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Sunday,  July 14, 2024 4:35 AM 

"Radical changes" won't come from Competition Bureau’s airline study: analyst

  • Air
  •   06-21-2024  6:08 am
  •   Pax Global Media

"Radical changes" won't come from Competition Bureau’s airline study: analyst
Travellers at Toronto Pearson airport in August 2022. (File photo/Pax Global Media)
Pax Global Media

As Canadians wait to hear recommendations coming from the Competition Bureau’s investigation into airline competition in the country, one analyst said he doesn’t think they will lead to big impacts.

“We do not believe that the government will make radical changes, such as cabotage or forced disposition of airport slots,” National Bank analyst Cameron Doerksen wrote in a research report released on Tuesday (June 18).

In the report, according to Yahoo Finance Canada, Doerksen assessed the Competition Bureau’s potential recommendations stemming from its market study and what they could mean for Canadian airlines.

“At least some of the Competition Bureau’s underlying assumptions are incorrect,” he noted.

“Although Canada’s airline sector is undoubtedly concentrated, we posit that this is mostly a function of systemic characteristics of the market,” Doerksen wrote.

He underlined that Canadian airlines have to deal with a widely dispersed population located in just a handful of large cities.

“Because of this concentration, there is a more limited number of city-pair routes that can support significant frequency and multiple competing airlines,” Doerksen wrote. “We believe this is one of the primary reasons why Canada has historically only been able to support two large network airlines and why airlines that have attempted to go head-to-head with the two large carriers on some of the busiest routes (with all their large network advantages) have typically failed (see Jetsgo in the early 2000s and more recently Lynx Air).”

The analyst then noted that “the timing of the Bureau’s study is also somewhat perplexing because competition in the domestic Canadian market today is more intense than it has been in years.”

Despite Lynx Air folded on Feb. 26 of this year, Porter Airlines and Flair Airlines continue to grow.

Doerksen also noted that Air Canada and WestJet’s portion of domestic seat capacity has shrunk over the last five years.

According to National Bank, Air Canada has 41 per cent of domestic seats and WestJet has 30 per cent, a drop from 2019, when Air Canada had 48 per cent and WestJet had 34 per cent.

The Competition Bureau announced in May it would launch a market study focused on the Canadian airline industry.

The initiative was announced by Melissa Fisher, a deputy commissioner with the bureau, while testifying in front of a parliamentary committee that started its own study of the same issues after Lynx ceased operations, one of at least eight budget airlines to shut down in Canada since 2000.

According to the Canadian Press, Fisher said the bureau will look at improving competition for “the benefit of domestic air passengers as well as the workers and entrepreneurs who enable these services.”

She also cited “recent events that have raised questions about the state of competition in the airline sector.”

The study is expected to examine the state of competition in the airline sector—including barriers to competition, like regulations and policies—and how governments can make improvements.

On May 27, the bureau opened public consultations. It stopped taking feedback on Monday (June 17).

Its final market study report is expected to be published in June 2025.

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