Canada’s competition watchdog wants to fly in some international reinforcements to shake up the country’s airline duopoly.
What happened: The Competition Bureau is calling on Ottawa to loosen its foreign ownership rules for airlines. In a new report, the bureau argues the strict rules have stifled competition in a sector that’s become a two-horse race between Air Canada and WestJet.
- As one solution, the watchdog says the feds should allow foreign-owned domestic carriers, as long as they only fly within Canada.
Catch-up: Right now, foreign investors can only own 49% of a Canadian airline, and just 25% for any single investor. Some in the industry argue the rule has made it nearly impossible for new airlines to get the funding they need to compete with Air Canada and WestJet, especially in a country with such high operating costs.
Why it matters: Canada has become a burial ground for challenger airlines (remember Lynx Air, Swoop, or Zoom?). Any changes that allow new carriers to compete with the big guys would be a welcome development for passengers.
- The Competition Bureau’s report found that airfares were 9% lower on average when just one new competitor flew on the same route.
Yes, but: Opening the door for a 100%-foreign-owned airline doesn’t fit with Ottawa’s wider crackdown on foreign investments. And with Canada’s high taxes and fees on airlines, it’s far from a guarantee that international investors would be lining up if the rules did change.—LA