Canada’s Competition Bureau has recommended loosening investment rules for airlines in order to increase competition within the Canadian market. The suggestion comes after a year-long study by the bureau, which also proposes raising the ownership limit for Canadian airlines and prioritizing competition in merger reviews.

The bureau’s research has found that foreign investment is crucial for new airlines to enter and continue operating in the Canadian market. This has been seen in countries like Australia, where increased foreign capital has led to more competition in the airline industry.

Currently, Canada does not allow foreign-owned airlines to operate domestic routes. This has resulted in a concentrated market, with Air Canada and WestJet accounting for a large majority of domestic passenger traffic. However, the recent expansion of Porter Airlines and Flair Airlines has caused a decrease in market concentration.

The bureau’s study has also shown that the introduction of a new competitor on a route can lead to a decrease in airfares by an average of 9%. This highlights the importance of increased competition in the Canadian airline industry.

However, the pandemic has led to a decrease in price competition within the sector. In response, the bureau has recommended loosening investment rules to allow for full foreign ownership of carriers operating solely within the domestic market.

The recommendations have been met with mixed reactions from Canadian airlines. Air Canada argues that the increase in airfares is due to factors such as third-party fees, supply-chain challenges, and rising fuel prices, rather than lack of competition.

Overall, the Competition Bureau’s recommendations aim to promote competition within the Canadian airline industry, which will ultimately benefit consumers through lower airfares and improved service.