A recent report from the Competition Bureau suggests that Canada should ease restrictions on foreign ownership of domestic airlines to enhance competition in the air travel industry.

Released by the bureau on Thursday, the report advocates for leveraging international capital and experience to strengthen competition in Canada. It proposes raising the cap for single-investor foreign ownership to 49% for airlines in general, up from the current 25%, and to 100% for 'domestic-only Canadian airlines.' This move would involve creating a new class of airline, similar to what has been successful in Australia.

Competition commissioner Matthew Boswell emphasized that with the right policy changes, new airlines could grow and provide Canadians with more affordable and reliable flight options.

While aviation expert John Gradek acknowledges that the issues raised in the report are not entirely new, he questions whether there is enough political momentum to implement the recommendations.

The Case for Competition

The report highlights the benefits of a competitive air travel market for Canadians, including lower prices and improved customer experience. It notes that the majority of domestic passenger travel in Canada is dominated by two airlines, Air Canada and WestJet, leading to reduced competition between them.

The bureau points out that restrictive regulations on international competitors limit competition and innovation in the domestic market. By reconsidering these restrictions, new capital sources could be unlocked, stimulating greater competition and innovation.

The Canadian Anti-Monopoly Project (CAMP) supports the report's assessment, emphasizing the need for immediate government action to address the lack of competition in the airline market.

Failure to Launch

While some signs of growing competition have emerged with smaller airlines like Porter and Flair gaining market share, the report warns that these gains are fragile. New airlines face significant challenges entering and growing in the market, including high user fees and limited access to logistical resources.

The bureau recommends policy changes to lower costs and provide equitable access to resources for new market entrants. Opportunities exist in smaller secondary airports, which could serve as a better entry point for new airlines if allowed to operate international flights.

Headwinds for Northern Communities

The report highlights the challenges faced by northern communities in Canada, where air travel is essential for accessing healthcare, employment, and social connections. It recommends establishing a national working group on remote air transportation to improve quality and accessibility for these communities.

Overall, the report underscores the importance of government intervention in ensuring reliable and affordable air services for northern and remote communities.