestic-only Canadian airlines – will the federal government go for it?

So far it’s just one of the Competition Bureau’s 10 new recommendations aimed at making air travel in Canada more affordable.

But after the grilling Canada’s airlines got in Ottawa last December over baggage fees and the need for affordable air travel in this country, anything is possible.

In the new report released this morning, ‘Cleared for Take-Off: Elevating Airline Competition’, the bureau notes: “Competition in Canada’s airline sector has struggled to take off. Canadians often voice their dissatisfaction because: airline options are limited; airfares are high; they want better-quality service.”

The bureau also notes that “many Canadians report that international flights are often cheaper than flights within Canada.”

Canada’s travel advisors can certainly attest to that.

The current foreign ownership cap sits at 49%. In addition, no more than 25% of a carrier can be owned by any one foreign entity, a proportion the bureau proposed raising to nearly half.

The report can be found here.

10 RECOMMENDATIONS

According to the bureau’s stats, at major airports across the country, Air Canada and WestJet together account for 56% to 78% of all domestic passenger traffic. “Market concentration has gone down by 10% between 2019 and 2023. This reflects the fact that airlines like Porter and Flair have had success entering the market and growing, even as others, such as Lynx Air, have exited the market. However, the average concentration remains extremely high and competition from new sources remains fragile.”

Lynx Air shut down in February 2024. Canada Jetlines followed suit just six months later. Over the decades many airlines, mostly low-cost carriers, have come and gone, as Canada’s travel industry well knows.

The bureau’s report adds that WestJet’s share of domestic passengers is declining more at major eastern airports while Air Canada’s share is declining more at major western airports, and notes the two airlines are directly competing on fewer routes compared to 2019.

The Bureau announced the study in May 2024 and launched it in July 2024.

Here are the 10 recommendations released today …

1. Make competition the priority when reviewing airline mergers and collaborations: “Remove the Minister of Transport’s power to override the merger and competitor collaboration review processes under the Competition Act. This will help ensure that anti-competitive deals are not approved.”

2. Remove barriers that limit smaller airports from competing with major hubs: “Eliminate international flight exclusivity clauses, which are rules that mean that only one airport in a local area can have international flights. Expand standard security screening services to secondary airports. Adopt a technology-neutral approach to aircraft restrictions at secondary airports so that they can compete more freely with major airports.”

3. Improve the publication of airline industry data: “Publish information on airline traffic, quality, and takeoff and landing permissions (known as slots) to help consumers, businesses, and regulators make more informed decisions.”

4. Consider reviewing the airport oversight and funding model: “Consider reviewing the way airports are overseen and funded. What else can be done to improve airline access to airports and benefit Canadians?”

5. Increase the single-investor foreign ownership limit for Canadian airlines to 49%: “Allowing more foreign investment in Canadian airlines improves access to capital, drives growth, and promotes competition.”

6. Allow up to 100% foreign ownership for domestic-only Canadian airlines: “Create a new class of airline that operates only in Canada but can have owners from outside Canada. Domestic aviation can then benefit from greater global expertise and capital.”

7. Work with other countries to remove foreign competition restrictions in international agreements: “Phase out specific restrictions on airlines having owners from outside Canada. Also, allow airlines from partner countries to fly domestic service within Canada. This practice is known as cabotage. These changes will mean Canada can benefit more from capital and industry knowledge from other countries. Support northern and remote market access.”

8. Coordinate leadership of northern and remote aviation: “Establish a national working group focused on air transportation in remote areas. Make it a priority to find competitive solutions to create higher quality and more accessible service for northern communities.”

9. Tailor regulations to the northern context: “Adopt an approach to policy that is specific to the North. This policy should focus on outcomes to eliminate unnecessary costs northern operators pay to meet regulations.”

10. Leverage government investments and tools to promote competition: “Upgrade northern airports so they can handle more aircraft types and airlines. Develop open-access facilities that all airlines can use, instead of facilities controlled by one existing airline. Open government contracts to as many bidders as possible. When there are more bidders, competition drives better value for Canadians. Promote interlining agreements to improve connecting flights between airlines. This will improve connections between regions.”

Matthew Boswell, Commissioner of Competition, said: “With the right policy changes, governments can create the conditions for new airlines to grow and compete – and give Canadians access to more affordable, reliable options for flights. With this report, we have identified concrete actions that governments can take to achieve these goals.”

AIR CANADA’s ‘MYTHS & FACTS’

The bureau’s report factored in court-ordered information from Air Canada and WestJet.

Air Canada today released a PDF, ‘Myths and Facts on the Canadian Domestic Competitive Landscape’, with data to support its position on everything from domestic airfare affordability, the perceived lack of competition and lack of chances for new entrant success in the Canadian air travel industry, and more.

“As Canada’s flag carrier and the airline with the largest network and most services in Canada, we have a deep interest in a strong, competitive domestic market to best serve our customers,” said Air Canada.

‘Myths and Facts on the Canadian Domestic Competitive Landscape’ can be found here.