Failure to take off: It's crickets on proposed fixes to airline concentration
Critics say lobbying is responsible for government ignoring consumer problems, but records show MPs are on top of Air Canada CEO's French lessons
Thousands of Air Canada customers are still waiting on refunds for flights cancelled this summer and it doesn’t look like the government is going to do much to help them any time soon – the result of industry capture, critics say.
Aside from the continuing delay in payouts by the airline resulting from the strike by its flight attendants in August, reported this week by CityNews, the problems with the industry received scant mention in last week’s federal budget.
That follows a similar lack of attention to a critical market study released by the Competition Bureau in June, as well as a report tabled by the Standing Committee on Transport, Infrastructure and Communities at the end of last month.
“I’ve heard nothing from the government,” says Ambarish Chandra, an associate professor at the University of Toronto who studies competition in a number of industries including airlines, of the Bureau study.
“It’s not just the government, the opposition parties aren’t championing this either. Every time we come up with even slightly innovative solutions, either the government shuts it down or the airlines themselves, directly or through proxies, argue against these things.”
Using its newly legislated ability to proactively conduct market studies for the first time, the Bureau in June found that Canadians are faced with limited airline options, high prices and poor services.
Its 10 recommendations to the government included encouraging new airlines to enter the market by removing barriers that limit smaller airports from competing with major hubs, requiring the publication of deeper industry data, and lowering foreign ownership restrictions on airlines.
Adding just a single new competitor on a given route between two cities, the report found, tended to lower airfares by 9 per cent on average.
The Transport Committee report, tabled on Oct. 29, mirrored some of those recommendations – such as taking steps to increase competition between smaller airports and bigger hubs – and added others, including reinvesting all airport rent amounts into infrastructure projects and reducing the “regulatory and administrative burden on the aviation sector.”
Canada’s two top airlines are indeed actively lobbying the federal government, with Air Canada reporting 40 meetings with designated public office holders from the beginning of 2025 through Sept. 23, with WestJet close behind at 37 through Oct. 8.
The two airlines, which hold between half and three quarters of all domestic passenger traffic at major Canadian airports, according to the Bureau, have each had meetings with government officials at a rate of once per week this year.
Both companies, through their joint lobby group the National Airlines Council of Canada, in August submitted recommendations to the budget. The group was seeking a digitization strategy for air travel, lower regulatory burdens and caps on Crown rents charged to airports, among other measures.
Both airlines have also made significant negative headlines in recent months. Air Canada ultimately caved this summer to flight attendants for better employment terms after they went on strike and defied an order from the government to return to work. WestJet, meanwhile, attracted international attention last month – including from late-night TV host Stephen Colbert – for announcing extra fees on seats that recline.
On a recent episode of the Do Not Pass Go podcast, Biden administration competition advisor Tim Wu singled out airlines as the companies that have perfected “valueless wealth extraction” from consumers. Check that out here (story continues below):
"Eat your guests for dinner:" Tim Wu on platforms and The Age of Extraction
Does it feel like every business – whether it’s telecom providers, airlines, grocery chains and more – are simply trying to get more and more of your money these days without providing better products and services in return?
The budget did promise new infrastructure funding through the Airports Capital Assistance Program, though much of this is intended to build more cargo capacity in order to spur further international trade.
Consumer advocate Gabor Lukacs says the only relevant item he saw in the budget for airline passengers was a promise to review fines levied on companies for violating legislation or regulations, to ensure that non-compliance is not just treated as a cost of doing business. The government promised to report the findings of that review in next year’s budget.
“If this is more than a lip service, then it would be a very welcomed and positive change, not just in air passenger rights, but across the entire economy,” Lukacs says. “It would be much needed to put an end to the two-tier legal system – one law for big corporations and another for the average citizen.”
The most recent discussion of airline competition by the Transport Committee took place on Sept. 23, though it was in camera and reported details are minimal. According to the meeting minutes, the committee ordered that a report be presented to the House of Commons, which happened a month later. The only other published details were an agreement that:
“Air Canada provide the committee with the number of hours that Mr. Michael Rousseau, President and CEO of Air Canada, has devoted to learning French since 2021; that the response be broken down by week, month and year; and that the response be provided to the committee within 30 days following the adoption of this motion.”
The committee also met on Oct. 23, again in camera, and agreed to commence a study of the Competition Act and air travel in northern, rural, and remote communities of Canada.
*Update: a reader writes to point out that little-covered Senate Bill S-239 received first reading on Oct. 30. The bill proposes that the heads of any respective federal or provincial institutions must respond to recommendations made by a Competition Bureau market study within 120 days, as they pertain to internal trade barriers, and that their responses be published publicly.
The Competition Bureau’s full 10 recommendations to the government were:
Make competition the priority when reviewing airline mergers and collaborations.
Remove barriers that limit smaller airports from competing with major hubs.
Improve the publication of airline industry data.
Consider reviewing the airport oversight and funding model.
Increase the single-investor foreign ownership limit for Canadian airlines to 49 per cent.
Allow up to 100 per cent foreign ownership for domestic-only Canadian airlines.
Work with other countries to remove foreign competition restrictions in international agreements.
Coordinate leadership of northern and remote aviation.
Tailor regulations to the northern context.
Leverage government investments and tools to promote competition.
The Transport Committee’s eight recommendations to the government were:
Reinvest all rent amounts collected from airports into airport infrastructure projects, as recommended by the Standing Committee on Transport, Infrastructure and Communities in its report, Enhancing the Efficient, Affordable Operation of Canada’s Airports, published in February 2023.
Remove barriers that limit smaller airports from competing with major hubs.
Monitor the efficacy of recent changes to the Competition Act and ensure that they have adequately addressed the needs of the Competition Bureau to respond quickly in cases of anti-competitive and predatory behaviour in the airline sector.
Conduct a comprehensive review of the regulatory and administrative burden on airlines in Canada, with a view to streamlining and modernizing the regulatory regime governing airlines.
Consider ways to reduce the burdens and costs on northern airports in particular.
Review all taxes and fees that impact the aviation sector and the costs passed on to passengers and compare to other jurisdictions.
Develop a whole-of-system strategy to improve competition among Canada’s airlines, particularly at the domestic level.
That Transport Canada improve the publication of airport industry and performance data so that consumers and businesses can make informed decisions.
CityNews’ report on Air Canada refunds is here.
Recommendation 6 is a little confusing and surprising to me. Allow “up to” 100% foreign coverage. It can’t be more than 100% owned, so why not just say “allow full foreign ownership“?
Phrasing aside, isnt allowing full foreign ownership of vital industries risky? (Partial ownership seems ok, though.)
Your note spotlights how airline lobbying drowns out reform calls, leaving Canadians with fewer choices and steeper fares. The Competition Bureau's study backs this: one new competitor on a route cuts prices by nine per cent on average. Yet Statistics Canada reports air transportation prices dropped 6.5 per cent in September, offering brief relief—likely from lower fuel costs, not more rivals. Without action on foreign ownership limits, though, this dip may not last.