Airline prices, concentration – key issues affecting the control of the Competition Bureau

Market concentration, higher prices and a growing number of customer complaints are driving the Competition Bureau’s investigation into the Canadian airline industry.

In a statement on Monday, the regulator said two carriers continue to dominate the airspace while new airlines appear to be struggling to enter the market. Domestic ticket prices also seem “relatively high” and more passengers are filing complaints, he said.

The number of outstanding customer complaints against airlines has reached a record 72,000, according to the Canadian Transportation Agency.

The bureau’s review, which will draw on feedback from the public and stakeholders, is expected to pave the way for recommendations to the government that “would make it easier for new businesses to compete and for consumers to make informed choices.”

First announced on May 9, the market study is the bureau’s first since gaining new powers in December that include the ability to compel information from businesses.

Matthew Boswell, Commissioner for Competition, highlighted the importance of the aviation industry to residents and the economy.

“Because Canada’s population is dispersed over long distances, other modes of transportation may not replace air travel. “More competition in the industry will mean lower prices, better services and greater productivity,” Boswell said in the release.

Over the past 13 months, new low-cost carriers Swoop and Lynx Air disappeared from the skies, and WestJet acquired Sunwing Airlines. The latter two accounted for 72% of seats in Western Canada last year, according to the office.

Meanwhile, Air Canada and WestJet have strengthened their positions in the domestic market over the past year, even as rival Porter Airlines expands rapidly in its bid to become the country’s third-largest airline.

Canada’s two largest carriers accounted for 82% of domestic traffic among domestic carriers last month, up from 74% in April 2023, according to Cirium statistics.

The declining number of operators coincides with a six percent decline in domestic flight volumes between April 2023 and this month, although this may be partly due to a renewed focus on international travel.

While large cities continue to be well served, smaller cities have fewer options, which can also result in higher prices and, if things go wrong, stranded passengers.

Over the past five years, the Competition Bureau has raised concerns about the merger of Canadian North and First Air and the potential takeover of Transat by Air Canada, which scrapped the plan in 2021 due to regulatory hurdles in Europe.

The Competition Bureau noted on Monday that the latest probe is not an investigation into specific allegations of wrongdoing.

“However, if the office finds evidence that someone may be doing something illegal, we will investigate and take appropriate action,” the regulator said.

John Gradek, who teaches aviation management at McGill University, said the review should take into account the level of service in different parts of the country, as well as policies around airlines changing flights after purchasing a ticket.